WITTER DEAN INCOME BUILDER FUND, 485BPOS, 1996-10-24

WITTER DEAN INCOME BUILDER FUND
485BPOS, 1996-10-24

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 24, 1996

REGISTRATION NOS.: 333-01995
811-7575
===============================================================================

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. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
--------------------

DEAN WITTER INCOME BUILDER 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)

COPY TO:

DAVID M. BUTOWSKY, Esq.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036

--------------------

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after the effective date of this registration statement.

--------------------

IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)

[ ] immediately upon filing pursuant to paragraph (b)
[X] on October 25, 1996, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485.

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (a)(1) OF RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24f-2 NOTICE FOR
ITS FISCAL PERIOD ENDED SEPTEMBER 30, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON OCTOBER 15, 1996.

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS.
===============================================================================

<PAGE>

DEAN WITTER INCOME BUILDER FUND
CROSS-REFERENCE SHEET
FORM N-1A

<TABLE>
<CAPTION>
ITEM CAPTION
- ---- -------
PART A PROSPECTUS
- ------ ----------
<S> <C>
1. ................. Cover Page
2. ................. Prospectus Summary; Summary of Fund Expenses
3. ................. Financial Highlights; Performance Information
4. ................. Investment Objective and Policies; Risk
Considerations; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary
5. ................. The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. ................. Dividends, Distributions and Taxes; Additional
Information
7. ................. Purchase of Fund Shares; Shareholder Services
8. ................. Redemptions and Repurchases; Shareholder Services
9. ................. Not Applicable
</TABLE>

<TABLE>
<CAPTION>
PART B STATEMENT OF ADDITIONAL INFORMATION
- ------ -----------------------------------
<S> <C>
10. ................. Cover Page
11. ................. Table of Contents
12. ................. The Fund and Its Management Investment Practices and
Policies; Investment
13. ................. Restrictions; Portfolio Transactions and Brokerage
14. ................. Trustees and Officers
15. ................. The Fund and Its Management; Trustees and Officers
16. ................. The Fund and Its Management; Purchase of Fund Shares;
Custodian and Transfer Agent; Independent
Accountants; Shareholder Services
17. ................. Portfolio Transactions and Brokerage
18. ................. Description of Shares
19. ................. Repurchase of Fund Shares; Redemptions and
Repurchases; Financial Statements; Shareholder
Services
20. ................. Dividends, Distributions and Taxes
21. ................. Not applicable
22. ................. Performance Information
23. ................. Financial Statements
</TABLE>

PART C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.

<PAGE>

PROSPECTUS
OCTOBER 25, 1996

Dean Witter Income Builder Fund (the "Fund") is an open-end,
diversified management investment company whose primary investment objective
is to seek reasonable income. Growth of capital is the secondary objective.
The Fund seeks to achieve its objectives by investing, under normal market
conditions, at least 65% of its total assets in a diversified portfolio of
income-producing equity securities, including common stock, preferred stock
and convertible securities. Up to 35% of the Fund's assets may be invested in
fixed-income securities or common stocks that do not pay a regular dividend
but are expected to contribute to the Fund's ability to meet its investment
objectives.

Shares of the Fund are continuously offered at net asset value.
However, redemptions and/or repurchases are subject in most cases to a
contingent deferred sales charge, scaled down from 5% to 1% of the amount
redeemed, if made within six years of purchase, which charge will be paid to
the Fund's Distributor, Dean Witter Distributors Inc. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge." In addition, the Fund pays the
Distributor a distribution fee pursuant to a Plan of Distribution at the
annual rate of 1.0% of the lesser of the (i) average daily aggregate net sales
or (ii) average daily net assets of the Fund. See "Purchase of Fund
Shares--Plan of Distribution."

This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated October 25, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed on this
page. The Statement of Additional Information is incorporated herein by
reference.

Dean Witter
Income Builder Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

TABLE OF CONTENTS

Prospectus Summary/ 2
Summary of Fund Expenses/ 3
Financial Highlights/ 4
The Fund and its Management/ 4
Investment Objectives and Policies/ 5
Risk Considerations/ 8
Investment Restrictions/ 13
Purchase of Fund Shares/ 13
Shareholder Services/ 15
Redemptions and Repurchases/ 18
Dividends, Distributions and Taxes/ 20
Performance Information/ 21
Additional Information/ 22
Financial Statements--September 30, 1996/ 23
Report of Independent Accountants/ 36
Appendix/ 37

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

DEAN WITTER DISTRIBUTORS INC.,
DISTRIBUTOR

<PAGE>

PROSPECTUS SUMMARY

- -------------------------------------------------------------------------------
The The Fund is organized as a Trust, commonly known as a
Fund Massachusetts business trust, and is an open-end,
diversified management investment company. Under normal
market conditions, the Fund will invest at least 65% of its
total assets in income-producing equity securities,
including common stock, preferred stock and convertible
securities. Up to 35% of the Fund's assets may be invested
in fixed-income securities or common stocks that do not pay
a regular dividend but are expected to contribute to the
Fund's ability to meet its investment objectives.
- -------------------------------------------------------------------------------
Shares Offered Shares of beneficial interest with $.01 par value (see page
21).
- -------------------------------------------------------------------------------
Offering At net asset value (see page 13). Shares redeemed within
Price six years of purchase are subject to a contingent deferred
sales charge under most circumstances (see page 13).
- -------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000 ($100 if the account is
Purchase opened through EasyInvest (Service Mark) ); minimum
subsequent investment, $100 (see page 13).
- -------------------------------------------------------------------------------
Investment The primary investment objective of the Fund is to seek
Objective reasonable income. Growth of capital is the secondary
objective.
- -------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter
Services Company Inc., serve in various investment
management, advisory, management and administrative
capacities to 100 investment companies and other portfolios
with net assets under management of approximately $86.5
billion at September 30, 1996.
- -------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual
Fee rate of 0.75% of the Fund's average daily net assets.
- -------------------------------------------------------------------------------
Dividends and Dividends from net investment income are paid quarterly.
Distributions Capital gains, if any, are 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 unless the shareholder
elects to receive cash (see page 20).
- -------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor") receives
and Distribution from the Fund a Rule 12b-1 distribution fee accrued daily
Fee and payable monthly at the rate of 1.0% per annum of the
lesser of (i) the Fund's average daily aggregate net sales
(since inception) 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 13).
- -------------------------------------------------------------------------------
Redemption-- Shares are redeemable by the shareholder at net asset
Contingent value. An account may be involuntarily redeemed if the
Deferred total value of the account is less than $100, or, if the
Sales account was opened through Easyinvest (Service Mark) , if
Charge after twelve months the shareholder has invested less than
$1,000 in the account. Although no commission or sales load
is imposed upon the purchase of shares, a contingent
deferred sales charge (which declines from 5% to 1%) is
imposed on any redemption of shares if after such
redemption the aggregate current value of an account with
the Fund falls below the aggregate amount of the investor's
purchase payments made during the six years preceding the
redemption. However, there is no charge imposed on
redemption of shares purchased through reinvestment of
dividends or distributions (see page 18).
- -------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate
Considerations with changes in market value of portfolio securities.
Dividends payable by the Fund will vary in relation to the
amounts of dividends earned on common stock and interest
earned on fixed-income securities. The value of the Fund's
convertible and fixed-income portfolio securities and,
therefore, the Fund's net asset value per share, may
increase or decrease due to various factors, including
changes in prevailing interest rates. Generally, a rise in
interest rates will result in a decrease in the Fund's net
asset value per share, while a drop in interest rates will
result in an increase in the Fund's net asset value per
share. The high yield, high risk fixed-income securities in
which the Fund may invest are subject to greater risk of
loss of income and principal than higher rated, lower
yielding fixed-income securities. The prices of high yield,
high risk securities have been found to be less sensitive
to changes in prevailing interest rates than higher rated
investments, but are likely to be more sensitive to adverse

economic changes or individual corporate developments. The
Fund may enter into repurchase agreements, may purchase
foreign securities; securities on a when-issued and delayed
delivery basis and may utilize certain investment
techniques, all of which involve certain special risks (see
pages 8 through 12).
- -------------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions;
Services Investment of Distributions Received in Cash; Systematic
Withdrawal Plan; Exchange Privilege; EasyInvest (Service
Mark); Tax-Sheltered Retirement Plans (see pages 15 through
18).
- -------------------------------------------------------------------------------

The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.

<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:

YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
------------ ----------
First ............................................... 5.0%
Second .............................................. 4.0%
Third ............................................... 3.0%
Fourth .............................................. 2.0%
Fifth ............................................... 2.0%
Sixth ............................................... 1.0%
Seventh and thereafter .............................. None

Redemption Fees ........................................................ None
Exchange Fee ........................................................... None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
- ----------------------------------------------------------------------
Management Fees ........................................................ 0.75%
12b-1 Fees* ............................................................ 1.00%
Other Expenses ......................................................... 0.50%
Total Fund Operating Expenses .......................................... 2.25%

Management and 12b-1 Fees are annualized for the current fiscal period of
the Fund ending September 30, 1996. "Other Expenses," as shown above, are
based upon actual amounts of expenses of the Fund for the fiscal period ending
September 30, 1996, as annualized.

- ---------
* The 12b-1 fee is accrued daily and payable monthly, at an annual rate of
1.0% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's shares since the inception of the Fund (not including reinvestments
of dividends or 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 and is a payment made to the selling broker for
personal service and/or maintenance of shareholder accounts. The remainder
of the 12b-1 fee is an asset based sales charge, and is a distribution fee
paid to the Distributor to compensate it for the services provided and the
expenses borne by the Distributor and others in the distribution of the
Fund's shares (see "Purchase of Fund Shares").

<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: ............................. $73 $100
You would pay the following expenses on the same investment, assuming no redemption: .... $23 $ 70
</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" and "Plan of Distribution."

Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charge permitted by the
NASD.

<PAGE>

FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------

The following ratios and per share data for a share of beneficial interest
outstanding for the period June 26, 1996 (commencement of operations) through
September 30, 1996 have been audited by Price Waterhouse LLP, independent
accountants. The financial highlights should be read in conjunction with the
financial statements, notes thereto and the unqualified report of independent
accountants which are contained in this Prospectus commencing on page 23.

FOR THE PERIOD
JUNE 26, 1996*
THROUGH
SEPTEMBER 30, 1996
------------------
PER SHARE OPERATING PERFORMANCE:
- --------------------------------
Net asset value, beginning of period .... $10.00
------
Net investment income .................... 0.08
Net realized and unrealized gain ........ 0.23
------
Total from investment operations ........ 10.31
Less dividends from net investment income (0.08)
------
Net asset value, end of period ........... $10.23
======
TOTAL INVESTMENT RETURN+ ................. 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 2.25%(2)
Net investment income .................... 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $148,142
Portfolio turnover rate .................. 7%(1)
Average commission rate paid ............. $0.0558
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.

See Notes to Financial Statements

THE FUND AND ITS MANAGEMENT
- -------------------------------------------------------------------------------

Dean Witter Income Builder 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 March 21, 1996.

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 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$83.6 billion at September 30, 1996. The Investment Manager also manages
portfolios of

<PAGE>

pension plans, other institutions and individuals which aggregated
approximately $2.9 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.

The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general
investment policies and programs are being properly carried out and that
administrative services are being provided to the Fund in a satisfactory
manner.

As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund incurred by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.75% 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;
transfer agent, custodian, auditing fees; and certain legal 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 OBJECTIVES AND POLICIES
- -------------------------------------------------------------------------------

The primary investment objective of the Fund is to seek reasonable income.
Growth of capital is the secondary objective. The objectives are fundamental
policies of the Fund and may not be changed without a vote of a majority of
the outstanding voting securities of the Fund. There is no assurance that the
objectives will be achieved.

The Fund seeks to achieve its objectives by investing, under normal market
conditions, at least 65% of its total assets in income-producing equity
securities, including common stock, preferred stock and convertible
securities. Up to 35% of the Fund's assets may be invested in fixed-income
securities or common stocks that do not pay a regular dividend but are
expected to contribute to the Fund's ability to meet its investment
objectives.

Common Stocks, Preferred Stocks and Securities Convertible into Common
Stocks. The Fund will invest, under normal market conditions, primarily in
common stocks of large-cap companies which have a record of paying dividends
and, in the opinion of the Investment Manager, have the potential for
maintaining dividends, in preferred stock and in securities convertible into
common stocks of small and mid-cap companies. The Investment Manager intends
to use a value-oriented investment style in the selection of securities for
the Fund's portfolio. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for
a prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or based on a specified
formula. 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).

Lower Rated Fixed-Income Securities. The Fund also may invest up to 20% in
fixed-income securities rated below investment grade. Securities below
investment grade are the equivalent of high yield, high risk bonds (commonly
known as "junk

<PAGE>

bonds"). Investment grade is generally considered to be debt securities rated
BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's"). (Fixed-income securities rated
BBB by S&P or Baa by Moody's which generally are regarded as having an
adequate capacity to pay interest and repay principal, have speculative
characteristics.) However, the Fund will not invest in fixed-income securities
that are rated lower than B by S&P or Moody's or, if not rated, determined to
be of comparable quality by the Investment Manager. The Fund will not invest
in fixed-income securities that are in default in payment of principal or
interest. The 20% limitation on securities rated below investment grade in
which the Fund may invest does not include securities convertible into common
stock. A description of fixed-income securities ratings is contained in the
appendix to the Prospectus.

Foreign Securities. The Fund may invest in equity securities of foreign
issuers. However, the Fund will not invest more than 25% of the value of its
total assets, at the time of purchase, in securities of foreign issuers (other
than securities of Canadian issuers registered under the Securities Exchange
Act of 1934 or American Depository Receipts, on which there is no such limit).
The Fund may invest in American Depository Receipts (ADRs), European
Depository Receipts (EDRs) or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for use in the United States securities markets and EDRs,
in bearer form, are designed for use in European securities markets. The
Fund's investments in unlisted foreign securities are subject to the Fund's
overall policy limiting its investment in illiquid securities to 15% or less
of its net assets.

Corporate Notes and Bonds and U.S. Government Securities. A portion of the
Fund's assets may be invested in investment grade fixed income (fixed-rate and
adjustable rate) securities such as corporate notes and bonds and obligations
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities.

The non-governmental debt securities in which the Fund will invest will
include: (a) corporate debt securities, including bonds, notes and commercial
paper, rated in the four highest categories by a nationally recognized
statistical rating organization ("NRSRO") including Moody's Investors Service,
Inc., Standard & Poor's Corporation, Duff and Phelps, Inc. and Fitch Investors
Service, Inc.; and (b) bank obligations, including CDs, banker's acceptances
and time deposits, issued by banks with a long-term CD rating in one of the
four highest categories by a NRSRO. Investments in securities rated within the
four highest rating categories by a NRSRO are considered "investment grade."
However, such securities rated within the fourth highest rating category by a
NRSRO have speculative characteristics and, therefore, changes in economic
conditions or other circumstances are more likely to weaken their capacity to
make principal and interest payments than would be the case with investments
in securities with higher credit ratings. Where a fixed-income security is not
rated by a NRSRO (as may be the case with a foreign security) the Investment
Manager will make a determination of its creditworthiness and may deem it to
be investment grade. A description of fixed-income security ratings is
contained in the appendix to the Prospectus.

The U.S. Government Securities in which the Fund may invest include
securities which are direct obligations of the United States Government, such
as United States treasury bills, notes and bonds, and which are backed by the
full faith and credit of the United States; securities which are backed by the
full faith and credit of the United States but which are obligations of a
United States agency or instrumentality (e.g., obligations of the Government
National Mortgage Association); securities issued by a United States agency or
instrumentality which has the right to borrow, to meet its obligations, from
an existing line of credit with the United States Treasury

<PAGE>

(e.g., obligations of the Federal National Mortgage Association); securities
issued by a United States agency or instrumentality which is backed by the
credit of the issuing agency or instrumentality (e.g., obligations of the
Federal Farm Credit System).

Money market instruments in which the Fund may invest include securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities (Treasury bills, notes and bonds, including zero coupon
securities); bank obligations; Eurodollar certificates of deposit; obligations
of savings institutions; fully insured certificates of deposit; and commercial
paper rated within the four highest grades by Moody's or Standard & Poor's or,
if not rated, issued by a company having an outstanding debt issue rated at
least AA by Standard & Poor's or Aa by Moody's. Such securities may be used to
invest uncommitted cash balances.

There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Fund's
securities holdings. During such periods, the Fund may adopt a temporary
"defensive" posture in which up to 100% of its total assets is invested in
money market instruments or cash.

In addition to the securities noted above, the Fund may invest in the
following:

When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued, delayed delivery or forward commitment basis may
increase the volatility of the Fund's net asset value. (See the Statement of
Additional Information for added risk disclosure.)

When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value. See
the Statement of Additional Information for additional risk disclosure.

Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust, the
Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will be
absorbing duplicate levels of fees with respect to investments in real estate
investment trusts.

Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the

<PAGE>

Fund invests in zero coupon securities, it will not receive current cash
available for distribution to shareholders. In addition, zero coupon
securities are subject to substantially greater price fluctuations during
periods of changing prevailing interest rates than are comparable securities
which pay interest on a current basis. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though
the Fund receives no interest payments in cash on the security during the
year.

Rule 144A Securities. 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 buy securities restricted as to
resale 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 15% of the Fund's net assets. However, investing
in Rule 144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular point in time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.

Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying security
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. While repurchase agreements involve
certain risks not associated with direct investments in debt securities,
including the risks of default or bankruptcy of the selling financial
institution, the Fund follows procedures designed to minimize those risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized and well established financial institutions and maintaining
adequate collateralization.

RISK CONSIDERATIONS

Common Stocks, Preferred Stocks and Securities Convertible into Common
Stocks. The net

<PAGE>

asset value of the Fund's shares will fluctuate with changes in market values
of portfolio securities. 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).

The Investment Manager intends to follow a "bottom-up" approach in the
selection of convertible securities. Beginning with a universe of about 500
companies, the Investment Manager will narrow the focus to small and mid-cap
companies and review the issues to determine if the convertible is trading
with the underlying equity security. The yield of the underlying equity
security will be evaluated and company fundamentals will be studied to
evaluate cash flow, risk/reward balance, valuation and the prospects for
growth. The Investment Manager intends to select convertible securities that,
in its judgment, are issued by companies with sound management practices and
that represent good value.

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, may 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 privilige.) At such times the
price of the convertible security will tend to fluctuate directly with the
price of the underlying equity security.

The Fund may invest up to 25% of its total assets in "enhanced"
convertible securities. Enhanced convertible securities offer holders the
opportunity to obtain higher current income than would be available from a
traditional equity security issued by the same company, in return for reduced
participation or a cap on appreciation in the underlying common stock of the
issuer which the holder can realize. In addition, in many cases, enhanced
convertible securities are convertible into the underlying common stock of the
issuer automatically at maturity, unlike traditional convertible securities
which are convertible only at the option of the security holder. Enhanced
convertible securities may be more volatile than traditional convertible
securities due to the mandatory conversion feature.

The Fund also may invest up to 10% in "synthetic" convertible securities.
Unlike traditional convertible securities whose conversion values are based on
the common stock of the issuer of the convertible security, "synthetic"
convertible securities are preferred stocks or debt obligations of an issuer
which are combined with an equity component whose conversion value is based on
the value of the common stock of a different issuer or a particular benchmark
(which may include a foreign issuer or basket of foreign stocks, or a company
whose stock is not yet publicly traded). In many cases, "synthetic"
convertible securities are not convertible prior to maturity, at which time
the value of the security is paid in cash by the issuer.

"Synthetic" convertible securities may be less liquid than traditional
convertible securities and their price changes may be more volatile. Reduced
liquidity may have an adverse impact on the Fund's ability to sell particular
synthetic securities promptly at favorable prices and may also make it more
difficult for the Fund to obtain market quotations based on actual trades, for
purposes of valuing the Fund's portfolio securities.

The Fund may invest without limitation in "exchangeable" convertible bonds
and convertible preferred stock which are issued by one company, but
convertible into the common stock of a different

<PAGE>

publicly traded company. These securities generally have liquidity trading and
risk characteristics similar to traditional convertible securities noted
above.

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.

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. To the
extent the Fund purchases Eurodollar certificates of deposit issued by foreign
branches of domestic United States banks, consideration will be given to their
domestic marketability, the lower reserve requirements normally mandated for
overseas banking operations, the possible impact of interruptions in the flow
of international currency transactions and future international political and
economic developments which might adversely affect the payment of principal or
interest.

Lower Rated Convertible and Fixed-Income Securities. A portion of the
fixed-income and convertible securities in which the Fund may invest will
generally be below investment grade. Securities below investment grade are the
equivalent of high yield, high risk bonds, commonly known as "junk bonds."
Investment grade is generally considered to be debt securities rated BBB or
higher by Standard & Poor's Corporation ("S&P") or Baa or higher by Moody's
Investors Service, Inc. ("Moody's"). Fixed-income securities rated Baa by
Moody's or BBB by Standard & Poor's have speculative characteristics greater
than those of more highly rated bonds, while fixed-income securities rated Ba
or BB or lower by Moody's and Standard & Poor's, respectively, are considered
to be speculative investments. The Fund will not invest in convertibles and
fixed-income securities that are rated lower than B by S&P or Moody's or, if
not rated, determined to be of comparable quality by the Investment Manager.
The Fund will not invest in debt securities that are in

<PAGE>

default in payment of principal or interest. The ratings of fixed-income
securities by Moody's and Standard & Poor's are a generally accepted barometer
of credit risk. However, as the creditworthiness of issuers of lower-rated
fixed-income securities is more problematical than that of issuers of
higher-rated fixed-income securities, the achievement of the Fund's investment
objective will be more dependent upon the Investment Manager's own credit
analysis than would be the case with a mutual fund investing primarily in
higher quality bonds. The Investment Manager will utilize a security's credit
rating as simply one indication of an issuer's creditworthiness and will
principally rely upon its own analysis of any security currently held by the
Fund or potentially purchasable by the Fund for its portfolio.

During the fiscal period ended September 30, 1996, the monthly dollar
weighted average ratings of the debt obligations held by the Fund, expressed
as a percentage of the Fund's total investments, were as follows:

<TABLE>
<CAPTION>
PERCENTAGE OF
RATINGS TOTAL INVESTMENTS
------- -----------------
<S> <C>
AAA/Aaa ............... 0.0%
AA/Aa ................. 0.0%
A/A ................... 2.1%
BBB/Baa ............... 18.5%
BB/Ba ................. 28.9%
B/B ................... 32.9%
CCC/Caa ............... 0.0%
CC/Ca ................. 0.0%
C/C ................... 0.0%
Unrated ............... 17.6%
</TABLE>

Because of the special nature of the Fund's permitted investments in lower
rated debt securities, the Investment Manager must take account of certain
special considerations in assessing the risks associated with such
investments. Historically, the prices of lower rated securities have been
found to be less sensitive to changes in prevailing interest rates than higher
rated investments, but are likely to be more sensitive to adverse economic
changes or individual corporate developments. During an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet their
projected business goals or to obtain additional financing. If the issuer of a
fixed-income security owned by the Fund defaults, the Fund may incur
additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility of
market prices of lower rated securities and a corresponding volatility in the
net asset value of a share of the Fund.

Corporate Notes and Bonds and U.S. Government Securities. Payments of
interest and principal of U.S. Government securities are guaranteed by the
U.S. Government, however, neither the value nor the yield of corporate notes
and bonds and U.S. Government securities which may be invested in by the Fund
are guaranteed by the U.S. Government. Values and yield of corporate and
government bonds will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of
corporate notes and bonds and government bonds held by the Fund will fall.
Securities with longer maturities generally tend to produce higher yields and
are subject to greater market fluctuation as a result of changes in interest
rates than debt securities with shorter maturities. The Fund is not limited as
to the maturities of the U.S. Government securities in which it may invest.

Real Estate Investment Trusts. Real estate investment trusts are not
diversified and are subject to the risk of financing projects. They are also
subject to heavy cash flow dependency, defaults by borrowers or tenants,
self-liquidation, and the possibility of failing to qualify for tax-free
status under the Internal Revenue Code and failing to maintain exemption from
the Act. The Fund currently intends to invest up to 10%, but may invest up to
20% of its assets in real estate investment trusts.

Repurchase Agreements. While repurchase agreements involve certain risks
not associated with direct investments in debt securities, the Fund follows
procedures designed to minimize such risks.

<PAGE>

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.

For additional risk disclosure, please refer to the "Investment Objectives
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, including Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the
views of Trustees of the Fund and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant. The Investment Manager also may use quantitative screens in
the process of selecting portfolio securities.

Portfolio Managers. The assets of the Fund are managed within
InterCapital's Growth and Income Group, which manages equity funds and fund
portfolios with approximately $22 billion in assets as of September 30, 1996.
Paul D. Vance, Senior Vice President and Michael G. Knox, Vice President of
InterCapital, are members of InterCapital's Growth and Income Group. Mr. Vance
has been a portfolio manager at InterCapital for over five years. Mr. Knox has
been managing portfolios at InterCapital since August 1993. Prior to joining
InterCapital, Mr. Knox was with Eagle Asset Management, Inc. Mr. Vance and Mr.
Knox are portfolio managers with primary responsibility for the day-to-day
management of the Fund's portfolio.

Although the Fund does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Investment Manager's opinion strengthen
the Fund's position and contribute to its investment objective. The portfolio
turnover rate is not expected to exceed 90%. Brokerage commissions are not
normally charged on the purchase or sale of U.S. Government obligations, but
such transactions may involve costs in the form of spreads between bid and
asked prices. 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
InterCapital. In addition, the Fund may incur brokerage commissions on
transactions conducted through DWR.

<PAGE>

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 more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued, or guaranteed
by, the United States Government, its agencies or instrumentalities).

2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.

3. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.

4. 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 of the United States Government, its agencies or
instrumentalities. (See the Statement of Addi tional Information for
additional investment restrictions.)

PURCHASE OF FUND SHARES
- -------------------------------------------------------------------------------

The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers which have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.

The minimum initial purchase is $1,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter Income
Builder 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. The minimum initial purchase in the case
of investments through EasyInvest (Service Mark), an automatic purchase plan
(see "Shareholder Services"), is $100, provided that the schedule of automatic
investments will result in investments totalling at least $1,000 within the
first twelve months. In the case of investments pursuant to Systematic Payroll
Deduction Plans (including Individual Retirement Plans), the Fund, at its
discretion, may accept investments without regard to any minimum amounts which
would otherwise be required if the Fund has reason to believe that additional
investments will increase the investment in all accounts under such Plans to
at least $1,000. Certificates for shares purchased will not be issued unless a
request is made by the shareholder in writing to the Transfer Agent. The
offering price will be the net asset value per share next determined following
receipt of an order (see "Determination of Net Asset Value").

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

<PAGE>

day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is made
prior thereto. As noted above, orders placed directly with the Transfer Agent
must be accompanied by payment.

Investors will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such dividends and distributions.

While no sales charge is imposed at the time shares are purchased, a
contingent deferred sales charge may be imposed at the time of redemption (see
"Redemptions and Repurchases"). Sales personnel are compensated for selling
shares of the Fund at the time of their sale by the Distributor and/or
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive 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 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital
gains distributions), less the average daily aggregate net asset value of the
Fund's shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the Fund's average
daily net assets. This fee is treated by the Fund as an expense in the year it
is accrued.

Amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares
or who service 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.

For the fiscal period June 26, 1996 (commencement of operations) through
September 30, 1996, the Fund accrued payments under the Plan amounting to
$323,002, which amount is equal to 1.00% of the Fund's average daily net
assets for the fiscal period. The payments accrued under the Plan were
calculated pursuant to clause (b) of the compensation formula under the Plan.
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.

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, of $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. The Distributor has advised the Fund that such excess
amounts, including the carrying charge described above, totalled $7,917,422 at
September 30, 1996, which was equal to 5.34% of the Fund's net assets on such
date.

<PAGE>

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 prior or quotation service prior to the time
assets are valued; if there were no sales that day, the security is valued at
the latest bid price (in cases where a security is traded on more than one
exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price; (3) when market quotations are
not readily available, including circumstances under which it is determined by
the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Fund's Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors); (4) the value of
short-term debt securities which mature at a date less than sixty days
subsequent to valuation date will be determined on an amortized cost or
amortized value basis; and (5) the value of other assets will be determined in
good faith at fair value under procedures established by and under the general
supervision of the Fund's Trustees. Dividends receivable are accrued as of the
ex-dividend date. Interest income is accrued daily. Certain securities in the
Fund's portfolio may be valued by an outside pricing service approved by the
Fund's Trustees.

SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------

Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
[collectively, with the Fund, the "Dean Witter Funds"]), unless the
shareholder requests that they be paid in cash. Shares so acquired are not
subject to the imposition of a contingent deferred sales charge upon their
redemption (see "Redemptions and Repurchases").

Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or dis-

<PAGE>

tribution at the net asset value next determined after receipt by the Transfer
Agent, by returning the check or the proceeds to the Transfer Agent within
thirty days after the payment date. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").

Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (see "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
to the shareholder will be the designated monthly or quarterly amount.

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.

Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.

EXCHANGE PRIVILEGE

The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Income
Fund, Dean Witter Balanced Growth Fund, Dean Witter Intermediate Term U.S.
Treasury Trust and five Dean Witter Funds which are money market funds (the
foregoing eleven non-CDSC funds are hereinafter collectively referred to in
this section as the "Exchange Funds"). Exchanges may be made after the shares
of the Fund acquired by purchase (not by exchange or dividend reinvestment)
have been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment.

An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following 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

<PAGE>

subsequently re-exchanged for shares of the CDSC fund originally purchased.
During the period of time the shareholder remains invested in shares of an
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 shares of a CDSC fund (see
"Redemptions and Repurchases--Contingent Deferred Sales Charge"). 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. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.)

In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales charge
fund have been exchanged) are not subject to any CDSC upon their redemption.

Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the best
interests of the Fund and its other shareholders, investors should be aware
that the Fund and each of the other Dean Witter Funds may in their discretion
limit or otherwise restrict the number of times this Exchange Privilege may be
exercised by any investor. Any such restriction will be made by the Fund on a
prospective basis only, upon notice to the shareholder not later than ten days
following such shareholder's most recent exchange. Also, the Exchange
Privilege may be terminated or revised at any time by the Fund and/or any of
such Dean Witter Funds for which shares of the Fund 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 read it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares
on which the shareholder has realized 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 above Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their DWR or other Selected Dealer account
executive (no

<PAGE>

Exchange Privilege Authorization Form is required). Other shareholders (and
those who are clients of DWR or other Selected Broker-Dealer but who wish to
make exchanges directly by writing or telephoning the Transfer Agent) must
complete and forward to the Transfer Agent an Exchange Privilege Authorization
Form, copies of which may be obtained from the Fund, to initiate an exchange.
If the Authorization Form is used, exchanges may be made in writing or by
contacting the Transfer Agent at (800) 869-NEWS (toll-free).

The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR or
other Selected Broker-Dealer account number (if any). Telephone instructions
may also be recorded. If such procedures are not employed, the Fund may be
liable for any losses due to unauthorized or fraudulent instructions.

Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the
experience of the other Dean Witter Funds in the past.

Additional information on the above is available from an account executive
of DWR or another Selected Broker-Dealer or from the Transfer Agent.

REDEMPTIONS AND REPURCHASES
- -------------------------------------------------------------------------------

Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
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, along with any additional
documentation required by the Transfer Agent.

Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may, however,
be subject to a charge upon redemption. This charge is called a "contingent
deferred sales charge" ("CDSC"), 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 re-

<PAGE>

demption; (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, the CDSC, if otherwise applicable, will be waived in the case
of:

(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;

(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a
"key employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and

(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company,
an affiliate of the Investment Manager, serves as recordkeeper or Trustee
("Eligible 401(k) Plan"), provided that either: (A) the plan continues to be
an Eligible 401(k) Plan after the redemption; or (B) the redemption is in
connection with the complete termination of the plan involving the
distribution of all plan assets to participants.

With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.

Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares 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 per share next determined (see "Purchase of Fund
Shares") after such purchase order is received by DWR or another Selected
Broker-Dealer.

The CDSC, if any, will be the only fee imposed upon repurchase by the
Fund, the Distributor, DWR or other Selected Broker-Dealer. The offer by DWR
and other Selected Broker-Dealers to repurchase shares may be suspended
without notice by them at any time. In that event, shareholders may redeem
their shares through the Fund's Transfer Agent as set forth above under
"Redemption."

Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption suspended
under unusual circumstances, e.g.,

<PAGE>

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 the 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, upon sixty
days' notice and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100 as a result of redemptions or repurchases, or such lesser
amount as may be fixed by the Board of Trustees or, in the case of an account
opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $1,000 in the account. However, before the
Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the
applicable amount and allow the shareholder to make an additional investment
in an amount which will increase the value of the account to at least the
applicable amount 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 quarterly income
dividends and to distribute substantially all of the Fund's net short-term and
net long-term capital gains, if there are any, at least once each year. The
Fund may, however, determine either to distribute or to retain all or part of
any net 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 be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)

Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the Internal
Revenue Code, it is not expected that the Fund will be required to pay any
federal income tax. Shareholders who are required to pay taxes on their income
will normally have to pay federal income taxes, and any state income taxes, on
the dividends and distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income
or short-term capital gains, are taxable to the shareholder as ordinary
dividend income regardless of whether the shareholder receives such
distributions in additional shares or in cash.

<PAGE>

One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months.

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.

At 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.

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 "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return of
the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the net
investment income of the Fund over a 30-day period by an average value (using
the average number of shares entitled to receive dividends and the net asset
value per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount is compounded for six months and then
annualized for a twelve-month period to derive the yield of the Fund.

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 periods of one, five and ten years, or
over the life of the Fund, if less than any of the foregoing. Total return and
average annual total return reflect all income earned by the Fund, any
appreciation or depreciation of the Fund's assets and all expenses incurred by
the Fund for the stated periods. It also assumes reinvestment of all dividends
and distributions paid by the Fund.

In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. 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., the S&P 500 Index and the Lehman Brothers Government/Corporate
Bond Index).

<PAGE>

ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------

Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.

The Fund is not required to hold Annual Meet-ings 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 limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund,
requires that notice of such Fund obligations include such disclaimer, and
provides for indemnification out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability,
and the nature of the Fund's assets and operations, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund 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 prohibits engaging in futures and
options transactions and profiting on short-term trading (that is, a purchase
within 60 days of a sale or a sale within 60 days of a purchase) of a
security. In addition, investment personnel may not purchase or sell a
security for their personal account within 30 days before or after any
transaction in any Dean Witter Fund managed by them. Any violations of the
Code of Ethics are subject to sanctions, including reprimand, demotion or
suspension or termination of employment. The Code of Ethics comports with
regulatory requirements and the recommendations in the 1994 report by the
Investment Company Institute Advisory Group on Personal Investing.

Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
COMMON STOCKS (44.7%)
Apparel (1.0%)
86,500 Kellwood Co. ............................................ $ 1,438,062
-----------
Auto Parts (0.9%)
45,500 Dana Corp. .............................................. 1,376,375
-----------
Automotive (2.8%)
48,000 Chrysler Corp. .......................................... 1,374,000
44,500 Ford Motor Co. .......................................... 1,390,625
29,000 General Motors Corp. .................................... 1,392,000
-----------
4,156,625
-----------
Banks (0.9%)
60,000 Washington Federal, Inc. ................................ 1,402,500
-----------
Banks - Commercial (3.7%)
51,700 First Security Corp. .................................... 1,415,287
40,000 First Tennessee National Corp. .......................... 1,320,000
30,500 KeyCorp ................................................. 1,342,000
39,000 Wilmington Trust Corp. .................................. 1,394,250
-----------
5,471,537
-----------
Banks - Regional (0.9%)
31,000 Corestates Financial Corp. .............................. 1,340,750
-----------
Banks - Thrift Institutions (0.9%)
37,900 Washington Mutual, Inc. ................................. 1,411,775
-----------
Building Materials (0.9%)
22,400 Vulcan Materials Co. .................................... 1,344,000
-----------
Chemicals (2.8%)
16,700 Dow Chemical Co. ........................................ 1,340,175
25,400 PPG Industries, Inc. .................................... 1,381,125
21,000 Rohm & Haas Co. ......................................... 1,375,500
-----------
4,096,800
-----------
Conglomerates (0.9%)
28,000 Tenneco, Inc. ........................................... 1,403,500
-----------
Finance (1.0%)
41,000 Federal National Mortgage Assoc. ........................ 1,429,875
-----------
Financial (0.9%)
37,000 TCF Financial Corp. ..................................... 1,392,125
-----------
Financial - Miscellaneous (1.0%)
19,000 Student Loan Marketing Assoc. ........................... 1,417,875
-----------
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996, continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
Food Processing (1.0%)
62,500 Hormel Foods Corp. ...................................... $ 1,460,937
-----------
Healthcare - Drugs (0.9%)
22,500 Schering-Plough Corp. ................................... 1,383,750
-----------
Insurance (1.8%)
27,000 Jefferson-Pilot Corp. ................................... 1,397,250
30,100 Lincoln National Corp. .................................. 1,320,638
-----------
2,717,888
-----------
Life Insurance (0.9%)
30,000 Torchmark Corp. ......................................... 1,376,250
-----------
Machinery - Diversified (0.9%)
18,000 Johnson Controls, Inc. .................................. 1,350,000
-----------
Manufacturing - Consumer & Industrial Products (1.0%)
28,000 Whirlpool Corp. ......................................... 1,417,500
-----------
Manufacturing - Diversified (1.0%)
47,500 UST, Inc. ............................................... 1,407,188
-----------
Metals & Mining (0.9%)
50,500 Asarco, Inc. ............................................ 1,344,563
-----------
Miscellaneous (1.0%)
50,000 American Greetings Corp. (Class A) ...................... 1,431,250
-----------
Multi-Line Insurance (0.9%)
32,000 Providian Corp. ......................................... 1,376,000
-----------
Oil & Gas (0.9%)
34,000 Ashland Inc. ............................................ 1,351,500
-----------
Real Estate Investment Trust (5.5%)
75,000 American General Hospitality Corp. ...................... 1,425,000
48,400 Cali Realty Corp. ....................................... 1,312,850
50,000 CarrAmerica Realty Corp. ................................ 1,250,000
50,000 Excel Realty Trust, Inc. ................................ 1,081,250
20,000 FelCor Suite Hotels, Inc. ............................... 645,000
60,000 Liberty Property Trust .................................. 1,305,000
35,000 Patriot American Hospitality, Inc. ...................... 1,176,875
-----------
8,195,975
-----------
Steel (0.9%)
35,000 Timken Co. .............................................. 1,373,750
-----------
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996, continued

NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------
Telecommunications (1.9%)
23,400 Bell Atlantic Corp. ..................................... $ 1,401,075
46,500 U.S. West Communications Group, Inc. .................... 1,383,375
-----------
2,784,450
-----------
Telephones (1.0%)
29,500 SBC Communications, Inc. ................................ 1,419,688
-----------
Tobacco (0.9%)
15,000 Philip Morris Companies, Inc. ........................... 1,346,250
-----------
Utilities - Electric (3.7%)
50,000 Consolidated Edison Company of New York, Inc. ........... 1,387,500
44,000 New England Electric System ............................. 1,369,500
56,000 Peco Energy Co. ......................................... 1,330,000
50,000 Public Service Enterprise Group, Inc. ................... 1,337,500
-----------
5,424,500
-----------
Wholesale Distributor (1.0%)
51,000 Supervalu, Inc. ......................................... 1,402,500
-----------
TOTAL COMMON STOCKS (Identified Cost $64,366,530) ....... 66,245,738
-----------
CONVERTIBLE PREFERRED STOCKS (11.7%)
Auto Parts (0.5%)
55,000 Mascotech, Inc. $1.20 ................................... 783,750
-----------
Cable/Cellular (0.7%)
25,000 TCI Communications, Inc. (Series A) $2.125 .............. 996,875
-----------
Chemicals (2.5%)
73,500 Atlantic Richfield Co. $9.01 ............................ 1,727,250
35,000 Occidental Petroleum Corp. (Series 1993) $3.875 - 144A* . 1,986,250
-----------
3,713,500
-----------
Financial (1.4%)
50,000 Merrill Lynch & Co., Inc. (STRYPES) $2.39 ............... 2,012,500
-----------
Metals & Mining (1.6%)
45,000 Cyprus Amax Minerals Co. (Series A) $4.00 ............... 2,340,000
-----------
Publishing (1.1%)
13,000 Golden Books Financing Trust $4.375 - 144A* ............. 732,069
85,000 Hollinger International, Inc. $0.95 ..................... 945,625
-----------
1,677,694
-----------
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996, continued

NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------
Real Estate Investment Trust (1.5%)
31,700 FelCor Suite Hotels, Inc. (Series A) $1.95 .............. $ 824,200
61,200 Oasis ResidentiaI, Inc. (Series A) $2.25 ................ 1,468,800
-----------
2,293,000
-----------
Steel (0.7%)
24,000 WHX Corp. (Series A) $3.25 .............................. 999,000
-----------
Telecommunications (1.7%)
50,000 General Datacomm Industries, Inc. $2.25 - 144A* ......... 1,253,150
27,000 Globalstar Telecommunications $3.25 - 144A* ............. 1,282,500
-----------
2,535,650
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $16,988,117) ........................... 17,351,969
-----------

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CORPORATE BONDS (41.6%)
CONVERTIBLE BONDS (24.7%)
Biotechnology (0.5%)
$ 750 Nabi, Inc. - 144A* ....................................... 6.50% 02/01/03 807,637
----------
Cable/Cellular (2.0%)
970 Tele-Communications International Inc. ................... 4.50 02/15/06 778,425
6,750 U.S. Cellular Corp. ...................................... 0.00 06/15/15 2,244,375
----------
3,022,800
----------
Healthcare (6.9%)
1,500 ARV Assisted Living, Inc. - 144A* ........................ 6.75 04/01/06 1,477,485
2,000 Beverly Enterprises, Inc. ................................ 5.50 08/01/18 1,911,660
1,000 Grancare, Inc. ........................................... 6.50 01/15/03 1,030,000
2,000 Integrated Health Services, Inc. ......................... 6.00 01/01/03 1,979,680
2,000 Phymatrix Corp. - 144A* .................................. 6.75 06/15/03 1,675,340
2,000 Vivra, Inc. - 144A* ...................................... 5.00 07/01/01 2,122,700
----------
10,196,865
----------
Healthcare - Miscellaneous (1.4%)
2,700 Pharmaceutical Marketing Services, Inc. .................. 6.25 02/01/03 2,020,383
----------
Leisure (2.1%)
10,750 Coleman Worldwide Corp. .................................. 0.00 05/27/13 3,090,625
----------
Machinery (0.7%)
1,000 Robbins & Meyers, Inc. ................................... 6.50 09/01/03 1,016,250
----------
Medical Products & Supplies (0.6%)
750 Ventritex, Inc. .......................................... 5.75 08/15/01 871,260
----------
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996, continued

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------
Office Equipment & Supplies (1.9%)
$ 3,000 U.S. Office Products Co. - 144A* ......................... 5.50% 05/15/03 $2,820,000
----------
Real Estate Investment Trust (1.2%)
1,750 Camden Property Trust .................................... 7.33 04/01/01 1,767,500
----------
Retail (3.6%)
1,000 Charming Shoppes, Inc. ................................... 7.50 07/15/06 1,094,670
1,250 Home Depot, Inc. ......................................... 3.25 10/01/01 1,270,313
1,950 Mens Wearhouse, Inc. (The) ............................... 5.25 03/01/03 1,872,000
1,300 Michaels Stores, Inc. .................................... 6.75 01/15/03 1,030,900
----------
5,267,883
----------
Shoes (0.7%)
1,000 Nine West Group, Inc. - 144A* ............................ 5.50 07/15/03 1,073,280
----------
Steel (1.4%)
2,250 USX Corp. ................................................ 7.00 06/15/17 2,120,625
----------
Telecommunications (1.7%)
1,500 Midcom Communications Inc. - 144A* ....................... 8.25 08/15/03 1,715,160
750 SA Telecommunications Inc. - 144A* ....................... 10.00 08/15/06 787,500
----------
2,502,660
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $35,684,418) ................................................ 36,577,768
----------
NON-CONVERTIBLE BONDS (16.9%)
Auto Parts (0.7%)
1,000 Lear Corp. ............................................... 9.50 07/15/06 1,040,000
----------
Broadcast Media (1.0%)
1,500 JCAC Inc. ................................................ 10.125 06/15/06 1,545,000
----------
Cable/Cellular (2.1%)
1,000 Rogers Communications, Inc. (Canada) ..................... 10.875 04/15/04 1,030,000
2,000 Tele-Communications, Inc. ................................ 9.25 04/15/02 2,113,540
----------
3,143,540
----------
Entertainment (1.5%)
2,000 Time Warner, Inc. ........................................ 9.625 05/01/02 2,204,600
----------
Entertainment/Gaming (1.5%)
2,000 Casino America, Inc. ..................................... 11.50 11/15/01 2,180,000
----------
Fertilizers (0.7%)
1,000 Arcadian Partner (Series B) .............................. 10.75 05/01/05 1,102,500
----------
Healthcare (3.6%)
1,000 Healthsouth Rehabilition Corp. ........................... 9.50 04/01/01 1,045,000
2,000 Manor Care, Inc. ......................................... 9.50 11/15/02 2,120,000
2,000 OrNda Healthcorp ......................................... 12.25 05/15/02 2,160,000
----------
5,325,000
----------
SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1996, continued

PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------
Machinery (1.8%)
$ 2,460 Joy Technologies Inc. ..................................... 10.25% 09/01/03 $2,705,114
------------
Media Group (1.1%)
1,500 K-III Communications Corp. ................................ 10.625 05/01/02 1,567,500
------------
Publishing (0.7%)
1,000 Hollinger International Publishing, Inc. .................. 9.25 02/01/06 970,000
------------
Supermarkets (2.2%)
3,000 Purity Supreme, Inc. (Series B) ........................... 11.75 08/01/99 3,218,190
------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $24,946,042) ................................................ 25,001,444
------------
TOTAL CORPORATE BONDS
(Identified Cost $60,630,460) ................................................ 61,579,212
------------
SHORT-TERM INVESTMENT (1.3%)
REPURCHASE AGREEMENT
1,942 The Bank of New York (dated 09/30/96; proceeds $1,941,848;
collateralized by $1,369,637 U.S. Treasury Bond 12.75% due
11/15/10 valued at $1,980,410) (Identified Cost $1,941,578) 5.00 10/01/96 1,941,578
------------
TOTAL INVESTMENTS
(Identified Cost $143,926,685) (a) .................................. 99.3% 147,118,497
OTHER ASSETS IN EXCESS OF LIABILITIES ............................... 0.7 1,023,417
------------
NET ASSETS .......................................................... 100.0% $148,141,914
====== ============
</TABLE>

- ------------
STRYPES Structured yield product exchangeable for stock.
* Resale is restricted to qualified institutional investors.
(a) The aggregate cost for federal income tax purposes is $143,942,769.
The aggregate gross unrealized appreciation is $5,253,724 and the
aggregate gross unrealized depreciation is $2,077,996, resulting in
net unrealized appreciation of $3,175,728.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $143,926,685) .......................................... $147,118,497
Receivable for:
Interest .............................................................. 1,255,482
Shares of beneficial interest sold .................................... 1,187,289
Investments sold ...................................................... 846,101
Dividends ............................................................. 223,710
Deferred organizational expenses ........................................ 154,966
Prepaid expenses ........................................................ 444
------------
TOTAL ASSETS .......................................................... 150,786,489
------------
LIABILITIES:
Payable for:
Investments purchased ................................................. 2,091,873
Plan of distribution fee .............................................. 118,205
Investment management fee ............................................. 88,654
Dividends to shareholders ............................................. 45,628
Shares of beneficial interest repurchased ............................. 13,621
Organizational expenses ................................................. 163,660
Accrued expenses and other payables ..................................... 122,934
------------
TOTAL LIABILITIES ..................................................... 2,644,575
------------
NET ASSETS:
Paid-in-capital ......................................................... 144,828,578
Net unrealized appreciation ............................................. 3,191,812
Undistributed net investment income ..................................... 47,579
Net realized gain ....................................................... 73,945
------------
NET ASSETS ............................................................ $148,141,914
============
NET ASSET VALUE PER SHARE,
14,483,618 shares outstanding (unlimited shares authorized of $.01 par
value) ................................................................ $10.23
======
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 26, 1996* THROUGH SEPTEMBER 30, 1996

NET INVESTMENT INCOME:
Income
Interest .......................................... $1,163,801
Dividends ......................................... 725,075
----------
Total Income .................................... 1,888,876
----------
Expenses
Plan of distribution fee .......................... 323,002
Investment management fee ......................... 242,252
Transfer agent fees and expenses .................. 55,551
Registration fees ................................. 49,768
Professional fees ................................. 28,848
Organizational expenses ........................... 8,694
Custodian fees .................................... 8,339
Shareholder reports and notices ................... 7,581
Trustees' fees and expenses ....................... 958
Other ............................................. 1,037
----------
TOTAL EXPENSES .................................. 726,030
----------
NET INVESTMENT INCOME ........................... 1,162,846
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ............................... 73,945
Net unrealized appreciation ..................... 3,191,812
----------
NET GAIN ........................................ 3,265,757
----------
NET INCREASE ...................................... $4,428,603
==========
- ---------
* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1996*
THROUGH
SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C>
Net investment income ...................................... $ 1,162,846
Net realized gain .......................................... 73,945
Net unrealized appreciation ................................ 3,191,812
------------
NET INCREASE ............................................. 4,428,603
Dividends from net investment income ....................... (1,123,961)
Net increase from transactions in shares of beneficial
interest ................................................... 144,737,272
------------
TOTAL INCREASE ........................................... 148,041,914
NET ASSETS:
Beginning of period ........................................ 100,000
------------
END OF PERIOD
(Including undistributed net investment income of $47,579). $148,141,914
============
</TABLE>
- ---------
* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1996

1. ORGANIZATION AND ACCOUNTING POLICIES

Dean Witter Income Builder Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's primary investment
objective is to seek reasonable income and, as a secondary objective, growth
of capital. The Fund seeks to achieve its objective by investing primarily in
income-producing equity securities, including common and preferred stocks as
well as convertible securities. The Fund was organized as a Massachusetts
business trust on March 21, 1996 and had no operations other than those
relating to organizational matters and the issuance of 10,000 shares of
beneficial interest for $100,000 to Dean Witter InterCapital Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on June 26, 1996.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies:

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange, the
security is valued on the exchange designated as the primary market by the
Trustees); (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price prior to the time of valuation; (3) when market quotations are not
readily available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision of the Trustees (valuation of debt securities for which market
quotations are not readily available may be based upon current market prices
of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); and (4) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the

<PAGE>

DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1996 continued

identified cost method. Dividend income and other distributions are recorded
on the ex-dividend date except for certain dividends on foreign securities
which are recorded as soon as the Fund is informed after the ex-dividend date.
Discounts are accreted over the life of the respective securities.
Interest income is accrued daily.

C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.

E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of $163,660 which will be reimbursed for
the full amount thereof. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.75% to the net assets of the Fund determined as of the close
of each business day.

<PAGE>

DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1996 continued

personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.

3. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the expenses
borne by it and others in the distribution of the Fund's shares, including the
payment of commissions for sales of the Fund's shares and incentive
compensation to, and expenses of, the account executives of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
and other employees or selected broker-dealers who engage in or support
distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.

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. The Distributor has advised
the Fund that such excess amounts, included carrying charges, totaled
$7,917,422 at September 30, 1996.

Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered, may be recovered through future distribution fees from
the Fund and contingent deferred sales charges from the Fund's shareholders.

<PAGE>

DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1996 continued

The Distributor has informed the Fund that for the period ended September 30,
1996, it received approximately $26,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the period ended September 30, 1996
aggregated $149,132,161 and $7,295,003, respectively.

For the period ended September 30, 1996, the Fund incurred $24,548 in
brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund. At September 30, 1996, the Fund's payable for investments
purchased included unsettled trades with DWR of $841,873.

Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1996, the Fund had
transfer agent fees and expenses payable of approximately $32,000.

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 26, 1996*
THROUGH
SEPTEMBER 30, 1996
-------------------------
SHARES AMOUNT
------------ ------------
<S> <C> <C>
Sold .............................................. 14,654,263 $146,538,451
Reinvestment of dividends ......................... 83,927 855,216
------------ ------------
14,738,190 147,393,667
Repurchased ....................................... (264,572) (2,656,395)
------------ ------------
Net increase ...................................... 14,473,618 $144,737,272
============ ============
</TABLE>

- ------------
* Commencement of operations.

6. SELECTED PER SHARE DATA AND RATIOS

See the "Financial Highlights" table on page 4 of this Prospectus.

<PAGE>

DEAN WITTER INCOME BUILDER FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER INCOME BUILDER FUND

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights
(appearing on page 4 of this Prospectus) present fairly, in all material
respects, the financial position of Dean Witter Income Builder Fund (the
"Fund") at September 30, 1996, and the results of its operations, the changes
in its net assets and the financial highlights for the period June 26, 1996
(commencement of operations) through September 30, 1996, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit, which included confirmation of securities at September 30, 1996 by
correspondence with the custodian and brokers, provides a reasonable basis for
the opinion expressed above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
October 17, 1996

1996 FEDERAL TAX NOTICE (unaudited)

During the period ended September 30, 1996, 57.47% of the
income paid qualified for the dividends received deduction
available to corporations.

<PAGE>

APPENDIX
- -------------------------------------------------------------------------------

RATINGS OF CORPORATE DEBT INSTRUMENTS INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")

FIXED-INCOME SECURITY RATINGS

Aaa Fixed-income securities which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.

Aa Fixed-income securities which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise
what are generally known as high grade fixed-income securities. They
are rated lower than the best fixed-income securities because margins
of protection may not be as large as in Aaa securities or fluctuation
of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat
larger than in Aaa securities.

A Fixed-income securities which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.

Baa Fixed-income securities which are rated Baa are considered as medium
grade obligations; i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
fixed-income securities lack outstanding investment characteristics
and in fact have speculative characteristics as well.

Fixd-income securities rated Aaa, Aa, A and Baa are considered
investment grade.

Ba Fixed-income securities which are rated Ba are judged to have
speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may
be very moderate, and therefore not well safeguarded during both good
and bad times in the future. Uncertainty of position characterizes
bonds in this class.

B Fixed-income securities which are rated B generally lack
characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract
over any long period of time may be small.

Caa Fixed-income securities which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of
danger with respect to principal or interest.

Ca Fixed-income securities which are rated Ca present obligations which
are speculative in a high degree. Such issues are often in default or
have other marked shortcomings.

C Fixed-income securities which are rated C are the lowest rated class
of fixed-income securities, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.

<PAGE>

Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal
fixed-income security rating system. The modifier 1 indicates that the
security ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and a modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.

COMMERCIAL PAPER RATINGS

Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers: Prime-1, Prime-2, Prime-3.

Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.

STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")

FIXED-INCOME SECURITY RATINGS

A Standard & Poor's fixed-income security rating is a current assessment
of the creditworthiness of an obligor with respect to a specific obligation.
This assessment may take into consideration obligors such as guarantors,
insurers, or lessees.

The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event
of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.

Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.

AAA Fixed-income securities rated "AAA" have the highest rating assigned
by Standard & Poor's. Capacity to pay interest and repay principal is
extremely strong.

AA Fixed-income securities rated "AA" have a very strong capacity to pay
interest and repay principal and differs from the highest-rate issues
only in small degree.

A Fixed-income securities rated "A" have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than fixed-income securities in higher-rated
categories.

<PAGE>

BBB Fixed-income securities rated "BBB" are regarded as having an
adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for
fixed-income securities in this category than for fixed-income
securities in higher-rated categories.

Fixed-income securities rated AAA, AA, A and BBB are considered
investment grade.

BB Fixed-income securities rated "BB" have less near-term vulnerability
to default than other speculative grade fixed-income securities.
However, it faces major ongoing uncertainties or exposures to adverse
business, financial or economic conditions which could lead to
inadequate capacity or willingness to pay interest and repay
principal.

B Fixed-income securities rated "B" have a greater vulnerability to
default but presently have the capacity to meet interest payments and
principal repayments. Adverse business, financial or economic
conditions would likely impair capacity or willingness to pay
interest and repay principal.

CCC Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and are dependent upon favorable business,
financial and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse business,
financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.

CC The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied
"CCC" rating.

C The rating "C" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied
"CCC-" rating.

CI The rating "Cl" is reserved for fixed-income securities on which no
interest is being paid.

NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.

Fixed-income securities rated "BB," "B," "CCC," "CC" and "C" are
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. "BB"
indicates the least degree of speculation and "C" the highest degree
of speculation. While such fixed-income securities will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.

Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major ratings categories.

COMMERCIAL PAPER RATINGS

Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to purchase
or sell a security. The ratings are based upon current information furnished
by the issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:

<PAGE>

Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.

A-1 indicates that the degree of safety regarding timely payment is very
strong.

A-2 indicates capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as
overwhelming as for issues designated "A-1."

A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.

BOND RATINGS

FITCH INVESTORS SERVICE, INC. ("FITCH")

The Fitch Bond Ratings provides a guide to investors in determining the
investment risk associated with a particular security. The rating represents
its assessment of the issuer's ability to meet the obligations of a specific
debt issue or class of debt in a timely manner. Fitch bond ratings are not
recommendations to buy, sell or hold securities since they incorporate no
information on market price or yield relative to other debt instruments.

The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the record of the issuer and
of any guarantor, as well as the political and economic environment that might
affect the future financial strength and credit quality of the issuer.

Bonds which have the same rating are of similar but not necessarily
identical investment quality since the limited number of rating categories
cannot fully reflect small differences in the degree of risk. Moreover, the
character of the risk factor varies from industry to industry and between
corporate, health care and municipal.

In assessing credit risk, Fitch Investors Service relies on current
information furnished by the issuer and/or guarantor and other sources which
it considers reliable. Fitch does not perform an audit of the financial
statements used in assigning a rating.

Ratings may be changed, withdrawn or suspended at any time to reflect
changes in the financial condition of the issuer, the status of the issue
relative to other debt of the issuer, or any other circumstances that Fitch
considers to have a material effect on the credit of the obligor.

AAA rated bonds are considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability to
pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events.

AA rated bonds are considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal, while very strong, is somewhat less than for AAA rated
securities or more subject to possible change over the term of the
issue.

A rated bonds are considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay principal is
considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than bonds with
higher ratings.

<PAGE>

BBB rated bonds are considered to be investment grade and of satisfactory
credit quality. The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to weaken this
ability than bonds with higher ratings.

BB rated bonds are considered speculative and of low investment grade.
The obligor's ability to pay interest and repay principal is not
strong and is considered likely to be affected over time by adverse
economic changes.

B rated bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.

CCC rated bonds may have certain identifiable characteristics which, if
not remedied, could lead to the possibility of default in either
principal or interest payments.

CC rated bonds are minimally protected. Default in payment of interest
and/or principal seems probable.

C rated bonds are in imminent default in payment of interest and/or
principal.

SHORT-TERM RATINGS

Fitch's short-term ratings apply to debt obligations that are payable on
demand or have original maturities of generally up to three years, including
commercial paper, certificates of deposit, medium-term notes, and municipal
and investment notes. Although the credit analysis is similar to Fitch's bond
rating analysis, the short-term rating places greater emphasis on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner. Fitch's short-term ratings are as follows:

Fitch-1+ (Exceptionally Strong Credit Quality) Issues assigned this
rating are regarded as having the strongest degree of assurance
for timely payment.

Fitch-1 (Very Strong Credit Quality) Issues assigned this rating reflect
an assurance of timely payment only slightly less in degree than
issues rated Fitch-1+.

Fitch-2 (Good Credit Quality) Issues assigned this rating have a
satisfactory degree of assurance for timely payment but the
margin of safety is not as great as the two higher categories.

Fitch-3 (Fair Credit Quality) Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse change is
likely to cause these securities to be rated below investment
grade.

Fitch-S (Weak Credit Quality) Issues assigned this rating have
characteristics suggesting a minimal degree of assurance for
timely payment and are vulnerable to near term adverse changes
in financial and economic conditions.

D (Default) Issues assigned this rating are in actual or imminent
payment default.

LOC This symbol LOC indicates that the rating is based on a letter
of credit issued by a commercial bank.

<PAGE>

LONG-TERM RATINGS

DUFF & PHELPS, INC.

These ratings represent a summary opinion of the issuer's long-term
fundamental quality. Rating determination is based on qualitative and
quantitative factors which may vary according to the basic economic and
financial characteristics of each industry and each issuer. Important
considerations are vulnerability to economic cycles as well as risks related
to such factors as competition, government action, regulation, technological
obsolescence, demand shifts, cost structure, and management depth and
expertise. The projected viability of the obligor at the trough of the cycle
is a critical determination.

Each rating also takes into account the legal form of the security, (e.g.,
first mortgage bonds, subordinated debt, preferred stock, etc.). The extent of
rating dispersion among the various classes of securities is determined by
several factors including relative weightings of the different security
classes in the capital structure, the overall credit strength of the issuer,
and the nature of covenant protection. Review of indenture restrictions is
important to the analysis of a company's operating and financial constraints.

The Credit Rating Committee formally reviews all ratings once per quarter
(more frequently, if necessary).

RATING SCALE DEFINITION

AAA HIGHEST CREDIT QUALITY. THE RISK FACTORS ARE NEGLIGIBLE, BEING
ONLY SLIGHTLY MORE THAN RISK-FREE U.S. TREASURY DEBT.

AA+ High credit quality. Protection factors are strong. Risk is
AA modest, but may vary slightly from time to time because of
AA- economic conditions.

A+ Protection factors are average but adequate. However, risk
A factors are more variable and greater in periods of economic
A- stress.

BBB+ Below average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability in
BBB- risk during economic cycles.

BB+ Below investment grade but deemed likely to meet obligations
BB when due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions or company
fortunes. Overall quality may move up or down frequently
within this category.

B+ Below investment grade and possessing risk that obligations
B will not be met when due. Financial protection factors will
B- fluctuate widely according to economic cycles, industry
conditions and/or company fortunes. Potential exists for
frequent changes in the quality rating within this category or
into a higher or lower quality rating grade.

CCC Well below investment grade securities. May be in default or
considerable uncertainty exists as to timely payment of
principal, interest or preferred dividends. Protection factors
are narrow and risk can be substantial with unfavorable
economic/ industry conditions, and/or with unfavorable company
developments.

DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.

DP Preferred stock with dividend arrearages.

<PAGE>

SHORT-TERM RATINGS

Duff & Phelps' short-term ratings are consistent with the rating criteria
utilized by money market participants. The ratings apply to all obligations
with maturities of under one year, including commercial paper, the uninsured
portion of certificates of deposit, unsecured bank loans, master notes,
bankers acceptances, irrevocable letters of credit, and current maturities of
long-term debt. Asset-backed commercial paper is also rated according to this
scale.

Emphasis is placed on liquidity which is defined as not only cash from
operations, but also access to alternative sources of funds, including trade
credit, bank lines, and the capital markets. An important consideration is the
level of an obligor's reliance on short-term funds on an ongoing basis.

A. CATEGORY 1: HIGH GRADE

Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or
access to alternative sources of funds, is outstanding,
and safety is just below risk-free U.S. Treasury
short-term obligations.

Duff 1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental
protection factors. Risk factors are minor.

Duff- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.

B. CATEGORY 2: GOOD GRADE

Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.

C. CATEGORY 3: SATISFACTORY GRADE

Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless,
timely payment is expected.

D. CATEGORY 4: NON-INVESTMENT GRADE

Duff 4 Speculative investment characteristics. Liquidity is not
sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a
high degree of variation.

E. CATEGORY 5: DEFAULT

Duff 5 Issuer failed to meet scheduled principal and/or interest
payments.

<PAGE>

Dean Witter
Income Builder Fund
Two World Trade Center
New York, New York 10048

TRUSTEES

Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder

OFFICERS

Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Paul D. Vance
Vice President
Michael G. Knox
Vice President
Thomas F. Caloia
Treasurer

CUSTODIAN

The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT

Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

INVESTMENT MANAGER

Dean Witter InterCapital Inc.

DEAN WITTER
INCOME BUILDER
FUND

PROSPECTUS--OCTOBER 25, 1996

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
OCTOBER 25, 1996 INCOME BUILDER
FUND

- -------------------------------------------------------------------------------

Dean Witter Income Builder Fund (the "Fund") is an open-end, diversified
management investment company whose primary investment objective is to seek
reasonable income. Growth of capital is a secondary objective. The Fund seeks
to achieve its objectives by investing under normal market conditions, at
least 65% of its total assets in a diversified portfolio of income-producing
common stocks and preferred stocks and in securities convertible into common
stock. (See "Investment Practices and Policies.")

A Prospectus for the Fund dated October 25, 1996, 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 numbers listed below
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc., at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the Prospectus.

Dean Witter Income Builder Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

<PAGE>

TABLE OF CONTENTS
- -------------------------------------------------------------------------------

The Fund and its Management ............................................ 3
Trustees and Officers .................................................. 6
Investment Practices and Policies ..................................... 11
Investment Restrictions ................................................ 13
Portfolio Transactions and Brokerage ................................... 14
The Distributor ........................................................ 16
Shareholder Services ................................................... 19
Redemptions and Repurchases ............................................ 23
Dividends, Distributions and Taxes .................................... 25
Performance Information ................................................ 27
Shares of the Fund ..................................................... 27
Custodian and Transfer Agent .......................................... 28
Independent Accountants ................................................ 28
Reports to Shareholders ................................................ 28
Legal Counsel .......................................................... 29
Experts ............................................................... 29
Registration Statement ................................................. 29

<PAGE>

THE FUND AND ITS MANAGEMENT
- -------------------------------------------------------------------------------

THE FUND

The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts
on March 21, 1996.

THE INVESTMENT MANAGER

Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in
this Statement of Additional Information, the terms "InterCapital" and
"Investment Manager" refer to DWR's InterCapital Division prior to the
internal reorganization and 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 Board of
Trustees. In addition, Trustees of the Fund provide guidance on economic
factors and interest rate trends. Information as to these Trustees and
officers is contained under the caption "Trustees and Officers".

InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter Tax-Exempt Securities Trust, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Dividend Growth Securities
Inc., Dean Witter American Value Fund, Dean Witter U.S. Government Money
Market Trust, Dean Witter Variable Investment Series, Dean Witter World Wide
Investment Trust, Dean Witter Select Municipal Reinvestment Fund, Dean Witter
U.S. Government Securities Trust, Dean Witter California Tax-Free Income Fund,
Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible Securities
Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added Market
Series, High Income Advantage Trust, High Income Advantage Trust II, High
Income Advantage Trust III, Dean Witter Government Income Trust, Dean Witter
Utilities Fund, Dean Witter California Tax-Free Daily Income Trust, Dean
Witter Strategist Fund, Dean Witter World Wide Income Trust, Dean Witter
Intermediate Income Securities, Dean Witter New York Municipal Money Market
Trust, Dean Witter Capital Growth Securities, Dean Witter European Growth Fund
Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Global
Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter
Multi-State Municipal Series Trust, Dean Witter 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 Trust, Dean Witter International SmallCap Fund,
Dean Witter Select Dimensions Investment Series, Dean Witter Mid-Cap Growth
Fund, Dean Witter Global Asset Allocation Fund, Dean Witter National Municipal
Trust, Dean Witter Balanced Growth Fund, Dean Witter Balanced Income Fund,
Dean Witter Hawaii Municipal Trust, Dean Witter Capital Appreciation Fund,
Dean Witter Information Fund, Dean Witter Special Value Fund, Dean Witter
Intermediate Term U.S. Treasury Trust, Dean Witter Japan Fund, InterCapital
Quality Municipal Income Trust, InterCapital California Quality Municipal
Securities, InterCapital New York Quality Municipal Securities, InterCapital
Quality Municipal Investment Trust, Active Assets Money Trust, Active Assets
Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Municipal Income Trust, Municipal Income Trust
II, Municipal Income Trust III, Municipal Income Opportunities Trust,
Municipal Income Opportunities Trust II, Municipal Income Opportunities Trust
III, Prime Income Trust and Municipal Premium Income Trust. The foregoing
investment companies, together with the Fund, are collectively referred to as
the Dean Witter Funds. In addition, Dean Witter Services Company Inc.,
("DWSC"), a wholly-owned subsidiary of InterCapital, serves as manager for the
following investment companies for which TCW Funds Management, Inc. is the
investment adviser: TCW/DW Core Equity Trust, TCW/DW North American Government
Income Trust, TCW/DW Latin

<PAGE>

American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Emerging Markets Opportunities Trust,
TCW/DW Mid-Cap Equity Trust, TCW/DW Global Telecom Trust, TCW/DW Total Return
Trust, TCW/DW Strategic Income Trust, TCW/DW Term Trust 2000, TCW/DW Term
Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also
serves as: (i) sub-adviser to Templeton Global Opportunities Trust, an
open-end investment company; (ii) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; and (iii) sub-administrator
of MassMutual Participation Investors and Templeton Global Governments Income
Trust, closed-end investment companies.

Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.

Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the salaries
of all personnel, including officers of the Fund, who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund. The
Investment Manager has retained DWSC to perform its administrative services
under the Agreement.

Expenses not expressly assumed by the Investment Manager under the
Agreement or by Dean Witter Distributiors Inc., the Distributor of the Fund's
shares ("Distributors" or "the Distributor") will be paid by the Fund. The
expenses borne by the Fund include, but are not limited to: expenses of the
Plan of Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of
share certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing, including
typesetting, and distributing Prospectuses and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders;
all expenses of shareholders' and Trustees' meetings and of preparing,
printing and mailing of proxy statements and reports to shareholders; fees and
travel expenses of Trustees or members of any advisory board or committee who
are not employees of the Investment Manager or any corporate affiliate of the
Investment Manager; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Fund or of the
Investment Manager (not including compensation or expenses of attorneys who
are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification relating thereto); and all other costs of the
Fund's operation.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.75% to the Fund's daily net assets. For the period June 26,
1996 (commencement of operations) through September 30, 1996, the Fund accrued
to the Investment Manager total compensation under the Agreement in the amount
of $242,252.

The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any

<PAGE>

of its investors for any act or omission by the Investment Manager or for any
losses sustained by the Fund or its investors. The Agreement in no way
restricts the Investment Manager from acting as investment manager or adviser
to others.

The Investment Manager paid the organizational expenses of the Fund, in the
amount of $163,660, incurred prior to the offering of the Fund's shares. The
Fund will reimburse the Investment Manager for such expenses. The
organizational expenses of the Fund have been deferred by the Fund and are
being amortized on the straight line method over a period not to exceed five
years from the date of commencement of the Fund's operations.

The Agreement was initially approved by the Trustees on April 17, 1996 and
by InterCapital, as the then sole shareholder, on April 17, 1996. 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 April 30,
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 DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so
request.

<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 82 Dean Witter Funds and the 14 TCW/DW Funds are
shown below:

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C>
Michael Bozic (55).......................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee
c/o Levitz Furniture Corporation of the Dean Witter Funds; formerly President and Chief
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July, 1995); formerly variously Chairman, Chief
Executive Officer, President and Chief Operating Officer
of the Sears Merchandise Group of Sears, Roebuck and Co.
(1987-1991); Director of Eaglemark Financial Services,
Inc., the United Negro College Fund and Weirton Steel
Corporation.

Charles A. Fiumefreddo* (63)................ Chairman, Chief Executive Officer and Director of
Chairman, President, InterCapital, Distributors and DWSC; Executive Vice
Chief Executive Officer and Trustee President and Director of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of the
New York, New York Dean Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of
Dean Witter Trust Company ("DWTC"); Director and/or
officer of various DWDC subsidiaries; formerly Executive
Vice President and Director of DWDC (until February,
1993).

Edwin J. Garn (64).......................... Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Chemical Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1972-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Chemical Corporation (since January,
1993); Director of Franklin Quest (time management
systems) and John Alden Financial Corp.; member of the
board of various civic and charitable organizations.

John R. Haire (71).......................... Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Directors or Trustees and
Two World Trade Center Director or Trustee of the Dean Witter Funds; Chairman of
New York, New York the Audit Committee and Chairman of the Committee of the
Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978);
Director of Washington National Corporation (insurance).

<PAGE>

NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Dr. Manuel H. Johnson (47).................. Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Koch Professor of International
c/o Johnson Smick International, Inc. Economics and Director of the Center for Global Market
1133 Connecticut Avenue, N.W. Studies at George Mason University; Co-Chairman and a
Washington, DC founder of the Group of Seven Council (G7C), an
international economic commission; Director or Trustee of
the Dean Witter Funds; Trustee of the TCW/DW Funds;
Director of NASDAQ (since June, 1995); Director of
Greenwich Capital Markets, Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal
Reserve System (1986-1990) and Assistant Secretary of the
U.S. Treasury (1982-1986).

Michael E. Nugent (60)...................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); director of various business
organizations.

Philip J. Purcell* (53)..................... Chairman of the Board of Directors and Chief Executive
Trustee Officer of DWDC, DWR, and Novus Credit Services Inc.;
Two World Trade Center Director of InterCapital, DWSC, and Distributors;
New York, New York Director or Trustee of the Dean Witter Funds; Director
and/or officer of various DWDC subsidiaries.

John L. Schroeder (66)...................... Retired; Director or Trustee of the Dean Witter Funds;
Trustee Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Trustees (August, 1991-September, 1995) and Chairman and Chief
114 West 47th Street Investment Officer of Axe-Houghton Management and the
New York, New York Axe-Houghton Funds (April, 1983-June, 1991).

Sheldon Curtis (64) ........................ Senior Vice President, Secretary, and General Counsel of
Vice President, InterCapital and DWSC; Senior Vice President and
Secretary and General Counsel Secretary of DWTC; Senior Vice President, Assistant
Two World Trade Center Secretary and Assistant General Counsel of Distributors;
New York, New York Assistant Secretary of DWR; Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/DW
Funds.

Thomas F. Caloia (50) ...................... First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter Funds
Two World Trade Center and the TCW/DW Funds.
New York, New York

Paul D. Vance (60).......................... Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York

<PAGE>

NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Michael G. Knox (30) ....................... Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds; prior to joining InterCapital as a
Two World Trade Center Portfolio Manager in August, 1993, Mr. Knox was with
New York, New York Eagle Asset Management, Inc.
</TABLE>

- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, Robert S. Giambrone, Senior Vice President of InterCapital, DWSC,
Distributors and DWTC and Director of DWTC, are Vice Presidents of the Fund,
and Marilyn K. Cranney and Barry Fink, First Vice Presidents and Assistant
General Counsels of InterCapital and DWSC, Lou Anne D. McInnis and Ruth Rossi,
Vice Presidents and Assistant General Counsels of InterCapital and DWSC, and
Frank Bruttomesso and Carsten Otto, Staff Attorneys with InterCapital, are
Assistant Secretaries of The Fund.

THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES

The Board of Trustees consists of eight (8) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of this
Statement of Additional Information, there are a total of 82 Dean Witter
Funds, comprised of 122 portfolios. As of September 30, 1996, the Dean Witter
Funds had total net assets of approximately $78.0 billion and more than five
million shareholders.

Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four of
the six independent Trustees are also Independent Trustees of the TCW/DW
Funds.

Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.

All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31,
1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.

The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to
time. The Independent Trustees are required to select and nominate individuals
to fill any Independent Trustee vacancy on the Board of any Fund that has a
Rule 12b-1 plan of distribution. Most of the Dean Witter Funds have such a
plan.

<PAGE>

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing
the independence of the independent accountants; considering the range of
audit and non-audit fees; reviewing the adequacy of the Fund's system of
internal controls; and preparing and submitting Committee meeting minutes to
the full Board.

Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.

DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE

The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and consults
with them in advance of meetings to help refine reports and to focus on
critical issues. Members of the Committees believe that the person who serves
as Chairman of both Committees and guides their efforts is pivotal to the
effective functioning of the Committees.

The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service providers.
In effect, the Chairman of the Committees serves as a combination of chief
executive and support staff of the Independent Trustees.

The Chairman of the Committee of the Independent Trustees and the Audit
Committee 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 and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the
Audit Committee of the TCW/DW Funds. The current Committee Chairman has had
more than 35 years experience as a senior executive in the investment company
industry.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS

The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of separate
groups of Independent Trustees arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, having the same Independent Trustees serve on all
Fund Boards enhances the ability of each Fund to obtain, at modest cost to
each separate Fund, the services of Independent Trustees, and a Chairman of
their Committees, of the caliber, experience and business acumen of the
individuals who serve as Independent Trustees of the Dean Witter Funds.

COMPENSATION OF INDEPENDENT TRUSTEES

The Fund pays each Independent Trustee an annual fee of $1,000 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

<PAGE>

Fund pays the Chairman of the Audit Committee an annual fee of $750 and pays
the Chairman of the Committee of the Independent Trustees an additional annual
fee of $1,200). The Fund also reimburses such Trustees for travel and other
out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by
the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund.

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 that during such
fiscal year the Fund holds the same number of Board and committee meetings as
were held by the other Dean Witter Funds during the calendar year ended
December 31, 1995, it is estimated that the compensation paid to each
Independent Trustee during such fiscal year will be the amount shown in the
following table:

FUND COMPENSATION (ESTIMATED)

AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- -------------
Michael Bozic ................................................... $2,000
Edwin J. Garn ................................................... 2,000
John R. Haire ................................................... 3,950
Dr. Manuel H. Johnson .......................................... 2,000
Michael E. Nugent ............................................... 2,000
John L. Schroeder ............................................... 2,000

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds. Mr.
Schroeder was elected as a Trustee of the TCW/DW Funds on April 20, 1995.

COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF TOTAL
FOR SERVICE AS COMMITTEES OF COMPENSATION
DIRECTOR OR FOR SERVICE AS INDEPENDENT PAID FOR
TRUSTEE AND TRUSTEE AND DIRECTORS/ SERVICES TO 79
COMMITTEE MEMBER COMMITTEE MEMBER TRUSTEES AND DEAN WITTER
OF 79 DEAN WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENTTRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350(1) 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>

- ----------------
(1) For the 79 Dean Witter Funds in operation at December 31, 1995. As noted
above, on July 1, 1996, Mr. Haire became Chairman of the Committee of the
Independent Trustees and the Audit Committee of the TCW/DW Funds in
addition to continuing to serve in such positions for the Dean Witter
Funds.

As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five years
(or such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Dean Witter Fund that has adopted the retirement
program (each such Fund referred to as an "Adopting Fund" and each such
Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee

<PAGE>

is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her
Eligible Compensation plus 0.4166666% of such Eligible Compensation for each
full month of service as an Independent Director or Trustee of any Adopting
Fund in excess of five years up to a maximum of 50.0% after ten years of
service. The foregoing percentages may be changed by the Board.(2) "Eligible
Compensation" is one-fifth of the total compensation earned by such Eligible
Trustee for service to the Adopting Fund in the five year period prior to the
date of the Eligible Trustee's retirement. Benefits under the retirement
program are not secured or funded by the Adopting Funds.

The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the
Fund) as of December 31, 1995, and the estimated retirement benefits for the
Fund's Independent Trustees from the 57 Dean Witter Funds as of December 31,
1995.

RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS

<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
RETIREMENT BENEFITS
ESTIMATED BENEFITS UPON
CREDITED YEARS ESTIMATED ACCRUED AS RETIREMENT
OF SERVICE AT PERCENTAGE OF EXPENSES BY FROM ALL
RETIREMENT ELIGIBLE ALL ADOPTING ADOPTING
NAME OF INDEPENDENTTRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS (3)
- -------------------------- --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 26,359 $ 51,550
Edwin J. Garn ............. 10 50.0 41,901 51,550
John R. Haire ............. 10 50.0 261,763 130,404
Dr. Manuel H. Johnson .... 10 50.0 16,748 51,550
Michael E. Nugent ......... 10 50.0 30,370 51,550
John L. Schroeder ......... 8 41.7 51,812 42,958
</TABLE>
- ---------------
(2) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.

(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (2)
above.

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
- -----------------------------------------------------------------------------

As discussed in the Prospectus, the Fund offers investors an opportunity to
participate in a diversified portfolio of securities, consisting, under normal
market conditions of at least 65% of its total assets in income-producing
equity securities, in preferred stocks and securities convertible into common
stock. Up to 35% of the Fund's assets may be invested in fixed-income
securities or common stocks that do not pay a regular dividend but are
expected to contribute to the Fund's ability to meet its investment
objectives. The Fund has no intention of investing in excess of 50% of its net
assets in lower rated convertibles and fixed-income securities for the fiscal
period ending September 30, 1997.

<PAGE>

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 the collateral are not subject to any limits.

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, their 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 liquid portfolio securities equal in value to commitments
to purchase securities on a when-issued, delayed delivery or forward
commitment 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 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 liquid portfolio securities equal
in value to recognized commitments for such securities. 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"). An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The 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 sale.

RULE 144A SECURITIES

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

<PAGE>

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 current policy may not exceed 15% of the Fund's net assets.

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 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 loan 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.

New Instruments. New financial products and various combinations thereof
continue to be developed. The Fund may invest in any such products as may be
developed, to the extent conistent with its investment objective and
applicable regulatory requirements.

PORTFOLIO TURNOVER

It is anticipated that the Fund's portfolio turnover rate will not exceed
90%. A 100% turnover rate would occur, for example, if 100% of the securities
held in the Fund's portfolio (excluding all securities whose maturities at
acquisition were one year or less) were sold and replaced within one year.

INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------

In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of Shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares

<PAGE>

of the Fund. For purposes of the following restrictions: (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 in securities of any issuer if in the exercise of reasonable
diligence, the Fund has determined that any officer or trustee/director of
the Fund or of the Investment Manager owns more than 1/2 of 1% of the
outstanding securities of such issuer, and such officers and
trustees/directors who own more than 1/2 of 1% own in the aggregate more
than 5% of the outstanding securities of such issuer.

2. Purchase or sell real estate or interests therein (including
limited partnership interests), although the Fund may purchase securities
of issuers which engage in real estate operations and securities secured by
real estate or interests therein.

3. Purchase or sell commodities.

4. 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.

5. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.

6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).

7. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6).

8. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above; (c) purchasing any securities on a
when-issued or delayed delivery basis; or (d) lending portfolio securities.

9. Make loans of money or securities, except: (a) by the purchase of
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.

10. Make short sales of securities.

11. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities.

12. 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.

13. Invest for the purpose of exercising control or management of any
other issuer.

In addition, the Fund, as non-fundamental policies, will not invest in
options or futures contracts or in more than 5% of the value of its net assets
in warrants, including not more than 2% of such assets in warrants not listed
on the New York or American Stock Exchange. However, the acquisition of
warrants attached to other securities is not subject to this restriction.

PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------

Subject to the general supervision of the Board of Trustees, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund,
the selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal

<PAGE>

for their own accounts without a stated commission, although the price of the
security usually includes a profit to the dealer. The Fund also expects that
securities will be purchased at times in underwritten offerings where the
price includes a fixed amount of compensation, generally referred to as the
underwriter's concession or discount. Options and futures transactions will
usually be effected through a broker and a commission will be charged. On
occasion, the Fund may also purchase certain money market instruments directly
from an issuer, in which case no commissions or discounts are paid. During the
fiscal period June 26, 1996 (commencement of operations) through September 30,
1996, the Fund paid $100,337 in brokerage commissions.

Many of the Fund's portfolio transactions will occur primarily with
issuers, underwriters or major dealers in U.S. Government Securities acting as
principals. Such transactions are normally on a net basis which do not involve
payment of brokerage commissions. The cost of securities purchased from an
underwriter usually includes a commission paid by the issuer to the
underwriters; transactions with dealers normally reflect the spread between bid
and asked prices.

The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including 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. In the case of certain
initial and secondary public offerings, the Investment Manager may utilize a
pro-rata allocation process based on the size of the Dean Witter Funds involved
and the number of shares available from the public offering.

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. Such
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.

In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes such prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investments; wire
services; and appraisals or evaluations of portfolio securities. During the
fiscal period ended September 30, 1996, the Fund directed the payment of
$69,282 in brokerage commissions in connection with transactions in the
aggregate amount of $38,434,510, to brokers because of research services
provided.

The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in

<PAGE>

varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services.

Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with DWR.
The Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio transactions
for the Fund, the commissions, fees or other remuneration received by DWR must
be reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow DWR to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker
in a commensurate arm's-length transaction. Furthermore, the Board of Trustees
of the Fund, including a majority of the Trustees who are not "interested"
persons of the Fund, as defined in the Act, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to DWR are consistent with the foregoing standard. During the fiscal
period ended September 30, 1996, the Fund paid $24,548 in brokerage commissions
to DWR. 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. During
the fiscal period ended September 30, 1996, the brokerage commissions paid to
DWR represented approximately 24.47% of the total brokerage commissions paid by
the Fund during the period and were paid on account of transactions having an
aggregate dollar value equal to approximately 30.48% of the aggregate dollar
value of all portfolio transactions of the Fund during the period for which
commissions were paid.

During the fiscal period ended September 30, 1996, the Fund purchased
preferred stock of Merrill Lynch & Co., which issuer was among the ten brokers
or the ten dealers which executed transactions for or with the Fund in the
largest dollar amounts during the period. At September 30, 1996, the Fund held
preferred stock issued by Merrill Lynch & Co. with a market value of
$2,012,500.

THE DISTRIBUTOR
- -----------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into
a selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Board of
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 April 17,
1996, a 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 has an
initial term ending April 30, 1997, 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

<PAGE>

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
broker-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 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's shares
since the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset value
of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or 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. The Distributor has informed the Fund that it received
approximately $25,720 in contingent deferred sales charges for the period June
26, 1996 (commencement of operations) through September 30, 1996.

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 April 17,
1996 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 then sole shareholder of
the Fund, approved the Plan on April 17, 1996, whereupon the Plan went into
effect.

Under its terms, the Plan will continue in effect until April 30, 1997 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.
Pursuant to the Plan and as required by Rule 12b-1, the Trustees wlil receive
and review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended by the Distributor under
the Plan and the purpose for which such expenditures were made. The Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
period ended September 30, 1996 of $323,002. This is an accrual at an annual
rate of 1.0% of the Fund's average daily net assets and was calculated pursuant
to clause (b) of the compensation formula of the plan. This amount is treated
by the Fund as an expense in the year it is accrued.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to a
contingent deferred sales charge, payable to the Distributor, if redeemed
during the six years after their purchase. DWR compensates its account
executives by paying them, from its own funds, commissions for the sales of

<PAGE>

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 and other branch office
distribution-related expenses including: (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of
mutual fund sales coordinators to promote the sale of Fund shares; and (d)
other expenses relating to branch promotion of Fund shares sales. Payments may
also be made with respect to distribution expenses incurred in connection with
the distribution of shares, including personal services to shareholders with
respect to holdings of such shares, of an investment company whose assets are
acquired by the Fund in a tax-free reorganization. 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.

The Fund paid 100% of the $323,002 accrued under the Plan for the fiscal
period ended September 30, 1996 to the Distributor. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $8,266,173 on behalf of
the Fund since the inception of the Plan. It is estimated that this amount was
spent in approximately the following ways: (i) 14.61% ($1,207,634)--advertising
and promotional expenses; (ii) 1.87% ($154,314)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 83.52%
($6,904,225)--other expenses, including the gross sales credit and the carrying
charge, of which 1.08% ($74,900) represents carrying charges, 39.27%
($2,711,242) represents commission credits to DWR branch offices for payments
of commissions to account executives and 59.65% ($4,118,083) represents
overhead and other branch office distribution-related expenses. The term
"overhead and other branch office distribution-related expenses" represents (a)
the expenses of operating DWR's branch offices in connection with the sale of
Fund shares, including lease costs, the salaries and employee benefits of
operations and sales support personnel, utility costs, communications costs and
the costs of stationery and supplies; (b) the costs of client sales seminars;
(c) travel expenses of mutual fund sales coordinators to promote the sale of
Fund shares; and (d) other expenses relating to branch promotion of Fund share
sales.

At any given time, the expenses in distribution 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. The Distributor has advised the Fund that
such excess amount, including the carrying charge designed to approximate the
opportunity costs incurred by DWR which arise from it having advanced monies
without having received the amount of any sales charges imposed at the time of
sale of the Fund's shares, totalled $7,917,422 at September 30, 1996. 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 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

<PAGE>

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) or 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

As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.

The net asset value per share of the Fund is determined once daily at 4:00
p.m. New York time (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time), on each day that the New York Stock
Exchange is open by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The New York Stock Exchange currently observes the following
holidays: New Year's Day; Presidents Day; Good Friday; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.

SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------

Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must be
requested in writing for each transaction. Certificates are issued only for
full shares and may be redeposited in the account at any time. There is no
charge to the investor for issuance of a certificate. Whenever a 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 change, such request should be received by the Transfer Agent at least five
business days prior to the record date of the dividend or distribution. In the
case of recently purchased shares for which registration instructions have not
been received on the record date, cash payments will be made to the Distributor
or other selected broker-dealer, and will be forwarded to the shareholder upon
the receipt of proper instructions.

<PAGE>

Targeted Dividends (Service Mark). In states where it is legally
permissible, shareholders may also have all income dividends and capital gains
distributions automatically invested in shares of an open-end Dean Witter Fund
other than Dean Witter Income Builder Fund. Such investment will be made as
described above for automatic investment in shares of the Fund, at the net
asset value per share of the selected Dean Witter Fund as of the close of
business on the payment date of the dividend or distribution and will begin to
earn dividends, if any, in the selected Dean Witter Fund the next business day.
To participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the Dean Witter Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted Dean Witter Fund before entering the program.

EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected. For further information or to
subscribe to EasyInvest, shareholders should contact their DWR or other
selected broker-dealer account executive or the Transfer Agent.

Investment of 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 net asset
value by returning the check or the proceeds to the Transfer Agent within 30
days after the payment date. If the shareholder returns the proceeds of a
dividend or distribution, such funds must be accompanied by a signed statement
indicating that the proceeds constitute a dividend or distribution to be
invested. Such investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by the Transfer Agent.

Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less then $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 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, or amounts credited to a shareholder's DWR
brokerage account, 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 share holder'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.

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").

<PAGE>

Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.

Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Income Builder 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 Witter Balanced Income Fund, Dean Witter
Balanced Growth Fund, Dean Witter Intermediate Term U.S. Treasury Trust and
five Dean Witter Funds which are money market funds (the foregoing eleven
non-CDSC funds are hereinafter referred to as the "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange 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

<PAGE>

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 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 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 the lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
Shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to
the lesser of (a) the purchase payments for, or (b) the current net asset value
of, the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro rata basis between the
non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the Prospectus under the caption "Contingent
Deferred Sales Charge", any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.

With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.

<PAGE>

The Distributor and any Selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
Selected broker-dealer for any transactions pursuant to this Exchange
Privilege.

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter 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 of as low as $5,000. The minimum
initial investment is $5,000 for Dean Witter Special Value Fund. The minimum
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.

The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
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.

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. If
shares are held in a shareholder's account without a share certificate, a
written request for redemption to the Fund's Transfer Agent at P.O. Box 983,
Jersey City, NJ 07303 is required. If certificates are held by the shareholder,
the shares may be redeemed by surrendering the certificates with a written
request for redemption. The share certificate, or an accompanying stock power,
and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for redemption,
whether or not accompanied by a share certificate, must be sent to the Fund's
Transfer Agent, which will redeem the shares at their net asset value next
computed (see "Purchase of Fund Shares") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value. The term
"good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by
the Transfer Agent, and bear signature guarantees when required by the Fund or
the Transfer Agent. If redemption is requested by a corporation, partnership,
trust or fiduciary, the Transfer Agent may require that written evidence of
authority acceptable to the Transfer Agent be submitted before such request is
accepted.

<PAGE>

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other
than the Distributor or a selected broker-dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at an
address other than the registered address, signatures must be guaranteed by an
eligible guarantor acceptable to the Transfer Agent (shareholders should
contact the Transfer Agent for a determination as to whether a particular
institution is such an eligible guarantor). A stock power may be obtained from
any dealer or commercial bank. The Fund may change the signature guarantee
requirements from time to time upon notice to shareholders, which may be by
means of a supplement to the prospectus.

Contingent Deferred Sales Charge. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will
be imposed to the extent that the net asset value of the shares redeemed does
not exceed: (a) the current net asset value of shares purchased more than six
years prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (see "Shareholder Services -- Targeted Dividends"),
plus (c) the current net asset value of shares acquired in exchange for (i)
shares of Dean Witter front-end sales charge funds, or (ii) shares of other
Dean Witter Funds for which shares of front-end sales charge funds have been
exchanged (see "Shareholder Services -- Exchange Privilege"), plus (d) increases
in the net asset value of the investor's shares above the total amount of
payments for the purchase of Fund shares made during the preceding six years.
The CDSC will be paid to the Distributor.

In 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.

The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payment for the purchase of shares, all payments made during a
month will be aggregated and deemed to have been made on the last day of the
month. The following table sets forth the rates of the CDSC:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
------------ --------------------
<S> <C>
First ............................................... 5.0%
Second .............................................. 4.0%
Third ............................................... 3.0%
Fourth .............................................. 2.0%
Fifth ............................................... 2.0%
Sixth ............................................... 1.0%
Seventh and thereafter ............................. None

</TABLE>

In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any such CDSC being imposed
at the lowest possible rate. Accordingly, shareholders may redeem, without

<PAGE>

incurring any CDSC, amounts equal to any net increase in the value of their
shares above the amount of their purchase payments made within the past six
years and amounts equal to the current value of shares purchased more than six
years prior to the redemption and shares purchased through reinvestment of
dividends or distributions or acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter Funds for
which shares of front-end sales charge funds have been exchanged. The CDSC
will be imposed, in accordance with the table shown above, on any redemptions
within six years of purchase which are in excess of these amounts and which
redemptions are not (a) requested within one year of death or initial
determination of disability of a shareholder, or (b) made pursuant to certain
taxable distributions from retirement plans or retirement accounts, as
described in the Prospectus.

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.

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.

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 Transfer Agent. Such payment
may be postponed or the right of redemption suspended at times (a) when the New
York Stock Exchange is closed for other than customary weekends and holidays,
(b) when trading on that Exchange is restricted, (c) when an emergency exists
as a result of which disposal by the Fund of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Fund fairly
to determine the value of its net assets, or (d) during any other period when
the Securities and Exchange Commission by order so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions prescribed in (b) or (c) exist. If
the shares to be redeemed have recently been purchased by check, 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.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------

As discussed in the Prospectus under "Dividends, Distributions and Taxes,"
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.

<PAGE>

If any such gains are retained, the Fund will pay federal income tax thereon,
and shareholders at year-end will be able to claim their share of the tax paid
by the Fund as a credit against their individual federal income tax.
Shareholders will increase their tax basis of Fund shares owned by an amount
equal, under current law, to 65% of the amount of undistributed capital gains.

The Fund, however, intends to distribute substantially all of its net
investment income and net 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. Shareholders will normally have to pay federal income taxes, and
any state income taxes, on the dividends and distributions they receive from
the Fund. Such dividends and distributions, to the extent that they are derived
from the net investment income or short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior calendar
year. Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent the
aggregate dividends received by the Fund would be eligible for the deduction if
the Fund were the shareholder claiming the dividends received deduction. In
this regard, a 46-day holding period generally must be met by the Fund and the
shareholder.

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than twelve months. Gains or losses on the sale of securities with a tax
holding period of twelve months or less will be short-term gains or losses.

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.

One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than three
months. Accordingly, the Fund may be restricted in the writing of options on
securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also be restricted in its
ability to engage in transactions involving futures contracts.

Under current federal tax law, the Fund will receive net investment income
in the form of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize income attributable to it from holding zero coupon Treasury
securities. Current federal tax law requires that a holder (such as the Fund)
of a zero coupon security accrue a portion of the discount at which the
security was purchased as income each year even though the Fund receives no
interest payment in cash on the security during the year. As an investment
company, the Fund must pay out substantially all of its net investment income
each year. Accordingly, the Fund, to the extent it invests in zero coupon
Treasury securities, may be required to pay out as an income distribution each
year an amount which is greater than the total amount of cash receipts of
interest the Fund actually received. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Investment Manager will select which securities to sell. The
Fund may realize a gain or loss from such sales. In the event the Fund realizes
net capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.

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

<PAGE>

exact amount of the dividend or capital gains distribution. Furthermore,
capital gains distributions and some portion of the dividends are subject to
federal income taxes. If the net asset value of the shares should be reduced
below a shareholder's cost as a result of the payment of dividends or the
distribution of realized long-term capital gains, such payment or distribution
would be in part a return of capital but nonetheless would be taxable to the
shareholder. Therefore, an investor should consider the tax implications of
purchasing Fund shares immediately prior to a distribution record date.

Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.

PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------

As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period and is computed by finding the annual percentage rate
which will result in the ending redeemable value of a hypothetical $1,000
investment made at the beginning of a one, five or ten year period, or for the
period from the date of commencement of the Fund's operations, if shorter than
any of the foregoing. For periods of less than one year, the Fund quotes its
total return on a non-annualized basis.

The Fund may compute its aggregate total return for specified periods by
determining the aggregate percentage rate which will result in the ending value
of a hypothetical $1,000 investment made at the beginning of the period. For
the purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing aggregate total return
involves a percentage obtained by dividing the ending value by the initial
$1,000 investment and subtracting 1 from the result. The ending redeemable
value is reduced by any contingent deferred sales charge at the end of the
period. Based on the foregoing calculation, the Fund's total return for the
period June 26, 1996 (commencement of operations) through September 30, 1996
was - 1.90%.

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 quotes. For example, the total return of the Fund may be
calculated in the manner described above, but without deduction of any
applicable contingent deferred sales charge. Based on this calculation, the
aggregate total return of the Fund for the period June 26, 1996 through
September 30, 1996 was 3.10%.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking into
account the effect of any applicable CDSC) and multiplying by $10,000, $50,000
or $100,000, as the case may be. Based on this calculation, investments of
$10,000, $50,000 and $100,000 in the Fund at inception would have grown to
$10,310, $51,550 and $103,100, respectively, at September 30, 1996.

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.

SHARES OF THE FUND
- -----------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. The Trustees themselves have the power
to alter the number and the terms of office of the Trustees (as provided for in
the Declaration of Trust), and they may at any time lengthen or shorten their
own terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees. The voting rights
of shareholders are not cumulative, so that

<PAGE>

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 and the Fund has no
present intention to add additional series or classes of shares.

The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor is
any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his/her or its duties. It also provides that all third
persons shall look solely to the Fund property for satisfaction of claims
arising in connection with the affairs of the Fund. With the exceptions stated,
the Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the affairs
of the Fund.

The Fund is authorized to issue an unlimited number of shares of beneficial
interest.

The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.

CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------

The Bank of New York, 90 Washington Street, New York, New York is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.

Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, including
providing subaccounting and recordkeeping services for certain retirement
accounts; disbursing cash dividends and reinvesting dividends; processing
account registration changes; handling purchase and redemption transactions;
mailing prospectuses and reports; mailing and tabulating proxies; processing
share certificate transactions; and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee from the Fund.

INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------

Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.

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 account-ants, will be sent to
shareholders each year.

The Fund's fiscal year ends on September 30. 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.

<PAGE>

LEGAL COUNSEL
- -----------------------------------------------------------------------------

Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

EXPERTS
- -----------------------------------------------------------------------------

The annual financial statements of the Fund for the period ended September
30, 1996 included in the Prospectus and incorporated by reference in this
Statement of Additional Information, have been so included and incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.

REGISTRATION STATEMENT
- -----------------------------------------------------------------------------

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.

<PAGE>

DEAN WITTER INCOME BUILDER FUND
PART C OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements

(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus

Financial highlights for the period June 26, 1996
through September 30, 1996......................... 4

Portfolio of Investments at September 30, 1996..... 23

Statement of Assets and Liabilities at September
30, 1996........................................... 29

Statement of Operations for the period June 26,
1996 through September 30, 1996.................... 30

Statement of Changes in Net Assets for the period
June 26, 1996 through September 30, 1996........... 31

Notes to Financial Statements...................... 32

- -
(2) Financial statements included in the Statement of
Additional Information (Part B):

None

(3) Financial statements included in Part C:

None

(b) Exhibits:

11. - Consent of Independent Accountants

16. - Schedule for Computation of Performance
Quotations

27. - Financial Data Schedule

--------------------
All other exhibits previously filed and incorporated by
reference.

<PAGE>

Item 25. Persons Controlled by or Under Common Control With
Registrant.

None

Item 26. Number of Holders of Securities.

(1) (2)
Number of Record Holders
Title of Class at September 30, 1996
-------------- ------------------------

Shares of Beneficial Interest 11,081

Item 27. Indemnification

Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties
or by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.

Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.

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

<PAGE>

event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.

The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.

Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for
which Registrant itself is not permitted to indemnify him.

Item 28. Business and Other Connections of Investment Adviser.

See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal address of
the Dean Witter Funds is Two World Trade Center, New York, New York 10048.

The term "Dean Witter Funds" used below refers to the following
registered investment companies:

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

<PAGE>

(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities

Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(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

<PAGE>

(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 Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund

The term "TCW/DW Funds" refers to the following registered
investment companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income 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

<PAGE>

Name and Position Other Substantial Business, Profession, Vocation
with Dean Witter or Employment, including Name, Principal Address
InterCapital Inc. and Nature of Connection
- ----------------- ------------------------------------------------

Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company ("DWTC");
Chairman, Director or Trustee, President and Chief
Executive Officer of the Dean Witter Funds and
Chairman, Chief Executive Officer and Trustee of
the TCW/DW Funds; Formerly Executive Vice President
and Director of Dean Witter, Discover & Co.
("DWDC"); Director and/or officer of various
DWDC subsidiaries.

Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and Distributors;
Director or Trustee of the Dean Witter Funds;
Director and/or officer of various DWDC
subsidiaries.

Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since January,
1993) and Chairman (since January,1995) of the Board
of Directors of NASDAQ.

James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors
and DWTC.

Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director

Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice President,
Secretary and Chief Legal Officer of Distributors;
Director of DWR, DWSC and Distributors.

Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.

<PAGE>

Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWTC.
and Chief Investment
Officer

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 Vice President of various Dean Witter Funds.
Senior Vice President

Mark Bavoso Vice President of various Dean Witter Funds.
Senior Vice President

Richard Felegy
Senior Vice President

Edward Gaylor Vice President of various Dean Witter Funds.
Senior Vice President

Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWTC and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.

Rajesh K. Gupta Vice President of various Dean Witter Funds.
Senior Vice President

Kenton J. Hinchcliffe Vice President of various Dean Witter Funds.
Senior Vice President

Kevin Hurley Vice President of various Dean Witter Funds.
Senior Vice President

Jenny B. Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President

<PAGE>

John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.

Anita Kolleeny Vice President of various Dean Witter Funds.
Senior Vice President

Jonathan R. Page Vice President of various Dean Witter Funds.
Senior Vice President

Ira N. Ross Vice President of various Dean Witter Funds.
Senior Vice President

Rochelle G. Siegel Vice President of various Dean Witter Funds.
Senior Vice President

Paul D. Vance Vice President of various Dean Witter Funds.
Senior Vice President

Elizabeth A. Vetell
Senior Vice President

James F. Willison Vice President of various Dean Witter Funds.
Senior Vice President

Ronald J. Worobel Vice President of various Dean Witter Funds.
Senior Vice President

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.

Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.

Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.

Robert Zimmerman
First Vice President

<PAGE>

Joan Allman
Vice President

Joseph Arcieri Vice President of various Dean Witter Funds.
Vice President

Kirk Balzer Vice President of Dean Witter Mid-Cap Growth Fund
Vice President

Douglas Brown
Vice President

Philip Casparius
Vice President

Thomas Chronert
Vice President

Rosalie Clough
Vice President

Patricia A. Cuddy Vice President of various Dean Witter Funds.
Vice President

B. Catherine Connelly
Vice President

Salvatore DeSteno Vice President of DWSC.
Vice President

Frank J. DeVito Vice President of DWSC.
Vice President

Dwight Doolan
Vice President

Bruce Dunn
Vice President

Jeffrey D. Geffen
Vice President

Deborah Genovese
Vice President

Peter W. Gurman
Vice President

<PAGE>

John Hechtlinger
Vice President

Peter Hermann Vice President of various Dean Witter Funds
Vice President

Elizabeth Hinchman
Vice President

David Hoffman
Vice President

David Johnson
Vice President

Christopher Jones
Vice President

James Kastberg
Vice President

Stanley Kapica
Vice President

Michael G. Knox Vice President of various Dean Witter Funds
Vice President

Konrad J. Krill Vice President of various Dean Witter Funds.
Vice President

Paula LaCosta Vice President of various Dean Witter Funds.
Vice President

Thomas Lawlor
Vice President

Gerard Lian Vice President of various Dean Witter Funds.
Vice President

LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.

Sharon K. Milligan
Vice President

Julie Morrone
Vice President

<PAGE>

David Myers
Vice President

James Nash
Vice President

Richard Norris
Vice President

Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.

Hugh Rose
Vice President

Robert Rossetti
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 of Prime Income Trust
Vice President

Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust

Jayne M. Stevlingson Vice President of various Dean Witter Funds.
Vice President

Kathleen Stromberg Vice President of various Dean Witter Funds.
Vice President

Vinh Q. Tran Vice President of various Dean Witter Funds.
Vice President

Alice Weiss Vice President of various Dean Witter Funds.
Vice President

<PAGE>

Item 29. Principal Underwriters

(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:

(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund

<PAGE>

(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust

(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048.
None of the following persons has any position or office with the
Registrant.

Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.

Michael T. Gregg Vice President and Assistant
Secretary.

Item 30. Location of Accounts and Records

All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained by
the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.

Item 31. Management Services

Registrant is not a party to any such management-related service
contract.

Item 32. Undertakings

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State
of New York on the 24th day of October, 1996.

DEAN WITTER INCOME BUILDER FUND

By /s/ Sheldon Curtis
--------------------------------
Sheldon Curtis
Vice President and Secretary

Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 1 has been signed below by the following persons in the
capacities and on the dates indicated.

Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 10/24/96
--------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/ Thomas F. Caloia 10/24/96
--------------------------
Thomas F. Caloia

(3) Majority of the Trustees

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell

By /s/ Sheldon Curtis 10/24/96
--------------------------
Sheldon Curtis
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder

By /s/ David M. Butowsky 10/24/96
--------------------------
David M. Butowsky
Attorney-in-Fact

<PAGE>

DEAN WITTER INCOME BUILDER FUND

EXHIBIT INDEX

Exhibit No. Description
----------- ------------

11. - Consent of Independent Accountants

16. - Schedule for Computation of Performance
Quotations

27. - Financial Data Schedule

Consent of Independent Accountants

We hereby consent to the use in the Prospectus constituting part of this Post-
Effective Amendment No. 1 to the registration statement on Form N-1A (the
"Registration Statement") of our report dated October 17, 1996, relating to the
financial statements and financial highlights of Dean Witter Income Builder
Fund, which appears in such Prospectus, and to the incorporation by reference of
our report into the Statement of Additional Information which constitutes part
of this Registration Statement. We also consent to the reference to us under the
heading "Financial Highlights" in such Prospectus and to the references to us
under the headings "Independent Accountants" and "Experts" in such Statement of
Additional Information.

/s/ Price Waterhouse LLP

PRICE WATERHOUSE LLP
1177 Avenue of Americas
New York, New York 10036
October 17, 1996

SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER INCOME BUILDER FUND

(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)

__ __
| _______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|__ __|

T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT

(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 30-Sep-96 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------

26-Jun-96 $981.00 0.26 N/A -1.90%

(B) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)

__ __
| _______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|__ __|

EV
TR = ---------- - 1
P

t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)

(B) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Sep-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------

26-Jun-96 $1,031.00 3.10% 0.26 N/A

(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT-G $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
26-Jun-96 3.10 $10,310 $51,550 $103,100
</TABLE>

<ARTICLE> 6
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 143,926,685
<INVESTMENTS-AT-VALUE> 147,118,497
<RECEIVABLES> 3,512,582
<ASSETS-OTHER> 155,410
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 150,786,489
<PAYABLE-FOR-SECURITIES> 2,091,873
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 552,702
<TOTAL-LIABILITIES> 2,644,575
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 144,828,578
<SHARES-COMMON-STOCK> 14,483,618
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 47,579
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 73,945
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,191,812
<NET-ASSETS> 148,141,914
<DIVIDEND-INCOME> 725,075
<INTEREST-INCOME> 1,163,801
<OTHER-INCOME> 0
<EXPENSES-NET> 726,030
<NET-INVESTMENT-INCOME> 1,162,846
<REALIZED-GAINS-CURRENT> 73,945
<APPREC-INCREASE-CURRENT> 3,191,812
<NET-CHANGE-FROM-OPS> 4,428,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,123,961)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 74,654,263
<NUMBER-OF-SHARES-REDEEMED> (264,572)
<SHARES-REINVESTED> 83,927
<NET-CHANGE-IN-ASSETS> 148,041,914
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 242,252
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 726,030
<AVERAGE-NET-ASSETS> 121,542,079
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> .23
<PER-SHARE-DIVIDEND> (.08)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.23
<EXPENSE-RATIO> 2.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>