<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1995
REGISTRATION NOS.: 33-53295
811-7169
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. / /
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. / /
----------------
DEAN WITTER CAPITAL APPRECIATION FUND
(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)
COPIES TO:
<TABLE>
<S> <C>
CHRISTINE A. EDWARDS, ESQ. DAVID M. BUTOWSKY, ESQ.
TWO WORLD TRADE CENTER GORDON ALTMAN BUTOWSKY
NEW YORK, NEW YORK 10048 WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
</TABLE>
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration statement.
-------------------
PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940, REGISTRANT
HEREBY ELECTS TO REGISTER AN INDEFINITE NUMBER OF ITS SHARES OF BENEFICIAL
INTEREST WITH $0.01 PAR VALUE. THE AMOUNT OF THE REGISTRATION FEE IS $500.00.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
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<S> <C>
PART A PROSPECTUS
1. .......................................... Cover Page
2. .......................................... Summary of Fund Expenses; Prospectus Summary
3. .......................................... Financial Highlights; Performance Information
Investment Objective and Policies; The Fund and its Management; Cover
4. .......................................... Page; Investment Restrictions; Prospectus Summary; Risk Considerations
The Fund and Its Management; Back Cover; Investment Objective and
5. .......................................... Policies
6. .......................................... Dividends, Distributions and Taxes; Additional Information
7. .......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. .......................................... Redemptions and Repurchases; Shareholder Services
9. .......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. .......................................... Cover Page
11. .......................................... Table of Contents
12. .......................................... The Fund and Its Management
Investment Practices and Policies; Investment Restrictions; Portfolio
13. .......................................... Transactions and Brokerage
14. .......................................... The Fund and Its Management; Trustees and Officers
15. .......................................... The Fund and Its Management; Trustees and Officers
The Fund and Its Management; The Distributor; Custodian and Transfer
16. .......................................... Agent; Independent Accountants; Shareholder Services
17. .......................................... Portfolio Transactions and Brokerage
18. .......................................... Description of Shares
The Distributor; Redemptions and Repurchases; Financial Statements;
19. .......................................... Determination of Net Asset Value; Shareholder Services
20. .......................................... Dividends, Distributions and Taxes
21. .......................................... The Distributor
22. .......................................... Performance Information
23. .......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
DEAN WITTER
CAPITAL APPRECIATION FUND
PROSPECTUS , 1995
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DEAN WITTER CAPITAL APPRECIATION FUND (THE "FUND") IS AN OPEN-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM
CAPITAL APPRECIATION. THE FUND SEEKS TO MEET ITS INVESTMENT OBJECTIVE BY
INVESTING PRIMARILY IN THE COMMON STOCKS OF U.S. COMPANIES THAT, IN THE OPINION
OF THE INVESTMENT MANAGER, OFFER THE POTENTIAL FOR EITHER SUPERIOR EARNINGS
GROWTH AND/OR APPEAR TO BE UNDERVALUED. CURRENT INCOME IS NOT AN OBJECTIVE OF
THE FUND. (SEE "INVESTMENT OBJECTIVE AND POLICIES").
Initial Offering--Shares are being offered in an underwriting by Dean Witter
Distributors Inc. at $10.00 per share with no underwriting commission, with all
proceeds going to the Fund. All expenses in connection with the organization of
the Fund and this offering will be paid by the Investment Manager and
Underwriter except for a maximum of $250,000 of organizational expenses to be
reimbursed by the Fund. The initial offering will run from approximately
, 1995 through , 1995.
Continuous Offering--A continuous offering will commence approximately one week
after the closing date (anticipated for , 1995, of the initial
offering. Shares of the Fund will be priced at the net asset value per share
next determined following receipt of an order.
Repurchases and/or redemptions of shares purchased in either the initial
offering or the continuous offering are subject in most cases to a contingent
deferred sales charge, which declines from 5% to 1% of the amount redeemed, if
made within six years of purchase, which charge will be paid to the Fund's
Underwriter/Distributor, Dean Witter Distributors Inc. See "Repurchases and
Redemptions--Contingent Deferred Sales Charge." In addition, the Fund pays the
Underwriter/Distributor a Rule 12b-1 distribution fee pursuant to a Plan of
Distribution at the annual rate of % 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--Continuous Offering--Plan of Distribution."
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 3
Financial Highlights..............................
The Fund and its Management....................... 4
Investment Objective and Policies................. 4
Risk Considerations............................. 5
Investment Restrictions........................... 8
Underwriting...................................... 9
Purchase of Fund Shares--
Continuous Offering............................. 9
Shareholder Services.............................. 11
Redemptions and Repurchases....................... 13
Dividends, Distributions and Taxes................ 14
Performance Information........................... 15
Additional Information............................ 15
</TABLE>
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.
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 , 1995, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER
CAPITAL APPRECIATION FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or
(800) 526-3143
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DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
open-end, diversified management investment company. The Fund invests primarily in the common
stocks of U.S. companies that, in the opinion of the Investment Manager, offer the potential for
either superior earnings growth and/or appear to be undervalued. Current income is not an
objective of the Fund.
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SHARES OFFERED Shares of beneficial interest with $.01 par value (see page ).
- -------------------------------------------------------------------------------------------------------
INITIAL Shares are being offered in an Underwriting by Dean Witter Distributors Inc. at $10.00 per share
OFFERING with no underwriting discount or commission. The minimum purchase is 100 shares ($1,000). Shares
redeemed within six years of purchase are subject to a contingent deferred sales charge under most
circumstances. The initial offering will run approximately from , 1995 through
, 1995. The closing will take place on , 1995 or such other date as may be
agreed upon by Dean Witter Distributors Inc. and the Fund (the "Closing Date"). Shares will not be
issued and dividends will not be declared by the Fund until after the Closing Date. If any orders
received during the initial offering period are accompanied by payment, such payment will be
returned unless an accompanying request for investment in a Dean Witter money market fund is
received at the time the payment is made. Any purchase order may be cancelled at any time prior to
the Closing Date (see page ).
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CONTINUOUS A continuous offering will commence within approximately one week after completion of the initial
OFFERING offering. During the continuous offering, the minimum initial investment will be $1,000 and the
minimum subsequent investment will be $100 (see page ).
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INVESTMENT The investment objective of the Fund is to seek long-term capital appreciation.
OBJECTIVE
- -------------------------------------------------------------------------------------------------------
INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
MANAGER subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory,
management and administrative capacities to investment companies and other portfolios
with net assets under management of approximately $ billion at , 1995. (see page 6).
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MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of % of the Fund's daily net
FEE assets, (see page ).
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DIVIDENDS AND Dividends from net investment income are paid at least annually. Capital gains, if any, are
DISTRIBUTIONS distributed at least annually or retained for reinvestment by the Fund. Dividends and capital
gains distributions are automatically reinvested in additional shares at net asset value (without
sales charge), unless the shareholder elects to receive cash (see page ).
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UNDERWRITER AND Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a
DISTRIBUTOR distribution fee accrued daily and payable monthly at the rate of % 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 which
includes payment of sales commissions to account executives and various other promotional and
sales related expenses. The Distributor also receives the proceeds of any contingent deferred
sales charges (see page ).
- -------------------------------------------------------------------------------------------------------
REDEMPTION-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily
CONTINGENT redeemed if the total value of the account is less than $100. Although no commission or sales load
DEFERRED is imposed upon the purchase of shares, a contingent deferred sales charge (which declines from 5%
SALES to 1%) is imposed on any redemption of shares if after such redemption the aggregate current value
CHARGE 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 ).
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RISKS The net asset value of the Fund's shares will fluctuate with changes in the market value of its
portfolio securities. The market value of the Fund's portfolio securities will increase or
decrease due to a variety of economic, market or political factors which cannot be predicted. The
Fund is intended for long-term investors who can accept the risks involved in seeking long-term
capital appreciation through the investment primarily in the securities of companies that offer
the potential for either superior earnings growth and/or appear to be undervalued. In selecting
investments for the Fund, the Investment Manager has no general criteria as to a company's asset
size, earnings or industry type. It should be recognized that investing in such companies involves
greater risk than is customarily associated with investing in more established companies. The Fund
may invest in the securities of foreign issuers which entails additional risks. The Fund may also
invest in futures and options which may be considered speculative in nature and may involve
greater risks than those customarily assumed by other investment companies which do not invest in
such instruments. An investment in shares of the Fund should not be considered a complete
investment program and is not appropriate for all investors. Investors should carefully consider
their ability to assume these risks and the risks outlined under the heading "Risk
Considerations", p. before making an investment in the Fund (see "Risk Considerations", pp. ).
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases......... None
Maximum Sales Charge Imposed on Reinvested
Dividends........................................ None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original
purchase price or redemption proceeds)........... 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining rates:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- -------------------------------------------------- -----------
<S> <C>
First............................................. 5.0%
Second............................................ 4.0%
Third............................................. 3.0%
Fourth............................................ 2.0%
Fifth............................................. 2.0%
Sixth............................................. 1.0%
Seventh and thereafter............................ None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees................................... None
Exchange Fee...................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees................................... %
12b-1 Fees*....................................... %
Other Expenses.................................... %
Total Fund Operating Expenses**+.................. %
<FN>
- ------------------------
"Total Fund Operating Expenses", as shown above, are based upon expected
amounts of expenses of the Fund for the fiscal period ending , 199 .
* The 12b-1 fee is accrued daily and payable monthly, at an annual rate of %
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 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. A portion of the 12b-1 fee equal to 0.25% of
the Fund's average daily net assets is characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines (see "Purchase of Fund Shares").
** "Total Fund Operating Expenses," as shown above, is based upon the sum of the
12b-1 Fees, Management Fees and estimated "Other Expenses," incurred by the
Fund for the fiscal period ended , 1995.
+ The Investment Manager has undertaken to assume all operating expenses
(except for any 12b-1 and/or brokerage fees) and to waive the compensation
provided for in its Management Agreement until such time as the Fund has $50
million of net assets or until six months from the date of commencement of
the Fund's operations, whichever occurs first. The fees and expenses
disclosed above do not reflect the assumption of any expenses or the waiver
of any compensation by the Investment Manager.
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- -------------------------------------------------- ------- -------
<S> <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:....... $ $
You would pay the following expenses on the same
investment, assuming no redemption:.............. $ $
</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 "Redemption and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter Capital Appreciation Fund (the "Fund") is an open-end, diversified,
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of The
Commonwealth of Massachusetts on , 1995.
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 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$ billion at , 1995. The Investment Manager also manages portfolios of
pension plans, other institutions and individuals which aggregated approximately
$ billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of % to the Fund's net assets.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly assumed
by the Investment Manager under its Investment Management Agreement with the
Fund.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is long-term capital appreciation. The
objective is a fundamental policy of the Fund and may not be changed without
shareholder approval. There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 80% of its net assets in the common stocks of
U.S. companies that, in the opinion of the Investment Manager, offer the
potential for either superior earnings growth and/or appear to be undervalued.
The Investment Manager will base the selection of stocks for the Fund's
portfolio on research and analysis, taking into account, among other factors, a
company's price/earnings ratio (that is whether the current stock price appears
undervalued in relation to earnings, projected cash flow, or asset value per
share; or the price-to-earnings ratio is attractive relative to the company's
underlying earnings growth rate), growth in sales, market-to-book ratio, the
quality of a company's balance sheet, and profitability in order to determine
whether the current market valuation is less than the Investment Manager's view
of a company's intrinsic value. Also, when reviewing investments for selection,
the Investment Manager will consider the following characteristics of a company:
capable management; attractive business niches; pricing flexibility; sound
financial and accounting practices and a demonstrated ability or prospects to
consistently grow revenues, earnings and cash flow. Stocks may also be selected
on the basis of whether the Investment Manager believes that the potential
exists for some catalyst (such as increased investor attention, asset sales, a
new product/innovation, or a change in management) to cause the stock's price to
rise. Such factors are part of the Investment Manager's overall investment
selection process.
The Investment Manager has no general criteria as to asset size, earnings or
industry type which would make an investment unsuitable for purchase by the
Fund. In addition, since the Investment Manager is seeking investments in
companies whose securities may appear to be undervalued, there is no limitation
on the stock price of any particular investment. However, as a result of the
selection process, which focuses on fundamentals in relation to prices, such
review of investments will include companies with low-priced stocks. In this
category are large companies with low-priced stocks (so called "fallen angels")
which, in the opinion of the Investment Manager, may appear to be undervalued
because they are overlooked by many investors; may not be closely followed
through investment research and/or their prices may reflect pessimism about the
companies' (and/or its industry's) outlook. Such compa-
4
<PAGE>
nies, by virtue of their stock price, may be takeover candidates. Low-priced
stocks are also associated with smaller companies whose securities' value may
reflect a discount because of smaller size and lack of research coverage;
emerging growth companies and private companies undergoing their initial public
offering. The Fund will invest in companies of all sizes. For a discussion of
the risks of investing in the securities of such companies, see "Risk
Considerations" below.
Consequently, the Fund looks for quality businesses with an investment
outlook based upon a mix of growth potential, financial strength and fundamental
value. The focus on fundamentals in relation to price sets the Fund apart from
pure "growth" or pure "value" funds. The Fund's holdings will be widely
diversified by industry and company and under most circumstances, at the time of
initial purchase, the average position will be less than 1.5% of the Fund's net
assets.
In addition to U.S. common stock, this portion of the Fund's portfolio may
also include convertible securities, rights and warrants, when considered by the
Investment Manager to be consistent with the Fund's investment objective. (For a
discussion of the risks of investing in each of these securities, see "Risk
Considerations" below.)
The Fund may invest in debt or preferred equity securities convertible into
or exchangeable for equity securities. The Fund may also invest in other debt
securities without regard to quality or rating, if in the opinion of the
Investment Manager, such securities which meet the investment criteria of the
Fund. The Fund will not purchase a non-investment grade debt security (or junk
bond) if, immediately after such purchase, the Fund would have more than 5% of
its total assets invested in such securities.
The Fund may invest up to 10% of its assets in foreign securities, including
non-dollar denominated securities traded outside of the U.S. and U.S.
dollar-denominated securities such as ADRs. (For a discussion of the risks of
investing in foreign securities, see "Risk Considerations" below.)
There may be periods during which, in the opinion of the Investment Manager,
market conditions warrant a 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 is invested in money
market instruments or cash, including obligations issued or guaranteed as to
principal or interest by the United States Government, its agencies or
instrumentalities, certificates of deposit, bankers' acceptances and other
obligations of domestic banks having total assets of $1 billion or more, and
short-term commercial paper of corporations organized under the laws of any
state or political subdivision of the United States.
The securities in which the Fund invests may or may not be listed on a
national stock exchange, but if they are not so listed, will generally have an
established over-the-counter market.
RISK CONSIDERATIONS
Given the investment risks described below, an investment in shares of the Fund
should not be considered a complete investment program and is not appropriate
for all investors. Investors should carefully consider their ability to assume
these risks before making an investment in the Fund.
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund is intended for
long-term investors who can accept the risks involved in seeking long-term
capital appreciation through the investment primarily in the securities of
companies that offer the potential for either superior earnings growth and/or
appear to be undervalued. In selecting investments for the Fund, the Investment
Manager has no general criteria as to a company's asset size, earnings or
industry type. It should be recognized that investing in such companies involves
greater risk than is customarily associated with investing in more established
companies.
The Fund may invest in securities of companies that are not well known to
the investing public or followed by many securities analysts, with the result
that there may be less publicly available information concerning such
securities. Also, these securities may be more volatile in price and have lower
trading volumes. In addition, while companies in which the Fund may invest often
have sales and earnings growth rates which may exceed those of large companies
and may be reflected in more rapid share price appreciation, such companies may
have limited operating histories, product lines, markets or financial resources
and they may be dependent upon one-person management. These companies may be
subject to intense competition from larger companies. The securities of such
companies may have limited marketability and may be subject to more abrupt or
erratic movements in price than securities of larger companies or in the market
averages in general. In the case of securities of large companies with
lower-priced stock (the so-called "fallen angels"), the risk associated with
such investment is that the price may continue to fall.
RIGHTS AND WARRANTS. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting rights,
pay no dividends and have no rights with respect to the corporation issuing
them.
CONVERTIBLE SECURITIES. The Fund may acquire, through purchase or a
distribution by the issuer of a security held in
5
<PAGE>
its portfolio, a fixed-income security which is convertible into common stock of
the issuer. 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 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. A portion of the convertible securities in which the
Fund may invest may be unrated or, if rated, rated below investment grade by a
nationally recognized statistical rating organization.
FOREIGN SECURITIES. The Fund may invest up to 10% of its total assets in
foreign securities. Foreign securities investments may be affected by changes in
currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and abroad)
or changed circumstances in dealings between nations. Fluctuations in the
relative rates of exchange between the currencies of different nations will
affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward foreign currency
exchange contracts (described below). The Fund will incur certain costs in
connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
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.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which may
be viewed as a type of secured lending by the Fund, and which typically involve
the acquisition by the Fund of debt securities, from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
and maintaining adequate collateralization.
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
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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. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a "when,
as and if issued" basis under which the issuance of the security depends upon
the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization, leveraged buyout or debt restructuring. If the anticipated event
does not occur and the securities are not issued, the Fund will have lost an
investment opportunity. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a "when,
as and if issued" basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be included within the category "illiquid securities," which under current
policy may not exceed 10% of the Fund's net assets.
OPTIONS AND FUTURE TRANSACTIONS. The Fund may purchase and sell (write) call
and put options on portfolio securities which are denominated in either U.S.
dollars or foreign currencies and on the U.S. dollar and foreign currencies,
which are or may in the future be listed on several U.S. and foreign securities
exchanges or are written in over-the-counter transactions ("OTC options"). OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund.
The Fund is permitted to write covered call options on portfolio securities
and the U.S. dollar and foreign currencies, without limit, in order to hedge
against the decline in the value of a security or currency in which such
security is denominated and to close out long call option positions. The Fund
may write covered put options, under which the Fund incurs an obligation to buy
the security (or currency) underlying the option from the purchaser of the put
at the option's exercise price at any time during the option period, at the
purchaser's election.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the price
of a security it anticipates purchasing or, in the case of call options on a
foreign currency, to hedge against an adverse exchange rate change of the
currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund may
purchase put options on securities which it holds in its portfolio to protect
itself against a decline in the value of the security and to close out written
put positions in a manner similar to call option closing purchase transactions.
There are no other limits on the Fund's ability to purchase call and put
options.
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
underlying portfolio securities, on any currency ("currency" futures), on U.S.
and foreign fixed-income securities ("interest rate" futures) and on such
indexes of U.S. or foreign equity or fixed-income securities as may exist or
come into being ("index" futures). The Fund may purchase or sell interest rate
futures contracts for the purpose of hedging some or all of the value of its
portfolio securities (or anticipated portfolio securities) against changes in
prevailing interest rates. The Fund may purchase or sell index futures contracts
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices (or the currency in which
they are denominated). As a futures contract purchaser, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
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New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
The Fund may close out its position as writer of an option, or as a buyer or
seller of a futures contract, only if a liquid secondary market exists for
options or futures contracts of that series. There is no assurance that such a
market will exist, particularly in the case of OTC options, as such options may
generally only be closed out by entering into a closing purchase transaction
with the purchasing dealer. Also, exchanges may limit the amount by which the
price of many futures contracts may move on any day. If the price moves equal
the daily limit on successive days, then it may prove impossible to liquidate a
futures position until the daily limit moves have ceased.
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 Investment Manager or Sub-Advisor 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 will arise in employing futures contracts to protect against
the price volatility of portfolio securities is that the prices of securities,
currencies and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the U.S. dollar
cash prices of the Fund's portfolio securities and their denominated currencies.
See the Statement of Additional Information for a further discussion of risks.
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 money market
instruments, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined daily,
of the loaned securities. 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, loans of portfolio
securities will only be made to firms deemed by the Investment Manager to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section of the Statement of Additional Information.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager 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
funds and fund portfolios, with approximately $ billion in assets as of July
31, 1995. Ronald Worobel, Senior Vice President of InterCapital and a member of
InterCapital's Small Capitalization Equity Group, is the primary portfolio
manager of the Fund 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 DWR.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Investment
Manager. In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR.
Although the Fund does not intend to engage in short-term trading, it may
sell portfolio securities without regard to the length of time they have been
held when such sale will, in the opinion of the Investment Manager contribute to
the Fund's investment objective. It is not anticipated that the Fund's portfolio
turnover rate will exceed 300% in any one year.
The Fund will incur brokerage costs commensurate with its portfolio turnover
rate. Short term gains and losses may result from such portfolio transactions.
See "Dividends, Distributions and Taxes" for a discussion of the tax
implications of the Fund's trading policy. A more extensive discussion of the
Fund's portfolio brokerage policies is set forth in the Statement of Additional
Information.
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INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
as defined in the Act. For purposes of the following limitations: (i) all
percentage limitations apply immediately after a purchase or initial investment,
and (ii) any subsequent change in any applicable percentage resulting from
market fluctuations or other changes in total or net assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of its
total assets, purchase more than 10% of the voting securities of any issuer.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up to
10,000,000 shares from the Fund, which number may be increased or decreased in
accordance with the Underwriting Agreement. The initial offering will run
approximately from , 1995 through , 1995. The Underwriting
Agreement provides that the obligation of the Underwriter is subject to certain
conditions precedent and that the Underwriter will be obligated to purchase the
shares on , 1995, or such other date as may be agreed upon by the
Underwriter and the Fund (the "Closing Date"). Shares will not be issued and
dividends will not be declared by the Fund until after the Closing Date. For
this reason, payment is not required to be made prior to the Closing Date. If
any orders received during the initial offering period are accompanied by
payment, such payment will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at the time the
payment is made. Prospective investors in money market funds should request and
read the money market fund prospectus prior to investing. All such funds
received and invested in a Dean Witter money market fund will be automatically
invested in the Fund on the Closing Date without any further action by the
investor. Any investor may cancel his or her purchase of Fund shares without
penalty at any time prior to the Closing Date.
The Underwriter will purchase shares from the Fund at $10.00 per share. No
underwriting discounts or selling commissions will be deducted from the initial
public offering price. The Underwriter may, however, receive contingent deferred
sales charges from future redemptions of such shares (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge").
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such other
date as may be agreed to between the parties.
The minimum number of Fund shares which may be purchased by any shareholder
pursuant to this offering is 100 shares. Certificates for shares purchased will
not be issued unless requested by the shareholder in writing.
PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Minimum subsequent purchases of $100
or more may be made by sending a check, payable to Dean Witter Capital
Appreciation Fund, directly to Dean Witter Trust Company (the "Transfer Agent")
at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive of
DWR or other Selected Broker-Dealer. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to 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
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<PAGE>
the Transfer Agent. The offering price will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value").
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to any dividends declared
beginning on the next business day following settlement date. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. Shares purchased through the Transfer Agent are entitled to any
dividends declared beginning on the next business day following receipt of an
order. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive dividends and
capital gains distributions if their order is received by the close of business
on the day prior to the record date for such distributions. 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 the Selected Broker-Dealer. In
addition, some sales personnel of the Selected Broker-Dealer will receive
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan"), under which the Fund pays the Distributor a fee, which is accrued
daily and payable monthly, at an annual rate of % of the lesser of: (a)
the average daily aggregate gross sales of the Fund's shares since the inception
of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
A portion of the fee payable pursuant to the Plan, equal to 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines. The service fee is a payment made for personal service
and/or the maintenance of shareholder accounts.
Amounts paid under the Plan are paid to the Distributor for 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.
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 $1 million in expenses in distributing
shares of the Fund had been incurred and $750,000 had been received as described
in (i) and (ii) above, the excess expense would amount to $250,000.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount, if any, 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 (or on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time) by taking the value of all assets of the Fund, subtracting all its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange or quoted by NASDAQ is valued at its latest
sale price on that exchange or quotation service, prior to the time assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where a security is traded on more than one exchange, the
security is valued on the exchange designated as the primary market by the
Trustees); and (2) all other portfolio
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securities for which over-the-counter market quotations are readily available
are valued at the latest bid price. When market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale and 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 Board of 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 prior to the close of the New York Stock Exchange.
Dividends receivable are accrued as of the ex-dividend date or as of the time
that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of sixty 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.
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
- --------------------------------------------------------------------------------
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 as acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value per share next
determined after receipt by the Transfer Agent, by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. Shares
so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases").
EASYINVESTSM. Shareholders may subscribe to EasyInvest, an automatic purchase
plan which provides for any amount from $100 to $5,000 to be transferred
automatically from a checking or savings account, on a semi-monthly, monthly or
quarterly basis, to the Transfer Agent for investment in shares of the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on 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.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
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 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 Short-Term Bond Fund, Dean
Witter Limited Term Municipal Trust, Dean Witter Balanced Growth Fund, Dean
Witter
11
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Balanced Income Fund and five Dean Witter Funds which are money market funds
(the foregoing ten non-CDSC funds are hereinafter collectively referred to as
the "Exchange Funds"). Exchanges may be made after the shares of the Fund
acquired by purchase (not by exchange or dividend reinvestment) have been held
for thirty days. There is no waiting period for exchanges of shares acquired by
exchange or dividend reinvestment.
An exchange to another CDSC fund or to 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 the 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 "Redemptions and Repurchases--Contingent Deferred Sales Charge").
However, in the case of shares exchanged into an Exchange Fund, upon a
redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the Exchange
Fund 12b-1 distribution fees 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 of 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 have been exchanged, upon such notice as may
be required by applicable regulatory agencies. Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on exchange of shares of the Fund
pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. In the case of any shareholder
holding a share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the Shareholder's account. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss. However, the ability to
deduct capital losses on an exchange may be limited in situations where there is
an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from
12
<PAGE>
the Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made in writing or by contacting the Transfer Agent at (800)
526-3143 (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the experience with the Dean
Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds may be
reduced by the amount of any applicable contingent deferred sales charges (see
below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption sent to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder(s), the shares may be redeemed by surrendering the certificates
with a written request for redemption, along with any additional information
required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------------- -----------------------
<S> <C>
First.................................... 5.0%
Second................................... 4.0%
Third.................................... 3.0%
Fourth................................... 2.0%
Fifth.................................... 2.0%
Sixth.................................... 1.0%
Seventh and thereafter................... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first. In addition, no CDSC
will be imposed on redemptions of shares which are attributable to reinvestment
of dividends or distributions from, or the proceeds of, certain Unit Investment
Trusts.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2; (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2); and (c) a tax-free return of
an excess contribution to an IRA. For the purpose of determining disability, the
Distributor utilizes the definition of
13
<PAGE>
disability contained in Section 72(m)(7) of the Internal Revenue Code, which
relates to the inability to engage in gainful employment. All waivers will be
granted only following receipt by the Distributor of confirmation of the
shareholder's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the telephonic
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 either the Fund, the
Distributor or DWR or other Selected Broker-Dealer. The offer by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice by
the Distributor at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under unusual
circumstances; E.G., when normal trading is not taking place on the New York
Stock Exchange. If the shares to be redeemed have recently been purchased by
check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund at their net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty days'
notice and at net asset value, the shares of any shareholder (other than shares
held in an Individual Retirement Account or custodial account under Section
403(b)(7) of the Internal Revenue Code) whose shares due to redemptions by the
shareholder have a value of less than $100 or such lesser amount as may be fixed
by the Trustees. However, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares is less than $100 and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to $100 or more before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay dividends and to
distribute substantially all of its net investment income and distribute capital
gains, if any, 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 net short-term capital gains to shareholders and 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
any such income and capital gains. Shareholders will normally have to pay
Federal income taxes, and any state and local income taxes, on the dividends and
distributions they receive from the Fund.
Distributions of 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. Some
part of such dividends and distributions may be eligible for the Federal
dividends received deduction available to the Fund's corporate shareholders.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
To avoid being subject to a
14
<PAGE>
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 makes the appropriate election with the Internal Revenue Service, the Fund
will report annually to its shareholders the amount per share of such taxes to
enable shareholders to claim United States foreign tax credits or deductions
with respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
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
over the life of the Fund. Average annual total return reflects all income
earned by the Fund, any appreciation or depreciation of the Fund's assets, all
expenses incurred by the Fund and all sales charges incurred by 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 the 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 indexes compiled by independent organizations,
such as mutual fund performance rankings of Lipper Analytical Services, Inc.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of a
liquidation, each share of beneficial interest of the Fund is entitled to its
portion of all the Fund's assets after all debts and expenses have been paid.
The shares do not have cumulative voting rights.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for obligations of the
Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to shareholders of personal liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean Witter
Services Company Inc. and the Distributor are subject to a strict Code of Ethics
adopted by those companies. The Code of Ethics is intended to ensure that the
interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and option transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
15
<PAGE>
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the recent report by the Investment Company Institute
Advisory Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
16
<PAGE>
DEAN WITTER
CAPITAL APPRECIATION FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
TRUSTEES
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center,
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
, 1995
CAPITAL APPRECIATION
FUND
- --------------------------------------------------
Dean Witter Capital Appreciation Fund (the "Fund") is an open-end,
diversified management investment company whose investment objective is to seek
capital appreciation. The Fund seeks to achieve its objective by investing
primarily in the common stocks of U.S. companies that, in the opinion of the
Investment Manager, offer the potential for either superior earnings growth
and/or appear to be undervalued. Current income is not an objective of the Fund.
(See "Investment Objective and Policies").
A Prospectus for the Fund dated , 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its 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
Capital Appreciation Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 6
Investment Practices and Policies...................................................... 10
Investment Restrictions................................................................ 24
Portfolio Transactions and Brokerage................................................... 26
The Underwriter........................................................................ 27
The Distributor........................................................................ 28
Determination of Net Asset Value....................................................... 30
Shareholder Services................................................................... 31
Redemptions and Repurchases............................................................ 35
Dividends, Distributions and Taxes..................................................... 38
Performance Information................................................................ 39
Description of Shares.................................................................. 40
Custodian and Transfer Agent........................................................... 41
Independent Accountants................................................................ 41
Reports to Shareholders................................................................ 41
Legal Counsel.......................................................................... 41
Experts................................................................................ 41
Registration Statement................................................................. 42
Statements of Assets and Liabilities at , 1995...........................
Report of Independent Accountants......................................................
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
, 1995.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the 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 of investments by the Fund's Trustees. In addition, Trustees of the Fund
provide guidance on economic factors and interest rate trends. Information as to
these Trustees and officers is contained under the caption "Trustees and
Officers".
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Insured Municipal Income Trust, InterCapital Insured Municipal Securities,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
California Municipal Securities, InterCapital Quality Municipal Investment
Trust, InterCapital Quality Municipal Income Trust, InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, High Income Advantage Trust,
High Income Advantage Trust II, High Income Advantage Trust III, Dean Witter
Government Income Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, Dean Witter U.S. Government Money Market Trust, Dean Witter
Variable Investment Series, Dean Witter World Wide Investment Trust, Dean Witter
Select Municipal Reinvestment Fund, Dean Witter U.S. Government Securities
Trust, Dean Witter World Wide Income Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, Dean Witter Utilities Fund, Dean Witter Managed Assets Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist Fund,
Dean Witter Intermediate Income Securites, Dean Witter Capital Growth
Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Premier Income Trust, Dean Witter Diversified Income Trust,
Dean Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter
Global Dividend Growth Securities, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
High Income Securities, Dean Witter National Municipal Trust, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select
Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean Witter
Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Municipal Income
Trust, Municipal Income Trust II, Municipal Income Trust III, Municipal Income
Opportunities Trust, Municipal Income Opportunities Trust II, Municipal Income
Opportunities Trust III, Municipal Premium Income Trust and Prime Income Trust.
The foregoing investment companies, together with the Fund, are collectively
referred to as the Dean Witter Funds.
3
<PAGE>
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 Term Trust 2002, TCW/DW Income and Growth
Fund, TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Global
Convertible Trust, TCW/DW Total Return Trust, TCW/DW Emerging Markets
Opportunities Trust, TCW/DW North American Intermediate Income Trust, TCW/DW
Term Trust 2001, TCW/DW Term Trust 2000 and TCW/ DW Term Trust 2003 (the "TCW/DW
Funds"). InterCapital also serves as: (1) 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 company may not be offered in the United States or
purchased by American citizens outside of the United States.
Pursuant to an Investment Management Agreement (the "Management 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 Management Agreement, the Investment Manager
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help and bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business, including the preparation of prospectuses, statements of
additional information, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys is, in the opinion of the
Investment Manager, necessary or desirable). In addition, the Investment Manager
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone service, heat, light, power and other utilities provided to the
Fund. The Investment Manager has retained DWSC to perform its administrative
services under the Agreement.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement or by the distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The Distributor")
will be paid by the Fund. The expenses borne by the Fund include, but are not
limited to: charges and expenses of any registrar; custodian, stock transfer and
dividend disbursing agent; brokerage commissions; taxes; engraving and printing
of share certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing, including
typesetting, and distributing Prospectuses and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and trustees' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of trustees or members of any advisory board or committee who are not
employees of the Investment Manager or any corporate affiliate of the Investment
Manager; all expenses incident to any dividend, withdrawal or redemption
options; charges and expenses of any outside service used for pricing of the
Fund's shares; fees and expenses of legal counsel, including counsel to the
trustees who are not interested persons of the Fund or of the Investment Manager
(not including compensation or expenses of attorneys who are employees of the
Investment Manager) and independent accountants; membership dues of industry
associations; interest on the Fund's 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
4
<PAGE>
costs and any indemnification relating thereto (depending upon the nature of the
legal claim, liability or lawsuit) and all other costs of the Fund's operations
properly payable by the Fund.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its obligation
thereunder, the Investment Manager is not liable to the Fund or any of its
investors for any act or omission by the Investment Manager or for any losses
sustained by the Fund or its investors. The Management Agreement in no way
restricts the Investment Manager from acting as investment manager or adviser to
others.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of % to the daily net assets of the Fund.
Pursuant to the Management Agreement total operating expenses of the Fund
are subject to applicable limitations under rules and regulations of states
where the Fund is authorized to sell its shares. Therefore, operating expenses
of the Fund are effectively subject to such limitations as the same may be
amended from time to time. Presently, the most restrictive limitation is as
follows: If, in any fiscal year, the total operating expenses of a fund,
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 such fund for the amount of
such excess.
The Investment Manager paid the organizational expenses of the Fund incurred
prior to the offering of the Fund's shares. The Fund will reimburse the
Investment Manager for such expenses in accordance with the terms of the
Underwriting Agreement between the Fund and Distributors. The Fund is deferring
and amortizing the organizational expenses on the straight line method over a
period not to exceed five years from the date of commencement of the Fund's
operations.
The Management Agreement (the "Agreement") was initially approved by the
Trustees on , 1995 and by InterCapital as the then sole shareholder on
, 1995. The Agreement may be terminated at any time, without penalty,
on thirty days' notice by the Trustees of the Fund, by the holders of a majority
of the outstanding shares of the Fund, as defined in the Investment Company Act
of 1940, as amended (the "Act"), or by the Investment Manager. The Agreement
will automatically terminate in the event of its assignment (as defined in the
Act).
Under its terms, the Agreement will continue in effect until ,
1997, and from year to year thereafter, provided continuance of the Agreement is
approved at least annually by the vote of the holders of a majority of the
outstanding shares of the Fund, as defined in the Act, or by the Trustees of the
Fund; provided that in either event such continuance is approved annually by the
vote of a majority of the Trustees of the Fund who are not parties to the
Agreement or "interested persons" (as defined in the Act) of any such party (the
"Independent Trustees"), which vote must be cast in person at a meeting called
for the purpose of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right of
Dean Witter, Discover & Co. ("DWDC"). The Fund has agreed that DWDC may use, or
at any time permit others to use, the name "Dean Witter". The Fund has also
agreed that in the event the Agreement is terminated, or if the affiliation
between InterCapital and DWDC is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWDC shall so request.
5
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the Dean Witter Funds and the TCW/DW Funds are shown
below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (62) ......................... Chairman, Chief Executive Officer and Director of
Chairman of the Board, InterCapital, Distributors and DWSC; Executive Vice
President and Chief Executive President and Director of DWR; Chairman, Director or
Officer and Trustee Trustee, President and Chief Executive Officer of the Dean
Two World Trade Center Witter Funds; Chairman, Chief Executive Officer and
New York, New York Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust Company ("DWTC"); Director and/or officer of
various DWDC subsidiaries; formerly Executive Vice
President and Director of DWDC (until February, 1993).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
Sheldon Curtis (63) .................................. Senior Vice President, Secretary and General Counsel of
Trustee InterCapital and DWSC; Senior Vice President, Assistant
Two World Trade Center Secretary and Assistant General Counsel of Distributors;
New York, New York Senior Vice President and Secretary of DWTC; Assistant
Secretary of DWR and Vice President, Secretary and General
Counsel of the Dean Witter Funds and the TCW/DW Funds.
<FN>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC and Distributors and President and
Director of DWTC, Edmund C. Puckhaber, Executive Vice President of InterCapital
and Director of DWTC, Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Joseph J. McAlinden, Senior Vice
President of InterCapital are Vice Presidents of the Fund; and Barry Fink and
Marilyn K. Cranney, First Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice Presidents
and Assistant General Counsels of InterCapital and DWSC, are Assistant
Secretaries of the Fund.
BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES
As mentioned above under the caption "The Fund and its Management," the Fund
is one of the Dean Witter Funds, a group of investment companies managed by
InterCapital. As of the date of this Statement of Additional Information, there
are a total of 77 Dean Witter Funds, comprised of 116 portfolios. As of ,
1995, the Dean Witter Funds had total net assets of approximately $ billion
and more than five million shareholders.
The Board of Directors or Trustees, consisting of ten (10) directors or
trustees, is the same for each of the Dean Witter Funds. Some of the Funds are
organized as business trusts, others as corporations, but the functions and
duties of directors and trustees are the same. Accordingly, directors and
trustees of the Dean Witter Funds are referred to in this section as Trustees.
Eight Trustees, that is, 80% of the total number, have no affiliation or
business connection with InterCapital or any of its affiliated persons and do
not own any stock or other securities issued by InterCapital's parent company,
DWDC. These are the "disinterested" or "independent" Trustees. Five of the eight
Independent Trustees are also Independent Trustees of the TCW/DW Funds. As of
the date of this Statement of Additional Information, there are a total of 13
TCW/DW Funds. Two of the Funds' Trustees, that is, the management Trustees, are
affiliated with InterCapital.
As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to the
investment company's sponsor." In addition to their general "watchdog" duties,
the Independent Trustees are charged with a wide variety of responsibilities
under the Act. In order to perform their duties effectively, the Independent
Trustees are required to review and understand large amounts of material, often
of a highly technical and legal nature.
The Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; that is, people whose advice and counsel are valuable and in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
of the demands made on their time by the Funds. Indeed, to serve on the Funds'
Boards, certain Trustees who would be qualified and in demand to serve on bank
boards would be prohibited by law from serving at the same time as a director of
a national bank and as a Trustee of a Fund.
The Independent Trustees are required to select and nominate individuals to
fill any Independent Trustee vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution. Since most of the
8
<PAGE>
Dean Witter Funds have such a plan, and since all of the Funds' Boards have the
same members, the Independent Trustees effectively control the selection of
other Independent Trustees of all the Dean Witter Funds.
GOVERNANCE STRUCTURE OF THE DEAN WITTER FUNDS
While the regulatory system establishes both general guidelines and specific
duties for the Independent Trustees, the governance arrangements from one
investment company group to another vary significantly. In some groups the
Independent Trustees perform their role by attendance at periodic meetings of
the board of directors with study of materials furnished to them between
meetings. At the other extreme, an investment company complex may employ a
full-time staff to assist the Independent Trustees in the performance of their
duties.
The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Trustees and the Funds' Investment Manager alike
believe that these arrangements are effective and serve the interests of the
Funds' shareholders. All of the Independent Trustees serve as members of the
Audit Committee and the Committee of the Independent Trustees. Three of them
also serve as members of the Derivatives Committee.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements, continually
reviewing Fund performance, checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex, and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; advising the independent accountants and management personnel that
they have direct access to the Committee at all times; and preparing and
submitting Committee meeting minutes to the full Board.
Finally, the Board of each Fund has established a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
During the calendar year ended December 31, 1994, the three Committees held
a combined total of eleven meetings. The Committee meetings are sometimes held
away from the offices of InterCapital and sometimes in the Board room of
InterCapital. These meetings are held without management directors or officers
being present, unless and until they may be invited to the meeting for purposes
of furnishing information or making a report. These separate meetings provide
the Independent Trustees an opportunity to explore in depth with their own
independent legal counsel, independent auditors and other independent
consultants, as needed, the issues they believe should be addressed and resolved
in the interests of the Funds' shareholders.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Trustees to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on the issues, and arranges to have the information furnished.
He also arranges for the services of independent experts to be provided to the
Committees and consults with them in advance of meetings to help refine reports
and to focus on critical
9
<PAGE>
issues. Members of the Committees believe that the person who serves as Chairman
of all three Committees and guides their efforts is pivotal to the effective
functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment management and other operating
contracts of the Funds and, on behalf of the Committees, conducts negotiations
with the Investment Manager and other service providers. In effect, the Chairman
of the Committees serves as a combination of chief executive and support staff
of the Independent Trustees.
The Chairman of the Committees is not employed by any other organization and
devotes his time primarily to the services he performs as Committee Chairman and
Independent Trustee of the Dean Witter Funds and as an Independent Trustee of
the TCW/DW Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
VALUE OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN WITTER
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds is in the best
interests of all the Funds' shareholders. This arrangement avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. It is believed that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the likelihood of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, it is believed that having the same Independent Trustees serve
on all Fund Boards enhances the ability of each Fund to obtain, at modest cost
to each separate Fund, the services of Independent Trustees, and a Chairman of
their Committees, of the caliber, experience and business acumen of the
individuals who serve as Independent Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund will pay each Independent Trustee an annual fee of $1,200 plus a
per meeting fee of $50 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund will pay the Chairman of
the Audit Committee an annual fee of $1,000 and will pay the Chairman of the
Committee of the Independent Trustees an additional annual fee of $2,400, in
each case inclusive of the Committee meeting fees). The Fund will also reimburse
such Trustees for travel and other out-of-pocket expenses incurred by them in
connection with attending such meetings. Trustees and officers of the Fund who
are or have been employed by the Investment Manager or an affiliated company
will not receive any compensation or expense reimbursement from the Fund.
Payments will commence as of the time the Fund begins paying management fees,
which, pursuant to an undertaking by the Investment Manager, will be at such
time as the Fund has $50 million of net assets or six months from the date of
commencement of the Fund's operations, whichever occurs first.
At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming the same number of
Board and committee meetings as were held by the other Dean Witter Funds during
the calendar year ended December 31, 1994, it is estimated that compensation
paid to each Independent Trustee during such fiscal year will be the amount
shown in the following table.
10
<PAGE>
FUND COMPENSATION (ESTIMATED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ---------------------------------------------------------------------------------------- ---------------
<S> <C>
</TABLE>
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE CHAIRMAN OF
AS DIRECTOR OR FOR SERVICE AS COMMITTEES OF
TRUSTEE AND TRUSTEE AND INDEPENDENT
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTORS/
OF 73 DEAN WITTER OF 13 TCW/DW TRUSTEES AND
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS AUDIT COMMITTEES
- -------------------------------------- ----------------------- ----------------------- ---------------------
<S> <C> <C> <C>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES TO
73 DEAN WITTER
FUNDS
AND 13
NAME OF INDEPENDENT TRUSTEE TCW/DW FUNDS
- -------------------------------------- ----------------------
<S> <C>
</TABLE>
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
FOREIGN SECURITIES. As stated in the Prospectus, the Fund may invest in
securities issued by foreign issuers. Investors should carefully consider the
risks of investing in securities of foreign issuers and securities denominated
in non-U.S. currencies. Fluctuations in the relative rates of exchange between
the currencies of different nations will affect the value of the Fund's
investments. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's 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 currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be
11
<PAGE>
less publicly available information about such companies. Moreover, foreign
companies are not subject to uniform accounting, auditing and financial
reporting standards and requirements comparable to those applicable to U.S.
companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation then 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.
REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. These
agreements, which may be viewed as a type of secured lending by the Fund,
typically involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
("collateral") at a specified price and at a fixed time in the future, usually
not more than seven days from the date of purchase. The collateral will be
maintained in a segregated account and will be marked to market daily to
determine that the value of the collateral, as specified in the agreement, does
not decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Investment Manager
subject to procedures established by the Board of Trustees of the Fund. In
addition, as described above, the value of the collateral underlying the
repurchase agreement will be at least equal to the repurchase price, including
any accrued interest earned on the repurchase agreement. In the event of a
default or bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss. It
is the current policy of the Fund not to invest in repurchase agreements that do
not mature within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 15% of its net assets.
The Fund's investments in repurchase agreements may at times be substantial
when, in the view of the Investment Manager, liquidity, tax or other
considerations warrant.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to notice provisions described below), and are at all times
secured by cash or cash equivalents, which are maintained in a segregated
account pursuant to applicable regulations and that are equal to at least the
market value, determined daily, of the loaned securities. The advantage of such
loans is that the Fund continues to receive the income on the loaned securities
while at the same time earning interest on the cash amounts deposited as
collateral, which will be invested in short-term obligations. The Fund will not
lend its portfolio securities if such loans are not permitted by the laws or
regulations of any state in which its shares are qualified for sale and will not
lend
12
<PAGE>
more than 25% of the value of its total assets. A loan may be terminated by the
borrower on one business day's notice, or by the Fund on four business days'
notice. If the borrower fails to deliver the loaned securities within four days
after receipt of notice, the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund. The creditworthiness of firms to which
the Fund lends its portfolio securities will be monitored on an ongoing basis by
the Investment Manager pursuant to procedures adopted and reviewed, on an
ongoing basis, by the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. However, the
Fund has no intention of lending any of its portfolio securities during its
fiscal year ending May 31, 1995.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time 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 commitment. 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. The securities so purchased or sold are subject
to market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. At the time the Fund makes the commitment to purchase or
sell securities on a when-issued, delayed delivery or forward commitment basis,
it will record the transaction and thereafter reflect the value, each day, of
such security purchased, or if a sale, the proceeds to be received, in
determining its net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase or sale price. The Fund will also
establish a segregated account with its custodian bank in which it will
continually maintain cash or cash equivalents or other high grade debt portfolio
securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis. Subject to the
foregoing restrictions, the Fund may purchase securities on such basis without
limit. The Investment Manager and the Board of Trustees do not believe that the
Fund's net asset value will be adversely affected by the purchase of securities
on such basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. The commitment
for the purchase of any such security will not be 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 maintain cash or cash equivalents or other high
grade debt portfolio securities equal in value to recognized commitments for
such securities. Once a segregated account has been established, if the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. The 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
13
<PAGE>
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The Investment Manager and the Trustees do not believe that
the net asset value of the Fund will be adversely affected by its purchase of
securities on such basis. The Fund may also sell securities on a "when, as and
if issued" basis provided that the issuance of the security will result
automatically from the exchange or conversion of a security owned by the Fund at
the time of the sale.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) Limitations on the resale of such securities may
have an adverse effect on their marketability, and may prevent the Fund from
disposing of them promptly at reasonable prices. The Fund may have to bear the
expense of registering such securities for resale and the risk of substantial
delays in effecting such registration.
The Securities and Exchange Commission ("SEC") has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. The procedures require that the following factors be taken into account in
making a liquidity determination: (1) the frequency of trades and price quotes
for the security; (2) the number of dealers and other potential purchasers who
have issued quotes on the security; (3) any dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the
marketplace trades (the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). If a restricted security is
determined to be "liquid", such security will not be included within the
category "illiquid securities", which under the SEC's current policies may not
exceed 15% of the Fund's net assets, and will not be subject to the 5%
limitation set out in the preceding paragraph.
The Rule 144A marketplace of sellers and qualified institutional buyers is
new and still developing and may take a period of time to develop into a mature
liquid market. As such, the market for certain private placements purchased
pursuant to Rule 144A may be initially small or may, subsequent to purchase,
become illiquid. Furthermore, the Investment Manager may not posses all the
information concerning an issue of securities that it wishes to purchase in a
private placement to which it would normally have had access, had the
registration statement necessitated by a public offering been filed with the
Securities and Exchange Commission.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same series to effect closing transactions,
and may hedge against potential changes in the market value of investments (or
anticipated investments) and facilitate the reallocation of the Fund's assets
into and out of equities and fixed-income securities by purchasing put and call
options on portfolio (or eligible portfolio) securities and engaging in
transactions involving futures contracts and options on such contracts. The Fund
may also hedge against potential changes in the market value of the currencies
in which its investments (or anticipated investments) are denominated by
purchasing put and call options on currencies and engage in transactions
involving currency futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options Clearing
Corporation ("OCC") and other clearing entities including foreign exchanges.
Ownership of a listed call option gives the Fund the right to buy from the OCC
the underlying security covered by the option at the stated exercise price (the
price per unit of the underlying security) 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 the underlying security 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
14
<PAGE>
the Fund the right to sell the underlying security to the OCC at the stated
exercise price. Upon notice of exercise of the put option, the writer of the put
would have the obligation to purchase the underlying security from the OCC at
the exercise price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges on which such securities trade will not continue indefinitely to
introduce options with new expirations to replace expiring options on particular
issues. Instead, the expirations introduced at the commencement of options
trading on a particular issue will be allowed to run their course, with the
possible addition of a limited number of new expirations as the original ones
expire. Options trading on each issue of bonds or notes will thus be phased out
as new options are listed on more recent issues, and options representing a full
range of expirations will not ordinarily be available for every issue on which
options are traded.
OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian, so that they will
be treated as being covered.
OPTIONS ON 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 a
security 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
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the interbank market involve substantially larger amounts than those that may be
involved in the use of foreign currency options, investors may be disadvantaged
by having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that are
less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
OTC OPTIONS. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the Fund. With OTC options, such variables
as expiration date, exercise price and premium will be agreed upon between the
Fund and the transacting dealer, without the intermediation of a third party
such as the OCC. If the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, the Fund would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with primary U.S. Government securities dealers recognized by
the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities and the U.S. dollar and foreign currencies, without
limit, in order to aid in achieving its investment objective. 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 securities (currency) deliverable under the call option. A call option is
also covered if the Fund holds a call on the same security (currency) 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 achieve a greater total return than would be
realized from holding the underlying securities (currency) alone. Moreover, the
income received from the premium will offset a portion of the potential loss
incurred by the Fund if the securities (currency) 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 less total
return from the portion of its portfolio upon which calls have been written than
it would have had such calls not been written.
As regards listed options and certain OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
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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. Also, effecting a closing purchase transaction will
permit the cash or proceeds from the concurrent sale of any securities subject
to the option to be used for other investments by the Fund. 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 on the option less the commission paid.
Options written by a Fund normally have expiration dates of from up to nine
months (equity securities) to eighteen months (fixed-income securities) 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 (currency) at the time
the option is written. See "Risks of Options and Futures Transactions," below.
COVERED PUT WRITING. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period, at
the purchaser's election (certain listed and OTC put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other high grade obligations in an amount equal to at least the
exercise price of the option, at all times during the option period. Similarly,
a short put position could be covered by the Fund by its purchase of a put
option on the same security as the underlying security of the written option,
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the 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 at its Custodian. In writing puts, the Fund
assumes the risk of loss should the market value of the underlying security
decline below the exercise price of the option (any loss being decreased by the
receipt of the premium on the option written). In the case of listed options,
during the option period, the Fund may be required, at any time, to make payment
of the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
The Fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction) while the potential loss equals the
difference between the exercise price of the option and the current market price
of the underlying securities when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
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PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options in order to close out a covered call position (see
"Covered Call Writing" above) or purchase call options on securities they intend
to purchase. The Fund may also purchase 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 or a call written over-the-counter may be a listed
or an OTC option. In either case, the call purchased is likely to be on the same
securities (currencies) and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities (currency) which it holds
(or has the right to acquire) in its portfolio only to protect itself against a
decline in the value of the security (currency). 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. The Fund may also purchase put options to close out written
put positions in a manner similar to call options closing purchase transactions.
In addition, the Fund may sell a put option which it has previously purchased
prior to the sale of the securities (currency) underlying such option. Such a
sale would result in a net gain or loss depending on whether the amount received
on the sale is more or less than the premium and other transaction costs paid on
the put option which is sold. Any such gain or loss could be offset in whole or
in part by a change in the market value of the underlying security (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 currency in which it is denominated) increase, but
has retained the risk of loss should the price of the underlying security
(currency) decline. The covered put writer also retains the risk of loss should
the market value of the underlying security (currency) decline below the
exercise price of the option less the premium received on the sale of the
option. In both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver or receive the underlying securities (currency) 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 over-the-counter 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 (exchange) an underlying security
(currency) at a time when it might otherwise be advantageous to do so. A covered
put option writer who is unable to effect a closing purchase transaction or to
purchase an offsetting over-the-counter option would continue to bear the risk
of decline in the market price of the underlying security (currency) until the
option expires or is exercised. In addition, a covered put writer would be
unable to utilize the amount held in cash or U.S. Government or other high grade
short-term debt obligations as security for the put option for other investment
purposes until the exercise or expiration of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option Exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, the Fund may
be able to purchase an offsetting option which does not close out its position
as a writer but constitutes an asset of equal value to the obligation under the
option written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to maintain
the securities subject to the call, or the collateral underlying the put, even
though it might not be advantageous to do so, until a closing transaction can be
entered into (or the option is exercised or expires).
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Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, 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.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written on
one or more accounts or through one or more brokers). An Exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which the Fund may write.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities is that the prices of securities
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. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be distorted
by the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective and
their cost of borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
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STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The multiplier for an index option
performs a function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in the difference
between the exercise price of an option and the current level of the underlying
index. A multiplier of 100 means that a one-point difference will yield $100.
Options on different indexes may have different multipliers. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike stock options, all settlements are in cash and a gain or
loss depends on price movements in the stock market generally (or in a
particular segment of the market) rather than the price movements in individual
stocks. Currently, options are traded on the S&P 100 Index and the S&P 500 Index
on the Chicago Board Options Exchange, the Major Market Index and the Computer
Technology Index, Oil Index and Institutional Index on the American Stock
Exchange and the NYSE Index and NYSE Beta Index on the New York Stock Exchange,
The Financial News Composite Index on the Pacific Stock Exchange and the Value
Line Index, National O-T-C Index and Utilities Index on the Philadelphia Stock
Exchange, each of which and any similar index on which options are traded in the
future which include stocks that are not limited to any particular industry or
segment of the market is referred to as a "broadly based stock market index."
Options on stock indexes provide the Fund with a means of protecting the Fund
against the risk of market wide price movements. If the Investment Manager
anticipates a market decline, the Fund could purchase a stock index put option.
If the expected market decline materialized, the resulting decrease in the value
of the Fund's portfolio would be offset to the extent of the increase in the
value of the put option. If the Investment Manager anticipates a market rise,
the Fund may purchase a stock index call option to enable the Fund to
participate in such rise until completion of anticipated common stock purchases
by the Fund. Purchases and sales of stock index options also enable the
Investment Manager to more speedily achieve changes in the Fund's equity
positions.
The Fund will write put options on stock indexes only if such positions are
covered by cash, U.S. Government securities or other high grade debt obligations
equal to the aggregate exercise price of the puts, which cover is held for the
Fund in a segregated account maintained for it by the Fund's Custodian. All call
options on stock indexes written by the Fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the underlying
securities. A call writer can offset some of the risk of its writing position by
holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In
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contrast, even if the writer of an index call holds stocks that exactly match
the composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those stocks against payment of the
exercise price. Instead, it will be required to pay cash in an amount based on
the closing index value on the exercise date; and by the time it learns that it
has been assigned, the index may have declined, with a corresponding decrease in
the value of its stock portfolio. This "timing risk" is an inherent limitation
on the ability of index call writers to cover their risk exposure by holding
stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock
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 ("interest rate" futures), on the U.S. dollar and foreign
currencies, and such indexes as the S&P 500 Index, the Moody's Investment-Grade
Corporate Bond Index and the New York Stock Exchange Composite Index ("index"
futures).
As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager anticipates that interest rates may rise and,
concomitantly, the price of fixed-income securities fall, the Fund may sell an
interest rate futures contract or a bond index futures contract. If declining
interest rates are anticipated, the Fund may purchase an interest rate futures
contract to protect against a potential increase in the price of U.S. Government
securities the Fund intends to purchase. Subsequently, appropriate fixed-income
securities may be purchased by the Fund in an orderly fashion; as securities are
purchased, corresponding futures positions would be terminated by offsetting
sales of contracts.
The Fund will purchase or sell futures contracts on the U.S. dollar and on
foreign currencies to hedge against an anticipated rise or decline in the value
of the U.S. dollar or foreign currency in which a portfolio security of the Fund
is denominated vis-a-vis another currency.
The Fund will purchase or sell stock index futures contracts for the purpose
of hedging its equity portfolio (or anticipated portfolio) securities against
changes in their prices. If the Investment Manager anticipates that the prices
of stock held by the Fund may fall, the Fund may sell a stock index futures
contract. Conversely, if the Investment Manager wishes to hedge against
anticipated price rises in those stocks which the Fund intends to purchase, the
Fund may purchase stock index futures contracts. In addition, interest rate and
stock index futures contracts will be bought or sold in order to close out a
short or long position in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open or
close of the last trading day of the contract and the futures contract price. A
futures contract sale is closed out by effecting a futures
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contract purchase for the same aggregate amount of the specific type of equity
security and the same delivery date. If the sale price exceeds the offsetting
purchase price, the seller would be paid the difference and would realize a
gain. If the offsetting purchase price exceeds the sale price, the seller would
pay the difference and would realize a loss. Similarly, a futures contract
purchase is closed out by effecting a futures contract sale for the same
aggregate amount of the specific type of equity security and the same delivery
date. If the offsetting sale price exceeds the purchase price, the purchaser
would realize a gain, whereas if the purchase price exceeds the offsetting sale
price, the purchaser would realize a loss. There is no assurance that the Fund
will be able to enter into a closing transaction.
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 debt obligations equal to approximately 2% of the contract amount.
Initial margin requirements are established by the Exchanges on which futures
contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits called "variation margin", with
the Fund's Custodian, in the account in the name of the broker, which are
reflective of price fluctuations in the futures contract. Currently, interest
rates 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.
INDEX FUTURES CONTRACTS. The Fund may invest in index futures contracts. An
index futures contract sale creates an obligation by the Fund, as seller, to
deliver cash at a specified future time. An index futures contract purchase
would create an obligation by the Fund, as purchaser, to take delivery of cash
at a specified future time. Futures contracts on indexes do not require the
physical delivery of securities, but provide for a final cash settlement on the
expiration date which reflects accumulated profits and losses credited or
debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirement is approximately 5% 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 a gain.
Currently, index futures contracts can be purchased or sold with respect to,
among others, the Standard & Poor's 500 Stock Price Index and the Standard &
Poor's 100 Stock Price Index on the Chicago Mercantile Exchange, the New York
Stock Exchange Composite Index on the New York Futures Exchange, the Major
Market Index on the American Stock Exchange, the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade and the Value Line Stock
Index on the Kansas City Board of Trade.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid),
22
<PAGE>
and the writer the obligation, to assume a position in a futures contract (a
long position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the term of the option.
Upon exercise of the option, the delivery of the futures position by the writer
of the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Investment
Manager wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, it might write a call option on an interest rate futures contract,
the underlying security of which correlates with the portion of the portfolio
the Investment Manager seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, augment the total return of the
Fund and thereby provide a further hedge against losses resulting from price
declines in portions of the Fund's portfolio.
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.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which the
Fund is exempted from registration as a commodity pool operator, the Fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The Fund
may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market may
advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract and
also experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction as
the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Fund may determine not to invest in the securities as
planned and will realize a loss on the futures contract that is not offset by a
reduction in the price of the securities.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. Government
securities or other high grade debt obligations equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained for the Fund
by its Custodian.
Alterna-
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<PAGE>
tively, 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.
If the Fund maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in a
segregated account maintained at its Custodian, cash, U.S. Government securities
or other high grade debt obligations equal in value (when added to any initial
or variation margin on deposit) to the market value of the securities underlying
the futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities underlying the futures contract (in the
case of a stock index futures contract a portfolio of securities substantially
replicating the relevant index), 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.
Exchanges may limit the amount by which the price of futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's requirements
for qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes" in the Prospectus and
the Statement of Additional Information.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of the
securities which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities 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 by the Investment Manager may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities.
The Investment Manager has 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.
24
<PAGE>
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Borrow money, except that the Fund, (i) may borrow from a bank for
temporary or emergency purposes and (ii) may engage in reverse repurchase
agreements and dollar rolls, in amounts not exceeding 5% (taken at the lower
of cost or current value) of its total assets (not including the amount
borrowed).
4. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(3). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with respect
to initial or variation margin for futures are not deemed to be pledges of
assets.
5. Issue senior securities as defined in the Act, except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase 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 objective and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
7. Make short sales of securities.
8. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
9. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
10. Invest for the purpose of exercising control or management of any
other issuer.
11. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the Act and
any Rules promulgated thereunder.
12. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell futures contracts or options on futures.
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<PAGE>
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.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Investment Manager
and the Sub-Advisor are responsible for decisions to buy and sell securities for
the Fund, the selection of brokers and dealers to effect the transactions, and
the negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession or
discount. Options and futures transactions will usually be effected through a
broker and a commission will be charged. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid.
The Investment Manager currently serves as investment advisors to a number
of clients, including other investment companies, and may in the future act as
investment adviser to others. It is the practice of the Investment Manager to
cause purchase and sale transactions to be allocated among the Fund and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and the
opinions of the persons responsible for managing the portfolios of the Fund and
other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and the Sub-Advisor 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 and the Sub-Advisor rely upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, and 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 foreign 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 and the
Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and the Sub-Advisor believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment
26
<PAGE>
Manager and/or the Sub-Advisor believe 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 and/or the Sub-Advisor.
Such services may include, but are not limited to, any one or more of the
following: information as to the availability of securities for purchase or
sale; statistical or factual information or opinions pertaining to investment;
wire services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to them in the management of accounts of some of
their 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 their 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 it must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow DWR to receive no more than the remuneration
which would be expected to be received by an unaffiliated broker in a
commensurate arm's-length transaction. Furthermore, the Board of Trustees of the
Fund, including a majority of the Trustees who are not "interested" persons of
the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to DWR
are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to DWR.
THE UNDERWRITER
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up
to shares from the Fund, which number may be increased or decreased in
accordance with the Underwriting Agreement. The Underwriting Agreement provides
that the obligation of the Underwriter is subject to certain conditions
precedent (such as the filing of certain forms and documents required by various
federal and state agencies and the rendering of certain opinions of counsel) and
that the Underwriter will be obligated to purchase the shares on ,
1995, or such other date as may be agreed upon between the Underwriter and the
Fund (the "Closing Date"). Shares will not be issued and dividends will not be
declared by the Fund until after the Closing Date.
The Underwriter will purchase shares from the Fund at $10.00 per share. No
underwriting discounts or selling commissions will be deducted from the initial
public offering price. The Underwriter will, however, receive contingent
deferred sales charges from future redemptions of such shares.
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such other
date as may be agreed to between the parties.
27
<PAGE>
The minimum number of Fund shares which may be purchased pursuant to this
offering is 100 shares. Certificates for shares purchased will not be issued
unless requested by the shareholder in writing.
The Underwriter has agreed to pay certain expenses of the initial offering
and the subsequent Continuous Offering of the Fund's shares. The Fund has agreed
to pay certain compensation to the Underwriter pursuant to a Plan of
Distribution pursuant to Rule 12b-1 under the Act, to compensate the Underwriter
for services it renders and the expenses it bears under the Underwriting
Agreement (see "The Distributor"). The Fund will bear the cost of initial
typesetting, printing and distribution of Prospectuses and Statements of
Additional Information and supplements thereto to shareholders. The Fund has
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
dealer agreement with DWR, which through its own sales organization sells shares
of the Fund. In addition, the Distributor may enter into similar 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 , 1995, a Distribution
Agreement (the "Distribution Agreement") appointing the Distributor exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement continues until April 30, 1996, and provides that it will remain in
effect from year to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement, the Distributor uses its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations, the Distributor is not liable to the Fund
or any of its shareholders for any error of judgment or mistake of law or for
any act or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of % of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. The Distributor 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.
28
<PAGE>
The Distributor has informed the Fund that an amount of the fees payable by
the Fund each year pursuant to the Plan of Distribution 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 fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan of Distribution fee payments made by the Fund is characterized as an
"asset-based sales charge" as such is defined by the aforementioned Rules of
Fair Practice.
The Plan was adopted by a vote of the Trustees of the Fund on , 1995,
at a meeting of the Trustees called for the purpose of voting on such Plan. The
vote included the vote of a majority of the Trustees of the Fund who are not
"interested persons" of the Fund (as defined in the Act) and who have no direct
or indirect financial interest in the operation of the Plan (the "Independent
12b-1 Trustees"). In making their decision to adopt the Plan, the Trustees
requested from the Distributor and received such information as they deemed
necessary to make an informed determination as to whether or not adoption of the
Plan was in the best interests of the shareholders of the Fund. After due
consideration of the information received, the Trustees, including the
Independent 12b-1 Trustees, determined that adoption of the Plan would benefit
the shareholders of the Fund. InterCapital, as sole shareholder of the Fund,
approved the Plan on , 1995, whereupon the Plan went into effect.
Under its terms, the Plan continued in effect until April 30, 1996 and will
remain in effect from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above. 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.
Pursuant to the Plan and as required by Rule 12b-1, the Trustees will
receive and review promptly after the end of each calendar quarter a written
report provided by the Distributor of the amounts expended by the Distributor
under the Plan and the purpose for which such expenditures were made.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares without
any deduction for sales charges. Shares of the Fund may be subject to a
contingent deferred sales charge, payable to the Distributor, if redeemed during
the six years after their purchase. DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of the Fund's shares,
currently a gross sales credit of up to 5% of the amount sold and an annual
residual commission of up to 0.25 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 DWR to its account
executives and Fund associated distribution-related expenses, including sales
compensation and overhead. The distribution fee that the Distributor receives
from the Fund under the Plan, in effect, offsets distribution expenses incurred
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 the distribution expenses to the Fund, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross sales
credit as it is reduced by amounts received by the Distributor under the Plan
and any contingent deferred sales charges received by the Distributor upon
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of its distribution costs
for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. Because there is no requirement under the
Plan that the Distributor be reimbursed for all 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 distribution expenses in excess of payments made under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon redemption
of shares, if for any
29
<PAGE>
reason the Plan is terminated, the Trustees will consider at that time the
manner in which to treat such expenses. Any cumulative expenses incurred, but
not yet recovered through distribution fees or contingent deferred sales
charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWSC and DWR or certain of their employees may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Fund, and all material amendments of the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Act) on not more than thirty days' written notice to any
other party to the Plan. So long as the Plan is in effect, the election and
nomination of Independent Trustees shall be committed to the discretion of the
Independent Trustees.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Fund is determined once daily at 4:00
p.m. New York time on each day that the New York Stock Exchange is open (or on
days when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time), and on each other day in which there is a sufficient degree of trading in
the Fund's investments to affect the net asset value, except that the net asset
value may not be computed on a day on which no orders to purchase, or tenders to
sell or redeem, Fund shares have been received by taking the value of all assets
of the Fund, subtracting its liabilities, dividing by the number of shares
outstanding and adjusting to the nearest cent. The New York Stock Exchange
currently observes the following holidays: New Year's Day; President's Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.
As stated in the Prospectus, short-term 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' market value, in
which case these securities will be valued at their fair value as determined by
the Trustees. Other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a remaining maturity of 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'
market value, in which case these securities will be valued at their fair 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 latest bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale price
on the commodities exchange on which they trade unless the Trustees determine
that such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Trustees. All other securities
and other assets are valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur
30
<PAGE>
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
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Fund's
transfer agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the Transfer
Agent in lieu of issuance of a share certificate. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates are
issued only for full shares and may be redeposited in the account at any time.
There is no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction from
the Fund or from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share, in shares of the Fund (or in
cash if the shareholder so requests) as of the close of business on the record
date. At any time an investor may request the Transfer Agent, in writing, to
have subsequent dividends and/or capital gains distributions paid to him or her
in cash rather than shares. To assure sufficient time to process the charge,
such request should be received by the Transfer Agent at least five business
days prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to the Distributor,
which will be forwarded to the shareholder, upon the receipt of proper
instructions.
TARGETED DIVIDENDS.-SM- In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of a Dean Witter Fund other than Dean Witter
Capital Appreciation Fund. Such investment will be made as described above for
automatic investment in shares in shares of the Fund, at the net asset value per
share of the selected Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Dean Witter Fund the next business day. Shareholders of
Dean Witter Capital Appreciation Fund must be shareholders of the Dean Witter
Fund targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Dean Witter Fund before entering the program.
EASYINVEST.-SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at the net
asset value next determined after receipt by the Transfer Agent, without the
imposition of a contingent deferred sales charge upon redemption, by returning
the check or the proceeds to the Transfer Agent within thirty days after the
payment date. If the shareholder returns the proceeds of a dividend or
distribution, such funds must be accompanied by a signed statement indicating
that the proceeds constitute a dividend or distribution to be invested. Such
investment will be made at the net asset value per share next determined after
receipt of the check or proceeds by the Transfer Agent.
31
<PAGE>
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any 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
deferred sales charge) to the shareholder will be the designated monthly or
quarterly amount.
The Transfer Agent acts as an agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent within five business days after the date of redemption.
The Withdrawal Plan may be terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for Federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Redemptions and Repurchases-- Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Account Executive or by written nomination to the Transfer Agent. In
addition, the party and/or the address to which the checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
International Small-Cap Fund, directly to the Fund's Transfer Agent. Such
amounts will be applied to the purchase of Fund shares at the net asset value
per share next computed after receipt of the check or purchase payment by the
Transfer Agent. The shares so purchased will be credited to the investor's
account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), and for shares of Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond
Fund, Dean
32
<PAGE>
Witter Balanced Income Fund, Dean Witter Balanced Growth Fund and five Dean
Witter Funds which are money market funds (the foregoing ten non-CDSC funds are
hereinafter referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment. An exchange
will be treated for federal income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a 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 an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a CDSC fund. However, in the case of shares exchanged
into an Exchange Fund 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 Fund 12b-1 distribution
fees, if any, incurred on or after that date which are attributable to those
shares. Shareholders acquiring shares of an Exchange Fund pursuant to this
exchange privilege may exchange those shares back into a CDSC fund from the
Exchange Fund, with no CDSC being imposed on such exchange. The holding period
previously frozen when shares were first exchanged for shares of the Exchange
Fund resumes on the last day of the month in which shares of a CDSC fund are
reacquired. A CDSC is imposed only upon an ultimate redemption, based upon the
time (calculated as described above) the shareholder was invested in a CDSC
fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon redemption,
will be the last day of the month in which the shares being exchanged were
originally purchased. In allocating the purchase payments between funds for
purposes of the CDSC, the amount which represents the current net asset value of
shares at the time of the exchange which were (i) purchased more than three or
six years (depending on the CDSC schedule applicable to the shares) prior to the
exchange, (ii) originally acquired through reinvestment of dividends or
distributions and (iii) acquired in exchange for shares of front-end sales
charge funds, or for shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (all such shares called "Free
Shares"), will be exchanged first. Shares of Dean Witter American Value Fund
acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter
33
<PAGE>
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 an Exchange Fund will be
considered Free Shares. If the exchanged amount exceeds the value of such Free
Shares, an exchange is made, on a block-by-block basis, of non-Free Shares held
for the longest period of time (except that if shares held for identical periods
of time but subject to different CDSC schedules are held in the same Exchange
Privilege account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
Shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the Prospectus under the caption "Contingent
Deferred Sales Charge", any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such an event the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust, although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum investment is
$10,000 for Dean Witter Short-Term U.S. Treasury Trust, although that fund, in
its discretion, may accept initial purchases as low as $5,000. The minimum
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
34
<PAGE>
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds, pursuant to the Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so permits
(provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist) or (e) if the Fund would be unable to invest amounts effectively in
accordance with its investment objective, policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
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 certificates, 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") after it receives the request, and certificate, if any, in good order.
Any redemption request received after such computation will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. If redemption is
requested by a corporation, partnership, trust or fiduciary, the Transfer Agent
may require that written evidence of authority acceptance 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. 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 a means of a new prospectus.
35
<PAGE>
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 the employee benefit plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for
their employees as qualified under Section 401K of the Internal Revenue Code.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean Witter Funds for which shares of front-end sales charge funds have
been exchanged. Any 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.
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 of 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 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 investor's entitlement.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments
36
<PAGE>
made during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ------------------------------------------------------------------------------------------- ---------------------
<S> <C>
First...................................................................................... 5.0%
Second..................................................................................... 4.0 %
Third...................................................................................... 3.0 %
Fourth..................................................................................... 2.0 %
Fifth...................................................................................... 2.0 %
Sixth...................................................................................... 1.0 %
Seventh and thereafter..................................................................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year period. This will result in any such CDSC being imposed at
the lowest possible rate. Accordingly, shareholders may redeem, without
incurring any CDSC, amounts equal to any net increase in the value of their
shares above the amount of their purchase payments made within the past six
years and amounts equal to the current value of shares purchased more than six
years prior to the redemption and shares purchased through reinvestment of
dividends or distributions or acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter Funds for which
shares of front-end sales charge funds have been exchanged. The CDSC will be
imposed, in accordance with the table shown above, on any redemptions within six
years of purchase which are in excess of these amounts and which redemptions are
not (a) requested within one year of death or initial determination of
disability of a shareholder, or (b) made pursuant to certain taxable
distributions from retirement plans or retirement accounts, as described above.
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 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, payment of the
redemption proceeds may be delayed for the minimum time needed to verify that
the check used for investment has been honored (not more than fifteen days from
the time of receipt of the check by the Transfer Agent). Shareholders
maintaining margin accounts with DWR or another selected broker-dealer are
referred to their account executive regarding restrictions on redemption of
shares of the Fund pledged in the margin account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
37
<PAGE>
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 30 days after the redemption
or repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund held by the shareholder at the net asset
value next determined after a reinstatement request, together with the proceeds,
is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax and state 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 and state personal income tax purposes but will be applied to
adjust the cost basis of the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and, if the Fund makes an election, the shareholders would include
such undistributed gains in their income and shareholders will be able to claim
their share of the tax paid by the Fund as a credit against their individual
federal income tax.
Any dividends declared in the last quarter of any calendar year which are
paid in the following year prior to February 1 will be deemed received by the
shareholder in the prior year.
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be generally short-term capital gains or losses.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). If so qualified,
the Fund will not be subject to federal income tax on its net investment income
and capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income, the portion
taxable as long-term capital gains, and the amount of dividends eligible for the
Federal dividends received deduction available to corporations. 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.
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.
The Fund may elect to retain net capital gains and pay corporate income tax
thereon. In such event, each shareholder of record on the last day of the Fund's
taxable year would be required to include in income for tax purposes such
shareholder's proportionate share of the Fund's undistributed net capital gain.
In addition, each shareholder would be entitled to credit such shareholder's
proportionate share of the tax paid by the Fund against federal income tax
liabilities, to claim refunds to the extent that the credit
38
<PAGE>
exceeds such liabilities, and to increase the basis of his shares held for
federal income tax purposes by an amount equal to 65% of such shareholder's
proportionate share of the undistributed net capital gain.
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 does elect to file the election with the Internal
Revenue Service, the Fund will report annually to its shareholders the amount
per share of such withholding.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund. The Fund may request a private letter ruling from the Internal Revenue
Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend distributions.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury issued proposed regulation section 1.1291- 8 which establishes a
mark-to-market regime which allows investment companies investing in PFIC's to
avoid most, if not all, of the difficulties posed by the PFIC rules. 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
39
<PAGE>
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.
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 charge which, if reflected, would reduce
the performance quoted. For example, the average annual total returns of the
Fund may be calculated in the manner described above, but without deduction for
any applicable contingent deferred sales charge.
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.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
total aggregate total return to date (expressed as a decimal and without taking
into account the effect of applicable CDSC) and multiplying by 10,000, $50,000
or $100,000 as the case may be.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
including the Capital Appreciation Lipper Index.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. The Trustees have been elected by InterCapital as the sole shareholder 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 to remove the Trustees following a meeting called for that purpose
requested in writing by the record holders of not less than ten percent of the
Fund's outstanding shares. The voting rights of shareholders are not cumulative,
so that holders of more than 50 percent of the shares voting can, if they
choose, elect all Trustees being selected, while the holders of the remaining
shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). However, the Trustees have not authorized
any such additional series or classes of shares.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his or her own bad
faith, willful misfeasance, gross negligence, or reckless disregard of his or
her duties. It also provides that all
40
<PAGE>
third persons shall look solely to the Fund's property for satisfaction of
claims arising in connection with the affairs of the Fund. With the exceptions
stated, the Declaration of Trust provides that a Trustee, officer, employee or
agent is entitled to be indemnified against all liabilities in connection with
the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The , is the Custodian of the Fund's assets. The
Custodian has contracted with various foreign banks and depositaries to hold
portfolio securities of non-U.S. issuers on behalf of the Fund. Any of the
Fund's cash balances with the Custodian in excess of $100,000 are unprotected by
federal deposit insurance. Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager, and of Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts including
providing subaccounting and recordkeeping services for certain retirement
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
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 . 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 statements of Assets and Liabilities of the Fund included in this
Statement of Additional Information and incorporated by reference in the
Prospectus has been so included and incorporated in reliance on the report of
independent accountants, given on the authority of
said firm as experts in auditing and accounting.
41
<PAGE>
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
42
<PAGE>
DEAN WITTER CAPITAL APPRECIATION FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
None
(b) EXHIBITS:
1. -- Declaration of Trust of Registrant
2. (a) -- By-Laws of Registrant
3. -- None
4. -- Not Applicable
5. -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.*
6. (a) -- Form of Distribution Agreement between Registrant and Dean Witter
Distributors Inc.*
(b) -- Forms of Selected Dealer Agreements*
(c) -- Form of Underwriting Agreement between Registrant and Dean Witter
Distributors Inc.*
7. -- None
8. (a) -- Form of Custodian Agreement between Registrant and The Bank of
New York*
(b) -- Form of Transfer Agency and Services Agreement between Registrant
and Dean Witter Trust Company*
9. -- Form of Services Agreement between Dean Witter InterCapital Inc.
and Dean Witter Services Company Inc.*
10.(a) -- Opinion of Sheldon Curtis, Esq.*
(b) -- Opinion of Lane & Altman *
11. -- Consent of Independent Accountants*
1
<PAGE>
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.*
14. -- None
15. -- Form of Plan of Distribution between Registrant and Dean Witter
Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations - to be filed
with first post-effective amendment
27. -- Financial Data Schedule-to be filed in pre-effective
amendment no. 1
Other -- Powers of Attorney *
________________________
* to be filed by amendment.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Prior to the effectiveness of this Registration Statement, the Registrant
will sell 10,000 of its shares of beneficial interest to Dean Witter
InterCapital Inc., a Delaware corporation. Dean Witter InterCapital Inc. is a
wholly-owned subsidiary of Dean Witter, Discover & Co., a Delaware corporation,
that is a balanced financial services organization providing a broad range of
nationally marketed credit and investment products.
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at , 1995
-------------- ------------------------
Shares of Beneficial Interest
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
2
<PAGE>
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.
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
3
<PAGE>
person for any act for which Registrant itself is not permitted to indemnify
him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business of
the investment adviser. The following information is given regarding officers
of Dean Witter InterCapital Inc. InterCapital is a wholly-owned subsidiary of
Dean Witter, Discover & Co. The principal address of the Dean Witter Funds is
Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
4
<PAGE>
(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
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Global Asset Allocation Fund
(51) Dean Witter Balanced Growth Fund
(52) Dean Witter Balanced Income Fund
(53) Dean Witter Hawaii Municipal Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
5
<PAGE>
(7) TCW/DW North American Intermediate Income Trust
(8) TCW/DW Global Convertible Trust
(9) TCW/DW Total Return Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee, President
and Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co. ("DWDC"); Director and/or officer
of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
David A. Hughey Executive Vice President and Chief Administrative
Executive Vice Officer of DWSC, Distributors and DWTC; Director
President and Chief of DWTC; Vice President of the Dean Witter Funds
Administrative Officer and the TCW/DW Funds.
Edmund C. Puckhaber Director of DWTC; Vice President of the Dean
Executive Vice Witter Funds.
President
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary
and General Counsel of the Dean Witter Funds and
the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Joseph McAlinden
Senior Vice President
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer of the Dean Witter Funds and the TCW/DW
Treasurer Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Douglas Brown
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
Russell Harper
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President
David Hoffman
Vice President
David Johnson
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Christopher Jones
Vice President
Stanley Kapica
Vice President
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paul LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President
Lou Anne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
Hugh Rose
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Marianne Zalys
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter 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
11
<PAGE>
(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
(49) Dean Witter Global Asset Allocation Fund
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(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
(9) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the
Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
12
<PAGE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Investment Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
The undersigned Registrant hereby undertakes to file a post- effective
amendment, using financial statements which need not be audited, within four to
six months from the effective date of the Registrant's Registration Statement
under the Securities Act of 1933.
The undersigned Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940 with regard to
facilitating shareholder communications in the event the requisite percentage of
shareholders so requests, to the same extent as if Registrant were subject to
the provisions of that Section.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and the State of New York on the 2nd day of
August, 1995.
DEAN WITTER CAPITAL APPRECIATION FUND
By: /s/Sheldon Curtis
---------------------------------
Sheldon Curtis
Trustee, Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chairman, President,
Trustee and Chief
Executive Officer
By: /s/Charles A. Fiumefreddo 08/02/95
----------------------------
Charles A. Fiumefreddo
By: /s/David A. Hughey Trustee 08/02/95
----------------------------
David A. Hughey
By: /s/Sheldon Curtis Trustee, Vice 08/02/95
---------------------------- President and
Sheldon Curtis Secretary
By: /s/Thomas F. Caloia Treasurer, Chief 08/02/95
---------------------------- Financial Officer
Thomas F. Caloia and Chief Accounting
Officer
<PAGE>
EXHIBIT INDEX
1. -- Declaration of Trust of Registrant
2. -- By-Laws of Registrant
3. -- None
4. -- Not Applicable
5. (a) -- Form of Investment Management Agreement between Registrant and
Dean Witter InterCapital Inc.*
6. (a) -- Form of Distribution Agreement between Registrant and Dean
Witter Distributors Inc.*
(b) -- Forms of Selected Dealer Agreement between Dean Witter
Distributors Inc. and Selected Dealers *
(c) -- Form of Underwriting Agreement between Registrant and Dean Witter
Distributors Inc.*
7. -- None
8. (a) -- Form of Custodian Agreement between Registrant and The Bank of
New York *
(b) -- Form of Transfer Agency and Services Agreement between Registrant
and Dean Witter Trust Company *
9. -- Form of Services Agreement between Dean Witter InterCapital Inc.
and Dean Witter Services Company Inc.*
10. -- Opinion of Sheldon Curtis, Esq.*
11. -- Consent of Independent Accountants*
12. -- None
13. -- Investment Letter of Dean Witter InterCapital Inc.*
14. -- None
15. -- Form of Plan of Distribution between Registrant and Dean Witter
Distributors Inc.*
16. -- Schedule for Computation of Performance Quotations - to be filed
with first post-effective amendment
27. -- Financial Data Schedule- to be filed with first post-effective
amendment
Other -- Powers of Attorney*
- -------------------
* to be filed by amendment.
<PAGE>
DEAN WITTER
CAPITAL APPRECIATION FUND
TWO WORLD TRADE CENTER
NEW YORK, NY 10048
DECLARATION OF TRUST
DATED: JULY 28, 1995
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I -- NAME AND DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II -- TRUSTEES . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number of Trustees. . . . . . . . . . . . . . . . . . . . . 3
Section 2.2 Election and Term . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Resignation and Removal . . . . . . . . . . . . . . . . . . 3
Section 2.4 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.5 Delegation of Power to Other Trustees . . . . . . . . . . . 4
ARTICLE III -- POWERS OF TRUSTEES. . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.2 Investments . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.3 Legal Title . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 Issuance and Repurchase of Securities . . . . . . . . . . . 5
Section 3.5 Borrowing Money; Lending Trust Assets . . . . . . . . . . . 5
Section 3.6 Delegation; Committees. . . . . . . . . . . . . . . . . . . 5
Section 3.7 Collection and Payment. . . . . . . . . . . . . . . . . . . 5
Section 3.8 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.9 Manner of Acting; By-Laws . . . . . . . . . . . . . . . . . 5
Section 3.10 Miscellaneous Powers. . . . . . . . . . . . . . . . . . . . 6
Section 3.11 Principal Transactions. . . . . . . . . . . . . . . . . . . 6
Section 3.12 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE IV -- INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER
AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.1 Investment Adviser. . . . . . . . . . . . . . . . . . . . . 6
Section 4.2 Administrative Services . . . . . . . . . . . . . . . . . . 7
Section 4.3 Distributor . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.4 Transfer Agent. . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.5 Custodian . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 4.6 Parties to Contract . . . . . . . . . . . . . . . . . . . . 7
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND
OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. . . . 8
Section 5.2 Non-Liability of Trustees, etc. . . . . . . . . . . . . . . 8
Section 5.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.4 No Bond Required of Trustees. . . . . . . . . . . . . . . . 8
Section 5.5 No Duty of Investigation; Notice in Trust Instruments,
etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.6 Reliance on Experts, etc. . . . . . . . . . . . . . . . . . 9
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST. . . . . . . . . . . . . . . . 9
Section 6.1 Beneficial Interest . . . . . . . . . . . . . . . . . . . . 9
Section 6.2 Rights of Shareholders. . . . . . . . . . . . . . . . . . . 9
Section 6.3 Trust Only. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.4 Issuance of Shares. . . . . . . . . . . . . . . . . . . . . 9
Section 6.5 Register of Shares. . . . . . . . . . . . . . . . . . . . . 10
Section 6.6 Transfer of Shares. . . . . . . . . . . . . . . . . . . . . 10
i
<PAGE>
PAGE
----
Section 6.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.8 Voting Powers . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6.9 Series or Classes of Shares . . . . . . . . . . . . . . . . 11
ARTICLE VII -- REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.1 Redemptions . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 7.2 Redemption at the Option of the Trust . . . . . . . . . . . 13
Section 7.3 Effect of Suspension of Determination of Net Asset Value. . 13
Section 7.4 Suspension of Right of Redemption . . . . . . . . . . . . . 13
ARTICLE VIII -- DETERMINATION OF NET ASSET VALUE, NET INCOME AND
DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.1 Net Asset Value . . . . . . . . . . . . . . . . . . . . . . 14
Section 8.2 Distributions to Shareholders . . . . . . . . . . . . . . . 14
Section 8.3 Determination of Net Income . . . . . . . . . . . . . . . . 14
Section 8.4 Power to Modify Foregoing Procedures. . . . . . . . . . . . 15
ARTICLE IX -- DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC. . . 15
Section 9.1 Duration. . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 9.2 Termination of Trust or a Series. . . . . . . . . . . . . . 15
Section 9.3 Amendment Procedure . . . . . . . . . . . . . . . . . . . . 15
Section 9.4 Merger, Consolidation and Sale of Assets. . . . . . . . . . 16
Section 9.5 Incorporation . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE X -- REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . 16
ARTICLE XI -- MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.1 Filing. . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.2 Resident Agent. . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . 17
Section 11.5 Reliance by Third Parties . . . . . . . . . . . . . . . . . 17
Section 11.6 Provisions in Conflict with Law or Regulations. . . . . . . 17
Section 11.7 Use of the Name "Dean Witter" . . . . . . . . . . . . . . . 17
Section 11.8 Principal Place of Business . . . . . . . . . . . . . . . . 18
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ii
<PAGE>
DECLARATION OF TRUST
OF
DEAN WITTER CAPITAL APPRECIATION FUND
DATED: JULY 28, 1995
THE DECLARATION OF TRUST of Dean Witter Capital Appreciation Fund is made
the 28th day of July, 1995 by the parties signatory hereto, as trustees (such
persons, so long as they shall continue in office in accordance with the
terms of this Declaration of Trust, and all other persons who at the time in
question have been duly elected or appointed as trustees in accordance with
the provisions of this Declaration of Trust and are then in office, being
hereinafter called the "Trustees").
W I T N E S S E T H :
WHEREAS, the Trustees desire to form a trust fund under the laws of
Massachusetts for the investment and reinvestment of funds contributed
thereto; and
WHEREAS, it is provided that the beneficial interest in the trust assets
be divided into transferable shares of beneficial interest as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust,
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
1
<PAGE>
ARTICLE 1
NAME AND DEFINITIONS
Section 1.1. NAME. The name of the trust created hereby is the "Dean
Witter Capital Appreciation Fund," and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue
or be sued under that name, which name (and the word "Trust" wherever herein
used) shall refer to the Trustees as Trustees, and not as individuals, or
personally, and shall not refer to the officers, agents, employees or
Shareholders of the Trust. Should the Trustees determine that the use of such
name is not advisable, they may use such other name for the Trust as they
deem proper and the Trust may hold its property and conduct its activities
under such other name.
Section 1.2. DEFINITIONS. Wherever they are used herein, the following
terms have the following respective meanings:
(a) "BY-LAWS" means the By-Laws referred to in Section 3.9 hereof, as
from time to time amended.
(b) the terms "COMMISSION," "AFFILIATED PERSON" and "INTERESTED
PERSON," have the meanings given them in the 1940 Act.
(c) "DECLARATION" means this Declaration of Trust as amended from
time to time. Reference in this Declaration of Trust to "DECLARATION,"
"HEREOF," "HEREIN" and "HEREUNDER" shall be deemed to refer to this
Declaration rather than the article or section in which such words
appear.
(d) "DISTRIBUTOR" means the party, other than the Trust, to a
contract described in Section 4.3 hereof.
(e) "FUNDAMENTAL POLICIES" shall mean the investment policies and
restrictions set forth in the Prospectus and Statement of Additional
Information and designated as fundamental policies therein.
(f) "INVESTMENT ADVISER" means any party, other than the Trust, to a
contract described in Section 4.1 hereof.
(g) "MAJORITY SHAREHOLDER VOTE" means the vote of the holders of a
majority of Shares, which shall consist of: (i) a majority of Shares
represented in person or by proxy and entitled to vote at a meeting of
Shareholders at which a quorum, as determined in accordance with the
By-Laws, is present; (ii) a majority of Shares issued and outstanding and
entitled to vote when action is taken by written consent of Shareholders;
and (iii) a "majority of the outstanding voting securities," as the
phrase is defined in the 1940 Act, when any action is required by the
1940 Act by such majority as so defined.
(h) "1940 ACT" means the Investment Company Act of 1940 and the rules
and regulations thereunder as amended from time to time.
(i) "PERSON" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other entities,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.
(j) "PROSPECTUS" means the Prospectus and Statement of Additional
Information constituting parts of the Registration Statement of the Trust
under the Securities Act of 1933 as such Prospectus and Statement of
Additional Information may be amended or supplemented and filed with the
Commission from time to time.
(k) "SERIES" means one of the separately managed components of the
Trust (or, if the Trust shall have only one such component, then that
one) as set forth in Section 6.1 hereof or as may be established and
designated from time to time by the Trustees pursuant to that section.
(l) "SHAREHOLDER" means a record owner of outstanding Shares.
(m) "SHARES" means the units of interest into which the beneficial
interest in the Trust shall be divided from time to time, including the
shares of any and all series or classes which may be established by the
Trustees, and includes fractions of Shares as well as whole Shares.
2
<PAGE>
(n) "TRANSFER AGENT" means the party, other than the Trust, to the
contract described in Section 4.4 hereof.
(o) "TRUST" means the Dean Witter Capital Appreciation Fund.
(p) "TRUST PROPERTY" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the account of
the Trust or the Trustees.
(q) "TRUSTEES" means the persons who have signed the Declaration, so
long as they shall continue in office in accordance with the terms
hereof, and all other persons who may from time to time be duly elected
or appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and reference herein to a Trustee or the Trustees
shall refer to such person or persons in their capacity as trustees
hereunder.
ARTICLE II
TRUSTEES
Section 2.1. NUMBER OF TRUSTEES. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by
a majority of the Trustees, provided, however, that the number of Trustees
shall in no event be less than three (3) nor more than fifteen (15).
Section 2.2. ELECTION AND TERM. The Trustees shall be elected by a vote of
a majority of the outstanding voting securities, as defined by the 1940 Act,
held by the initial shareholder(s) (i.e., the person(s) that supplied the
seed capital required under Section 14(a) of the 1940 Act). The Trustees
shall have the power to set and alter the terms of office of the Trustees,
and they may at any time lengthen or lessen their own terms or make their
terms of unlimited duration, subject to the resignation and removal
provisions of Section 2.3 hereof. Subject to Section 16(a) of the 1940 Act,
the Trustees may elect their own successors and may, pursuant to Section 2.4
hereof, appoint Trustees to fill vacancies. The Trustees shall adopt By-Laws
not inconsistent with this Declaration or any provision of law to provide for
election of Trustees by Shareholders at such time or times as the Trustees
shall determine to be necessary or advisable.
Section 2.3. RESIGNATION AND REMOVAL. Any Trustee may resign his trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees and such resignation shall
be effective upon such delivery, or at a later date according to the terms of
the instrument. Any of the Trustees may be removed (provided the aggregrate
number of Trustees after such removal shall not be less than the number
required by Section 2.1 hereof) by the action of two-thirds of the remaining
Trustees or by the action of the Shareholders of record of not less than
two-thirds of the Shares outstanding (for purposes of determining the
circumstances and procedures under which such removal by the Shareholders may
take place, the provisions of Section 16(c) of the 1940 Act or of the
corporate or business statute of any state in which Shares of the Trust are
sold, shall be applicable to the same extent as if the Trust were subject to
the provisions of that Section). Upon the resignation or removal of a
Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust
Property held in the name of the resigning or removed Trustee. Upon the
incapacity or death of any Trustee, his legal representative shall execute
and deliver on his behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence.
Section 2.4. VACANCIES. The term of office of a Trustee shall terminate
and a vacancy shall occur in the event of the death, resignation, removal,
bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of a Trustee. No such vacancy shall operate to annul the
Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy existing by reason of an
increase in the number of Trustees, subject to the provisions of Section
16(a) of the 1940 Act, the remaining Trustees shall fill such vacancy by the
appointment of such other person as they or he, in their or his discretion,
shall see fit, made by a written instrument signed by a majority of the
remaining Trustees. Any such appointment shall not become effective, however,
until the person named in the written instrument of appointment shall have
accepted in writing such appointment
3
<PAGE>
and agreed in writing to be bound by the terms of the Declaration. An
appointment of a Trustee may be made in anticipation of a vacancy to occur at
a later date by reason of retirement, resignation or increase in the number
of Trustees, provided that such appointment shall not become effective prior
to such retirement, resignation or increase in the number of Trustees.
Whenever a vacancy in the number of Trustees shall occur, until such vacancy
is filled as provided in this Section 2.4, the Trustees in office, regardless
of their number, shall have all the powers granted to the Trustees and shall
discharge all the duties imposed upon the Trustees by the Declaration. A
written instrument certifying the existence of such vacancy signed by a
majority of the Trustees shall be conclusive evidence of the existence of
such vacancy.
Section 2.5. DELEGATION OF POWER TO OTHER TRUSTEES. Any Trustee may, by
power of attorney, delegate his power for a period not exceeding six (6)
months at any one time to any other Trustee or Trustees; provided that in no
case shall less than two (2) Trustees personally exercise the powers granted
to the Trustees under the Declaration except as herein otherwise expressly
provided.
ARTICLE III
POWERS OF TRUSTEES
Section 3.1. GENERAL. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the
same extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by the Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its
branches and maintain offices both within and without the Commonwealth of
Massachusetts, in any and all states of the United States of America, in the
District of Columbia, and in any and all commonwealths, territories,
dependencies, colonies, possessions, agencies or instrumentalities
wheresoever in the world they may be located as they deem necessary, proper
or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is
in the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of the Declaration, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. INVESTMENTS. The Trustees shall have the power to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, exchange, distribute, lend
or otherwise deal in or dispose of negotiable or nonnegotiable
instruments, obligations, evidences of indebtedness, certificates of
deposit or indebtedness, commercial paper, repurchase agreements, reverse
repurchase agreements, options, commodities, commodity futures contracts
and related options, currencies, currency futures and forward contracts,
and other securities, investment contracts and other instruments of any
kind, including, without limitation, those issued, guaranteed or
sponsored by any and all Persons including, without limitation, states,
territories and possessions of the United States, the District of
Columbia and any of the political subdivisions, agencies or
instrumentalities thereof, and by the United States Government or its
agencies or instrumentalities, foreign or international
instrumentalities, or by any bank or savings institution, or by any
corporation or organization organized under the laws of the United States
or of any state, territory or possession thereof, and of corporations or
organizations organized under foreign laws, or in "when issued" contracts
for any such securities, or retain Trust assets in cash and from time to
time change the investments of the assets of the Trust; and to exercise
any and all rights, powers and privileges of ownership or interest in
respect of any and all such investments of every kind and description,
including, without limitation, the right to consent and otherwise act
with respect thereto, with power to designate one or more persons, firms,
associations
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or corporations to exercise any of said rights, powers and privileges in
respect of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional securities in
which the Trust may invest should the Fundamental Policies be amended.
The Trustees shall not be limited to investing in obligations maturing before
the possible termination of the Trust, nor shall the Trustees be limited by
any law limiting the investments which may be made by fiduciaries.
Section 3.3. LEGAL TITLE. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name
of one or more of the Trustees, or in the name of the Trust, or in the name
of any other Person as nominee, on such terms as the Trustees may determine,
provided that the interest of the Trust therein is appropriately protected.
The right, title and interest of the Trustees in the Trust Property shall
vest automatically in each Person who may hereafter become a Trustee. Upon
the resignation, removal or death of a Trustee he shall automatically cease
to have any right, title or interest in any of the Trust Property, and the
right, title and interest of such Trustee in the Trust Property shall vest
automatically in the remaining Trustees. Such vesting and cessation of title
shall be effective whether or not conveyancing documents have been executed
and delivered.
Section 3.4. ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares
and, subject to the provisions set forth in Articles VII, VIII and IX and
Section 6.9 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 3.5. BORROWING MONEY; LENDING TRUST ASSETS. Subject to the
Fundamental Policies, the Trustee shall have power to borrow money or
otherwise obtain credit and to secure the same by mortgaging, pledging or
otherwise subjecting as security the assets of the Trust, to endorse,
guarantee, or undertake the performance of any obligation, contract or
engagement of any other Person and to lend Trust assets.
Section 3.6. DELEGATION; COMMITTEES. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of
the Trust and the Trust Property, to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Trustees or otherwise as the Trustees may deem
expedient.
Section 3.7. COLLECTION AND PAYMENT. Subject to Section 6.9 hereof, the
Trustees shall have power to collect all property due to the Trust; to pay
all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases, agreements and
other instruments.
Section 3.8. EXPENSES. Subject to Section 6.9 hereof, the Trustees shall
have the power to incur and pay any expenses which in the opinion of the
Trustees are necessary or incidental to carry out any of the purposes of the
Declaration, and to pay reasonable compensation from the funds of the Trust
to themselves as Trustees. The Trustees shall fix the compensation of all
officers, employees and Trustees.
Section 3.9. MANNER OF ACTING; BY-LAWS. Except as otherwise provided
herein or in the By-Laws or by any provision of law, any action to be taken
by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment
by means of which all persons participating in the meeting can hear each
other, or by written consents of all the Trustees. The Trustees may adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of
the business of the Trust and may amend or repeal such By-Laws to the extent
such power is not reserved to the Shareholders.
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Section 3.10. MISCELLANEOUS POWERS. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series thereof; (b)
enter into joint ventures, partnerships and any other combinations or
associations; (c) remove Trustees or fill vacancies in or add to their
number, elect and remove such officers and appoint and terminate such agents
or employees as they consider appropriate, and appoint from their own number,
and terminate, any one or more committees which may exercise some or all of
the power and authority of the Trustees as the Trustees may determine; (d)
purchase, and pay for out of Trust Property or the property of the
appropriate Series of the Trust, insurance policies insuring the
Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers or independent contractors of the Trust
against all claims arising by reason of holding any such position or by
reason of any action taken or omitted to be taken by any such Person in such
capacity, whether or not constituting negligence, or whether or not the Trust
would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents
of the Trust; (f) to the extent permitted by law, indemnify any person with
whom the Trust or any Series thereof has dealings, including any Investment
Adviser, Distributor, Transfer Agent and selected dealers, to such extent as
the Trustees shall determine; (g) guarantee indebtedness or contractual
obligations of others; (h) determine and change the fiscal year of the Trust
or any Series thereof and the method by which its accounts shall be kept; and
(i) adopt a seal for the Trust but the absence of such seal shall not impair
the validity of any instrument executed on behalf of the Trust.
Section 3.11. PRINCIPAL TRANSACTIONS. Except in transactions permitted by
the 1940 Act or any rule or regulation thereunder, or any order of exemption
issued by the Commission, or effected to implement the provisions of any
agreement to which the Trust is a party, the Trustees shall not, on behalf of
the Trust, buy any securities (other than Shares) from or sell any securities
(other than Shares) to, or lend any assets of the Trust or any Series thereof
to, any Trustee or officer of the Trust or any firm of which any such Trustee
or officer is a member acting as principal, or have any such dealings with
any Investment Adviser, Distributor or Transfer Agent or with any Affiliated
Person of such Person; but the Trust or any Series thereof may employ any
such Person, or firm or company in which such Person is an Interested Person,
as broker, legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 3.12. LITIGATION. The Trustees shall have the power to engage in
and to prosecute, defend, compromise, abandon, or adjust, by arbitration, or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust, and out of the assets of the Trust or any Series
thereof to pay or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such power shall
include without limitation the power of the Trustees or any appropriate
committee thereof, in the exercise of their or its good faith business
judgment, to dismiss any action, suit, proceeding, dispute, claim, or demand,
derivative or otherwise, brought by any person, including a Shareholder in
its own name or the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND TRANSFER AGENT
Section 4.1. INVESTMENT ADVISER. Subject to approval by a Majority
Shareholder Vote, the Trustees may in their discretion from time to time
enter into one or more investment advisory or management contracts or, if the
Trustees establish multiple Series, separate investment advisory or
management contracts with respect to one or more Series whereby the other
party or parties to any such contracts shall undertake to furnish the Trust
or such Series such management, investment advisory, administration,
accounting, legal, statistical and research facilities and services,
promotional or marketing activities, and such other facilities and services,
if any, as the Trustees shall from time to time consider desirable and all
upon such terms and conditions as the Trustees may in their discretion
determine. The vote of the initial shareholder(s) shall constitute "Majority
Shareholder Vote" if such agreements are entered into prior to a public
offering of Shares of the Trust. Notwithstanding any provisions of the
Declaration, the Trustees
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may authorize the Investment Advisers, or any of them, under any such
contracts (subject to such general or specific instructions as the Trustees
may from time to time adopt) to effect purchases, sales, loans or exchanges
of portfolio securities and other investments of the Trust on behalf of the
Trustees or may authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of such
Investment Advisers, or any of them (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be deemed to
have been authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval or continuance of any such
investment advisory or management contract. If the Shareholders of any one or
more of the Series of the Trust should fail to approve any such investment
advisory or management contract, the Investment Adviser may nonetheless serve
as Investment Adviser with respect to any Series whose Shareholders approve
such contract.
Section 4.2. ADMINISTRATIVE SERVICES. The Trustees may in their discretion
from time to time contract for administrative personnel and services whereby
the other party shall agree to provide the Trustees or the Trust
administrative personnel and services to operate the Trust on a daily or
other basis, on such terms and conditions as the Trustees may in their
discretion determine. Such services may be provided by one or more persons or
entities.
Section 4.3. DISTRIBUTOR. The Trustees may in their discretion from time
to time enter into one or more contracts, providing for the sale of Shares to
net the Trust or the applicable Series of the Trust not less than the net
asset value per Share (as described in Article VIII hereof) and pursuant to
which the Trust may either agree to sell the Shares to the other parties to
the contracts, or any of them, or appoint any such other party its sales
agent for such Shares. In either case, any such contract shall be on such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article IV, including, without
limitation, the provision for the repurchase or sale of shares of the Trust
by such other party as principal or as agent of the Trust.
Section 4.4. TRANSFER AGENT. The Trustees may in their discretion from
time to time enter into a transfer agency and shareholder service contract
whereby the other party to such contract shall undertake to furnish transfer
agency and shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion determine not
inconsistent with the Declaration. Such services may be provided by one or
more Persons.
Section 4.5. CUSTODIAN. The Trustees may appoint or otherwise engage one
or more banks or trust companies, each having an aggregate capital, surplus
and undivided profits (as shown in its last published report) of at least
five million dollars ($5,000,000) to serve as Custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in the By-Laws of the Trust.
Section 4.6. PARTIES TO CONTRACT. Any contract of the character described
in Sections 4.1, 4.2, 4.3, 4.4 or 4.5 of this Article IV and any other
contract may be entered into with any Person, although one or more of the
Trustees or officers of the Trust may be an officer, director, trustee,
shareholder, or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence
of any such relationship; nor shall any Person holding such relationship be
liable merely by reason of such relationship for any loss or expense to the
Trust under or by reason of said contract or accountable for any profit
realized directly or indirectly therefrom, provided that the contract when
entered into was not inconsistent with the provisions of this Article IV. The
same Person may be the other party to any contracts entered into pursuant to
Sections 4.1, 4.2, 4.3, 4.4 or 4.5 above or otherwise, and any individual may
be financially interested or otherwise affiliated with Persons who are
parties to any or all of the contracts mentioned in this Section 4.6.
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ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 5.1. NO PERSONAL LIABILITY OF SHAREHOLDERS, TRUSTEES, ETC. No
Shareholder shall be subject to any personal liability whatsoever to any
Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than the
Trust or its Shareholders, in connection with the Trust Property or the
affairs of the Trust, save only that arising from bad faith, willful
misfeasance, gross negligence or reckless disregard for his duty to such
Person; and all such Persons shall look solely to the Trust Property, or to
the Property of one or more specific Series of the Trust if the claim arises
from the conduct of such Trustee, officer, employee or agent with respect to
only such Series, for satisfaction of claims of any nature arising in
connection with the affairs of the Trust. If any Shareholder, Trustee,
officer, employee or agent, as such, of the Trust is made a party to any suit
or proceeding to enforce any such liability, he shall not, on account
thereof, be held to any personal liability. The Trust shall indemnify out of
the property of the Trust and hold each Shareholder harmless from and against
all claims and liabilities, to which such Shareholder may become subject by
reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability; provided that, in the event the
Trust shall consist of more than one Series, Shareholders of a particular
Series who are faced with claims or liabilities solely by reason of their
status as Shareholders of that Series shall be limited to the assets of that
Series for recovery of such loss and related expenses. The rights accruing to
a Shareholder under this Section 5.1 shall not exclude any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically
provided herein.
Section 5.2. NON-LIABILITY OF TRUSTEES, ETC. No Trustee, officer, employee
or agent of the Trust shall be liable to the Trust, its Shareholders, or to
any Shareholder, Trustee, officer, employee, or agent thereof for any action
or failure to act (including without limitation the failure to compel in any
way any former or acting Trustee to redress any breach of trust) except for
this own bad faith, willful misfeasance, gross negligence or reckless
disregard of his duties.
Section 5.3. INDEMNIFICATION. (a) The Trustees shall provide for
indemnification by the Trust, or by one or more Series thereof if the claim
arises from his or her conduct with respect to only such Series, of any
person who is, or has been, a Trustee, officer, employee or agent of the
Trust against all liability and against all expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding in which
he becomes involved as a party or otherwise by virtue of his being or having
been a Trustee, officer, employee or agent and against amounts paid or
incurred by him in the settlement thereof, in such manner as the Trustees may
provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal, or other,
including appeals), actual or threatened; and the words "liability" and
"expenses" shall include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Section 5.4. NO BOND REQUIRED OF TRUSTEES. No Trustee shall be obligated
to give any bond or other security for the performance of any of his duties
hereunder.
Section 5.5. NO DUTY OF INVESTIGATION; NOTICE IN TRUST INSTRUMENTS,
ETC. No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust or a Series thereof
shall be bound to make any inquiry concerning the validity of any transaction
purporting to be made by the Trustees or by said officer, employee or agent
or be liable for the application of money or property paid, loaned or
delivered to or on the order of the Trustees or of said officer, employee or
agent. Every obligation, contract, instrument, certificate, Share, other
security of the Trust or a Series thereof or undertaking, and every other act
or thing whatsoever executed in connection with the Trust shall be
conclusively presumed to have been executed or done by the executors thereof
only in their
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capacity as officers, employees or agents of the Trust or a Series thereof.
Every written obligation, contract, instrument, certificate, Share, other
security of the Trust or undertaking made or issued by the Trustees shall
recite that the same is executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations of the Trust or a
Series thereof under any such instrument are not binding upon any of the
Trustees or Shareholders, individually, but bind only the Trust Estate (or,
in the event the Trust shall consist of more than one Series, in the case of
any such obligation which relates to a specific Series, only the Series which
is a party thereto), and may contain any further recital which they or he may
deem appropriate, but the omission of such recital shall not affect the
validity of such obligation, contract instrument, certificate, Share,
security or undertaking and shall not operate to bind the Trustees or
Shareholders individually. The Trustees shall at all times maintain insurance
for the protection of the Trust Property, its Shareholders, Trustees,
officers, employees and agents in such amount as the Trustees shall deem
adequate to cover possible tort liability, and such other insurance as the
Trustees in their sole judgment shall deem advisable.
Section 5.6. RELIANCE ON EXPERTS, ETC. Each Trustee and officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to
act resulting from reliance in good faith upon the books of account or other
records of the Trust, upon an opinion of counsel, or upon reports made to the
Trust by any of its officers or employees or by any Investment Adviser,
Distributor, Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by the Trustees,
officers or employees of the Trust, regardless of whether such counsel or
expert may also be a Trustee.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
Section 6.1. BENEFICIAL INTEREST. The interest of the beneficiaries
hereunder shall be divided into transferable shares of beneficial interest of
$.01 par value. The number of such shares of beneficial interest authorized
hereunder is unlimited. The Trustees shall have the authority to establish
and designate one or more Series or classes of shares. Each share of any
Series shall represent an equal proportionate share in the assets of that
Series with each other Share in that Series. The Trustees may divide or
combine the shares of any Series into a greater or lesser number of shares in
that Series without thereby changing the proportionate interests in the
assets of that Series. Subject to the provisions of Section 6.9 hereof, the
Trustees may also authorize the creation of additional series of shares (the
proceeds of which may be invested in separate, independently managed
portfolios) and additional classes of shares within any series. All Shares
issued hereunder including, without limitation, Shares issued in connection
with a dividend in Shares or a split in Shares, shall be fully paid and
nonassessable.
Section 6.2. RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition of
division of any property, profits, rights or interests of the Trust nor can
they be called upon to assume any losses of the Trust or suffer an assessment
of any kind by virtue of their ownership of Shares. The Shares shall be
personal property giving only the rights in the Declaration specifically set
forth. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may
determine with respect to any series of Shares.
Section 6.3. TRUST ONLY. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and
each Shareholder from time to time. It is not the intention of the Trustees
to create a general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal relationship other
than a trust. Nothing in the Declaration shall be construed to make the
Shareholders, either by themselves or with the Trustees, partners or members
of a joint stock association.
Section 6.4. ISSUANCE OF SHARES. The Trustees, in their discretion may,
from time to time without vote of the Shareholders, issue Shares of any
Series, in addition to the then issued and outstanding Shares
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and Shares held in the treasury, to such party or parties and for such amount
and type of consideration, including cash or property, at such time or times
and on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares. The
Trustees may from time to time divide or combine the Shares of any Series
into a greater or lesser number without thereby changing the proportionate
beneficial interests in that Series. Contributions to the Trust may be
accepted for, and Shares shall be redeemed as, whole Shares and/or fractions
of a Share as described in the Prospectus.
Section 6.5. REGISTER OF SHARES. A register shall be kept in respect of
each Series at the principal office of the Trust or at an office of the
Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares of each Series held by them
respectively and a record of all transfers thereof. Such register may be in
written form or any other form capable of being converted into written form
within a reasonable time for visual inspection. Such register shall be
conclusive as to who are the holders of the Shares and who shall be entitled
to receive dividends or distributions or otherwise to exercise or enjoy the
rights of Shareholders. No Shareholder shall be entitled to receive payment
of any dividend or distribution, nor to have notice given to him as herein or
in the By-Laws provided, until he has given his address to the Transfer Agent
or such other officer or agent of the Trustees as shall keep the said
register for entry thereon. It is not contemplated that certificates will be
issued for the Shares; however, the Trustees, in their discretion, may
authorize the issuance of Share certificates and promulgate appropriate rules
and regulations as to their use.
Section 6.6. TRANSFER OF SHARES. Shares shall be transferable on the
records of the Trust only by the record holder or by his agent thereunto duly
authorized in writing, upon delivery to the Trustees or the Transfer Agent of
a duly executed instrument of transfer, together with such evidence of the
genuineness of each such execution and authorization and of other matters as
may reasonably be required. Upon such delivery the transfer shall be recorded
on the register of the Trust. Until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or registrar nor
any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the
Transfer Agent, but until such record is made, the Shareholder of record
shall be deemed to be the holder of such Shares for all purposes hereunder
and neither the Trustees nor any Transfer Agent or registrar nor any officer
or agent of the Trust shall be affected by any notice of such death,
bankruptcy or incompetence, or other operation of law, except as may
otherwise be provided by the laws of the Commonwealth of Massachusetts.
Section 6.7. NOTICES. Any and all notices to which any Shareholder may be
entitled and any and all communications shall be deemed duly served or given
if mailed, postage prepaid, addressed to any Shareholder of record at his
last known address as recorded on the register of the Trust. Annual reports
and proxy statements need not be sent to a shareholder if: (i) an annual
report and proxy statement for two consecutive annual meetings, or (ii) all,
and at least two, checks (if sent by first class mail) in payment of
dividends or interest and shares during a twelve month period have been
mailed to such shareholder's address and have been returned undelivered.
However, delivery of such annual reports and proxy statements shall resume
once a Shareholder's current address is determined.
Section 6.8. VOTING POWERS. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof, (ii) for
the removal of Trustees as provided in Section 2.3 hereof, (iii) with respect
to any investment advisory or management contract as provided in Section 4.1,
(iv) with respect to termination of the Trust as provided in Section 9.2, (v)
with respect to any amendment of the Declaration to the extent and as
provided in Section 9.3, (vi) with respect to any merger, consolidation or
sale of assets as provided in Section 9.4, (vii) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5,
(viii) to the same extent as the stockholders of a
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Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided that Shareholders of a Series are not entitled to vote in
connection with the bringing of a derivative or class action with respect to
any matter which only affects another Series or its Shareholders), (ix) with
respect to any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act and (x) with respect to such additional matters relating
to the Trust as may be required by law, the Declaration, the By-Laws or any
registration of the Trust with the Commission (or any successor agency) or
any state, or as and when the Trustees may consider necessary or desirable.
Each whole Share shall be entitled to one vote as to any matter on which it
is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote, except that Shares held in the treasury of the
Trust as of the record date, as determined in accordance with the By-Laws,
shall not be voted. On any matter submitted to a vote of Shareholders, all
Shares shall be voted by individual Series except (1) when required by the
1940 Act, Shares shall be voted in the aggregate and not by individual
Series; and (2) when the Trustees have determined that the matter affects
only the interests of one or more Series, then only the Shareholders of such
Series shall be entitled to vote thereon. The Trustees may, in conjunction
with the establishment of any further Series or any classes of Shares,
establish conditions under which the several series or classes of Shares
shall have separate voting rights or no voting rights. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, the Declaration or the By-Laws to be taken by Shareholders.
The By-Laws may include further provisions for Shareholders' votes and
meetings and related matters.
Section 6.9. SERIES OR CLASSES OF SHARES. The following provisions are
applicable regarding the Series of Shares of the Trust established in Section
6.1 hereof and shall be applicable if the Trustees shall establish additional
Series or shall divide the shares of any Series into two or more classes,
also as provided in Section 6.1 hereof, and all provisions relating to the
Trust shall apply equally to each Series thereof except as the context
requires:
(a) The number of authorized shares and the number of shares of each
Series or of each class that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued shares or any shares
previously issued and reacquired of any Series or class into one or more
Series or one or more classes that may be established and designated from
time to time. The Trustees may hold as treasury shares (of the same or
some other Series or class), reissue for such consideration and on such
terms as they may determine, or cancel any shares of any Series or any
class reacquired by the Trust at their discretion from time to time.
(b) The power of the Trustees to invest and reinvest the Trust
Property shall be governed by Section 3.2 of this Declaration with
respect to any one or more Series which represents the interests in the
assets of the Trust immediately prior to the establishment of any
additional Series and the power of the Trustees to invest and reinvest
assets applicable to any other Series shall be as set forth in the
instrument of the Trustees establishing such series which is hereinafter
described.
(c) All consideration received by the Trust for the issue or sale of
shares of a particular Series or class together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that Series or class for all
purposes, subject only to the rights of creditors, and shall be so
recorded upon the books of account of the Trust. In the event that there
are any assets, income, earnings, profits, and proceeds thereof, funds,
or payments which are not readily identifiable as belonging to any
particular Series or class, the Trustees shall allocate them among any
one or more of the Series or classes established and designated from time
to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the Trustees
shall be conclusive and binding upon the shareholders of all Series or
classes for all purposes. No holder of Shares of any Series shall have
any claim on or right to any assets allocated or belonging to any other
Series.
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(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and all
expenses, costs, charges and reserves attributable to that Series. All
expenses and liabilities incurred or arising in connection with a
particular Series, or in connection with the management thereof, shall be
payable solely out of the assets of that Series and creditors of a
particular Series shall be entitled to look solely to the property of
such Series for satisfaction of their claims. Any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated and
charged by the Trustees to and among any one or more of the series
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the holders of all
Series for all purposes. The Trustees shall have full discretion, to the
extent not inconsistent with the 1940 Act, to determine which items shall
be treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon the
shareholders.
(e) The power of the Trustees to pay dividends and make distributions
shall be governed by Section 8.2 of this Declaration with respect to any
one or more Series or classes which represents the interests in the
assets of the Trust immediately prior to the establishment of any
additional Series or classes. With respect to any other Series or class,
dividends and distributions on shares of a particular Series or class may
be paid with such frequency as the Trustees may determine, which may be
daily or otherwise, pursuant to a standing resolution or resolutions
adopted only once or with such frequency as the Trustees may determine,
to the holders of shares of that Series or class, from such of the income
and capital gains, accrued or realized, from the assets belonging to that
Series or class, as the Trustees may determine, after providing for
actual and accrued liabilities belonging to that Series or class. All
dividends and distributions on shares of a particular Series or class
shall be distributed pro rata to the holders of that Series or class in
proportion to the number of shares of that Series or class held by such
holders at the date and time of record established for the payment of
such dividends or distributions.
(f) The Trustees shall have the power to determine the designations,
preferences, privileges, limitations and rights, including voting and
dividend rights, of each class and Series of Shares.
(g) Subject to compliance with the requirements of the 1940 Act, the
Trustees shall have the authority to provide that the holders of Shares
of any Series or class shall have the right to convert or exchange said
Shares into Shares of one or more Series of Shares in accordance with
such requirements and procedures as may be established by the Trustees.
(h) The establishment and designation of any Series or class of
shares in addition to those established in Section 6.1 hereof shall be
effective upon the execution by a majority of the then Trustees of an
instrument setting forth such establishment and designation and the
relative rights, preferences, voting powers, restrictions, limitations as
to dividends, qualifications, and terms and conditions of redemption of
such Series or class, or as otherwise provided in such instrument. At any
time that there are no shares outstanding of any particular Series or
class previously established and designated, the Trustees may by an
instrument executed by a majority of their number abolish that Series or
class and the establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an amendment to
this Declaration.
(i) Shareholders of a Series shall not be entitled to participate in
a derivative or class action with respect to any matter which only
affects another Series or its Shareholders.
(j) Each Share of a Series of the Trust shall represent a beneficial
interest in the net assets of such Series. Each holder of Shares of a
Series shall be entitled to receive his pro rata share of distributions
of income and capital gains made with respect to such Series. In the
event of the liquidation of a particular Series, the Shareholders of that
Series which has been established and designated and which is being
liquidated shall be entitled to receive, when and as declared by the
Trustees, the excess of the assets belonging to that Series over the
liabilities belonging to that Series. The holders of Shares of any Series
shall not be entitled hereby to any distribution upon liquidation
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of any other Series. The assets so distributable to the Shareholders of
any Series shall be distributed among such Shareholders in proportion to
the number of Shares of that Series held by them and recorded on the
books of the Trust. The liquidation of any particular Series in which
there are Shares then outstanding may be authorized by an instrument in
writing, without a meeting, signed by a majority of the Trustees then in
office, subject to the approval of a majority of the outstanding voting
securities of that Series, as that phrase is defined in the 1940 Act.
ARTICLE VII
REDEMPTIONS
Section 7.1. REDEMPTIONS. Each Shareholder of a particular Series shall
have the right at such times as may be permitted by the Trust to require the
Trust to redeem all or any part of his Shares of that Series, upon and
subject to the terms and conditions provided in this Article VII. The Trust
shall, upon application of any Shareholder or pursuant to authorization from
any Shareholder, redeem or repurchase from such Shareholder outstanding
shares for an amount per share determined by the Trustees in accordance with
any applicable laws and regulations; provided that (a) such amount per share
shall not exceed the cash equivalent of the proportionate interest of each
share or of any class or Series of shares in the assets of the Trust at the
time of the redemption or repurchase and (b) if so authorized by the
Trustees, the Trust may, at any time and from time to time charge fees for
effecting such redemption or repurchase, at such rates as the Trustees may
establish, as and to the extent permitted under the 1940 Act and the rules
and regulations promulgated thereunder, and may, at any time and from time to
time, pursuant to such Act and such rules and regulations, suspend such right
of redemption. The procedures for effecting and suspending redemption shall
be as set forth in the Prospectus from time to time. Payment will be made in
such manner as described in the Prospectus.
Section 7.2. REDEMPTION AT THE OPTION OF THE TRUST. Each Share of the
Trust or any Series of the Trust shall be subject to redemption at the option
of the Trust at the redemption price which would be applicable if such Share
were then being redeemed by the Shareholder pursuant to Section 7.1: (i) at
any time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Series, or (ii) upon such other conditions with
respect to maintenance of Shareholder accounts of a minimum amount as may
from time to time be determined by the Trustees and set forth in the then
current Prospectus of the Trust. Upon such redemption the holders of the
Shares so redeemed shall have no further right with respect thereto other
than to receive payment of such redemption price.
Section 7.3. EFFECT OF SUSPENSION OF DETERMINATION OF NET ASSET VALUE. If,
pursuant to Section 7.4 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or
of any Series thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 7.1 hereof but who shall not
yet have received payment) to have Shares redeemed and paid for by the Trust
or a Series thereof shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right
so suspended may, during the period of such suspension, by appropriate
written notice of revocation at the office or agency where application was
made, revoke any application for redemption not honored and withdraw any
certificates on deposit. The redemption price of Shares for which redemption
applications have not been revoked shall be the net asset value of such
Shares next determined as set forth in Section 8.1 after the termination of
such suspension, and payment shall be made within seven (7) days after the
date upon which the application was made plus the period after such
application during which the determination of net asset value was suspended.
Section 7.4. SUSPENSION OF RIGHT OF REDEMPTION. The Trust may declare a
suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine the value of its net assets, or (iv)
during any other period when the Commission may for the
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protection of security holders of the Trust by order permit suspension of the
rights of redemption or postponement of the date of payment or redemption;
provided that applicable rules and regulations of the Commission shall govern
as to whether the conditions prescribed in (ii), (iii) or (iv) exist. Such
suspension shall take effect at such time as the Trust shall specify but not
later than the close of business on the business day next following the
declaration of suspension, and thereafter there shall be no right of
redemption or payment on redemption until the Trust shall declare the
suspension at an end, except that the suspension shall terminate in any event
on the first day on which said stock exchange shall have reopened or the
period specified in (ii) or (iii) shall have expired (as to which in the
absence of an official ruling by the Commission, the determination of the
Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination
of the suspension.
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 8.1. NET ASSET VALUE. The net asset value of each outstanding
Share of each Series of the Trust shall be determined on such days and at
such time or times as the Trustees may determine. The method of determination
of net asset value shall be determined by the Trustees and shall be as set
forth in the Prospectus. The power and duty to make the daily calculations
may be delegated by the Trustees to any Investment Adviser, the Custodian,
the Transfer Agent or such other person as the Trustees by resolution may
determine. The Trustees may suspend the daily determination of net asset
value to the extent permitted by the 1940 Act.
Section 8.2. DISTRIBUTIONS TO SHAREHOLDERS. The Trustees shall from time
to time distribute ratably among the Shareholders of the Trust or of any
Series such proportion of the net income, earnings, profits, gains, surplus
(including paid-in surplus), capital, or assets of the Trust or of such
Series held by the Trustees as they may deem proper. Such distribution may be
made in cash or property (including without limitation any type of
obligations of the Trust or of such Series or any assets thereof), and the
Trustees may distribute ratably among the Shareholders of the Trust or of
that Series additional Shares issuable hereunder in such manner, at such
times, and on such terms as the Trustees may deem proper. Such distributions
may be among the Shareholders of record (determined in accordance with the
Prospectus) of the Trust or of such Series at the time of declaring a
distribution or among the Shareholders of record of the Trust or of such
Series at such later date as the Trustees shall determine. The Trustees may
always retain from the net income, earnings, profits or gains of the Trust or
of such Series such amount as they may deem necessary to pay the debts or
expenses of the Trust or of such Series or to meet obligations of the Trust
or of such Series, or as they may deem desirable to use in the conduct of its
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders of the Trust or of any
Series such dividend reinvestment plans, cash dividend payout plans or
related plans as the Trustees deem appropriate.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust to avoid or reduce liability for taxes.
Section 8.3. DETERMINATION OF NET INCOME. The Trustees shall have the
power to determine the net income of any Series of the Trust and from time to
time to distribute such net income ratably among the Shareholders as
dividends in cash or additional Shares of such Series issuable hereunder. The
determination of net income and the resultant declaration of dividends shall
be as set forth in the Prospectus. The Trustees shall have full discretion to
determine whether any cash or property received by any Series of the Trust
shall be treated as income or as principal and whether any item of expense
shall be charged to the income or the principal account, and their
determination made in good faith shall be
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conclusive upon the Shareholders. In the case of stock dividends received,
the Trustees shall have full discretion to determine, in the light of the
particular circumstances, how much, if any, of the value thereof shall be
treated as income, the balance, if any, to be treated as principal.
Section 8.4. POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
Share net asset value of the Shares or net income, or the declaration and
payment of dividends and distributions, as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act,
or any rule or regulation thereunder, including any rule or regulation
adopted pursuant to Section 22 of the 1940 Act by the Commission or any
securities association registered under the Securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified. Without limiting the generality of the
foregoing, the Trustees may establish classes or additional Series of Shares
in accordance with Section 6.9.
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. DURATION. The Trust shall continue without limitation of time
but subject to the provisions of this Article IX.
Section 9.2. TERMINATION OF TRUST. (a) The Trust or any Series may be
terminated (i) by a Majority Shareholder Vote at any meeting of Shareholders
of the Trust or the appropriate Series thereof, (ii) by an instrument in
writing, without a meeting, signed by a majority of the Trustees and
consented to by a Majority Shareholder Vote of the Trust or the appropriate
Series thereof, or by such other vote as may be established by the Trustees
with respect to any class or Series of Shares, or (iii) with respect to a
Series as provided in Section 6.9(h). Upon the termination of the Trust or
the Series:
(i) The Trust or the Series shall carry on no business except for the
purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or the Series and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall have been
wound up, including the power to fulfill or discharge the contracts of
the Trust or the Series, collect its assets, sell, convey, assign,
exchange, transfer or otherwise dispose of all or any part of the
remaining Trust Property or Trust Property allocated or belonging to such
Series to one or more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities or other
property of any kind, discharge or pay its liabilities, and to do all
other acts appropriate to liquidate its business; provided that any sale,
conveyance, assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property or Trust Property allocated or
belonging to such Series shall require Shareholder approval in accordance
with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements, as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or Trust Property allocated or
belonging to such Series, in cash or in kind or partly each, among the
Shareholders of the Trust according to their respective rights.
Section 9.3. AMENDMENT PROCEDURE. (a) This Declaration may be amended by a
Majority Shareholder Vote, at a meeting of Shareholders, or by written
consent without a meeting. The Trustees may also amend this Declaration
without the vote or consent of Shareholders (i) to change the name of the
Trust or any Series or classes of Shares, (ii) to supply any omission, or
cure, correct or supplement any ambiguous, defective or inconsistent
provision hereof, (iii) if they deem it necessary to conform this Declaration
to the requirements of applicable federal or state laws or regulations or the
requirements of the Internal Revenue Code, or to eliminate or reduce any
federal, state or local taxes which are or may by the Trust or the
Shareholders, but the Trustees shall not be liable for failing to do so, or
(iv) for any other purpose which does not adversely affect the rights of any
Shareholder with respect to which the amendment is or purports to be
applicable.
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(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust or of any Series of the Trust
by reducing the amount payable thereon upon liquidation of the Trust or of
such Series of the Trust or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or of such Series outstanding and
entitled to vote, or by such other vote as may be established by the Trustees
with respect to any Series or class of Shares. Nothing contained in this
Declaration shall permit the amendment of this Declaration to impair the
exemption from personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and
reciting that it was duly adopted by the Shareholders or by the Trustees as
aforesaid or a copy of the Declaration, as amended, and executed by a
majority of the Trustees or certified by the Secretary or any Assistant
Secretary of the Trust, shall be conclusive evidence of such amendment when
lodged among the records of the Trust. Unless such amendment or such
certificate sets forth some later time for the effectiveness of such
amendment, such amendment shall be effective when lodged among the records of
the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by
the affirmative vote of a majority of the Trustees or by an instrument signed
by a majority of the Trustees.
Section 9.4. MERGER, CONSOLIDATION AND SALE OF ASSETS. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized, at any meeting
of Shareholders called for the purpose, by the affirmative vote of the
holders of not less than two-thirds of the Shares of the Trust or such Series
outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting, consented to by the holders of not less than
two-thirds of such Shares, or by such other vote as may be established by the
Trustees with respect to any series or class of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended
by the Trustees, a Majority Shareholder Vote shall be sufficient
authorization; and any such merger, consolidation, sale, lease or exchange
shall be deemed for all purposes to have been accomplished under and pursuant
to the laws of the Commonwealth of Massachusetts.
Section 9.5. INCORPORATION. With approval of a Majority Shareholder Vote,
or by such other vote as may be established by the Trustees with respect to
any Series or class of Shares, the Trustees may cause to be organized or
assist in organizing a corporation or corporations under the laws of any
jurisdiction or any other trust, partnership, association or other
organization to take over all of the Trust Property or the Trust Property
allocated or belonging to such Series or to carry on any business in which
the Trust shall directly or indirectly have any interest, and to sell, convey
and transfer the Trust Property or the Trust Property allocated or belonging
to such Series to any such corporation, trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise,
and to lend money to, subscribe for the shares or securities of, and enter
into any contracts with any such corporation, trust, partnership, association
or organization in which the Trust or such Series holds or is about to
acquire shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any successor thereto and any such
corporation, trust, partnership, association or other organization if and to
the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE X
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit or cause the officers of
the Trust to submit to the Shareholders a written financial report of each
Series of the Trust, including financial statements which shall at least
annually be certified by independent public accountants.
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ARTICLE XI
MISCELLANEOUS
Section 11.1. FILING. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of Massachusetts and
may also be filed or recorded in such other places as the Trustees deem
appropriate. Each amendment so filed shall be accompanied by a certificate
signed and acknowledged by a Trustee or by the Secretary or any Assistant
Secretary of the Trust stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees
and shall, upon filing with the Secretary of the Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
Section 11.2. RESIDENT AGENT. The Prentice-Hall Corporation System, Inc.,
84 State Street, Boston, Massachusetts 02109 is the resident agent of the
Trust in the Commonwealth of Massachusetts.
Section 11.3. GOVERNING LAW. This Declaration is executed by the Trustees
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof and the rights of all parties and the validity and construction
of every provision hereof shall be subject to and construed according to the
laws of said State.
Section 11.4. COUNTERPARTS. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument,
which shall be sufficiently evidenced by any such original counterpart.
Section 11.5. RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary of the Trust,
certifying to: (a) the number or identity of Trustees or Shareholders, (b)
the due authorization of the execution of any instrument or writing, (c) the
form of any vote passed at a meeting of Trustees or Shareholders, (d) the
fact that the number of Trustees or Shareholders present at any meeting or
executing any written instrument satisfies the requirements of this
Declaration, (e) the form of any By-Laws adopted by or the identity of any
officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with
the Trustees and their successors.
Section 11.6. PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS. (a) The
provisions of the Declaration are severable, and if the Trustees shall
determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of
the Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation
to the extent necessary to eliminate such conflict; provided, however, that
such determination shall not affect any of the remaining provisions of the
Declaration or render invalid or improper any action taken or omitted prior
to such determination.
(b) If any provision of the Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction or any other provision
of the Declaration in any jurisdiction.
Section 11.7. USE OF THE NAME "DEAN WITTER." Dean Witter Reynolds Inc.
("DWR") has consented to the use by the Trust of the identifying name "Dean
Witter," which is a property right of DWR. The Trust will only use the name
"Dean Witter" as a component of its name and for no other purpose, and will
not purport to grant to any third party the right to use the name "Dean
Witter" for any purpose. DWR, or any corporate affiliate of the parent of
DWR, may use or grant to others the right to use the name "Dean Witter", or
any combination or abbreviation thereof, as all or a portion of a corporate
or business name or for any commercial purpose, including a grant of such
right to any other investment company. At the request of DWR or its parent,
the Trust will take such action as may be required to
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provide its consent to the use by DWR or its parent, or any corporate
affiliate of DWR's parent, or by any person to whom DWR or its parent or an
affiliate of DWR's parent shall have granted the right to the use, of the
name "Dean Witter," or any combination or abbreviation thereof. Upon the
termination of any investment advisory or investment management agreement
into which DWR, or any corporate affiliate of DWR or its parent and the Trust
may enter, the Trust shall, upon request by DWR, or any corporate affiliate
of DWR or its parent, cease to use the name "Dean Witter" as a component of
its name, and shall not use the name, or any combination or abbreviation
thereof, as a part of its name or for any other commercial purpose, and shall
cause its officers, trustees and shareholders to take any and all actions
which DWR or its parent may request to effect the foregoing and to reconvey
to DWR or its parent any and all rights to such name.
Section 11.8. PRINCIPAL PLACE OF BUSINESS. The principal place of business
of the Trust shall be Two World Trade Center, New York, New York 10048, or
such other location as the Trustees may designate from time to time.
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IN WITNESS WHEREOF, the undersigned have executed this Declaration of
Trust this th day of , 1995.
- ----------------------------------- -----------------------------------
Charles A. Fiumefreddo, as David A. Hughey, as
Trustee and not individually Trustee and not individually
Two World Trade Center Two World Trade Center
New York, New York 10048 New York, New York 10048
- -----------------------------------
Sheldon Curtis, as Trustee
and not individually
Two World Trade Center
New York, New York 10048
STATE OF NEW YORK )
) :ss.:
COUNTY OF NEW YORK )
On this th day of , 1995, DAVID A. HUGHEY, CHARLES A. FIUMEFREDDO
and SHELDON CURTIS, known to me and known to be the individuals described in and
who executed the foregoing instrument, personally appeared before me and they
severally acknowledged the foregoing instrument to be their free act and deed.
-----------------------------------
Notary Public
My commission expires:
------------------
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BY-LAWS
OF
DEAN WITTER CAPITAL APPRECIATION FUND
ARTICLE I
DEFINITIONS
The terms "COMMISSION", "DECLARATION", "DISTRIBUTOR", "INVESTMENT
ADVISER", "MAJORITY SHAREHOLDER VOTE", "1940 ACT", "SHAREHOLDER", "SHARES",
"TRANSFER AGENT", "TRUST", "TRUST PROPERTY", and "TRUSTEES" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Capital Appreciation Fund dated July 28, 1995.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote as otherwise required by Section
16(c) of the 1940 Act and to the extent required by the corporate or business
statute of any state in which the Shares of the Trust are sold, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
<PAGE>
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the meeting
from time to time. Any adjourned meeting may be held as adjourned without
further notice. At any adjourned meeting at which a quorum shall be present,
any business may be transacted as if the meeting had been held as originally
called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall
be called by the Chairman or the Secretary upon the written request of any
two (2) Trustees.
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SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
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(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person
shall be entitled to indemnification for any liability, whether or not
there is an adjudication of liability, arising by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of duties
as described in Section 17(h) and (i) of the Investment Company Act of
1940 ("disabling conduct"). A person shall be deemed not liable by reason
of disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit
or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the
Trustee, officer, employee or agent of the Trust to repay the advance if
it is not ultimately determined that such person is entitled to be
indemnified by the Trust; and
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(3) either, (i) such person provides a security for his
undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
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SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the Chairman the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. THE CHAIRMAN. (a) The Chairman shall preside at all meetings
of the Shareholders and of the Trustees, he shall be a signatory on all
Annual and Semi-Annual Reports as may be sent to shareholders, and he shall
perform such other duties as the Trustees may from time to time prescribe.
SECTION 6.7. THE PRESIDENT. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time preside.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
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SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
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the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and
deposit the same in its own banking department or elsewhere as the
Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
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ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
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ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Capital Appreciation
Fund, dated July 28, 1995, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Capital Appreciation Fund refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, Shareholder, officer, employee or agent of Dean Witter Capital
Appreciation Fund shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or
claim or otherwise, in connection with the affairs of said Dean Witter
Capital Appreciation Fund, but the Trust Estate only shall be liable.
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