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Filed Pursuant to Rule 497(e)
Registration File No.: 333-06935
PROSPECTUS -- AUGUST 28, 1996
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Dean Witter Special Value Fund (the "Fund") is an open-end, diversified
management investment company whose investment objective is long-term capital
appreciation. The Fund seeks to meet its investment objective by investing
primarily in equity securities issued by companies whose equity market
capitalization, at the time of purchase, falls within the range of $100
million to $1 billion and that appear undervalued relative to the marketplace
or to investments in similar companies. Investing in smaller companies
carries more risk than investing in larger companies. (See "Risk
Considerations and Investment Practices.")
Initial Offering--Shares are being offered in an underwriting by Dean Witter
Distributors Inc. at $10.00 per share with all proceeds going to the Fund.
All expenses in connection with the organization of the Fund and this
offering will be paid by the Investment Manager and Underwriter except for a
maximum of $200,000 of organizational expenses to be reimbursed by the Fund.
The initial offering will run from approximately September 24, 1996 through
October 24, 1996.
Continuous Offering--A continuous offering will commence approximately two
weeks after the closing date of the initial offering which is anticipated for
October 29, 1996. Shares of the Fund will be priced at the net asset value
per share next determined following receipt of an order.
Redemptions and/or repurchases of shares purchased in either the initial
offering or the continuous offering are subject in most cases to a contingent
deferred sales charge, scaled down from 5% to 1% of the amount redeemed, if
made within six years of purchase, which charge will be paid to the Fund's
Distributor, Dean Witter Distributors Inc. (See "Redemptions and
Repurchases--Contingent Deferred Sales Charge.") In addition, the Fund pays
the Distributor a Rule 12b-1 distribution fee pursuant to a Plan of
Distribution at the annual rate of 1% of the average daily net assets of the
Fund. See "Purchase of Fund Shares--Plan of Distribution."
The Fund intends to suspend the offering of its shares to new investors
whenever the Fund's Investment Manager determines that doing so is in the
best interests of prudent portfolio management. During any such suspension,
the Fund will continue to offer its shares to current shareholders.
Currently, the
Dean Witter
Special Value 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
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations and Investment Practices ......................... 8
Investment Restrictions ............................................... 13
Underwriting .......................................................... 14
Purchase of Fund Shares ............................................... 15
Shareholder Services .................................................. 17
Redemptions and Repurchases ........................................... 20
Dividends, Distributions and Taxes .................................... 22
Performance Information ............................................... 22
Additional Information ................................................ 23
Fund anticipates suspending offering its shares to new investors if its net
assets reach a level of approximately $250 million during the initial
offering or ensuing months of the continuous offering, unless the Investment
Manager determines that the continued offering of the Fund's shares is
consistent at that time with prudent portfolio management. Following any such
suspension, the Fund will recommence offering its shares to new investors from
time to time as may be consistent with prudent portfolio management.
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 August 28, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
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
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PROSPECTUS SUMMARY
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<TABLE>
<CAPTION>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund diversified management investment company. The Fund invests primarily in equity securities issued by
companies whose equity market capitalization, at the time of purchase, falls within the range of $100
million to $1 billion and that appear undervalued relative to the marketplace or to investments in similar
companies.
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Shares Offered Shares of beneficial interest with $0.01 par value (see page 23).
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Initial Shares are being offered in an underwriting by Dean Witter Distributors Inc. at $10.00 per share. The
Offering minimum purchase is 500 shares ($5,000). Shares redeemed within six years of purchase are subject to a
contingent deferred sales charge under most circumstances. The initial offering will run approximately from
September 24, 1996 through October 24, 1996. The closing will take place on October 29, 1996 or such other
date as may be agreed upon by Dean Witter Distributors Inc. and the Fund (the "Closing Date"). Shares will
not be issued and dividends will not be declared by the Fund until after the Closing Date. If any orders
received during the initial offering period are accompanied by payment, such payment will be returned
unless an accompanying request for investment in a Dean Witter money market fund is received at the time
the payment is made. Any purchase order may be cancelled at any time prior to the Closing Date. The Fund
intends to suspend the offering of its shares to new investors (during the initial or continuous offering)
whenever Dean Witter InterCapital Inc. determines that doing so is in the best interests of prudent
portfolio management. During any such suspension, the Fund will continue to offer its shares to current
investors. The Fund currently anticipates suspending the offering of its shares to new investors if its net
assets reach a level of approximately $250 million during the Initial Offering or the ensuing months of the
Continuous Offering, unless the Investment Manager determines that the continued offering of the Fund's
shares is consistent at that time with prudent portfolio management. Subsequently, the Fund will recommence
offering its shares to new investors from time to time as may be consistent with prudent portfolio
management (see page 14).
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Continuous A continuous offering, if any, will commence within approximately two weeks after the Closing Date. During
Offering the continuous offering, the minimum initial investment will be $5,000 ($500 if the account is opened
through EasyInvest (Service Mark) ) and the minimum subsequent investment will be $100 (see page 15).
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Investment The investment objective of the Fund is long-term capital appreciation.
Objective
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Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary, Dean
Manager Witter Services Company Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-nine investment companies and other portfolios with net assets under
management of approximately $83.4 billion at July 31, 1996.
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Management The Investment Manager receives a monthly fee at the annual rate of 0.75% of the Fund's average daily net
Fee assets.
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Dividends and Dividends from net investment income, if any, are paid at least annually. Capital gains, if any, are
Distributions distributed at least annually or retained for reinvestment by the Fund. Dividends and capital gains
distributions are automatically reinvested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 22).
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Underwriter and Dean Witter Distributors Inc. (the "Distributor") is the Fund's Underwriter and Distributor. The
Distributor and Distributor receives from the Fund a distribution fee accrued daily and payable monthly at the rate of 1.0%
Plan of per annum of the Fund's average daily net assets. This fee compensates the Distributor for the services
Distribution provided in distributing shares of the Fund and for sales-related expenses. A portion of the 12b-1 fee
equal to 0.25% of the Fund's average daily net assets is characterized as a service fee within the meaning
of the National Association of Securities Dealers, Inc. ("NASD") guidelines and the remaining portion of
the 12b-1 fee is characterized as an asset-based sales charge (see page 16). The Distributor also receives
the proceeds of any contingent deferred sales charges (see page 20).
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2
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Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if
Contingent the total value of the account is less than $100 or, if the account was opened through EasyInvest, if after
Deferred twelve months the shareholder has invested less than $5,000 in the account. Although no commission or sales
Sales load is imposed upon the purchase of shares, a contingent deferred sales charge (scaled down from 5% to 1%)
Charge is imposed on any redemption of shares if after such redemption the aggregate current value of an account
with the Fund falls below the aggregate amount of the investor's purchase payments made during the six
years preceding the redemption. However, there is no charge imposed on redemption of shares purchased
through reinvestment of dividends or distributions (see pages 20-21).
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Risk The net asset value of the Fund's shares will fluctuate with changes in market value of portfolio
Considerations securities. Investing in small-sized market capitalization companies involves greater risk of volatility in
the Fund's net asset value than is customarily associated with investing in larger, more established
companies. Investing in "micro-cap" companies involves even greater risk than investing in companies in the
higher end of the small equity market capitalization range. An investment in the Fund should be considered
a long-term holding and subject to all the risks associated with small company stocks. The market value of
the Fund's portfolio securities and, therefore, the Fund's net asset value per share, will increase or
decrease due to a variety of economic, market or political factors which cannot be predicted. The Fund may
invest in lower-rated convertible and non-convertible fixed-income securities, may enter into repurchase
agreements, may purchase securities on a when-issued, delayed delivery or forward commitment basis, may
purchase securities on a "when, as and if issued" basis, may lend its portfolio securities and may utilize
certain investment techniques including transactions involving stock index futures which may be considered
speculative in nature and may involve greater risks than those customarily assumed by other investment
companies which do not invest in such instruments. An investment in shares of the Fund should not be
considered a complete investment program and is not appropriate for all investors. Investors should
carefully consider their ability to assume these risks and the risks outlined under the heading "Risk
Considerations and Investment Practices" (pages 8-13) before making an investment in the Fund.
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Shareholder Automatic Investment of Dividends and Distributions; Investment of Distributions Received in Cash;
Services Systematic Withdrawal Plan; Exchange Privilege; EasyInvest (Service Mark); Tax-Sheltered Retirement Plans
(see pages 17-19).
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</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus
and in the Statement of Additional Information.
3
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
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Maximum Sales Charge Imposed on Purchases ........................................... None
Maximum Sales Charge Imposed on Reinvested Dividends ................................ None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) . 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following
declining rates:
<TABLE>
<CAPTION>
Year Since Purchase
Payment Made Percentage
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<S> <C>
First ..................... 5.0%
Second .................... 4.0%
Third ..................... 3.0%
Fourth .................... 2.0%
Fifth ..................... 2.0%
Sixth ..................... 1.0%
Seventh and thereafter ... None
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
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Management Fees .......................................................... 0.75%
12b-1 Fees* .............................................................. 1.00%
Other Expenses ........................................................... 0.26%
Total Fund Operating Expenses** .......................................... 2.01%
</TABLE>
Management and 12b-1 Fees are for the current fiscal period of the Fund
ending January 31, 1997. "Other Expenses," as shown above, are based upon
estimated amounts of expenses of the Fund for the fiscal period ending
January 31, 1997.
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* The 12b-1 fee is accrued daily and payable monthly, at an annual rate of
1.0% of the Fund's average daily net assets. A portion of the 12b-1 fee
equal to 0.25% of the Fund's average daily net assets is characterized
as a service fee within the meaning of National Association of
Securities Dealers, Inc. ("NASD") guidelines and is a payment made to
the selling broker for personal service and/or maintenance of
shareholder accounts. The remainder of the 12b-1 fee is an asset-based
sales charge, and is a distribution fee paid to the Distributor to
compensate it for the services provided and the expenses borne by the
Distributor and others in the distribution of the Fund's shares (see
"Purchase of Fund Shares").
** "Total Fund Operating Expenses," as shown above, are based upon the sum
of 12b-1 Fees, Management Fees and "Other Expenses" which may be
incurred by the Fund in its initial full year of operations. The
Investment Manager has undertaken to assume all operating expenses
(except for brokerage and 12b-1 fees) and to waive the compensation
provided for in its Management Agreement until such time as the Fund has
$50 million of net assets or until six months from the date of
commencement of the Fund's operations, whichever occurs first. The fees
and expenses disclosed above do not reflect the assumption of any
expenses or the waiver of any compensation by the Investment Manager.
<TABLE>
<CAPTION>
Example 1 Year 3 Years
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<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period: .......................................... $70 $93
You would pay the following expenses on the same investment, assuming no redemption: ........ $20 $63
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Plan of Distribution."
Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charge permitted by
the NASD.
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Special Value 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 June 21, 1996.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-nine investment companies, thirty of
which are listed on the New York Stock Exchange, with combined assets of
approximately $80.7 billion at July 31, 1996. The Investment Manager also
manages portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.7 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 the Investment
Manager to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund incurred by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
the annual rate of 0.75% to the Fund's net assets.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
transfer agent, custodian, auditing fees; and certain legal fees, and
printing and other expenses relating to the Fund's operations which are not
expressly assumed by the Investment Manager under its Investment Management
Agreement with the Fund. The Investment Manager has undertaken to assume all
operating expenses (except for brokerage and 12b-1 fees) and to waive the
compensation provided for in its Investment Management Agreement until such
time as the Fund has $50 million in net assets or until six months from the
date of the Fund's commencement of operations, whichever occurs first.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is long-term capital appreciation.
The objective is a fundamental policy of the Fund and may not be changed
without a vote of a majority of the outstanding voting securities of the
Fund. There is no assurance that the objective will be achieved. The
following policies may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve its objective by investing primarily in equity
securities issued by companies whose equity market capitalization, at the
time of purchase, falls within the range of $100 million to $1 billion and
that, in the opinion of the Investment Manager, appear undervalued relative
to the marketplace or to investments in similar companies. Under normal
market conditions, the Fund will invest at least 65% of its total assets in
common stocks issued by these small-sized companies. Up to 35% of the Fund's
total assets may be invested in common stocks not meeting the forego-
5
<PAGE>
ing small company equity market parameters, in debt or preferred equity
securities convertible into or exchangeable for equity securities, in
non-convertible debt or preferred equity securities, and in rights and
warrants.
The Investment Manager intends to pursue a value-oriented approach in
selecting securities for the Fund's portfolio. This approach seeks to
identify securities whose market value, in the Investment Manager's view, is
less than their intrinsic value. The Investment Manager believes that
securities of certain small companies often trade at a discount from their
intrinsic value (sometimes also referred to as "business value" or
"investment worth").
Stocks of small companies are often under-researched and not widely
recognized by stock analysts or the financial press and, as a result, may be
less efficiently priced than larger, better-known companies. In addition,
small companies may have other unique attributes which make them relatively
undervalued in the market place compared to other similar larger companies.
The Investment Manager will attempt to identify and invest in such securities
for the Fund with the expectation that the "value discount" may narrow over
time and lead to capital appreciation for the Fund.
As part of the value-oriented approach, the Investment Manager, based on
research and analysis, will seek to identify companies with attributes which
the Investment Manager believes provide growth opportunities but are not
fairly valued in the market place. Such attributes may include, among other
things, one or more of the following: valuable franchises or other
intangibles; ownership of valuable trademarks or trade names; control of
distribution networks or of other market share for particular products;
ownership of real estate, the value of which is understated; underutilized
liquidity and other factors that would identify the issuer as a potential
takeover target or turnaround candidate.
In addition to, or instead of, seeking companies with attributes such as
those described above, the Investment Manager may select securities for
investment by the Fund on the basis of the Investment Manager's belief that
the potential exists for some catalyst to cause a stock's price to rise. Such
a catalyst might include, among other things, one or more of the following:
increased investor attention, asset sales, corporate restructurings or
reorganizations, a cyclical turnaround of a depressed business or industry, a
new product/innovation, or significant changes in management and regulatory
or environmental shifts.
In its security selection process, the Investment Manager will focus
initially on securities with market-to-book ratios and price-earnings ratios
which are lower than those of the general market averages or those of
securities of similar companies, although the Fund is not restricted to
selecting only securities with those characteristics if other indicators of a
value discount exist. In evaluating a company as a potential investment of
the Fund, the Investment Manager will consider factors such as the company's
dividend yield (if any), growth in sales, balance sheet, average
sales-per-share, cash flow per share, management capabilities, attractiveness
of business opportunities, pricing flexibility, financial and accounting
practices and an ability or prospects to increase revenues, earnings and cash
flow, and profitability, in an effort to determine whether the company's
intrinsic value is greater than its market price.
The Fund's strategy of investing in small companies will involve
investment in a large number of portfolio securities which may be volatile
and long-term in nature. Such investments may include "micro-cap" companies
(generally, companies with equity market capitalization of less than $150
million) which represent some of the smallest and least liquid equity
securities in the U.S. markets. An investment in the Fund, therefore, should
be considered a long-term holding and not a complete investment program and
may not be suitable for all investors. For a further discussion of the risks
of investing in smaller companies, see "Risk Considerations and Investment
Practices" below.
Fixed-income securities in which the Fund may invest include corporate
notes and bonds and obli-
6
<PAGE>
gations 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. ("Moody's"), Standard & Poor's Corporation
("S&P"), Duff and Phelps, Inc. and Fitch Investors Service, Inc., or, if
unrated, of comparable quality as determined by the Investment Manager; and
(b) bank obligations, including CDs, banker's acceptances and time deposits,
issued by banks with a long-term CD rating in one of the four highest
categories by a NRSRO. Investments in securities rated within the four
highest rating categories by a NRSRO are considered "investment grade."
However, such securities rated within the fourth highest rating category by a
NRSRO have speculative characteristics and, therefore, changes in economic
conditions or other circumstances are more likely to weaken the capacity of
their issuers 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, the Investment Manager will
make a determination of its creditworthiness and may deem it to be investment
grade.
The Fund also may invest up to 20% of its total assets in convertible
fixed-income securities rated below investment grade or, if unrated, of
comparable quality as determined by the Investment Manager. In addition, the
Fund may invest up to 5% of its total assets in non-convertible fixed-income
securities rated below investment grade or, if unrated, of comparable quality
as determined by the Investment Manager. Securities below investment grade
are the equivalent of high yield, high risk bonds (commonly known as "junk
bonds"). The Fund will not invest in fixed-income securities that are in
default in payment of principal or interest. In the event that the Fund's
investments in securities rated below investment grade, including downgraded
securities, constitute more than 20% (in the case of convertible fixed-income
securities) or 5% (in the case of non-convertible fixed-income securities) of
the Fund's total assets, the Fund will seek immediately to sell sufficient
securities to reduce the total to below the applicable percentage. See "Risk
Considerations and Investment Practices" below for a discussion of the risks
of investing in lower-rated and unrated fixed-income securities and the
Appendix to the Statement of Additional Information for a description of
fixed-income security ratings.
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 S&P
or, if not rated, issued by a company having an outstanding debt issue rated
at least AA by S&P or Aa by Moody's. 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
7
<PAGE>
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.
The Fund may invest in American Depository Receipts (see "Risk
Considerations and Investment Practices" below) and securities of Canadian
issuers registered under the Securities Act of 1934, but under current policy
the Fund will not otherwise invest in foreign securities. The Fund may also
purchase and sell futures contracts on stock indexes, may invest in
repurchase agreements, private placements, zero coupon securities and real
estate investment trusts, may purchase securities on a when-issued, delayed
delivery or forward commitment basis, may purchase securities on a "when, as
and if issued" basis, and may lend its portfolio securities, as discussed
under "Risk Considerations and Investment Practices" below.
The Fund reserves the right to seek to achieve its investment objective by
converting to a "master/ feeder" fund structure (see "Additional
Information").
RISK CONSIDERATIONS AND
INVESTMENT PRACTICES
The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's portfolio securities. The market value of the
Fund's portfolio securities will increase or decrease due to a variety of
economic, market or political factors which cannot be predicted.
Stocks of Smaller Companies. The Fund's strategy of investing in smaller
companies carries more risk than investments in larger companies. As noted
above, such investments may include "micro-cap" companies representing some
of the smallest and least liquid equity securities in the U.S. markets. While
some of the Fund's holdings may be listed on a national securities exchange,
portfolio securities are more likely to be traded in the over-the-counter
market. The low market liquidity of the Fund's holdings may have an adverse
impact on the Fund's ability to sell certain portfolio securities at
favorable prices and may also make it difficult for the Fund to obtain market
quotations based on actual trades, for purposes of valuing the Fund's
portfolio securities.
Investing in lesser-known, smaller capitalization companies involves
greater risk of volatility of the Fund's net asset value than is customarily
associated with larger, more established companies. Often smaller
capitalization companies and the industries in which they are focused are
still evolving and, while this may offer better growth potential than larger,
more established companies, it also may make them more sensitive to changing
market conditions.
Other risks of investing in smaller capitalization companies include the
probability that some companies may never realize the value discount
potential that appeared to be inherent in them at the time of investment or
may even fail as a business for several reasons. A new product or innovation
may not take hold, an anticipated takeover or turnaround may not occur, a
trademark may lose its value to other generic products. Also, smaller
companies may lack the resources, financial or otherwise, to take advantage
of a valuable product or favorable market position or may be unable to
withstand the competitive pressures of larger, more established rivals. The
Investment Manager will seek to minimize the risks described above by broad
diversification of the Fund's portfolio. However, there can be no assurance
that such diversification will prevent loss in value of certain portfolio
securities or in the Fund's net asset value.
Convertible Securities. 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 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"
8
<PAGE>
(the security's worth if it were to be exchanged for the underlying security,
at market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security
(the credit standing of the issuer and other factors may also have an effect
on the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, the security 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 privilege.) At such
times the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
The Fund may invest up to 25% of its total assets in "enhanced"
convertible securities. Enhanced convertible securities offer holders the
opportunity to obtain higher current income than would be available from a
traditional equity security issued by the same company, in return for reduced
participation or a cap on appreciation in the underlying common stock of the
issuer which the holder can realize. In addition, in many cases, enhanced
convertible securities are convertible into the underlying common stock of
the issuer automatically at maturity, unlike traditional convertible
securities which are convertible only at the option of the security holder.
Enhanced convertible securities may be more volatile than traditional
convertible securities due to the mandatory conversion feature.
The Fund also may invest up to 10% in "synthetic" convertible securities.
Unlike traditional convertible securities whose conversion values are based
on the common stock of the issuer of the convertible security, "synthetic"
convertible securities are preferred stocks or debt obligations of an issuer
which are combined with an equity component whose conversion value is based
on the value of the common stock of a different issuer or a particular
benchmark (which may include a foreign issuer or basket of foreign stocks, or
a company whose stock is not yet publicly traded). In many cases, "synthetic"
convertible securities are not convertible prior to maturity, at which time
the value of the security is paid in cash by the issuer.
"Synthetic" convertible securities may be less liquid than traditional
convertible securities and their price changes may be more volatile. Reduced
liquidity may have an adverse impact on the Fund's ability to sell particular
synthetic securities promptly at favorable prices and may also make it more
difficult for the Fund to obtain market quotations based on actual trades,
for purposes of valuing the Fund's portfolio securities.
The Fund may invest without limitation in "exchangeable" convertible bonds
and convertible preferred stock which are issued by one company, but
convertible into the common stock of a different publicly traded company.
These securities generally have liquidity trading and risk characteristics
similar to traditional convertible securities noted above.
Because of the special nature of the Fund's permitted investments in lower
rated convertible securities, the Investment Manager must take account of
certain special considerations in assessing the risks associated with such
investments. (Lower rated convertible and fixed-income securities are
commonly known as "junk bonds.") These considerations are discussed below
under "Lower-Rated Convertible and Fixed-Income Securities."
Corporate Notes and Bonds. Values and yield of corporate 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 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
debt securities in which it may invest.
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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 (see above). 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 S&P or Baa or higher by Moody's. Fixed-income
securities rated Baa by Moody's or BBB by S&P have speculative
characteristics greater than those of more highly rated securities, while
fixed-income securities rated Ba or BB or lower by Moody's or S&P,
respectively, are considered to be speculative investments. As noted above,
the Fund will not invest in fixed-income securities that are in default in
payment of principal or interest.
Because of the special nature of the Fund's permitted investments in lower
rated securities, it must take account of certain special considerations in
assessing the risks associated with such investments. 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 lower-rated security owned by
the Fund defaults, the Fund may incur additional expenses to seek recovery.
In addition, periods of economic uncertainty and change can be expected to
result in an increased volatility of market prices of lower rated securities
and a corresponding volatility in the net asset value of a share of the Fund.
Stock Index Futures Transactions. The Fund may purchase and sell futures
contracts on stock indexes such as the Standard & Poor's 500 Composite Stock
Price Index, the New York Stock Exchange Composite Index and the Russell 2000
Index. An index futures contract sale creates an obligation by the Fund, as
seller, to deliver cash at a specified future time. An index futures contract
purchase would create an obligation by the Fund, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indexes do
not require the physical delivery of securities, but provide for a final cash
settlement on the expiration date which reflects accumulated profits and
losses credited or debited to each party's account.
The Fund may purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. Purchase of a futures contract by the Fund
may serve as a temporary substitute for the purchase of individual stocks
which may then be purchased in orderly fashion. The Fund will not enter into
futures contracts on stock indexes for speculative purposes. The Fund may not
enter into futures contracts if immediately thereafter the amount committed
to margin exceeds 5% of the value of the Fund's total assets. The Fund may
close out its position as a buyer or seller of a futures contract only if a
liquid secondary market exists for futures contracts of that series. There is
no assurance that such a market will exist. Also, exchanges may limit the
amount by which the price of many futures contracts may move on any day. If
the price moves equal the daily limit on successive days, then it may prove
impossible to liquidate a futures position until the daily limit moves have
ceased.
Futures contracts may be considered speculative in nature and may involve
greater risks than those customarily assumed by other investment companies
which do not invest in such instruments. One such risk is that the Investment
Manager could be incorrect in its expectations as to the direction or extent
of various interest rate or price movements or the time span within which the
movements take place. Another risk which will arise in employing futures
contracts to protect against the price volatility of portfolio securities is
that the prices of indexes subject to futures contracts (and thereby the
futures contract prices) may correlate imperfectly with the behavior of the
cash prices of the Fund's portfolio
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<PAGE>
securities. This risk may particularly apply, given the nature of the Fund's
investments in securities of smaller companies rather than larger companies.
See the Statement of Additional Information for a further discussion of
risks.
The extent to which the Fund may enter into transactions involving futures
contracts may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes."
Rights and Warrants. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting
rights, pay no dividends and have no rights with respect to the corporation
issuing them.
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 such
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
American Depository Receipts. The Fund may invest in securities of foreign
issuers in the form of American Depository Receipts ("ADRs"), including ADRs
sponsored by persons other than the underlying issuers ("unsponsored ADRs").
ADRs are receipts typically issued by a U.S. bank or trust company evidencing
ownership of the underlying securities. Generally, issuers of the stock of
unsponsored ADRs are not obligated to distribute material information in the
United States and, therefore, there may not be a correlation between such
information and the market value of such ADRs.
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 its net asset value. See the Statement of
Additional Information for additional 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.
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,
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<PAGE>
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.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts. 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.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on
the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by
the Fund. If a restricted security is determined to be "liquid," such
security will not be included within the category "illiquid securities,"
which under current policy may not exceed 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.
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
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<PAGE>
at least the market value, determined daily, of the loaned securities. As
with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans of portfolio securities will only
be made to firms deemed by the Investment Manager to be creditworthy and when
the income which can be earned from such loans justifies the attendant risks.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section of the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the
views of Trustees of the Fund and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant. The assets of the Fund are managed within InterCapital's
Growth and Income Group, which manages twenty-three equity funds and fund
portfolios with approximately $20.5 billion in assets as of July 31, 1996.
Jenny Beth Jones, Senior Vice President of InterCapital and a member of
InterCapital's Growth and Income Group, is the primary portfolio manager of
the Fund. Prior to joining InterCapital in August, 1996, Ms. Jones was a
portfolio manager at Oppenheimer Capital.
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. Orders for
transactions in portfolio securities and commodities are placed for the Fund
with a number of brokers and dealers, including DWR. The Fund may incur
brokerage commissions on transactions conducted through DWR. Pursuant to an
order of the Securities and Exchange Commission, the Fund may effect
principal transactions in certain money market instruments with DWR. It is
not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 100% in any one year. The Fund will incur
brokerage costs commensurate with its portfolio turnover rate. See
"Dividends, Distributions and Taxes" for a discussion of the tax implications
of the Fund's trading policy.
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 instrumentali-
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<PAGE>
ties), except that the Fund may invest all or substantially all of its assets
in another registered investment company having the same investment objective
and policies and substantially the same investment restrictions as the Fund
(a "Qualifying Portfolio").
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer, except that the Fund may invest all or
substantially all of its assets in a Qualifying Portfolio.
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 investment
in a Qualifying Portfolio or any obligation of the United States Government,
its agencies or instrumentalities. (See the Statement of Additional
Information for additional investment restrictions.)
UNDERWRITING
- -----------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase
up to 10,000,000 shares from the Fund, which number may be increased or
decreased in accordance with the Underwriting Agreement. The initial offering
will run approximately from September 24, 1996 through October 24, 1996. The
Underwriting Agreement provides that the obligation of the Underwriter is
subject to certain conditions precedent and that the Underwriter will be
obligated to purchase the shares on October 29, 1996, or such other date as
may be agreed upon by the Underwriter and the Fund (the "Closing Date").
Shares will not be issued and dividends will not be declared by the Fund
until after the Closing Date. For this reason, payment is not required to be
made prior to the Closing Date. If any orders received during the initial
offering period are accompanied by payment, such payment will be returned
unless an accompanying request for investment in a Dean Witter money market
fund is received at the time the payment is made. Prospective investors in
money market funds should request and read the money market fund prospectus
prior to investing. All such funds received and invested in a Dean Witter
money market fund will be automatically invested in the Fund on the Closing
Date without any further action by the investor. Any investor may cancel his
or her purchase of Fund shares without penalty at any time prior to the
Closing Date.
The Underwriter will purchase shares from the Fund at $10.00 per share
with all proceeds going to the Fund. The Underwriter may, however, receive
contingent deferred sales charges from future redemptions of such shares (see
"Redemptions and Repurchases--Contingent Deferred Sales Charge").
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such
other date as may be agreed to between the parties.
The minimum number of Fund shares which may be purchased by any
shareholder pursuant to this offering is 500 shares. Certificates for shares
purchased will not be issued unless requested by the shareholder in writing.
The Fund intends to suspend the offering of its shares to new investors
whenever the Investment Manager determines that doing so is in the best
interests of prudent portfolio management. The Fund currently anticipates
suspending the offering of its shares to new investors if its net assets
reach a level of approximately $250 million during the initial offering or
ensuing months of the continuous offering, unless the Investment Manager
determines that the continued offering of the Fund's shares is consistent at
that time with prudent portfolio management (see "Purchase of Fund
Shares--Continuous Offering").
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PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
- -----------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Distributor") will act as the
Distributor of the Fund's shares during the continuous offering. Pursuant to
a Distribution Agreement between the Fund and the Distributor, an affiliate
of the Investment Manager, shares of the Fund are distributed by the
Distributor and offered by DWR and other dealers which have entered into
selected dealer agreements with the Distributor ("Selected Broker-Dealers").
The principal executive office of the Distributor is located at Two World
Trade Center, New York, New York 10048.
The minimum initial purchase is $5,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter Special
Value Fund, directly to Dean Witter Trust Company (the "Transfer Agent") at
P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive of
DWR or other Selected Broker-Dealer. The minimum initial purchase in the case
of investments through EasyInvest (Service Mark), an automatic purchase plan
(see "Shareholder Services"), is $500, provided that the schedule of
automatic investments will result in investments totalling at least $5,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, in its discretion, may accept investments without regard to any
minimum amounts which would otherwise be required if the Fund has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $5,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent. The offering price will be the net asset value
per share next determined following receipt of an order (see "Determination
of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital gains distributions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions. While no sales charge is imposed at the time
shares are purchased, a contingent deferred sales charge may be imposed at
the time of redemption (see "Redemptions and Repurchases"). Sales personnel
are compensated for selling shares of the Fund by the Distributor and/or
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
The Fund intends to suspend the offering of its shares to new investors
(during the initial or continuous offering) whenever the Investment Manager
determines that doing so is in the best interests of prudent portfolio
management. During any such suspension, current shareholders of the Fund will
continue to be able to purchase additional Fund shares. The Fund currently
anticipates suspending the offering of its shares to new investors if its net
assets reach a level of approximately $250 million during the initial
offering or ensuing months of the continuous offering, unless the Investment
Manager determines that the continued offering of the Fund's shares is
consistent at that time with prudent portfolio management. Subsequently, the
Fund may recommence offering its shares to new investors from time to time as
may be consistent with prudent portfolio management. Automatic reinvestment
of dividends and distributions, and other existing shareholder services such
as the Systematic Withdrawal Plan, EasyInvest (Service Mark) and the Exchange
Privilege (see "Shareholder Services"), will not be affected by any
suspension by the Fund of offering its shares.
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<PAGE>
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of 1.0% of the Fund's
average daily net assets. This fee is treated by the Fund as an expense in
the year it is accrued. A portion of the fee payable pursuant to the Plan,
equal to 0.25% of the Fund's average daily net assets, is characterized as a
service fee within the meaning of NASD guidelines. The service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts.
Amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of
DWR's account executives and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan to compensate DWR and other Selected Broker-Dealers for
their opportunity costs in advancing such amounts, which compensation would
be in the form of a carrying charge on any unreimbursed expenses.
At any given time, the expenses in distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan, and (ii) the proceeds of contingent deferred sales charges paid by
investors upon the re demption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing shares of the Fund had been incurred and $750,000
had been received as described in (i) and (ii) above, the excess expense
would amount to $250,000.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount, if any, does not constitute
a liability of the Fund. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under
the Plan, and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open
(or, on days when the New York Stock Exchange closes prior to 4:00 p.m., at
such earlier time), by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange or quoted by NASDAQ is valued at its latest sale price on that
exchange or quotation service prior to the time assets are valued; if there
were no sales that day, the security is valued at the latest bid price (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market 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 cir-
16
<PAGE>
cumstances 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 Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Shares so acquired are not
subject to the imposition of a contingent deferred sales charge upon their
redemption (see "Redemptions and Repurchases").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent, by returning the check
or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (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, 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 Repurchases--Involuntary Redemption"). EasyInvest (Service
Mark) is available during any period when the Fund is offering its shares.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. Any
applicable contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed
from his or her account so that the proceeds to the shareholder will be the
designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax-Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
17
<PAGE>
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
Funds sold with a contingent deferred sales charge ("CDSC funds"), and for
shares of Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited
Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced
Income Fund, Dean Witter Balanced Growth Fund, Dean Witter Intermediate Term
U.S. Treasury Trust and five Dean Witter Funds which are money market funds
(the foregoing eleven non-CDSC funds are hereinafter collectively referred to
in this section as the "Exchange Funds.") Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund during any period when the Fund is
offering its shares.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following day. Subsequent exchanges between any of
the money market funds and any of the CDSC funds can be effected on the same
basis. No contingent deferred sales charge ("CDSC") is imposed at the time of
any exchange, although any applicable CDSC will be imposed upon ultimate
redemption. Shares of the Fund acquired in exchange for shares of another
CDSC fund having a different CDSC schedule than that of this Fund will be
subject to the CDSC schedule of this Fund, even if such shares are
subsequently re-exchanged for shares of the CDSC fund originally purchased.
During the period of time the shareholder remains invested in shares of an
Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired) the holding period (for the purpose of
determining the rate of the CDSC) is frozen. If those shares are subsequently
reexchanged for shares of a CDSC fund, the holding period previously frozen
when the first exchange was made resumes on the last day of the month in
which shares of a CDSC fund are reacquired. Thus, the CDSC is based upon the
time (calculated as described above) the shareholder was invested in shares
of a CDSC fund (see "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). However, in the case of shares exchanged into an Exchange Fund on
or after April 23, 1990, upon a redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given
in an amount equal to the Exchange Fund 12b-1 distribution fees, if any,
incurred on or after that date which are attributable to those shares.
(Exchange Fund 12b-1 distribution fees are described in the prospectuses for
those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or
18
<PAGE>
exchanges from the investor. Although the Fund does not have any specific
definition of what constitutes a pattern of frequent exchanges, and will
consider all relevant factors in determining whether a particular situation
is abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other
Dean Witter Funds may in their discretion limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such Dean Witter
Funds for which shares of the Fund have been exchanged, upon such notice as
may be required by applicable regulatory agencies. Shareholders maintaining
margin accounts with DWR or another Selected Broker-Dealer are referred to
their account executive regarding restrictions on exchange of shares of the
Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and read it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares on which the shareholder has realized a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Dean Witter Funds (for which the Exchange Privilege is available) pursuant to
this Exchange Privilege by contacting their DWR or other Selected Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the
experience of the other Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their account executive or the Transfer Agent.
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<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption, along with any additional
documentation required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), which will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- --------------------------- -----------------------
<S> <C>
First ...................... 5.0%
Second ..................... 4.0%
Third ...................... 3.0%
Fourth ..................... 2.0%
Fifth ...................... 2.0%
Sixth ...................... 1.0%
Seventh and thereafter .... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in exchange for shares of Dean Witter Funds sold with a front-end
sales charge or of other Dean Witter Funds acquired in exchange for such
shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a
"key employee" of a "top heavy" plan, following attainment of age 59 1/2);
(B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust
Company, an affiliate of the Investment Manager, serves as recordkeeper or
20
<PAGE>
Trustee ("Eligible 401(k) Plan"), provided that either: (A) the plan
continues to be an Eligible 401(k) Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic or telegraphic request of the shareholder. The repurchase
price is the net asset value per share next determined (see "Purchase of Fund
Shares") after such repurchase order is received by DWR or other Selected
Broker-Dealer, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the
Fund, the Distributor, DWR or other Selected Broker-Dealer. The offer by DWR
and other Selected Broker-Dealers to repurchase shares may be suspended
without notice by them at any time. In that event, shareholders may redeem
their shares through the Fund's Transfer Agent as set forth above under
"Redemption."
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances, e.g., when normal trading is not
taking place on the New York Stock Exchange. If the shares to be redeemed
have recently been purchased by check, payment of the redemption proceeds may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or another Selected Dealer are referred to their account
executive regarding restrictions on redemption of shares of the Fund pledged
in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund at the net asset value next determined
after a reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right to redeem, upon sixty
days' notice and at net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100 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 $5,000 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.
21
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to distribute substantially
all of the Fund's net investment income and net realized short-term and
long-term capital gains, if there are any, at least once each year. The Fund
may, however, determine either to distribute or to retain all or part of any
net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code, it is not expected that the Fund will be required to
pay any federal income tax. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Any dividends
declared in the last quarter of any calendar year which are paid in the
following year prior to February 1 will be deemed, for tax purposes, to have
been received by the shareholder in the prior year.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in its
ability to engage in transactions involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, 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 "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years, or
over the life of the Fund, if less than any of the foregoing. Total return
and average annual total return reflect all income earned by the Fund, any
appreciation or depreciation of the Fund's assets and all expenses incurred
by the Fund for the stated periods. It alsoassumes reinvestment of all
dividends and distributions paid by the Fund.
22
<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations (such as mutual fund performance rankings of Lipper Analytical
Services, Inc. and the S&P 500 Index).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain 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, the
possibility of the Fund being unable to meet its obligations is remote and
thus, in the opinion of Massachusetts counsel to the Fund, the risk to Fund
shareholders of personal liability is remote.
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 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 objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund. Such investment would be made
only if the Trustees of the Fund believe that to do so would be in the best
interests of the Fund and its shareholders.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
23
<PAGE>
Dean Witter
Special Value Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Jenny Beth Jones
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
SPECIAL VALUE FUND
PROSPECTUS --AUGUST 28, 1996
