<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 25, 1997
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. 3 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 4 [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
BARRY FINK, 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 November 26, 1997, pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485.
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. ................ Purchase of Fund Shares; 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
13. .................Investment Practices and Policies; Investment
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. .................Purchase of Fund Shares; 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
NOVEMBER 26, 1997
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.
The Fund offers four classes of shares (each, a "Class"), each with a
different combination of sales charges, ongoing fees and other features. The
different distribution arrangements permit an investor to choose the method of
purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund Shares --
Alternative Purchase Arrangements.")
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 November 26, 1997, 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/ 4
Financial Highlights/ 6
The Fund and its Management/ 9
Investment Objectives and Policies/ 9
Risk Considerations/ 13
Investment Restrictions/ 17
Purchase of Fund Shares/ 18
Shareholder Services/ 28
Redemptions and Repurchases/ 31
Dividends, Distributions and Taxes/ 32
Performance Information/ 33
Additional Information/ 34
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC.,
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
------------------- ------------------------------------------------------------------
The The Fund is organized as a 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 $0.01 par value (see page 34).
The Fund offers four Classes of shares, each with a different
combination of sales charges, ongoing fees and other features (see
pages 18-28).
- ------------------- ------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if
Purchase the account is opened through EasyInvest (Service Mark) ). Class D
shares are only available to persons investing $5 million or more
and to certain other limited categories of investors. For the
purpose of meeting the minimum $5 million investment for Class D
shares, and subject to the $1,000 minimum initial investment for
each Class of the Fund, an investor's existing holdings of Class A
shares and shares of funds for which Dean Witter InterCapital Inc.
serves as investment manager ("Dean Witter Funds") that are sold
with a front-end sales charge, and concurrent investments in Class
D shares of the Fund and other Dean Witter Funds that are multiple
class funds, will be aggregated. The minimum subsequent investment
is $100 (see page 18).
- ------------------- ------------------------------------------------------------------
Investment The primary investment objective of the Fund is to seek reasonable
Objective income. Growth of capital is the secondary objective.
- ------------------- ------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund,
Manager 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
$100.7 billion at October 31, 1997.
- ------------------- ------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate
Fee of 0.75% of the Fund's average daily net assets (see page 9).
- ------------------- ------------------------------------------------------------------
Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Fund has
Distribution adopted a distribution plan pursuant to Rule 12b-1 under the
Fee Investment Company Act (the "12b-1 Plan") with respect to the
distribution fees paid by the Class A, Class B and Class C shares
of the Fund to the Distributor. The entire 12b-1 fee payable by
Class A and a portion of the 12b-1 fee payable by each of Class B
and Class C equal to 0.25% of the average daily net assets of the
Class are currently each characterized as a service fee within the
meaning of the National Association of Securities Dealers, Inc.
guidelines. The remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge (see pages 18 and
26).
- ------------------- ------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements o Class A shares are offered with a front-end sales
charge, starting at 5.25% and reduced for larger purchases.
Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charge
at the time of purchase but a contingent deferred sales charge
("CDSC") of 1.0% may be imposed on redemptions within one year of
purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the
Fund's Class A shares and servicing shareholder accounts pursuant
to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an
amount equal to payments at an annual rate of 0.25% of average
daily net assets of the Class (see pages 18, 21 and 26).
2
<PAGE>
- ---------------------------------------------------------------------------------------
o Class B shares are offered without a front-end sales charge, but
will in most cases be subject to a CDSC (scaled down from 5.0% to
1.0%) if redeemed within six years after purchase. The CDSC will
be imposed on any redemption of shares if after such redemption
the aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's purchase
payments made during the six years preceding the redemption. A
different CDSC schedule applies to investments by certain
qualified plans. Class B shares are also subject to a 12b-1 fee
assessed at the annual rate of 1.0% of the lesser of: (a) the
average daily net sales of the Fund's Class B shares or (b) the
average daily net assets of Class B. All shares of the Fund held
prior to July 28, 1997 have been designated Class B shares. Shares
held before May 1, 1997 that have been designated Class B shares
will convert to Class A shares in May, 2007. In all other
instances, Class B shares convert to Class A shares approximately
ten years after the date of the original purchase (see pages 18,
23 and 26).
o Class C shares are offered without a front-end sales charge, but
will in most cases be subject to a CDSC of 1.0% if redeemed within
one year after purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the
distribution of the Fund's Class C shares and servicing
shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments
at an annual rate of 1.0% of average daily net assets of the Class
(see pages 18, 25 and 26).
o Class D shares are offered only to investors meeting an initial
investment minimum of $5 million and to certain other limited
categories of investors. Class D shares are offered without a
front-end sales charge or CDSC and are not subject to any 12b-1
fees (see pages 18 and 26).
- ------------------- ------------------------------------------------------------------
Dividends and The Fund pays quarterly income dividends and distributes
Capital Gains substantially all of any net short-term and net long-term capital
Distributions gains at least once each year. The Fund may, however, determine to
retain all or part of any net long-term capital gains in any year
for reinvestment. Dividends and capital gains distributions paid
on shares of a Class are automatically reinvested in additional
shares of the same Class at net asset value unless the shareholder
elects to receive cash. Shares acquired by dividend and
distribution reinvestment will not be subject to any sales charge
or CDSC (see pages 28 and 32).
- ------------------- ------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less
any applicable CDSC on Class A, Class B or Class C shares. An
account may be involuntarily redeemed if the total value of the
account is less than $100 or, if the account was opened through
EasyInvest (Service Mark), if after twelve months the shareholder
has invested less than $1,000 in the account (see page 31).
- ------------------- ------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with
Considerations 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 investement techniques, all of which
involve certain special risks (see pages 13-16).
- ------------------- ------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions; Investment of
Services Distributions Received in Cash; Systematic Withdrawal Plan;
Exchange Privilege; EasyInvest (Service Mark); Tax-Sheltered
Retirement Plans (see page 28).
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The estimated expenses and fees set forth in the table
are based on the expenses and fees for the fiscal year ending September 30,
1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- -------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ............................................. 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ............... None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds).................................................... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees............................................... None None None None
Exchange Fee.................................................. None None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ------------------------------------------------------------------------------------------------------
Management Fees .............................................. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (5)(6)............................................. 0.25% 0.91% 1.00% None
Other Expenses ............................................... 0.19% 0.19% 0.19% 0.19%
Total Fund Operating Expenses (7)............................. 1.19% 1.85% 1.94% 0.94%
</TABLE>
- ------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Class A and a portion of the 12b-1 fee payable by each
of Class B and Class C equal to 0.25% of the average daily net assets
of the Class are currently each characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc.
("NASD") guidelines and are payments made for personal service and/or
maintenance of shareholder accounts. The remainder of the 12b-1 fee, if
any, 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--Plan of Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will
be subject to the lower 12b-1 fee applicable to Class A shares. No
sales charge is imposed at the time of conversion of Class B shares to
Class A shares. Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing 1.00% distribution fee (see
"Purchase of Fund Shares--Alternative Purchase Arrangements").
(7) There were no outstanding shares of Class A, Class C or Class D prior
to July 28, 1997. Accordingly, "Total Fund Operating Expenses," as
shown above with respect to those Classes, are estimates based upon the
sum of 12b-1 Fees, Management Fees and estimated "Other Expenses."
4
<PAGE>
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------ -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) a 5% annual return and (2) redemption at the end of each time
period:
Class A ............................................................... $64 $88 $114 $189
Class B ............................................................... $69 $88 $120 $217
Class C................................................................ $30 $61 $105 $226
Class D ............................................................... $10 $30 $ 52 $115
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A ............................................................... $64 $88 $114 $189
Class B ............................................................... $19 $58 $100 $217
Class C ............................................................... $20 $61 $105 $226
Class D ............................................................... $10 $30 $ 52 $115
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS 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" "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charge permitted by the NASD.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the
unqualified report of independent accountants, which are contained in the
Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JUNE 26, 1996*
SEPTEMBER 30, THROUGH
1997**++ SEPTEMBER 30, 1996
- ---------------------------------------- --------------------- ------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 10.23 $ 10.00
--------------------- ------------------
Net investment income ................... 0.46 0.08
Net realized and unrealized gain ....... 2.54 0.23
--------------------- ------------------
Total from investment operations ....... 3.00 0.31
--------------------- ------------------
Less dividends and distributions from:
Net investment income .................. (0.41) (0.08)
Net realized gain ...................... (0.01) --
--------------------- ------------------
Total dividends and distributions ...... (0.42) (0.08)
--------------------- ------------------
Net asset value, end of period .......... $ 12.81 $ 10.23
===================== ==================
TOTAL INVESTMENT RETURN+ ................ 29.83% 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.85% 2.25%(2)
Net investment income ................... 4.16% 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $358,973 $148,142
Portfolio turnover rate ................. 74% 7%(1)
Average commission rate paid ............ $0.0558 $0.0558
</TABLE>
- ------------
* Commencement of operations.
Prior to July 28, 1997, the Fund issued one class of shares. All shares **
held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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.
6
<PAGE>
FINANCIAL HIGHLIGHTS, continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ------------------------------------------ -------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.12
Net realized and unrealized gain .......... 0.61
-------------------
Total from investment operations .......... 0.73
-------------------
Less dividends from net investment income (0.12)
-------------------
Net asset value, end of period ............ $12.81
===================
TOTAL INVESTMENT RETURN+ ................. 5.95%(1)
RATIO TO AVERAGE NET ASSETS:
Expenses .................................. 1.28%(2)
Net investment income ..................... 5.77%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $1,047
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.10
Net realized and unrealized gain .......... 0.61
-------------------
Total from investment operations .......... 0.71
-------------------
Less dividends from net investment income (0.11)
-------------------
Net asset value, end of period ............ $12.80
===================
TOTAL INVESTMENT RETURN+................... 5.79%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.98%(2)
Net investment income ..................... 4.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $987
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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.
7
<PAGE>
FINANCIAL HIGHLIGHTS, continued
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ------------------------------------------ -------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.12
Net realized and unrealized gain .......... 0.62
-------------------
Total from investment operations .......... 0.74
-------------------
Less dividends from net investment income (0.12)
-------------------
Net asset value, end of period ............ $12.82
===================
TOTAL INVESTMENT RETURN+ ................. 5.98%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.96%(2)
Net investment income ..................... 5.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $21
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
8
<PAGE>
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 Morgan Stanley,
Dean Witter, Discover & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
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
$97 billion at October 31, 1997. The Investment Manager also manages
portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.7 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. For the fiscal year ended
September 30, 1997, the Fund accrued total compensation to the Investment
Manager amounting to 0.75% of the Fund's average daily net assets and the
total expenses of Class B amounted to 1.85% of the average daily net assets
of Class B. Shares of Class A, Class C and Class D were first issued on July
28, 1997.
The expenses of the Fund 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; 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
9
<PAGE>
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 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
accep-
10
<PAGE>
tances 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 (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
11
<PAGE>
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 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.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail
financially. However, loans of portfolio securities will only be made to
firms deemed by the Investment Manager to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks.
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
12
<PAGE>
"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
The net asset value of the Fund's shares will fluctuate with changes in
the market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund's yield will
also vary based on the yield of the Fund's portfolio securities.
Common Stocks, Preferred Stocks and Securities Convertible into Common
Stocks. The net 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
13
<PAGE>
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 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 securi-
14
<PAGE>
ties 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
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 year ended September 30, 1997, 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 ................... 2.7%
AA/Aa ..................... 0.0%
A/A ....................... 0.6%
BBB/Baa ................... 18.7%
BB/Ba ..................... 20.8%
B/B ....................... 36.0%
CCC/Caa ................... 0.0%
CC/Ca ..................... 0.0%
C/C ....................... 0.0%
Unrated ................... 21.2%
</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
15
<PAGE>
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, including the
risks of default or bankruptcy of the selling financial institution, the Fund
follows procedures designed to minimize such risks. These procedures include
effecting repurchase transactions only with large, well-capitalized and
well-established financial institutions 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"), and other broker-dealer affiliates of
InterCapital 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 23 equity funds and
fund portfolios with approximately $28.4 billion in assets as of October 31,
1997. Paul D. Vance, Senior Vice President and Michael G. Knox, Vice
16
<PAGE>
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 DWR. In addition, the Fund may incur brokerage commissions
on transactions conducted through DWR and other brokers and dealers that are
affiliates of InterCapital.
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.)
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially
all of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
17
<PAGE>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
GENERAL
The Fund offers each Class of 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 Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales
charge are subject to a contingent deferred sales charge ("CDSC") of 1.0% if
redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but
are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most
redemptions within six years after purchase. (Class B shares purchased by
certain qualified employer-sponsored benefit plans are subject to a CDSC
scaled down from 2.0% to 1.0% if redeemed within three years after purchase.)
Class C shares are sold without an initial sales charge but are subject to a
CDSC of 1.0% on most redemptions made within one year after purchase. Class D
shares are sold without an initial sales charge or CDSC and are available
only to investors meeting an initial investment minimum of $5 million, and to
certain other limited categories of investors. At the discretion of the Board
of Trustees of the Fund, Class A shares may be sold to categories of
investors in addition to those set forth in this prospectus at net asset
value without a front-end sales charge, and Class D shares may be sold to
certain other categories of investors, in each case as may be described in
the then current prospectus of the Fund. See "Alternative Purchase Arrange
ments--Selecting a Particular Class" for a discussion of factors to consider
in selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and
to certain other limited categories of investors. For the purpose of meeting
the minimum $5 million initial investment for Class D shares, and subject to
the $1,000 minimum initial investment for each Class of the Fund, an
investor's existing holdings of Class A shares of the Fund and other Dean
Witter Funds that are multiple class funds ("Dean Witter Multi-Class Funds")
and shares of Dean Witter Funds sold with a front-end sales charge ("FSC
Funds") and concurrent investments in Class D shares of the Fund and other
Dean Witter Multi-Class Funds will be aggregated. 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 FSB (the "Transfer Agent" or
"DWT") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account
executive of DWR or other Selected Broker-Dealer. When purchasing shares of
the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent
will not process the transaction until the proper Class is identified. 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. The
minimum initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase
the investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset
allocation program and (iii) fee-based programs approved by the Distributor,
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory or administrative services, the Fund, in its
discretion, may accept investments without regard to any
18
<PAGE>
minimum amounts which would otherwise be required, provided, in the case of
Systematic Payroll Deduction Plans, that the Distributor 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.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. 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. Sales personnel of a Selected Broker-Dealer are
compensated for selling shares of the Fund by the Distributor or any of its
affiliates and/or the Selected Broker-Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation as special sales incentives, including trips,
educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their
needs. The general public is offered three Classes of shares: Class A shares,
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors.
See "No Load Alternative--Class D Shares."
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class.
This summary is qualified in its entirety by detailed discussion of each
Class that follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain
other limited categories of investors) are not subject to any sales charges
at the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase, except for certain specific circumstances.
Class A shares are also subject to a 12b-1 fee of up to 0.25% of the average
daily net assets of the Class. See "Initial Sales Charge Alternative--Class A
Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to
1.0%) if redeemed within six years of purchase. (Class B shares purchased by
certain qualified employer-sponsored benefit plans are subject to a CDSC
scaled down from 2.0% to 1.0% if redeemed within three years after purchase.)
This CDSC may be waived for certain redemptions. Class B shares are
19
<PAGE>
also subject to an annual 12b-1 fee of 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's Class B 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 Class B shares redeemed since the Fund's inception upon which a CDSC
has been imposed or waived, or (b) the average daily net assets of Class B.
The Class B shares' distribution fee will cause that Class to have higher
expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition,
a certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class C shares. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class A or
Class D shares. See "Level Load Alternative--Class C Shares."
Class D Shares. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are
not subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any
other relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are
not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C
shares over the term of the investment. As an alternative, Class B and Class
C shares are sold without any initial sales charge so the entire purchase
price is immediately invested in the Fund. Any investment return on these
additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to
an ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a
front-end sales charge and they are uncertain as to the length of time they
intend to hold their shares.
For the purpose of meeting the $5 million minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class
Funds, shares of FSC Funds and shares of Dean Witter Funds for which such
shares have been exchanged will be included together with the current
investment amount.
20
<PAGE>
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- --------- ------------------------- ------------- --------------------
<S> <C> <C> <C>
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- --------- ------------------------- ------------- --------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- --------- ------------------------- ------------- --------------------
C 1.0% CDSC during 1.0% No
first year
- --------- ------------------------- ------------- --------------------
D None None No
- --------- ------------------------- ------------- --------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees
for each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase (calculated from the last day of the month in which the
shares were purchased), except for certain specific circumstances. The CDSC
will be assessed on an amount equal to the lesser of the current market value
or the cost of the shares being redeemed. The CDSC will not be imposed (i) in
the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references
to six years in the first paragraph of that section shall mean one year in
the case of Class A shares, and (ii) in the circumstances identified in the
section "Additional Net Asset Value Purchase Options" below. Class A shares
are also subject to an annual 12b-1 fee of up to 0.25% of the average daily
net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
--------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- -------------------- --------------- ---------------
<S> <C> <C>
Less than $25,000 .. 5.25% 5.54%
$25,000 but less
than $50,000 ...... 4.75% 4.99%
$50,000 but less
than $100,000 ..... 4.00% 4.17%
$100,000 but less
than $250,000 ..... 3.00% 3.09%
$250,000 but less
than $1 million .. 2.00% 2.04%
$1 million and over 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the
sales charge is reallowed,
21
<PAGE>
such Selected Broker-Dealers may be deemed to be underwriters as that term is
defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; and for
investments in Individual Retirement Accounts of employees of a single
employer through Systematic Payroll Deduction plans; or (g) any other
organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class
A shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The
sales charge payable on the purchase of the Class A shares of the Fund, the
Class A shares of the other Dean Witter Multi-Class Funds and the shares of
the FSC Funds will be at their respective rates applicable to the total
amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single
transaction, together with shares of the Fund and other Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Dean Witter Funds acquired in exchange for those
shares, and including in each case shares acquired through reinvestment of
dividends and distributions), which are held at the time of such transaction,
amounts to $25,000 or more. If such investor has a cumulative net asset value
of shares of FSC Funds and Class A and Class D shares equal to at least $5
million, such investor is eligible to purchase Class D shares subject to the
$1,000 minimum initial investment requirement of that Class of the Fund. See
"No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Selected Broker-Dealer or the Transfer Agent
fails to confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or shares of other Dean Witter Funds which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the date of receipt by the Distributor of the Letter of
Intent, or of Class A shares of the Fund or shares of other Dean Witter Funds
acquired in exchange for shares of such funds purchased during such period at
a price including a front-end sales charge, which are still owned by the
shareholder, may also be included in determining the applicable reduction.
22
<PAGE>
Additional Net Asset Value Purchase Options. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which DWT (an affiliate of the Investment Manager) provides
discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for
services in the nature of investment advisory or administrative services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs'
agreements, and restrictions on transferability of Fund shares);
(3) retirement plans qualified under Section 401(k) of the Internal
Revenue Code ("401(k) plans") and other employer-sponsored plans qualified
under Section 401(a) of the Internal Revenue Code with at least 200 eligible
employees and for which DWT serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper;
(4) 401(k) plans and other employer-sponsored plans qualified under
Section 401(a) of the Internal Revenue Code for which DWT serves as Trustee
or the 401(k) Support Services Group of DWR serves as recordkeeper whose
Class B shares have converted to Class A shares, regardless of the plan's
asset size or number of eligible employees;
(5) investors who are clients of a Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if the shares are
being purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase
was made within sixty days after the redemption and the proceeds of the
redemption had been maintained in the interim in cash or a money market fund;
and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Se-lected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the Fund. A CDSC, however, will be
imposed on most Class B shares redeemed within six years after purchase. The
CDSC will be imposed on any redemption of shares if after such redemption the
aggregate current value of a Class B account with the Fund falls below the
aggregate amount of the investor's purchase payments for Class B shares made
during the six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) preceding the redemption. In
addition, Class B shares are subject to an annual 12b-1 fee of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
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 Class B shares redeemed since the Fund's
inception upon which a CDSC has been imposed or waived, or (b) the average
daily net assets of Class B.
Except as noted below, Class B 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 CDSC upon
redemption. Shares redeemed earlier than six years after purchase may,
however, be subject to a CDSC which will be a percentage of the dollar amount
of shares re-
23
<PAGE>
deemed 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 following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third...................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In the case of Class B shares of the Fund held by 401 (k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which DWT serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper and whose accounts are opened on or after
July 28, 1997, shares held for three years or more after purchase (calculated
as described in the paragraph above) will not be subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase
may be subject to a CDSC (calculated as described in the paragraph above),
the percentage of which will depend on how long the shares have been held, as
set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First ..................... 2.0%
Second .................... 2.0%
Third ..................... 1.0%
Fourth and thereafter .... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain employer-sponsored benefit plans, three
years) preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three 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
FSC Funds 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
401(k) plan or other employer-sponsored plan qualified under Section 401(a)
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 DWT serves as Trustee or
the 401(k) Support Services Group of DWR serves as recordkeeper ("Eligible
Plan"), provided that either: (A) the plan continues to be an Eligible 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.
24
<PAGE>
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.
Conversion to Class A Shares. All shares of the Fund held prior to July
28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances Class B
shares will convert automatically to Class A shares, based on the relative
net asset values of the shares of the two Classes on the conversion date,
which will be approximately ten (10) years after the date of the original
purchase. The ten year period is calculated from the last day of the month in
which the shares were purchased or, in the case of Class B shares acquired
through an exchange or a series of exchanges, from the last day of the month
in which the original Class B shares were purchased, provided that shares
originally purchased before May 1, 1997 will convert to Class A shares in
May, 2007. The conversion of shares purchased on or after May 1, 1997 will
take place in the month following the tenth anniversary of the purchase.
There will also be converted at that time such proportion of Class B shares
acquired through automatic reinvestment of dividends and distributions owned
by the shareholder as the total number of his or her Class B shares
converting at the time bears to the total number of outstanding Class B
shares purchased and owned by the shareholder. In the case of Class B shares
held by a 401(k) plan or other employer-sponsored plan qualified under
Section 401(a) of the Internal Revenue Code and for which DWT serves as
Trustee or the 401(k) Support Services Group of DWR serves as recordkeeper,
the plan is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the first shares of a Dean Witter
Multi-Class Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired) is excluded from the holding period for
conversion. If those shares are subsequently re-exchanged for Class B shares
of a Dean Witter Multi-Class Fund, the holding period resumes on the last day
of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior
to the date for conversion. Class B shares evidenced by share certificates
that are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions
made within one year after purchase (calculated from the last day of the
month in which the shares were purchased). The CDSC will be assessed on an
25
<PAGE>
amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed in the circumstances set
forth above in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case
of Class C shares. Class C shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares,
Class C shares have no conversion feature and, accordingly, an investor that
purchases Class C shares will be subject to 12b-1 fees applicable to Class C
shares for an indefinite period subject to annual approval by the Fund's
Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million and the
following categories of investors: (i) investors participating in the
InterCapital mutual fund asset allocation program pursuant to which such
persons pay an asset based fee; (ii) persons participating in a fee-based
program approved by the Distributor, pursuant to which such persons pay an
asset based fee for services in the nature of investment advisory or
administrative services (subject to all of the terms and conditions of such
programs, referred to in (i) and (ii) above, which may include termination
fees, mandatory redemption upon termination and such other circumstances as
specified in the programs' agreements, and restrictions on transferability of
Fund shares); (iii) 401(k) plans established by DWR and SPS Transaction
Services, Inc. (an affiliate of DWR) for their employees; (iv) certain Unit
Investment Trusts sponsored by DWR; (v) certain other open-end investment
companies whose shares are distributed by the Distributor; and (vi) other
categories of investors, at the discretion of the Board, as disclosed in the
then current prospectus of the Fund. Investors who require a $5 million
minimum initial investment to qualify to purchase Class D shares may satisfy
that requirement by investing that amount in a single transaction in Class D
shares of the Fund and other Dean Witter Multi-Class Funds, subject to the
$1,000 minimum initial investment required for that Class of the Fund. In
addition, for the purpose of meeting the $5 million minimum investment
amount, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares
have been exchanged will be included together with the current investment
amount. If a shareholder redeems Class A shares and purchases Class D shares,
such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C
shares of the Fund. In the case of Class A and Class C shares, the Plan
provides that the Fund will reimburse the Distributor and others for the
expenses of certain activities and services incurred by them specifically on
behalf of those shares. Reimbursements for these expenses will be made in
monthly payments by the Fund to the Distributor, which will in no event
exceed amounts equal to payments at the annual rates of 0.25% and 1.0% of the
average daily net assets of Class A and Class C, respectively. In the case of
Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B 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 Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (b) the
average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of
the NASD guidelines. In the case of Class B and Class C shares, a portion of
the fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently
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characterized as a service fee. A service fee is a payment made for personal
service and/or the maintenance of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses
borne by the Distributor and others in the distribution of the shares of
those Classes, including the payment of commissions for sales of the shares
of those Classes and incentive compensation to and expenses of DWR's account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan in the case of Class B shares 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 year ended September 30, 1997, Class B shares of the Fund
accrued payments under the Plan amounting to $2,268,574, which amount is
equal to 0.91% of the average daily net assets of Class B for the fiscal
year. These payments were calculated pursuant to clause (a) of the
compensation formula under the Plan. All shares held prior to July 28, 1997
have been designated Class B shares. For the period July 28 through September
30, 1997, Class A and Class C shares of the Fund accrued payments under the
Plan amounting to $175 and $869, respectively, which amounts on an annualized
basis are equal to 0.25% and 1.00% of the average daily net assets of Class A
and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B 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
CDSCs paid by investors upon the redemption of Class B shares. For example,
if $1 million in expenses in distributing Class B 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 $13,633,538 at September 30, 1997, which was equal to 3.80% of the
net assets of Class B on such date. 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
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 CDSCs 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 CDSCs, may or may not be recovered through future
distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses
representing a gross sales commission credited to account executives at the
time of sale may be reimbursed in the subsequent calendar year. No interest
or other financing charges will be incurred on any Class A or Class C
distribution expenses incurred by the Distributor under the Plan or on any
unreimbursed expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share 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
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<PAGE>
prior to 4:00 p.m., at such earlier time), by taking the net assets of the
Fund, dividing by the number of shares outstanding and adjusting to the
nearest cent. The assets belonging to the Class A, Class B, Class C and Class
D shares will be invested together in a single portfolio. The net asset value
of each Class, however, will be determined separately by subtracting each
Class's accrued expenses and liabilities. The net asset value per share will
not be determined on Good Friday and on such other federal and non-federal
holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time 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
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Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Dean Witter Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are
acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class 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 acquired at
net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases").
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 or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and Re
purchases--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based
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<PAGE>
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 CDSC will be imposed on shares
redeemed under the Withdrawal Plan (see "Purchase of Fund Shares").
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.
Withdrawal plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted. Each
withdrawal constitutes a redemption of shares and any gain or loss realized
must be recognized for federal income tax purposes.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
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
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange
fee. Shares may also be exchanged for shares of the following funds: Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S.
Treasury Trust and five Dean Witter funds which are money market funds (the
"Exchange Funds"). Class A shares may also be exchanged for shares of Dean
Witter Multi-State Municipal Series Trust and Dean Witter Hawaii Municipal
Trust, which are Dean Witter Funds sold with a front-end sales charge ("FSC
Funds"). Class B shares may also be exchanged for shares of Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a Dean
Witter Fund offered with a CDSC. 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 Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term 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 Dean Witter Multi-Class Funds, FSC Funds, Global Short-Term or
any Exchange Fund that is not a money market fund can be effected on the same
basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains in 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 re-exchanged for shares of a Dean
Witter Multi-Class Fund or shares of Global Short-Term, the holding period
previously frozen
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<PAGE>
when the first exchange was made resumes on the last day of the month in
which shares of a Dean Witter Multi-Class Fund or shares of Global Short-Term
are reacquired. Thus, the CDSC is based upon the time (calculated as
described above) the shareholder was invested in shares of a Dean Witter
Multi-Class Fund or in shares of Global Short-Term (see "Purchase of Fund
Shares"). In the case of exchanges of Class A shares which are subject to a
CDSC, the holding period also includes the time (calculated as described
above) the shareholder was invested in shares of a FSC Fund. 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 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.) Class B shares of the Fund
acquired in exchange for shares of Global Short-Term or Class B shares of
another Dean Witter Multi-Class Fund having a different CDSC schedule than
that of this Fund will be subject to the higher CDSC schedule, even if such
shares are subsequently re-exchanged for shares of the fund with the lower
CDSC schedule.
Additional Information Regarding Exchanges. 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
of each Class of shares and any other conditions imposed by each fund. In the
case of a shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder 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 Exchange Privilege Authorization Form is required).
Other shareholders (and those who are clients of
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<PAGE>
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 each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). 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.
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 by the Fund or the
Distributor. 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., 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
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<PAGE>
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 35 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 in the same Class from which such shares were redeemed
or repurchased, 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 before the redemption is processed. No CDSC will be imposed
on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and 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 shares of the same Class 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. Shares
acquired by dividend and distribution reinvestments will not be subject to
any front-end sales charge or CDSC. Class B shares acquired through dividend
and distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher (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. Any dividends
declared in the last quarter of any calendar year which are paid in the
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following year prior to February 1 will be deemed, for tax purposes, to have
been received by the shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of
such payments would not be taxable to shareholders.
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.
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. These figures are computed separately
for Class A, Class B, Class C and Class D shares. 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 each Class of the Fund
is computed by dividing the Class's net investment income over a 30-day
period by an average value (using the average number of shares entitled to
receive dividends and the 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 for each Class.
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A,
Class B, Class C and Class D shares. 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 a Class of 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,
all expenses incurred by the applicable Class and all sales charges which
will be incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class 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 each Class of shares of the Fund. Such calculations may or may
not reflect the deduction of any 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).
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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 except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein,
Class A, Class B and Class C bear the expenses related to the distribution of
their respective shares.
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.
Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objectives by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objectives and policies and substantially the same investment
restrictions as those applicable to the Fund.
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.
34
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
Dean Witter California Tax-Free Daily Income Trust
Dean Witter New York Municipal Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development
Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International SmallCap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund
Dean Witter Income Builder Fund
Dean Witter Special Value Fund
Dean Witter Financial Services Trust
Dean Witter Market Leader Trust
Dean Witter S&P 500 Index Fund
Dean Witter Fund of Funds
ASSET ALLOCATION FUNDS
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S. Treasury Trust
DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Stategist Series
Utilities Series
Value-Added Market Series
Global Equity Series
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
<PAGE>
Dean Witter
Income Builder Fund
Two World Trade Center
New York, New York 10048 DEAN WITTER
INCOME BUILDER
TRUSTEES FUND
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
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 FSB
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.
PROSPECTUS -- NOVEMBER 26, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
INCOME BUILDER
FUND
NOVEMBER 26, 1997
- -----------------------------------------------------------------------------
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 November 26, 1997, 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
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management............. 3
Trustees and Officers................... 6
Investment Practices and Policies ...... 12
Investment Restrictions................. 14
Portfolio Transactions and Brokerage ... 15
The Distributor......................... 17
Purchase of Fund Shares................. 22
Shareholder Services.................... 24
Redemptions and Repurchases............. 29
Dividends, Distributions and Taxes ..... 30
Performance Information................. 32
Shares of the Fund...................... 33
Custodian and Transfer Agent ........... 33
Independent Accountants................. 34
Reports to Shareholders................. 34
Legal Counsel........................... 34
Experts ................................ 34
Registration Statement.................. 34
Financial Statements--September 30,
1997 .................................. 35
Report of Independent Accountants ..... 52
Appendix ............................... 53
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on March 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 Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), a Delaware corporation. In an internal
reorganization which took place in January, 1993, InterCapital assumed the
investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter). The daily
management of the Fund and research relating to the Fund's portfolio are
conducted by or under the direction of officers of the Fund and of the
Investment Manager, subject to review by the Fund's Board of Trustees.
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 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 International SmallCap Fund, Dean Witter Select Dimensions
Investment Series, Dean Witter Mid-Cap Growth Fund, Dean Witter Global Asset
Allocation Fund, 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, Dean Witter Financial Services Trust, Dean Witter Market Leader Trust,
Dean Witter S&P 500 Index Fund, Dean Witter Fund of Funds, 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
3
<PAGE>
investment adviser: TCW/DW Core Equity Trust, TCW/DW North American
Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Income and
Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW
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) administrator of
The BlackRock Strategic Term Trust Inc., a closed-end investment company; and
(ii) 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. These
expenses will be allocated among the four classes of shares of the Fund
(each, a "Class") pro rata based on the net assets of the Fund attributable
to each Class, except as described below. Such expenses include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1 (the
"12b-1 fee") (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. The 12b-1 fees relating to a particular Class will be allocated
directly to that Class. In addition, other expenses associated with a
particular Class (except advisory or custodial fees) may be allocated
directly to that Class, provided that such expenses are reasonably identified
as specifically attributable to that Class and the direct allocation to that
Class is approved by the Trustees.
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
4
<PAGE>
calculated daily by applying the annual rate of 0.75% to the Fund's daily net
assets. The management fee is allocated among the Classes pro rata based on
the net assets of the Fund attributable to each Class. For the period June
26, 1996 (commencement of operations) through September 30, 1996 and the
fiscal year ended September 30, 1997, the Fund accrued to the Investment
Manager total compensation under the Agreement in the amounts of $242,252 and
$1,868,871, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The 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 has reimbursed 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 February 21, 1997
and by the shareholders of the Fund at a Special Meeting of Shareholders held
on May 21, 1997. The Agreement is substantially identical to a prior
investment management agreement which was initially approved by the Board of
Trustees on April 17, 1996 and by InterCapital, as the then sole shareholder,
on April 17, 1996. The Agreement took effect on May 31, 1997 upon the
consummation of the merger of Dean Witter, Discover & Co. with Morgan Stanley
Group Inc. The Agreement may be terminated at any time, without penalty, on
thirty days' notice by the Board of Trustees of the Fund, by the holders of a
majority, as defined in the Investment Company Act of 1940 (the "Act"), of
the outstanding shares of the Fund, or by the Investment Manager. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Agreement has an initial term ending April 30, 1999,
and will remain in effect 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 following owned more than 5% of the outstanding Class A shares of the
Fund on November 4, 1997: Dean Witter Trust FSB Trustee FBO The Stanford I.
Rose Charitable Remainder Unitrust, under agreement dated June 9, 1994, P.O.
Box 957, Jersey City, NJ 07303-0957 -5.2%.
The following owned more than 5% of the outstanding Class C shares of the
Fund on November 4, 1997: Dean Witter Reynolds Inc., as Custodian for David
S. Brodnan, IRA Rollover dated July 2, 1997, 1153 Johnson Dr., Buffalo Grove,
IL 60089-6949 -5.3% and Takeshi Mori, Alcasal Meguro Hanabusatoma, #405
3-10-50 Kamisaki, Shinagawa Ku, Tokyo, Japan -5.5%.
The following owned more than 5% of the outstanding Class D shares of the
Fund on November 4, 1997: Dean Witter InterCapital Inc., Attn: Frank DeVito,
73rd Fl., Two World Trade Center, New York, NY 10048-0203 -24.8%; Dean Witter
Reynolds Inc., as Custodian for Constance L. Houser, IRA Rollover dated
September 7, 1995, 2110 Henderson Street, Bethlehem, PA 18017-4925 -24.6% and
Dean Witter Reynolds Inc., as Custodian for Gerald O. Messier, IRA Rollover
dated December 5, 1995, RR 1, Box 1930 Rugg Road, Fairfield, Vermont
05455-9730 -50.5%.
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.
5
<PAGE>
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 83 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 (56).......................... 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* (64).................. 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 FSB ("DWT"); Director and/or officer
of various MSDWD subsidiaries; formerly Executive Vice
President and Director of Dean Witter, Discover & Co.
(until February, 1993).
Edwin J. Garn (65).......................... Director or Trustee of the Dean Witter Funds; formerly
Trustee United States Senator (R-Utah)(1974-1992) and Chairman,
c/o Huntsman 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 Corporation (since January, 1993);
Director of Franklin Covey (time management systems),
John Alden Financial Corp. (health insurance), United
Space Alliance (joint venture between Lockheed Martin
and the Boeing Company) and Nuskin Asia Pacific
(multilevel marketing); member of the board of various
civic and charitable organizations.
John R. Haire (72).......................... 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
New York, New York of 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).
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Wayne E. Hedien (63)........................ Retired; Director or Trustee of the Dean Witter Funds;
Trustee Director of The PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field
Weitzen Shalov & Wein Museum of Natural History; formerly associated with the
Counsel to the Independent Trustees Allstate Companies (1966-1994), most recently as
114 West 47th Street Chairman of The Allstate Corporation (March,
New York, New York 1993-December, 1994) and Chairman and Chief Executive
Officer of its wholly-owned subsidiary, Allstate
Insurance Company (July, 1989-December, 1994); director
of various other business and charitable organizations.
Dr. Manuel H. Johnson (48).................. Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the Group
c/o Johnson Smick International, Inc. of Seven Council (G7C), an international economic
1133 Connecticut Avenue, N.W. commission; Director or Trustee of the Dean Witter
Washington, DC Funds; Trustee of the TCW/DW Funds; Director of NASDAQ
(since June, 1995); Chairman and Trustee of the
Financial Accounting Foundation (oversight organization
of the Financial Accounting Standards Board); formerly
Vice Chairman of the Board of Governors of the Federal
Reserve System (1986-1990) and Assistant Secretary of
the U.S. Treasury.
Michael E. Nugent (61)...................... 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* (54)..................... Chairman of the Board of Directors and Chief Executive
Trustee Officer of MSDWD, DWR, and Novus Credit Services Inc.;
1585 Broadway Director of InterCapital, DWSC, and Distributors;
New York, New York Director or Trustee of the Dean Witter Funds; Director
and/or officer of various MSDWD subsidiaries.
John L. Schroeder (67)...................... 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).
114 West 47th Street
New York, New York
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
Barry Fink (42)............................. Senior Vice President (since March, 1997) and Secretary
Vice President, Secretary and General Counsel (since February, 1997) of
and General Counsel InterCapital and DWSC; Senior Vice President (since
Two World Trade Center March, 1997) and Assistant Secretary and Assistant
New York, New York General Counsel (since February, 1997) of Distributors;
Assistant Secretary of DWR (since August, 1996); Vice
President, Secretary and General Counsel of the Dean
Witter Funds and the TCW/DW Funds (since February,
1997); previously First Vice President (June,
1993-February, 1997), Vice President (until June, 1993)
and Assistant Secretary and Assistant General Counsel of
InterCapital and DWSC and Assistant Secretary of the
Dean Witter Funds and the TCW/DW Funds.
Thomas F. Caloia (51) ....................... First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter
Two World Trade Center Funds and the TCW/DW Funds.
New York, New York
Paul D. Vance (61)........................... Senior Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds.
Two World Trade Center
New York, New York
Michael G. Knox (31) ........................ Vice President of InterCapital; Vice President of
Vice President various Dean Witter Funds; prior to joining InterCapital
Two World Trade Center as a Portfolio Manager in August, 1993, Mr. Knox was
New York, New York with 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 DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Executive Vice President and Director of DWR, and Director
of SPS Transaction Services, Inc. and various other MSDWD subsidiaries,
Joseph J. McAlinden, Executive Vice President and Chief Investment Officer of
InterCapital and Director of DWT, Robert S. Giambrone, Senior Vice President
of InterCapital, DWSC, Distributors and DWT and Director of DWT, are Vice
Presidents of the Fund. Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, Lou Anne D. McInnis, Ruth
Rossi and Carsten Otto, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso and Todd Lebo, Staff Attorneys
with InterCapital, are Assistant Secretaries of The Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees currently consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 83 Dean Witter
Funds, comprised of 126 portfolios. As of October 31, 1997, the Dean Witter
Funds had total net assets of approximately $91.8 billion and more than six
million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by
8
<PAGE>
InterCapital's parent company, MSDWD. These are the "disinterested" or
"independent" Trustees. The other two Trustees (the "management Trustees")
are affiliated with InterCapital. Four of the seven independent Trustees are
also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1996, the three Committees held a combined total of sixteen 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.
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,
9
<PAGE>
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 ($800 after
December 31, 1997) plus a per meeting fee of $50 for meetings of the Board of
Trustees or committees of the Board of Trustees attended by the Trustee (the
Fund 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). If a Board meeting and a Committee meeting, or more
than one Committee meeting, take place on a single day, the Trustees are paid
a single fee by the Fund. The Fund also reimburses such Trustees for travel
and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have
been employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended September 30,
1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ----------------------------------- ---------------
<S> <C>
Michael Bozic ..................... $1,650
Edwin J. Garn ..................... 1,850
John R. Haire ..................... 3,800
Wayne E. Hedien ................... 250
Dr. Manuel H. Johnson ............. 1,800
Michael E. Nugent .................. 1,850
John L. Schroeder .................. 1,850
</TABLE>
10
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for
services to the 82 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1996. 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.
Hedien's term as Director or Trustee of each Dean Witter Fund commenced on
September 1, 1997.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
COMMITTEES OF FOR SERVICE AS
INDEPENDENT CHAIRMAN OF
FOR SERVICE DIRECTORS/ COMMITTEES OF TOTAL CASH
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT COMPENSATION
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 82 AND AUDIT 82 DEAN WITTER
NAME OF OF 82 DEAN WITTER OF 14 TCW/DW DEAN WITTER COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ---------------------- ----------------- ---------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ......... $138,850 -- -- -- $138,850
Edwin J. Garn ......... 140,900 -- -- -- 140,900
John R. Haire ......... 106,400 $64,283 $195,450 $12,187 378,320
Dr. Manuel H. Johnson 137,100 66,483 -- -- 203,583
Michael E. Nugent .... 138,850 64,283 -- -- 203,133
John L. Schroeder...... 137,150 69,083 -- -- 206,233
</TABLE>
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 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.(1) "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.
(1) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
11
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the
Fund) for the year ended December 31, 1996, and the estimated retirement
benefits for the Fund's Independent Trustees, to commence upon their
retirement, from the 57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS (2)
- --------------------------- --------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic .............. 10 50.0% $20,147 $ 51,325
Edwin J. Garn .............. 10 50.0 27,772 51,325
John R. Haire .............. 10 50.0 46,952 129,550
Wayne E. Hedien............. 9 42.9 Not Applicable Not Applicable
Dr. Manuel H. Johnson ..... 10 50.0 10,926 51,325
Michael E. Nugent .......... 10 50.0 19,217 51,325
John L. Schroeder........... 8 41.7 38,700 42,771
</TABLE>
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
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 year ending September 30, 1998.
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.
12
<PAGE>
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 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
13
<PAGE>
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
The Fund's portfolio turnover rate for the fiscal period June 26, 1996
(commencement of operations) through September 30, 1996 and the fiscal year
ended September 30, 1997 was approximately 7% and 74%, respectively. A 100%
turnover rate would occur, for example, if 100% of the securities held in the
Fund's portfolio (excluding all securities whose maturities at acquisition
were one year or less) were sold and replaced within one year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of Shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund. 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.
14
<PAGE>
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objectives by investing all or substantially
all of its assets in another investment company having substantially the same
investment objectives and policies as the Fund.
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 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 and the fiscal year ended September
30, 1997, the Fund paid $100,337 and $224,501, respectively, in brokerage
commissions.
15
<PAGE>
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 year ended September
30, 1997, the Fund directed the payment of $140,389 in brokerage commissions
in connection with transactions in the aggregate amount of $68,263,594, 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 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., Certifi-
16
<PAGE>
cates of Deposit and Bankers' Acceptances) and Commercial Paper. Such
transactions will be effected with DWR only when the price available from DWR
is better than that available from other dealers. During the fiscal period
ended September 30, 1997, the Fund did not effect any principal transactions
with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect 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 and the
fiscal year ended September 30, 1997, the Fund paid $24,548 and $82,810,
respectively, 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 year ended
September 30, 1997, the brokerage commissions paid to DWR represented
approximately 37% 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 49% of the aggregate dollar value of all
portfolio transactions of the Fund during the period for which commissions
were paid. During the period June 1 through September 30, 1997, the Fund did
not pay any brokerage commissions to Morgan Stanley & Co., Inc., which
Broker-dealer became an affiliate of the Investment Manager on May 31, 1997
upon consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc.
During the fiscal year ended September 30, 1997, 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, 1997, the
Fund held preferred stock issued by Merrill Lynch & Co. with a market value
of $3,476,250 and $1,818,900.
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 MSDWD.
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 June 30, 1997, the current Distribution Agreement appointing
the Distributor exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. By its
terms, the Distribution Agreement has an initial term ending April 30, 1998,
and 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
17
<PAGE>
securities laws and pays filing fees in accordance with 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 losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan" ) pursuant to which each Class, other than Class D, pays
the Distributor compensation accrued daily and payable monthly at the
following annual rates: 0.25% and 1.0% of the average daily net assets of
Class A and Class C, respectively, and, with respect to Class B, 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
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 Class B 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 average daily net assets
of Class B. The Distributor receives the proceeds of front-end sales charges
and of contingent deferred sales charges imposed on certain redemptions of
shares, which are separate and apart from payments made pursuant to the Plan
(see "Purchase of Fund Shares" in the Prospectus). The Distributor has
informed the Fund that it and/or DWR received (a) approximately $25,720 and
$618,040 in contingent deferred sales charges from Class B for the fiscal
period June 26, 1996 (commencement of operations) through September 30, 1996
and the fiscal year ended September 30, 1997, respectively, (b) approximately
$0 and $12 in contingent deferred sales charges from Class A and Class C,
respectively, for the fiscal year ended September 30, 1997, and (c)
approximately $14,418 in front-end sales charges from Class A for the fiscal
year ended September 30, 1997, none of which was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class's average daily net assets
are currently each characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). The "service fee" is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by a Class, if any, is
characterized as an "asset-based sales charge" as such is defined by the
aforementioned Rules of the Association.
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. At their meeting held on
June 30, 1997, the Trustees, including a majority of the Independent 12b-1
Trustees, approved amendments to the Plan to reflect the multiple-class
structure for the Fund, which took effect on July 28, 1997.
Pursuant to the Plan and as required by Rule 12b-1, the Trustees will
receive and review promptly after the end of each calendar quarter a written
report provided by the Distributor of the amounts expended by the Distributor
under the Plan and the purpose for which such expenditures were made. The
Fund accrued amounts payable to the Distributor under the Plan, during the
fiscal year ended September 30, 1997 of $2,268,574. This is an accrual at an
annual rate of 0.91% of the Fund's average
18
<PAGE>
daily net assets and was calculated pursuant to clause (a) of the
compensation formula of the plan. This amount is treated by the Fund as an
expense in the year it is accrued. For the fiscal period July 28 through
September 30, 1997, Class A and Class C shares of the Fund accrued payments
under the Plan amounting to $175 and $869, respectively, which amounts are
equal to 0.25% and 1.00% of the average daily net assets of Class A and Class
C, respectively, for such period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set
forth in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the account executives or
dealers of record in all cases. On orders of $1 million or more (for which no
sales charge was paid) or net asset value purchases by 401(k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which Dean Witter Trust FSB ("DWT") serves as Trustee or the
401(k) Support Services Group of DWR serves as recordkeeper, the Investment
Manager compensates DWR's account executives by paying them, from its own
funds, a gross sales credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission,
currently a residual of up to 0.25% of the current value (not including
reinvested dividends or distributions) of the amount sold in all cases. In
the case of retirement plans qualified under Section 401(k) of the Internal
Revenue Code and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code for which DWT serves as Trustee or the
401(k) Support Services Group of DWR serves as recordkeeper, and which plans
are opened on or after July 28, 1997, DWR compensates its account executives
by paying them, from its own funds, a gross sales credit of 3.0% of the
amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value
of the respective accounts for which they are the account executives of
record.
With respect to Class D shares other than shares held by participants in
the InterCapital mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of
up to 1.0% of the amount sold. There is a chargeback of 100% of the amount
paid if the Class D shares are redeemed in the first year and a chargeback of
50% of the amount paid if the Class D shares are redeemed in the second year
after purchase. The Investment Manager also compensates DWR's account
executives by paying them, from its own funds, an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective
accounts for which they are the account executives of record (not including
accounts of participants in the InterCapital mutual fund asset allocation
program).
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
19
<PAGE>
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, in the case of
Class B shares, 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, in the case of Class B
shares, 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 is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments
at the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case
of Class A, and 1.0%, in the case of Class C, of the average net assets of
the respective Class during the month. No interest or other financing
charges, if any, incurred on any distribution expenses on behalf of Class A
and Class C will be reimbursable under the Plan. With respect to Class A, in
the case of all expenses other than expenses representing the service fee,
and, with respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to account executives, such
amounts shall be determined at the beginning of each calendar quarter by the
Trustees, including, a majority of the Independent 12b-1 Trustees. Expenses
representing the service fee (for Class A) or a gross sales credit or a
residual to account executives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall
be reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular
expenses, and the portions thereof, that may be borne by the Fund, and in
making such a determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the Fund's Class A and Class C
shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended September 30, 1997 to the Distributor.
The Distributor and DWR estimate that they have spent, pursuant to the Plan,
$16,871,334 on behalf of Class B since the inception of the Plan. It is
estimated that this amount was spent in approximately the following ways: (i)
10.52% ($1,774,280)--advertising and promotional expenses; (ii) 1.15%
($194,735)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 88.33% ($14,902,319)--other expenses, including the
gross sales credit and the carrying charge, of which 3.77% ($561,104)
represents carrying charges, 38.88% ($5,793,851) represents commission
credits to DWR branch offices for payments of commissions to account
executives and 57.35% ($8,574,364) 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. The amounts accrued by Class A and Class C for distribution during the
fiscal period July 28, 1997 through September 30, 1997 were for expenses
which relate to compensation of sales personnel and associated overhead
expenses.
In the case of Class B shares, 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 in the case of Class B
shares the excess distribution expenses,
20
<PAGE>
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 Class B shares, totalled $13,633,538 at September 30, 1997. Because
there is no requirement under the Plan that the Distributor be reimbursed for
all expenses with respect to Class B shares 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 to the extent
that the Distributor, InterCapital, DWSC, DWR, DWSC 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.
Under its terms, the Plan had an initial term ending April 30, 1997 and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Prior to the Board's approval of amendments to the Plan to reflect the
multiple-class structure for the Fund, the most recent continuance of the
Plan for one year, until April 30, 1998, was approved by the Board of
Trustees of the Fund, including a majority of the Independent 12b-1 Trustees,
at a Board meeting held on April 24, 1997. Prior to approving the
continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to
continue the Plan, the Trustees considered: (1) the Fund's experience under
the Plan and whether such experience indicates that the Plan is operating as
anticipated; (2) the benefits the Fund had obtained, was obtaining and would
be likely to obtain under the Plan; and (3) what services had been provided
and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees of the Fund, including
each of the Independent 12b-1 Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
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 affected Class or Classes 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 12b-1
Trustees shall be committed to the discretion of the Independent 12b-1
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.
21
<PAGE>
The net asset value per share for each Class of shares 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, Reverend
Dr. Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without
an initial sales charge are subject to a contingent deferred sales charge
("CDSC") of 1.0% if redeemed within one year of purchase, except in the
circumstances discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefiting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class
A shares of the Fund and/or other Dean Witter Funds that are multiple class
funds ("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds
sold with a front-end sales charge purchased at a price including a front-end
sales charge having a current value of $5,000, and purchases $20,000 of
additional shares of the Fund, the sales charge applicable to the $20,000
purchase would be 4.75% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the selected broker-dealer or
shareholder when such an order is placed by mail. The reduced sales charge
will not be granted if: (a) such notification is not furnished at the time of
the order; or (b) a review of the records of the Distributor or Dean Witter
Trust FSB (the "Transfer Agent") fails to confirm the investor's represented
holdings.
Letter of Intent. As discussed in the Prospectus, reduced sales charges
are available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase of Class A shares made during the period will receive the
reduced sales commission applicable to the amount represented by the goal, as
if it were a single purchase. A number of shares equal in value to 5% of the
dollar amount of the Letter of Intent will be held in escrow by the Transfer
Agent, in the name of the shareholder. The initial purchase under a Letter of
Intent must be equal to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the
Distributor is authorized by the shareholder to liquidate a sufficient number
of his or her escrowed shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced
sales charges in the same manner as set forth above under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. For the purpose of determining whether the investor is
entitled to a further reduced sales charge applicable to
22
<PAGE>
purchases at or above a sales charge level which exceeds the stated goal of a
Letter of Intent, the cumulative current net asset value of any shares owned
by the investor in any other Dean Witter Funds held by the shareholder which
were previously purchased at a price including a front-end sales charge
(including shares of the Fund and other Dean Witter Funds acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions) will be added to the cost or net
asset value of shares of the Fund owned by the investor. However, shares of
"Exchange Funds" (see "Shareholder Services--Exchange Privilege") and the
purchase of shares of other Dean Witter Funds will not be included in
determining whether the stated goal of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction.
The 5% escrow and minimum purchase requirements will be applicable to the new
stated goal. Investors electing to purchase shares of the Fund pursuant to a
Letter of Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As
stated in the Prospectus, a CDSC will be imposed on any redemption by an
investor if after such redemption the current value of the investor's Class B
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Class B shares during the preceding six years
(or, in the case of shares held by certain employer-sponsored benefit plans,
three 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 (or, in the case of shares held
by certain employer-sponsored benefit plans, three 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 (three) years. The
CDSC will be paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three 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 (three) 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. A portion
of the amount redeemed which exceeds an amount which represents both such
increase in value and the value of shares purchased more than six years (or,
in the case of shares held by certain employer-sponsored benefit plans, three
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 Class B shares of the Fund 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
23
<PAGE>
on the last day of the month. The following table sets forth the rates of the
CDSC applicable to most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF 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>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWT
serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper and whose accounts are opened on or after July 28, 1997:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------- ------------------------
<S> <C>
First .................... 2.0%
Second ................... 2.0%
Third .................... 1.0%
Fourth 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 or three-year period. This will result in any such
CDSC being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years
(or, in the case of shares held by certain employer-sponsored benefit plans,
three years) of purchase which are in excess of these amounts and which
redemptions do not qualify for waiver of the CDSC, as described in the
Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC
of 1.0% on most redemptions made within one year after purchase, except in
the circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by the
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
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applicable Class 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 applicable Class 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. It has
been and remains the Fund's policy and practice that, if checks for dividends
or distributions paid in cash remain uncashed, no interest will accrue on
amounts represented by such uncashed checks.
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 any Class of an
open-end Dean Witter Fund other than Dean Witter Income Builder Fund or in
another Class of Dean Witter Income Builder Fund. Such investment will be
made as described above for automatic investment in shares of the applicable
Class 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 selected Class 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 or following
redemption of shares of a Dean Witter money market fund, 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 (subject to any applicable
sales charges). Shares of the Dean Witter money market funds redeemed in
connection with EasyInvest are redeemed on the business day preceding the
transfer of funds. 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 in shares
of the applicable Class at net asset value, without the imposition of a CDSC
upon redemption, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or 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 CDSC will be imposed on shares redeemed
under the Withdrawal Plan (see "Purchase of Fund Shares"). 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
CDSC) to the shareholder will be the designated monthly or quarterly amount.
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<PAGE>
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. 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 sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the
Fund for which they qualify at any time by sending a check in any amount, not
less than $100, payable to Dean Witter Income Builder Fund, and indicating
the selected Class, directly to the Fund's Transfer Agent. In the case of
Class A shares, after deduction of any applicable sales charge, the balance
will be applied to the purchase of Fund shares, and, in the case of shares of
the other Classes, the entire amount 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 each Class of
shares of the Fund may exchange their shares for shares of the same Class of
shares of any other Dean Witter Multi-Class Fund without the imposition of
any exchange fee. Shares may also be exchanged for shares of any of the
following funds: Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are
money market funds (the foregoing nine funds are hereinafter referred to as
the "Exchange Funds"). Class A shares may also be exchanged for shares of
Dean Witter Multi-State Municipal Series Trust and Dean Witter Hawaii
Municipal Trust, which are Dean Witter Funds sold with a front-end sales
charge ("FSC Funds"). Class B shares may also be exchanged for shares of Dean
Witter Global Short-Term Income Fund Inc., ("Global Short Term") which is a
Dean Witter Fund offered with a CDSC. Exchanges may be made after the shares
of the Fund acquired by purchase (not by exchange or dividend reinvestment)
26
<PAGE>
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 caption "Purchase of
Fund Shares," a 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 a Dean
Witter Multi-Class Fund or Global Short-Term 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
Dean Witter Multi-Class Fund or Global Short-Term. 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 incurred on or after that date which
are attributable to those shares. Shareholders acquiring shares of an
Exchange Fund pursuant to this exchange privilege may exchange those shares
back into a Dean Witter Multi-Class Fund or Global Short-Term 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 Dean
Witter Multi-Class Fund or Global Short-Term 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 Dean Witter Multi-Class
Fund or in a Global Short-Term. In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or
Global Short-Term are exchanged for shares of a Dean Witter Multi-Class Fund,
shares of Global Short-Term, shares of a FSC Fund, or 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 one, 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 FSC Funds, or for shares of other
Dean Witter Funds for which shares of FSC Funds have been exchanged (all such
shares called "Free Shares"), will be exchanged first. 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, with respect to Class B shares, if
shares held for identical periods of time but subject to different CDSC
schedules are held in the same Exchange Privilege account, the shares of that
block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares
of the fund exchanged into will be equal to the lesser of (a) the purchase
payments for, or (b) the current net asset value of, the exchanged non-Free
Shares. If an exchange between funds would result in exchange of only part of
a
27
<PAGE>
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 "Purchase of Fund Shares," 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.
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 for the
Exchange Privilege account of each Class 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 for the
Exchange Privilege account of each Class 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
for the Exchange Privilege account of each Class is $5,000 for Dean Witter
Special Value Fund. The minimum initial investment for the Exchange Privilege
account of each Class of 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.
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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 each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. 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 Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary, the
Transfer Agent may require that written evidence of authority acceptable to
the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a supplement to the prospectus.
Repurchase. As stated in the Prospectus, 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 request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer
reduced by any applicable CDSC.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares of any Class 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 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). It has been and remains the Fund's policy and practice that,
if checks for redemption proceeds remain uncashed, no
29
<PAGE>
interest will accrue on amounts represented by such uncashed checks.
Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their account executive regarding restrictions
on redemption of shares of the Fund pledged in the margin account.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC 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 CDSC 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 35 days after the
redemption or repurchase, reinstate any portion or all of the proceeds of
such redemption or repurchase in shares of the Fund in the same Class at the
net asset value next determined after a reinstatement request, together with
the proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax and state income tax treatment of any gain or loss realized upon the
redemption or repurchase, except that if the redemption or repurchase
resulted in a loss and reinstatement is made in shares of the Fund, some or
all of the loss, depending on the amount reinstated, will not be allowed as a
deduction for federal income tax and state personal income tax purposes but
will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus 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. 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.
Because the Fund 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. The amount of dividends paid by
the Fund which may qualify for the dividends received deduction is limited to
the aggregate amount of qualifying dividends which the Fund derives from its
portfolio investments which the Fund has held for a minimum period, usually
46 days within a 90-day period beginning 45 days before the ex-dividend date
of each qualifying dividend. Shareholders must meet a similar holding period
requirement with respect to their shares to claim the dividends received
deduction with respect to any distribution of qualifying dividends. Any
long-term capital gain distributions will also not be eligible for the
dividends received deduction. The ability to take the dividends received
deduction will also be limited in the case of a Fund shareholder which incurs
or continues indebtedness which is directly attributable to its investment in
the Fund.
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<PAGE>
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.
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. It is expected that the
Treasury will issue regulations or other guidance to permit shareholders to
take into account their proportionate share of the Fund's capital gains
distributions that will be subject to a reduced rate under the Taxpayer
Relief Act of 1997. The Taxpayer Relief Act reduces the maximum tax on
long-term capital gains from 28% to 20%; however, it also lengthens the
required holding period to obtain the lower rate from more than 12 months to
more than 18 months. The lower rates do not apply to collectibles and certain
other assets. Additionally, the maximum capital gain rate for assets that are
held more than five years and that are acquired after December 31, 2000 is
18%.
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.
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 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.
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PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. These figures are
computed separately for Class A, Class B, Class C and Class D shares. The
Fund's "average annual total return" represents an annualization of the
Fund's total return over a specified period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten
year period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value
is reduced by any CDSC at the end of the one, five or ten year or other
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing the average
annual total return involves a percentage obtained by dividing the ending
redeemable value by the amount of the initial investment, taking a root of
the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total returns
of Class B for the period June 26, 1996 (commencement of operations) through
September 30, 1997 and the fiscal year ended September 30, 1997 were 23.00%
and 24.83%, respectively.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class A, Class C and Class D 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 CDSC at the end of the period. Based on
the foregoing calculations, the total returns for the period July 28, 1997
through September 30, 1997 were 0.39%, 4.79% and 5.98% for Class A, Class C
and Class D, respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class 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 imposition of the maximum front-end sales charge for
Class A or the deduction of the CDSC for each of Class B and Class C which,
if reflected, would reduce the performance quoted. For example, the average
annual total return of the Fund may be calculated in the manner described in
the preceding paragraph, but without deduction for any applicable sales
charge. Based on this calculation, the average annual total returns of Class
B for the period June 26, 1996 (commencement of operations) through September
30, 1997 and the fiscal year ended September 30, 1997 were 25.99% and 29.83%,
respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate
which will result in the ending value of a hypothetical $1,000 investment
made at the beginning of the period. For the purpose of this calculation, it
is assumed that all dividends and distributions are reinvested. The formula
for computing aggregate total return involves a percentage obtained by
dividing the ending value (without reduction for any sales charge) by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the total returns for Class B for the period June 26,
1996 (commencement of operations) through September 30, 1997 and the fiscal
year ended September 30, 1997 were 33.86% and 29.83%, respectively. Based on
the foregoing calculations, the total returns for Class A, Class C and Class
D for the period July 28 through September 30, 1997 were 5.95%, 5.79% and
5.98%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of 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 $9,475, $48,000 and $97,000 in the case of Class A
(investments of $10,000, $50,000 and $100,000 adjusted for the initial sales
charge) or by $10,000, $50,000 and $100,000 in the case of each
32
<PAGE>
of Class B, Class C and Class D, as the case may be. Investments of $10,000,
$50,000 and $100,000 in each Class at inception of the Class would have grown
to the following amounts at September 30, 1997:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION --------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- --------- ----------- --------- --------- ----------
<S> <C> <C> <C> <C>
Class A... 07/28/97 $10,039 $50,856 $102,772
Class B... 06/26/96 13,386 66,930 133,860
Class C... 07/28/97 10,579 52,895 105,790
Class D... 07/28/97 10,598 52,990 105,980
</TABLE>
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. All of the Trustees have
been elected by the shareholders of the Fund, most recently at a Special
Meeting of Shareholders held on May 21, 1997. The Trustees themselves have
the power to alter the number and the terms of office of the Trustees (as
provided for in the Declaration of Trust), and they may at any time lengthen
or shorten their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being 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. The Trustees have not authorized any such additional
series or classes of shares, other than as set forth in the Prospectus.
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 FSB ("DWT"), 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
33
<PAGE>
described herein. DWT 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, DWT's
responsibilities include maintaining shareholder accounts, disbursing cash
dividends and reinvesting dividends, processing account registration changes,
handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services DWT 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.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Barry Fink, 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, 1997 which are included in the Statement of Additional Information and
incorporated by reference in the Prospectus, have been so included and
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
34
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (47.7%)
Apparel (0.9%)
89,000 Kellwood Co. ................................................... $ 3,153,937
--------------
Auto Parts (0.9%)
63,000 Dana Corp. ..................................................... 3,110,625
--------------
Automotive (2.6%)
82,000 Chrysler Corp. ................................................. 3,018,625
68,000 Ford Motor Co. ................................................. 3,077,000
47,500 General Motors Corp. ........................................... 3,179,531
--------------
9,275,156
--------------
Banks (5.1%)
46,000 Corestates Financial Corp. ..................................... 3,044,625
103,000 First Security Corp. ........................................... 3,064,250
54,000 First Tennessee National Corp. ................................. 3,078,000
47,000 KeyCorp ........................................................ 2,990,375
107,000 Washington Federal, Inc. ....................................... 3,156,500
57,000 Wilmington Trust Corp. ......................................... 3,099,375
--------------
18,433,125
--------------
Banks -Thrift Institutions (0.9%)
45,000 Washington Mutual, Inc. ........................................ 3,133,125
--------------
Building Materials (0.8%)
34,800 Vulcan Materials Co. ........................................... 3,027,600
--------------
Chemicals (3.7%)
34,000 Dow Chemical Co. ............................................... 3,083,375
150,145 Lyondell Petrochemical Co. ..................................... 3,931,913
50,000 PPG Industries, Inc. ........................................... 3,134,375
32,000 Rohm & Haas Co. ................................................ 3,070,000
--------------
13,219,663
--------------
Conglomerates (0.9%)
65,000 Tenneco, Inc. .................................................. 3,111,875
--------------
Finance (0.9%)
67,000 Fannie Mae ..................................................... 3,149,000
--------------
Financial (1.3%)
41,000 Providian Financial Corp. ...................................... 1,627,187
55,000 TCF Financial Corp. ............................................ 3,214,062
--------------
4,841,249
--------------
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Financial -Miscellaneous (0.8%)
20,000 SLM Holding Corp. .............................................. $ 3,090,000
--------------
Food Processing (0.9%)
102,000 Hormel Foods Corp. ............................................. 3,270,375
--------------
Healthcare -Drugs (0.8%)
60,000 Schering-Plough Corp. .......................................... 3,090,000
--------------
Household Appliances (0.8%)
46,000 Whirlpool Corp. ................................................ 3,050,375
--------------
Insurance (3.0%)
17,811 Aegon N.V. (ADR)(Netherlands) .................................. 1,419,314
41,000 Jefferson-Pilot Corp. .......................................... 3,239,000
45,000 Lincoln National Corp. ......................................... 3,133,125
78,000 Torchmark Corp. ................................................ 3,061,500
--------------
10,852,939
--------------
Machinery -Diversified (0.9%)
65,000 Johnson Controls, Inc. ......................................... 3,221,562
--------------
Metals & Basic Materials (0.8%)
62,000 Hercules, Inc. ................................................. 3,084,500
--------------
Miscellaneous (0.9%)
86,000 American Greetings Corp. (Class A) ............................. 3,160,500
--------------
Mobile Home & Recreation (0.8%)
92,000 Fleetwood Enterprises, Inc. .................................... 3,087,750
--------------
Oil & Gas (0.9%)
58,000 Ashland, Inc. .................................................. 3,153,750
--------------
Real Estate Investment Trust (7.1%)
109,000 American General Hospitality Corp. ............................. 3,174,625
98,300 Boston Properties, Inc.* ....................................... 3,225,469
82,916 Camden Property Trust .......................................... 2,539,302
72,100 Excel Realty Trust, Inc. ....................................... 2,262,137
129,000 Glenborough Realty Trust, Inc. ................................. 3,571,688
59,250 Healthcare Realty Trust, Inc. .................................. 1,684,922
115,000 Liberty Property Trust ......................................... 3,097,813
125,000 LTC Properties, Inc. ........................................... 2,375,000
120,000 Reckson Associates Realty Corp. ................................ 3,195,000
--------------
25,125,956
--------------
Restaurants (0.9%)
115,000 Sbarro, Inc. ................................................... 3,220,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Retail -Specialty Apparel (0.8%)
124,000 Limited (The), Inc. ............................................ $ 3,030,250
--------------
Steel (0.8%)
87,000 USX-U.S. Steel Group, Inc. ..................................... 3,023,250
--------------
Telecommunications (1.8%)
39,000 Bell Atlantic Corp. ............................................ 3,137,063
84,000 U.S. West Communications Group, Inc. ........................... 3,234,000
--------------
6,371,063
--------------
Telephones (0.8%)
69,000 AT&T Corp. ..................................................... 3,057,563
--------------
Tobacco (1.7%)
72,600 Philip Morris Companies, Inc. .................................. 3,017,438
97,000 UST, Inc. ...................................................... 2,964,563
--------------
5,982,001
--------------
Utilities -Electric (3.4%)
90,000 Consolidated Edison Company of New York, Inc. .................. 3,060,000
79,000 New England Electric System .................................... 3,100,750
134,000 PECO Energy Co. ................................................ 3,140,625
122,000 Public Service Enterprise Group, Inc. .......................... 3,141,500
--------------
12,442,875
--------------
Utilities -Telephone (0.9%)
69,000 GTE Corp. ...................................................... 3,130,875
--------------
Wholesale Distributor (0.9%)
81,000 Supervalu, Inc. ................................................ 3,179,250
--------------
TOTAL COMMON STOCKS
(Identified Cost $133,921,087) ................................. 172,080,189
--------------
CONVERTIBLE PREFERRED STOCKS (16.3%)
Auto Parts (0.7%)
83,500 Walbro Capital Trust $2.00 ..................................... 2,442,375
--------------
Banks -International (1.8%)
135,000 National Australia Bank, Ltd. $1.969 (Australia)(Units)++ ...... 3,965,625
76,500 Westpac Banking Corp. STRYPES $3.14 (WI) ....................... 2,457,563
--------------
6,423,188
--------------
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Broadcast Media (2.3%)
55,800 Chancellor Media Corp. -144A** ................................. $ 3,354,975
70,000 Metromedia International Group, Inc. $3.625 .................... 3,600,625
145,000 Triathlon Broadcasting Co. $0.945 .............................. 1,250,625
--------------
8,206,225
--------------
Chemicals (1.3%)
80,000 Occidental Petroleum Corp. (Series 1993) $3.875 -144A** ........ 4,655,000
--------------
Finance (2.9%)
112,000 Insignia Financing, Inc. $1.45 ................................. 5,404,000
90,000 Merrill Lynch & Co., Inc. (STRYPES) $2.39 (1)*** ............... 3,476,250
25,800 Merrill Lynch & Co., Inc. (STRYPES) $4.087 (2) ................. 1,818,900
--------------
10,699,150
--------------
Healthcare (1.1%)
141,000 Kapson Senior Quarters $2.00 -144A** ........................... 3,842,250
--------------
Metals & Mining (0.7%)
50,000 Cyprus Amax Minerals Co. (Series A) $4.00*** ................... 2,725,000
--------------
Publishing (0.7%)
195,200 Hollinger International, Inc. $0.951 ........................... 2,403,400
--------------
Real Estate (0.5%)
36,600 Rouse Co. (Series B) $3.00 ..................................... 1,820,850
--------------
Real Estate Investment Trust (1.8%)
106,700 FelCor Suite Hotels, Inc. (Series A) $1.95*** .................. 3,467,750
113,000 Merry Land & Investment Co., Inc. (Series C) $2.15 ............. 2,994,500
--------------
6,462,250
--------------
Telecommunications (2.2%)
50,000 General Datacomm Industries, Inc. $2.25 ........................ 925,000
49,000 Loral Space & Communications, Ltd. (Series C) $3.00 (Bermuda) .. 2,946,125
66,600 Loral Space & Communications, Ltd. $3.00 -144A** ............... 4,004,325
--------------
7,875,450
--------------
Textiles (0.3%)
30,500 Designer Finance Trust $3.00 ................................... 1,204,750
--------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $54,748,966) .................................. 58,759,888
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CORPORATE BONDS (34.5%)
CONVERTIBLE BONDS (15.7%)
Auto Parts (1.6%)
$3,000 MascoTech, Inc. ................................................ 4.50% 12/15/03 $2,705,010
2,700 Tower Automotive, Inc. -144A** ................................. 5.00 08/01/04 2,908,764
--------------
5,613,774
--------------
Cable/Cellular (1.0%)
9,350 U.S. Cellular Corp. ............................................ 0.00 06/15/15 3,509,990
--------------
Healthcare (3.5%)
1,500 ARV Assisted Living, Inc. ...................................... 6.75 04/01/06 1,404,375
3,000 Emeritus Corp. -144A** ......................................... 6.25 01/01/06 2,658,750
4,500 Phymatrix Corp. ................................................ 6.75 06/15/03 3,920,625
5,425 Physicians Resource Group, Inc. -144A** ......................... 6.00 12/01/01 4,791,197
--------------
12,774,947
--------------
Healthcare -Miscellaneous (0.8%)
2,730 Pharmaceutical Marketing Services, Inc. ........................ 6.25 02/01/03 2,352,059
675 Pharmaceutical Marketing Services, Inc. (Eurobond) .............. 6.25 02/01/03 580,500
--------------
2,932,559
--------------
Machinery (0.7%)
2,300 Thermo Fibertek, Inc. -144A** .................................. 4.50 07/15/04 2,416,449
--------------
Office Equipment & Supplies (2.0%)
7,480 U.S. Office Products Co. ....................................... 5.50 05/15/03 7,392,035
--------------
Publishing (0.5%)
1,900 Nelson (Thomas), Inc. .......................................... 5.75 11/30/99 1,936,822
--------------
Real Estate Investment Trust (1.2%)
4,425 Capstone Capital Corp. ......................................... 6.55 03/14/02 4,192,688
--------------
Restaurants (1.1%)
10,000 Boston Chicken, Inc. ........................................... 0.00 06/01/15 2,157,800
2,490 Boston Chicken, Inc. ........................................... 4.50 02/01/04 1,860,976
--------------
4,018,776
--------------
Retail (0.7%)
3,200 Saks Holdings, Inc. ............................................ 5.50 09/15/06 2,686,848
--------------
Shoes (1.1%)
4,300 Nine West Group, Inc. -144A** .................................. 5.50 07/15/03 3,984,896
--------------
Telecommunications (1.5%)
2,425 Midcom Communications, Inc. -144A** ............................ 8.25 08/15/03 1,943,031
750 SA Telecommunications, Inc. -144A** ............................ 10.00 08/15/06 412,500
2,700 Smartalk Teleservices, Inc. -144A** ............................ 5.75 09/15/04 2,922,750
--------------
5,278,281
--------------
TOTAL CONVERTIBLE BONDS
(Identified Cost $55,669,651) ....................................................... 56,738,065
--------------
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS (18.8%)
Broadcast Media (2.0%)
$3,000 JCAC Inc. ...................................................... 10.125% 06/15/06 $3,255,000
3,805 Outlet Broadcasting, Inc. ...................................... 10.875 07/15/03 4,105,062
--------------
7,360,062
--------------
Building Materials (1.4%)
4,400 Johns Manville International Group, Inc. ....................... 10.875 12/15/04 4,895,000
--------------
Business Services (1.3%)
4,200 Neodata Services, Inc. (Series B) .............................. 12.00 05/01/03 4,583,250
--------------
Cable/Cellular (1.5%)
3,000 Continental Cablevision, Inc. .................................. 11.00 06/01/07 3,355,500
2,000 Tele-Communications, Inc. ...................................... 9.25 04/15/02 2,190,720
--------------
5,546,220
--------------
Entertainment (0.6%)
2,000 Time Warner, Inc. .............................................. 9.625 05/01/02 2,233,580
--------------
Entertainment/Gaming (2.2%)
5,400 California Hotel Finance Corp. ................................. 11.00 12/01/02 5,649,750
2,000 Casino America, Inc. ........................................... 11.50 11/15/01 2,105,000
--------------
7,754,750
--------------
Healthcare (4.3%)
3,000 Healthsouth Rehabilition Corp. ................................. 9.50 04/01/01 3,172,500
9,250 Magellan Health Services, Inc. (Series A) ...................... 11.25 04/15/04 10,209,687
2,000 Manor Care, Inc. ............................................... 9.50 11/15/02 2,077,500
--------------
15,459,687
--------------
Machinery (0.7%)
2,460 Joy Technologies Inc. .......................................... 10.25 09/01/03 2,666,025
--------------
Oil & Gas (0.2%)
600 Global Marine, Inc. ............................................ 12.75 12/15/99 617,370
--------------
Publishing (0.9%)
2,200 Big Flower Press, Inc. ......................................... 8.875 07/01/07 2,183,500
1,000 Hollinger International Publishing, Inc. ....................... 9.25 02/01/06 1,037,500
--------------
3,221,000
--------------
Retail (2.5%)
6,400 Barnes & Noble, Inc. (Series B) ................................ 11.875 01/15/03 6,873,216
1,950 Thrifty PayLess Holdings, Inc. ................................. 12.25 04/15/04 2,230,313
--------------
9,103,529
--------------
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
DEAN WITTER INCOME BUILDER FUND
PORTFOLIO OF INVESTMENTS September 30, 1997, continued
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------------------
Supermarkets (1.2%)
$4,200 Kroger Co. ..................................................... 9.25% 01/01/05 $4,426,338
--------------
TOTAL NON-CONVERTIBLE BONDS
(Identified Cost $68,180,635) ....................................................... 67,866,811
--------------
TOTAL CORPORATE BONDS
(Identified Cost $123,850,286) ...................................................... 124,604,876
--------------
SHORT-TERM INVESTMENTS (2.2%)
U.S. GOVERNMENT AGENCIES (a)(2.1%)
4,000 Federal Home Loan Mortgage Assoc. .............................. 5.50 10/01/97 4,000,000
3,500 Federal Home Loan Mortgage Assoc. .............................. 6.05 10/01/97 3,500,000
--------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $7,500,000) ......................................................... 7,500,000
--------------
REPURCHASE AGREEMENT (0.1%)
457 The Bank of New York (dated 09/30/97; proceeds $456,708)(b)
(Identified Cost $456,641) .................................... 5.25 10/01/97 456,641
--------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $7,956,641) ........................................................ 7,956,641
--------------
TOTAL INVESTMENTS
(Identified Cost $320,476,980)(c) ........................................ 100.7% 363,401,594
LIABILITIES IN EXCESS OF OTHER ASSETS .................................... (0.7) (2,373,515)
---------- --------------
NET ASSETS ............................................................... 100.0% $361,028,079
========== ==============
</TABLE>
- ------------
STRYPES Structured yield product exchangeable for stock.
WI Security purchased on a when issued basis.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
*** Some or all of these securities are segregated in connection with
the purchase of when issued securities.
++ Consists of one or more class of securities traded together as a
unit; stocks with attached warrants.
(1) Convertible into IMC Global, Inc. common stock.
(2) Exchangeable for SunAmerica, Inc. common stock.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent
yield.
(b) Collateralized by $348,690 U.S. Treasury Bond 9.125% due 05/15/18
valued at $465,774.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$45,627,606 and the aggregate gross unrealized depreciation is
$2,702,992, resulting in net unrealized appreciation of
$42,924,614.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $320,476,980)............................. $363,401,594
Receivable for:
Interest...................................... 3,004,847
Shares of beneficial interest sold ........... 1,998,193
Dividends .................................... 536,472
Investments sold.............................. 476,255
Deferred organizational expenses ............... 122,251
Prepaid expenses and other assets .............. 62,569
--------------
TOTAL ASSETS ................................. 369,602,181
--------------
LIABILITIES:
Payable for:
Investments purchased......................... 7,534,806
Shares of beneficial interest repurchased .... 372,873
Plan of distribution fee...................... 261,259
Investment management fee..................... 229,714
Dividends to shareholders..................... 73,962
Accrued expenses and other payables ............ 101,488
--------------
TOTAL LIABILITIES ............................ 8,574,102
--------------
NET ASSETS ................................... $361,028,079
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital................................. $299,319,702
Net unrealized appreciation .................... 42,924,614
Accumulated undistributed net investment
income......................................... 1,125,380
Accumulated undistributed net realized gain ... 17,658,383
--------------
NET ASSETS.................................... $361,028,079
==============
CLASS A SHARES:
Net Assets...................................... $ 1,047,150
Shares Outstanding (unlimited authorized, $.01
par value) .................................... 81,737
NET ASSET VALUE PER SHARE..................... $ 12.81
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset
value)....................................... $ 13.52
==============
CLASS B SHARES:
Net Assets...................................... $358,973,270
Shares Outstanding (unlimited authorized, $.01
par value) .................................... 28,017,556
NET ASSET VALUE PER SHARE..................... $ 12.81
==============
CLASS C SHARES:
Net Assets...................................... $ 986,533
Shares Outstanding (unlimited authorized, $.01
par value) .................................... 77,052
NET ASSET VALUE PER SHARE .................... $ 12.80
==============
CLASS D SHARES:
Net Assets...................................... $ 21,126
Shares Outstanding (unlimited authorized, $.01
par value) .................................... 1,648
NET ASSET VALUE PER SHARE .................... $ 12.82
==============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended September 30, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest .................................... $ 7,949,746
Dividends (net of $1,821 foreign withholding
tax)........................................ 7,026,183
------------
TOTAL INCOME .............................. 14,975,929
------------
EXPENSES
Plan of distribution fee (Class B shares) ... 2,268,574
Investment management fee.................... 1,868,871
Transfer agent fees and expenses............. 195,434
Professional fees ........................... 78,964
Registration fees ........................... 76,870
Shareholder reports and notices ............. 39,602
Organizational expenses ..................... 32,715
Custodian fees............................... 28,617
Trustees' fees and expenses.................. 11,870
Other........................................ 8,537
------------
TOTAL EXPENSES ............................ 4,610,054
------------
NET INVESTMENT INCOME ..................... 10,365,875
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................ 17,728,044
Net change in unrealized appreciation ...... 39,732,802
------------
NET GAIN................................... 57,460,846
------------
NET INCREASE................................. $67,826,721
============
</TABLE>
- ------------
* Class A, Class C, and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JUNE 26, 1996*
ENDED THROUGH
SEPTEMBER 30, 1997** SEPTEMBER 30, 1996
- ------------------------------------------------------ -------------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 10,365,875 $ 1,162,846
Net realized gain...................................... 17,728,044 73,945
Net change in unrealized appreciation.................. 39,732,802 3,191,812
-------------------- ------------------
NET INCREASE......................................... 67,826,721 4,428,603
-------------------- ------------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares....................................... (7,078) --
Class B shares....................................... (9,398,309) (1,123,961)
Class C shares....................................... (7,487) --
Class D shares....................................... (193) --
Net realized gain
Class B shares ...................................... (157,191) --
-------------------- ------------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................... (9,570,258) (1,123,961)
-------------------- ------------------
Net increase from transactions in shares of beneficial
interest ............................................. 154,629,702 144,737,272
-------------------- ------------------
NET INCREASE......................................... 212,886,165 148,041,914
NET ASSETS:
Beginning of period ................................... 148,141,914 100,000
-------------------- ------------------
END OF PERIOD
(Including undistributed net investment income
of $1,125,380 and $47,579, respectively)............. $361,028,079 $148,141,914
==================== ==================
</TABLE>
* Commencement of operations.
** Class A, Class C, and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997
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. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares
designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
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
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 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
43
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
appropriate matrix utilizing similar factors); (4) certain portfolio
securities may be valued by an outside pricing service approved by the
Trustees. The pricing service may utilize a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters,
and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the securities valued by such pricing
service; and (5) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. 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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amounts 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.
44
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $164,000 which have been
reimbursed for the full amount thereof. Such expenses have been deferred and
are being amortized on the straight-line method over a period not to exceed
five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), 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.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -0.25% of
the average daily net assets of Class A; (ii) Class B -1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class
B shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets
of Class B; and (iii) Class C -1.0% of the average daily net assets of Class
C. In the case of Class A shares, amounts paid under the Plan are paid to the
Distributor for services provided. In the case of Class B and Class C shares,
amounts paid under the Plan are paid to the Distributor for services provided
and the expenses borne by it and others in the distribution of the shares of
these Classes, including the payment of commissions for sales of these
Classes 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 others who engage in or support
distribution of the shares or who service shareholder accounts, including
overhead and telephone expenses; printing and distribution of prospectuses
and
45
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
reports used in connection with the offering of these 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, in the case of Class B shares, 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.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. 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, including carrying charges, totaled $13,633,538 at
September 30, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 1.0% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended September 30, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended September 30,
1997, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares of $618,040 and received $14,418 in front-end
sales charges from sales of the Fund's Class A shares. The respective
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended September 30, 1997
aggregated $335,019,572 and $182,625,832, respectively.
For the year ended September 30, 1997, the Fund incurred $82,810 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the
Fund. At September 30, 1997, the Fund's receivable for investments sold and
payable for investments purchased included unsettled trades with DWR of
$77,072 and $1,329,581, respectively.
46
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1997, the Fund
had transfer agent fees and expenses payable of approximately $2,800.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JUNE 26, 1996*
ENDED THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996
----------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
CLASS A SHARES**
Sold ........................................ 84,697 $ 1,060,929 -- --
Reinvestment of dividends ................... 297 3,779 -- --
Redeemed .................................... (3,257) (41,000) -- --
------------- -------------- ------------ --------------
Net increase - Class A ...................... 81,737 1,023,708 -- --
------------- -------------- ------------ --------------
CLASS B SHARES
Sold ........................................ 16,601,412 187,858,686 14,654,263 $146,538,451
Reinvestment of dividends and distributions 629,815 7,297,503 83,927 855,216
Redeemed .................................... (3,697,289) (42,533,458) (264,572) (2,656,395)
------------- -------------- ------------ --------------
Net increase - Class B ...................... 13,533,938 152,622,731 14,473,618 144,737,272
------------- -------------- ------------ --------------
CLASS C SHARES**
Sold ........................................ 80,094 1,000,747 -- --
Reinvestment of dividends ................... 519 6,601 -- --
Redeemed .................................... (3,561) (44,293) -- --
------------- -------------- ------------ --------------
Net increase - Class C ...................... 77,052 963,055 -- --
------------- -------------- ------------ --------------
CLASS D SHARES**
Sold ........................................ 1,633 20,015 -- --
Reinvestment of dividends ................... 15 193 -- --
------------- -------------- ------------ --------------
Net increase - Class D ...................... 1,648 20,208 -- --
------------- -------------- ------------ --------------
Net increase in Fund......................... 13,694,375 $154,629,702 14,473,618 $144,737,272
============= ============== ============ ==============
</TABLE>
* Commencement of operations.
** For the period July 28, 1997 (issue date) through September 30, 1997.
47
<PAGE>
DEAN WITTER INCOME BUILDER FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1997, continued
6. FEDERAL INCOME TAX STATUS
As of September 30, 1997, the Fund had permanent book/tax differences
primarily attributable to nondeductible expenses. To reflect
reclassifications arising from these differences, paid-in-capital was charged
$138,578, accumulated undistributed net realized gain was credited $13,585
and accumulated undistributed net investment income was credited $124,993.
48
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JUNE 26, 1996*
SEPTEMBER 30, THROUGH
1997**++ SEPTEMBER 30, 1996
- ---------------------------------------- --------------------- ------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $10.23 $10.00
--------------------- ------------------
Net investment income ................... 0.46 0.08
Net realized and unrealized gain ....... 2.54 0.23
--------------------- ------------------
Total from investment operations ....... 3.00 0.31
--------------------- ------------------
Less dividends and distributions from:
Net investment income .................. (0.41) (0.08)
Net realized gain ...................... (0.01) --
--------------------- ------------------
Total dividends and distributions ...... (0.42) (0.08)
--------------------- ------------------
Net asset value, end of period .......... $12.81 $10.23
===================== ==================
TOTAL INVESTMENT RETURN+ ................ 29.83% 3.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 1.85% 2.25%(2)
Net investment income ................... 4.16% 3.60%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $358,973 $148,142
Portfolio turnover rate ................. 74% 7%(1)
Average commission rate paid ............ $0.0558 $0.0558
</TABLE>
- ------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
49
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ------------------------------------------ -------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.12
Net realized and unrealized gain .......... 0.61
-------------------
Total from investment operations .......... 0.73
-------------------
Less dividends from net investment income (0.12)
-------------------
Net asset value, end of period ............ $12.81
===================
TOTAL INVESTMENT RETURN+ ................. 5.95%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.28%(2)
Net investment income ..................... 5.77%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $1,047
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.10
Net realized and unrealized gain .......... 0.61
-------------------
Total from investment operations .......... 0.71
-------------------
Less dividends from net investment income (0.11)
-------------------
Net asset value, end of period ............ $12.80
===================
TOTAL INVESTMENT RETURN+................... 5.79%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.98%(2)
Net investment income ..................... 4.61%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $987
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
50
<PAGE>
DEAN WITTER INCOME BUILDER FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
SEPTEMBER 30,
1997++
- ------------------------------------------ -------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $12.20
-------------------
Net investment income ..................... 0.12
Net realized and unrealized gain .......... 0.62
-------------------
Total from investment operations .......... 0.74
-------------------
Less dividends from net investment income (0.12)
-------------------
Net asset value, end of period ............ $12.82
===================
TOTAL INVESTMENT RETURN+ ................. 5.98%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 0.96%(2)
Net investment income ..................... 5.41%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $21
Portfolio turnover rate ................... 74%
Average commission rate paid .............. $0.0558
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
51
<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 present
fairly, in all material respects, the financial position of Dean Witter
Income Builder Fund (the "Fund") at September 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for the
year then ended and for the period June 26, 1996 (commencement of operations)
through September 30, 1996 and the financial highlights for each of the
periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at September 30, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 10, 1997
1997 FEDERAL TAX NOTICE (unaudited)
During the period ended September 30, 1997, 27.21% of the income paid
qualified for the dividends received deduction available to
corporations.
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS INVESTMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
FIXED-INCOME SECURITY RATINGS
<TABLE>
<CAPTION>
<S> <C>
Aaa Fixed-income securities which are rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa Fixed-income securities which are rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade fixed-income securities. They
are rated lower than the best fixed-income securities because margins of protection may not be as large
as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger than in Aaa securities.
A Fixed-income securities which are rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa Fixed-income securities which are rated Baa are considered as medium grade obligations; i.e., they are
neither highly protected nor poorly secured. Interest payments and principal security appear adequate
for the present but certain protective elements may be lacking or may be characteristically unreliable
over any great length of time. Such fixed-income securities lack outstanding investment characteristics
and in fact have speculative characteristics as well.
Fixed-income securities rated Aaa, Aa, A and Baa are considered investment grade.
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.
</TABLE>
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
53
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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.
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.
54
<PAGE>
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.
</TABLE>
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:
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.
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
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.
55
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C>
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.
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.
</TABLE>
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
56
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
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).
<TABLE>
<CAPTION>
RATING SCALE DEFINITION
<S> <C>
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 modest, but may vary slightly from time to
AA time because of economic conditions.
AA-
A+ Protection factors are average but adequate. However, risk factors are more variable and greater in periods
A of economic stress.
A-
BBB+ Below average protection factors but still considered sufficient for prudent investment. Considerable
BBB variability in risk during economic cycles.
BBB-
57
<PAGE>
BB+ Below investment grade but deemed likely to meet obligations when due. Present or prospective
BB financial protection factors fluctuate according to industry conditions or company fortunes.
BB- Overall quality may move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will not be met when due. Financial
B protection factors will fluctuate widely according to economic cycles, industry conditions and/or
B- 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.
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C>
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.
</TABLE>
58
<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):
<TABLE>
<CAPTION>
Page in
Prospectus
----------
<S> <C>
Financial Highlights for the fiscal period June 26, 1996
(commencement of operations) through September 30, 1996 and
the fiscal year ended September 30, 1997 (Class B)............... 6
Financial Highlights for the period July 28, 1997 through
September 30, 1997 (Classes A, C and D).......................... 7
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page In
SAI
---
Portfolio of Investments at September 30, 1997................... 35
Statement of Assets and Liabilities at September 30,1997......... 42
Statement of Operations for the year ended September 30, 1997.... 42
Statement of Changes in Net Assets for the years ended
September 30, 1996 and September 30, 1997........................ 43
Notes to Financial Statements at September 30, 1997.............. 43
Financial Highlights for the period ended September 30, 1996
and the fiscal year ended September 30, 1997 (Class B)........... 49
Financial Highlights for the period July 28, 1997 through
September 30, 1997 (Classes A, C and D).......................... 50
(3) Financial statements included in Part C:
None
</TABLE>
<PAGE>
b) Exhibits:
2. Form of Amended and Restated By-Laws of the Registrant.
8. Form of Amended and Restated Transfer Agency and Service
Agreement between the Registrant and Dean Witter Trust FSB.
11. Consent of Independent Accountants.
16. Schedules for Computation of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at October 31, 1997
-------------- -------------------
Share of Beneficial Interest
Class A 117
Class B 21,882
Class C 120
Class D 4
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.
<PAGE>
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such 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 Morgan Stanley, 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
<PAGE>
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter 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
<PAGE>
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
(45) Dean Witter Mid-Cap Growth Fund
(46) Dean Witter Select Dimensions Investment Series
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Information Fund
(53) Dean Witter Japan Fund
(54) Dean Witter Income Builder Fund
(55) Dean Witter Special Value Fund
(56) Dean Witter Financial Services Trust
(57) Dean Witter Market Leader Trust
(58) Dean Witter S&P 500 Index Fund
(59) Dean Witter Fund of Funds
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,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of
Chairman, Chief Executive Dean Witter Reynolds Inc. ("DWR");
Officer and Director Chairman, Chief Executive Officer and
Director of Dean Witter Distributors Inc.
("Distributors") and Dean Witter Services
Company Inc. ("DWSC"); Chairman and
Director of Dean Witter Trust FSB ("DWT");
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;
Director and/or officer of various Morgan
Stanley, Dean Witter, Discover & Co.
("MSDWD") subsidiaries; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and
Director Director of MSDWD and DWR; Director of DWSC
and Distributors; Director or Trustee of
the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer
Director of Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors and
DWT; Trustee of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWT.
Thomas C. Schneider Executive Vice President and Chief
Executive Vice Strategic and Administrative Officer of
President, Chief MSDWD; Executive Vice President and Chief
Financial Officer and Financial Officer of DWSC and Distributors;
Director Director of DWR, DWSC, Distributors and
MSDWD.
Christine A. Edwards Executive Vice President, Chief Legal
Director Officer and Secretary of MSDWD; 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
President and Chief DWSC, Executive Vice President of
Operating Officer Distributors; Executive Vice President and
Director of DWT; Vice President of the Dean
Witter Funds and the TCW/DW Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Mitchell M. Merin President and Chief Strategic Officer of
President and Chief DWSC, Executive Vice President of
Strategic Officer Distributors; Executive Vice President and
Director of DWT; Executive Vice President
and Director of DWR; Director of SPS
Transaction Services, Inc. and various
other MSDWD subsidiaries.
John B. Van Heuvelen President, Chief Operating Officer and
Executive Vice Director of DWT.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWT.
and Chief Investment
Officer
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary and General Counsel of
Secretary and General DWSC; Senior Vice President, Assistant
Counsel Secretary and Assistant General Counsel of
Distributors; Vice President, Secretary and
General Counsel of the Dean Witter Funds
and the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWT and Director of DWT; Vice President
of the Dean Witter Funds and the TCW/DW
Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value
Senior Vice President Fund.
John B. Kemp, III Director of the Provident Savings Bank,
Senior Vice President Jersey City, New Jersey.
Anita H. Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingston Vice President of various Dean Witter Funds.
Senior Vice President
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Douglas Brown
First Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Thomas F. Caloia First Vice President and Assistant
First Vice President Treasurer of DWSC, Assistant Treasurer of
and Assistant Distributors; Treasurer and Chief Financial
Treasurer Officer of the Dean Witter Funds and the
TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice
First Vice President President and Assistant Secretary of DWSC;
and Assistant Secretary Assistant Secretary of the Dean Witter
Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of
First Vice President DWSC; Assistant Treasurer of Distributors;
and Controller First Vice President and Treasurer of DWT.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Kirk Balzer
Vice President Vice President of various Dean Witter Funds.
Nancy Belza
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter Variable
Vice President Investment Series
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Christopher Jones
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
Vice President Vice President of various Dean Witter Funds
Michael Knox
Vice President Vice President of various Dean Witter Funds
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean
the TCW/DW Funds. Witter Funds and Assistant Secretary
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean
Assistant Secretary Witter Funds and the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious
Vice President Metal and Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean
the TCW/DW Funds. Witter Funds and Assistant Secretary
Carl F. Sadler
Vice President
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ------------------------------------------
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
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
<PAGE>
(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 Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
(45) Dean Witter Balanced Growth Fund
(46) Dean Witter Balanced Income Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Variable Investment Series
(49) Dean Witter Capital Appreciation Fund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Information Fund
(52) Dean Witter Japan Fund
(53) Dean Witter Income Builder Fund
(54) Dean Witter Special Value Fund
(55) Dean Witter Financial Services Trust
(56) Dean Witter Market Leader Trust
(57) Dean Witter S&P 500 Index Fund
(58) Dean Witter Fund of Funds
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW 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.
<PAGE>
Name Positions and Office with 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 25th day of November, 1997.
DEAN WITTER INCOME BUILDER FUND
By /s/ Barry Fink
-------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 11/25/97
-----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 11/25/97
-----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 11/25/97
-----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 11/25/97
-----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
2. Form of Amended and Restated By-Laws of the Registrant.
8. Form of Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Dean Witter Trust FSB.
11. Consent of Independent Accountants.
16. Schedules for Computation of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
<PAGE>
BY-LAWS
OF
DEAN WITTER INCOME BUILDER FUND
AMENDED AND RESTATED AS OF OCTOBER 23, 1997
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Distributor," "Investment
Adviser," "Majority Shareholder Vote," "1940 Act," "Shareholder," "Shares,"
"Transfer Agent," "Trust," "Trust Property," and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Income Builder Fund dated March 20, 1996.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote as otherwise required by Section
16(c) of the 1940 Act and to the extent required by the corporate or business
statute of any state in which the Shares of the Trust are sold, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
<PAGE>
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have the power to adjourn the
meeting from time to time. The Shareholders present in person or represented
by proxy at any meeting and entitled to vote thereat also shall have the
power to adjourn the meeting from time to time if the vote required to
approve or reject any proposal described in the original notice of such
meeting is not obtained (with proxies being voted for or against adjournment
consistent with the votes for and against the proposal for which the required
vote has not been obtained). The affirmative vote of the holders of a
majority of the Shares then present in person or represented by proxy shall
be required to adjourn any meeting. Any adjourned meeting may be reconvened
without further notice or change in record date. At any reconvened meeting at
which a quorum shall be present, any business may be transacted that might
have been transacted at the meeting as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
2
<PAGE>
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall
be called by the Chairman or the Secretary upon the written request of any
two (2) Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the President, any Vice President or the
Treasurer or by any one or more officers or agents of the Trust as shall be
designated for that purpose by vote of the Trustees.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him
3
<PAGE>
in connection with the action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of itself, create a presumption that the person did not act in good faith and
in a manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
4
<PAGE>
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
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All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the Chairman the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders
and of the Trustees; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to the President or to one or more Vice Presidents
such of his powers and duties at such times and in such manner as he may deem
advisable; he shall be a signatory on all Annual and Semi-Annual Reports as
may be sent to shareholders, and he shall perform such other duties as the
Trustees may from time to time prescribe.
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(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the Chairman, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
Chairman, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the Chairman, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the Chairman, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
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ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holders' name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the Chairman, the President, or a Vice President, and countersigned
by the Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at all times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
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SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii)
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. The
record date, in any case, shall not be more than one hundred eighty (180)
days, and in the case of a meeting of Shareholders not less than ten (10)
days, prior to the date on which such meeting is to be held or the date on
which such other particular action requiring determination of Shareholders is
to be taken, as the case may be. In the case of a meeting of Shareholders,
the meeting date set forth in the notice to Shareholders accompanying the
proxy statement shall be the date used for purposes of calculating the 180
day or 10 day period, and any adjourned meeting may be reconvened without a
change in record date. In lieu of fixing a record date, the Trustees may
provide that the transfer books shall be closed for a stated period but not
to exceed, in any case, twenty (20) days. If the transfer books are closed
for the purpose of determining Shareholders entitled to notice of a vote at a
meeting of Shareholders, such books shall be closed for at least ten (10)
days immediately preceding the meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time
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designate, or as may be specified in or pursuant to the agreement between the
Trust and the bank or trust company appointed as Custodian of the securities
and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Income Builder Fund,
dated March 20, 1996, a copy of which is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name Dean
Witter Income Builder Fund refers to the Trustees under the Declaration
collectively as Trustees, but not as individuals or personally; and no
Trustee, Shareholder, officer, employee or agent of Dean Witter Income
Builder Fund shall be held to any personal liability, nor shall resort be had
to their private property for the satisfaction of any obligation or claim or
otherwise, in connection with the affairs of said Dean Witter Income Builder
Fund, but the Trust Estate only shall be liable.
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
[OPEN-END FUNDS]
666568
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C>
Article 1 Terms of Appointment............................... 1
Article 2 Fees and Expenses.................................. 2
Article 3 Representations and Warranties of DWTFSB .......... 3
Article 4 Representations and Warranties of the Fund ........ 3
Article 5 Duty of Care and Indemnification................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB .... 4
Article 7 Duration and Termination of Agreement.............. 5
Article 8 Assignment ........................................ 5
Article 9 Affiliations....................................... 6
Article 10 Amendment.......................................... 6
Article 11 Applicable Law..................................... 6
Article 12 Miscellaneous...................................... 6
Article 13 Merger of Agreement................................ 7
Article 14 Personal Liability................................. 7
</TABLE>
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of
such Funds acting severally on its own behalf and not jointly with any of
such other Funds (each such Fund hereinafter referred to as the "Fund"), each
such Fund having its principal office and place of business at Two World
Trade Center, New York, New York, 10048, and DEAN WITTER TRUST FSB
("DWTFSB"), a federally chartered savings bank, having its principal office
and place of business at Harborside Financial Center, Plaza Two, Jersey City,
New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTFSB desires
to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act
as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation,
open-account or similar plans provided to the holders of such Shares
("Shareholders") and set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund, including
without limitation any periodic investment plan or periodic withdrawal
program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book
form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed by
the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may
be reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are
authorized, based upon data provided to it by the Fund, and issued and
outstanding. DWTFSB shall also provide to the Fund on a regular basis
the total number of Shares that are authorized, issued and outstanding
and shall notify the Fund in case any proposed issue of Shares by the
Fund would result in an overissue. In case any issue of Shares
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTFSB shall have
no obligation to take cognizance of any Blue Sky laws relating to the
issue of sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the above
paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing
agent in connection with dividend reinvestment, accumulation,
open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including
but not limited to, maintaining all Shareholder accounts, preparing
Shareholder meeting lists, mailing proxies, receiving and tabulating
proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident
alien accounts, preparing and filing appropriate forms required with
respect to dividends and distributions by federal tax authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and
redemptions of Shares and other confirmable transactions in
Shareholder accounts, preparing and mailing activity statements for
Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the
daily purchases and sales for shareholders in each State. The
responsibility of DWTFSB for the Fund's status under the securities
laws of any State or other jurisdiction is limited to the inclusion on
the system of each State as to which the Fund has informed DWTFSB that
shares may be sold in compliance with state securities laws and the
reporting of purchases and sales in each such State to the Fund as
provided above and as agreed from time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 Fees and Expenses
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and
certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to
time subject to mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees
to reimburse DWTFSB for out of pocket expenses in connection with the
services rendered by DWTFSB hereunder. In addition, any other expenses
incurred by DWTFSB at the request or with the consent of the Fund will be
reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
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Article 3 Representations and Warranties of DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of
Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws
to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 Representations and Warranties of the Fund
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the
Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with
respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation
or warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities or Blue Sky laws
of any State or other jurisdiction that notice of
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<PAGE>
offering of such Shares in such State or other jurisdiction or in
violation of any stop order or other determination or ruling by any
federal agency or any State or other jurisdiction with respect to the
offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission
to act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not
be liable and shall be indemnified by the Fund for any action taken or
omitted by it in reliance upon such instructions or upon the opinion of such
counsel. DWTFSB, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records
or documents provided to DWTFSB or its agents or subcontractors by machine
readable input, telex, CRT data entry or other similar means authorized by
the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund. DWTFSB,
its agents and subcontractors shall also be protected and indemnified in
recognizing stock certificates which are reasonably believed to bear the
proper manual or facsimile signature of the officers of the Fund, and the
proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to
the other for any damages resulting from such failure to perform or otherwise
from such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify
it except with the other party's prior written consent.
Article 6 Documents and Covenants of the Fund and DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent
of the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
4
<PAGE>
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the
Fund and signature cards bearing the signature of any officer of the
Fund or any other person authorized to sign written instructions on
behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary
of the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service
offered or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB
agrees that all such records prepared or maintained by DWTFSB relating to the
services performed by DWTFSB hereunder are the property of the Fund and will
be preserved, maintained and made available in accordance with such Section
31 of the 1940 Act, and the rules and regulations thereunder, and will be
surrendered promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement
shall remain confidential and shall not be voluntarily disclosed to any other
person except as may be required by law or with the prior consent of DWTFSB
and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTFSB will endeavor to notify the Fund and
to secure instructions from an authorized officer of the Fund as to such
inspection. DWTFSB reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be
held liable for the failure to exhibit the Shareholder records to such
person.
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written
notice, and by DWTFSB on 90 days written notice, to the other party without
payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below, neither this Agreement nor
any rights or obligations hereunder may be assigned by either party without
the written consent of the other party.
5
<PAGE>
8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTFSB; provided, however,
that such person or entity has and maintains the qualifications, if any,
required to perform such obligations and duties, and that DWTFSB shall be as
fully responsible to the Fund for the acts and omissions of any agent or
subcontractor as it is for its own acts or omissions under this Agreement.
Article 9 Affiliations
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Morgan Stanley, Dean Witter, Discover & Co. or any of its
direct or indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the
case may be), officers, employees, agents and shareholders of the Fund, and
the directors, officers, employees, agents and shareholders of the Fund's
investment adviser and/or distributor, are or may be interested in DWTFSB as
directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTFSB
may be interested in the Fund as Directors or Trustees (as the case may be),
officers, employees, agents and shareholders or otherwise, or in the
investment adviser and/or distributor as directors, officers, employees,
agents, shareholders or otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the
Board of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 Applicable Law
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 Miscellaneous
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent, and DWTFSB
desires to render such services, such services shall be provided pursuant to
a letter agreement, substantially in the form of Exhibit A hereto, between
DWTFSB and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or
destroyed, supported by an appropriate bond satisfactory to DWTFSB and the
Fund issued by a surety company satisfactory to DWTFSB, except that DWTFSB
may accept an affidavit of loss and indemnity agreement executed by the
registered holder (or legal representative) without surety in such form as
DWTFSB deems appropriate indemnifying DWTFSB and the Fund for the issuance of
a replacement certificate, in cases where the alleged loss is in the amount
of $1,000 or less.
12.3 In the event that any check or other order for payment of money on
the account of any Shareholder or new investor is returned unpaid for any
reason, DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may
instruct DWTFSB.
6
<PAGE>
12.4 Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or to DWTFSB shall be
sufficiently given if addressed to that party and received by it at its
office set forth below or at such other place as it may from time to time
designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 Personal Liability
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however,
that the Declaration of Trust of the Fund provides that the assets of a
particular Series of the Fund shall under no circumstances be charged with
liabilities attributable to any other Series of the Fund and that all persons
extending credit to, or contracting with or having any claim against, a
particular Series of the Fund shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
7
<PAGE>
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
8
<PAGE>
SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By:
--------------------------
Barry Fink
Vice President and
General Counsel
ATTEST:
- ---------------------------------
Assistant Secretary
DEAN WITTER TRUST FSB
By:
--------------------------
John Van Heuvelen
President
ATTEST:
- ----------------------------------
Executive Vice President
9
<PAGE>
EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (insert name of investment company) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and
appoint Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each
series and class of shares of the Fund, whether now or hereafter authorized
or issued ("Shares"), dividend disbursing agent and shareholder servicing
agent, registrar and agent in connection with any accumulation, open-account
or similar plan provided to the holders of Shares, including without
limitation any periodic investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund
to DWTFSB of fees as set out in the fee schedule attached hereto as Schedule
A, DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(name of fund)
By:
-------------------------------
Barry Fink
Vice President and General
Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By:
----------------------------------
Its:
--------------------------------
Date:
--------------------------------
10
<PAGE>
SCHEDULE A
Fund: Dean Witter Income Builder Fund
Fees: (1) Annual maintenance fee of $12.65 per shareholder account, payable
monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
<PAGE>
Exhibit 99.B(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 10, 1997, relating to the financial statements and financial
highlights of Dean Witter Income Builder Fund, which appears in such Statement
of Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement.
We also consent to the references to us under the headings "Independent
Accountants" and "Experts" in such Statement of Additional Information and
to the reference to us under the heading "Financial Highlights" in such
Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 24, 1997
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
INCOME BUILDER FUND (A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 TOTAL RETURN YEARS-n TOTAL RETURN-T
- ---------- --------- ------------ --------- --------------
28-Jul-97 $1,003.90 0.39% 0.18 NA
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE (NON STANDARD
COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 RETURN-TR YEARS-n TOTAL RETURN-t
- ---------- --------- --------- ------- --------------
28-Jul-97 $1,059.50 5.95% 0.18 NA
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<C> <C> <C> <C> <C>
28-Jul-97 5.95 $10,039 $50,856 $102,772
</TABLE>
*INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4%
& 3% SALES CHARGE
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
INCOME BUILDER FUND (B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 TOTAL RETURN YEARS-n TOTAL RETURN-T
- ---------- --------- ------------ --------- --------------
30-Sep-96 $1,248.30 24.83% 1.00 24.83%
26-Jun-96 $1,298.60 29.86% 1.26 23.00%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE (NON STANDARD
COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 RETURN-TR YEARS-n TOTAL RETURN-t
- ---------- --------- --------- ------- --------------
30-Sep-96 $1,298.30 29.83% 1.00 29.83%
26-Jun-96 $1,338.60 33.86% 1.26 25.99%
(D) GROWTH OF $10,00
(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>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<C> <C> <C> <C> <C>
26-Jun-96 33.86 $13,386 $66,930 $133,860
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
INCOME BUILDER FUND (C)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 TOTAL RETURN YEARS-n TOTAL RETURN-T
- ---------- --------- ------------ --------- --------------
28-Jul-97 $1,047.90 4.79% 0.18 NA
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE (NON STANDARD
COMPUTATIONS)
_ _
| ______________________|
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 RETURN-TR YEARS-n TOTAL RETURN-t
- ---------- --------- --------- ------- --------------
28-Jul-97 $1,057.90 5.79% 0.18 NA
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<C> <C> <C> <C> <C>
28-Jul-97 5.79 $10,579 $52,895 $105,790
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
INCOME BUILDER FUND (D)
(A) TOTAL RETURN (NO LOAD FUND)
(B) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
_ _
| ______________________|
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED-P 30-Sep-97 TOTAL RETURN YEARS-n TOTAL RETURN-T
- ---------- --------- ------------ --------- --------------
28-Jul-97 $1,059.80 5.98% 0.18 NA
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<C> <C> <C> <C> <C>
28-Jul-97 5.98 $10,598 $52,990 $105,980
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Income Builder Class A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 320,476,980
<INVESTMENTS-AT-VALUE> 363,401,594
<RECEIVABLES> 6,015,767
<ASSETS-OTHER> 184,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 369,602,181
<PAYABLE-FOR-SECURITIES> 7,534,806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,039,296
<TOTAL-LIABILITIES> 8,574,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 299,458,280
<SHARES-COMMON-STOCK> 81,737
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,000,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,644,798
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,924,614
<NET-ASSETS> 1,047,150
<DIVIDEND-INCOME> 7,949,746
<INTEREST-INCOME> 7,026,183
<OTHER-INCOME> 0
<EXPENSES-NET> 4,610,054
<NET-INVESTMENT-INCOME> 10,365,875
<REALIZED-GAINS-CURRENT> 17,728,044
<APPREC-INCREASE-CURRENT> 39,732,802
<NET-CHANGE-FROM-OPS> 67,826,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,078)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,697
<NUMBER-OF-SHARES-REDEEMED> (3,257)
<SHARES-REINVESTED> 297
<NET-CHANGE-IN-ASSETS> 212,886,165
<ACCUMULATED-NII-PRIOR> 47,579
<ACCUMULATED-GAINS-PRIOR> 73,945
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,610,054
<AVERAGE-NET-ASSETS> 405,613
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> .61
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.81
<EXPENSE-RATIO> 1.28
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> Income Builder Class B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 320,476,980
<INVESTMENTS-AT-VALUE> 363,401,594
<RECEIVABLES> 6,015,767
<ASSETS-OTHER> 184,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 369,602,181
<PAYABLE-FOR-SECURITIES> 7,534,806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,039,296
<TOTAL-LIABILITIES> 8,574,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 299,458,280
<SHARES-COMMON-STOCK> 28,017,556
<SHARES-COMMON-PRIOR> 14,483,618
<ACCUMULATED-NII-CURRENT> 1,000,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,644,798
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,924,614
<NET-ASSETS> 358,973,270
<DIVIDEND-INCOME> 7,949,746
<INTEREST-INCOME> 7,026,183
<OTHER-INCOME> 0
<EXPENSES-NET> 4,610,054
<NET-INVESTMENT-INCOME> 10,365,875
<REALIZED-GAINS-CURRENT> 17,728,044
<APPREC-INCREASE-CURRENT> 39,732,802
<NET-CHANGE-FROM-OPS> 67,826,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,398,309)
<DISTRIBUTIONS-OF-GAINS> (157,191)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,601,412
<NUMBER-OF-SHARES-REDEEMED> (3,697,289)
<SHARES-REINVESTED> 629,815
<NET-CHANGE-IN-ASSETS> 212,886,165
<ACCUMULATED-NII-PRIOR> 1,162,846
<ACCUMULATED-GAINS-PRIOR> 73,945
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,610,054
<AVERAGE-NET-ASSETS> 249,022,913
<PER-SHARE-NAV-BEGIN> 10.23
<PER-SHARE-NII> .46
<PER-SHARE-GAIN-APPREC> 2.54
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> (.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.81
<EXPENSE-RATIO> 1.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Income Builder Class C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 320,476,980
<INVESTMENTS-AT-VALUE> 363,401,594
<RECEIVABLES> 6,015,767
<ASSETS-OTHER> 184,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 369,602,181
<PAYABLE-FOR-SECURITIES> 7,534,806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,039,296
<TOTAL-LIABILITIES> 8,574,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 299,458,280
<SHARES-COMMON-STOCK> 77,052
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,000,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,644,798
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,924,614
<NET-ASSETS> 986,533
<DIVIDEND-INCOME> 7,949,746
<INTEREST-INCOME> 7,026,183
<OTHER-INCOME> 0
<EXPENSES-NET> 4,610,054
<NET-INVESTMENT-INCOME> 10,365,875
<REALIZED-GAINS-CURRENT> 17,728,044
<APPREC-INCREASE-CURRENT> 39,732,802
<NET-CHANGE-FROM-OPS> 67,826,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (7,487)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 80,094
<NUMBER-OF-SHARES-REDEEMED> (3,561)
<SHARES-REINVESTED> 519
<NET-CHANGE-IN-ASSETS> 212,886,165
<ACCUMULATED-NII-PRIOR> 1,162,846
<ACCUMULATED-GAINS-PRIOR> 73,945
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,610,054
<AVERAGE-NET-ASSETS> 503,287
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> .61
<PER-SHARE-DIVIDEND> (.11)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.80
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> Income Builder Class D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 320,476,980
<INVESTMENTS-AT-VALUE> 363,401,594
<RECEIVABLES> 6,015,767
<ASSETS-OTHER> 184,820
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 369,602,181
<PAYABLE-FOR-SECURITIES> 7,534,806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,039,296
<TOTAL-LIABILITIES> 8,574,102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 299,458,280
<SHARES-COMMON-STOCK> 1,648
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 1,000,387
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17,644,798
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 42,924,614
<NET-ASSETS> 21,126
<DIVIDEND-INCOME> 7,949,746
<INTEREST-INCOME> 7,026,183
<OTHER-INCOME> 0
<EXPENSES-NET> 4,610,054
<NET-INVESTMENT-INCOME> 10,365,875
<REALIZED-GAINS-CURRENT> 17,728,044
<APPREC-INCREASE-CURRENT> 39,732,802
<NET-CHANGE-FROM-OPS> 67,826,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (193)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,633
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 15
<NET-CHANGE-IN-ASSETS> 212,886,165
<ACCUMULATED-NII-PRIOR> 1,162,846
<ACCUMULATED-GAINS-PRIOR> 73,945
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,868,871
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,610,054
<AVERAGE-NET-ASSETS> 17,134
<PER-SHARE-NAV-BEGIN> 12.20
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> .62
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.82
<EXPENSE-RATIO> .96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that WAYNE E. HEDIEN, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF
THE DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Dated: September 1, 1997
/s/ Wayne E. Hedien
-----------------------------------
Wayne E. Hedien
<PAGE>
SCHEDULE A
1. Active Assets Money Trust
2. Active Assets Tax-Free Trust
3. Active Assets Government Securities Trust
4. Active Assets California Tax-Free Trust
5. Dean Witter New York Municipal Money Market Trust
6. Dean Witter American Value Fund
7. Dean Witter Tax-Exempt Securities Trust
8. Dean Witter Tax-Free Daily Income Trust
9. Dean Witter Capital Growth Securities
10. Dean Witter U.S. Government Money Market Trust
11. Dean Witter Precious Metals and Minerals Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter World Wide Investment Trust
14. Dean Witter Value-Added Market Series
15. Dean Witter Utilities Fund
16. Dean Witter Strategist Fund
17. Dean Witter California Tax-Free Daily Income Trust
18. Dean Witter Convertible Securities Trust
19. Dean Witter Intermediate Income Securities
20. Dean Witter World Wide Income Trust
21. Dean Witter S&P 500 Index Fund
22. Dean Witter U.S. Government Securities Trust
23. Dean Witter Federal Securities Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter California Tax-Free Income Fund
26. Dean Witter New York Tax-Free Income Fund
27. Dean Witter Select Municipal Reinvestment Fund
28. Dean Witter Variable Investment Series
29. High Income Advantage Trust
30. High Income Advantage Trust II
31. High Income Advantage Trust III
32. InterCapital Insured Municipal Bond Trust
33. InterCapital Insured Municipal Trust
34. InterCapital Insured Municipal Income Trust
35. InterCapital Quality Municipal Investment Trust
36. InterCapital Quality Municipal Income Trust
37. Dean Witter Government Income Trust
38. Municipal Income Trust
39. Municipal Income Trust II
40. Municipal Income Trust III
41. Municipal Income Opportunities Trust
42. Municipal Income Opportunities Trust II
43. Municipal Income Opportunities Trust III
44. Municipal Premium Income Trust
45. Prime Income Trust
46. Dean Witter Short-Term U.S. Treasury Trust
47. Dean Witter Diversified Income Trust
<PAGE>
48. InterCapital California Insured Municipal Income Trust
49. Dean Witter Health Sciences Trust
50. Dean Witter Global Dividend Growth Securities
51. InterCapital Quality Municipal Securities
52. InterCapital California Quality Municipal Securities
53. InterCapital New York Quality Municipal Securities
54. Dean Witter Retirement Series
55. Dean Witter Limited Term Municipal Trust
56. Dean Witter Short-Term Bond Fund
57. Dean Witter Global Utilities Fund
58. InterCapital Insured Municipal Securities
59. InterCapital Insured California Municipal Securities
60. Dean Witter High Income Securities
61. Dean Witter National Municipal Trust
62. Dean Witter International SmallCap Fund
63. Dean Witter Mid-Cap Growth Fund
64. Dean Witter Select Dimensions Investment Series
65. Dean Witter Global Asset Allocation Fund
66. Dean Witter Balanced Growth Fund
67. Dean Witter Balanced Income Fund
68. Dean Witter Intermediate Term U.S. Treasury Trust
69. Dean Witter Hawaii Municipal Trust
70. Dean Witter Japan Fund
71. Dean Witter Capital Appreciation Fund
72. Dean Witter Information Fund
73. Dean Witter Fund of Funds
74. Dean Witter Special Value Fund
75. Dean Witter Income Builder Fund
76. Dean Witter Financial Services Trust
77. Dean Witter Market Leader Trust
78. Dean Witter Managers' Select Fund
79. Dean Witter Liquid Asset Fund Inc.
80. Dean Witter Natural Resource Development
Securities Inc.
81. Dean Witter Dividend Growth Securities Inc.
82. Dean Witter European Growth Fund Inc.
83. Dean Witter Pacific Growth Fund Inc.
84. Dean Witter High Yield Securities Inc.
85. Dean Witter Global Short-Term Income Fund Inc.
86. InterCapital Income Securities Inc.
