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DEAN WITTER Filed Pursuant to Rule 497(e)
FINANCIAL SERVICES TRUST Registration File No.: 333-16177
PROSPECTUS--JANUARY 14, 1997
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DEAN WITTER FINANCIAL SERVICES TRUST (THE "FUND") IS AN OPEN-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY, WHOSE INVESTMENT OBJECTIVE IS LONG-TERM CAPITAL
APPRECIATION. THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
AT LEAST 65% OF ITS TOTAL ASSETS IN THE EQUITY SECURITIES OF COMPANIES IN THE
FINANCIAL SERVICES AND FINANCIAL SERVICES RELATED INDUSTRIES. ISSUERS IN THESE
INDUSTRIES PROVIDE FINANCIAL SERVICES OR FINANCIAL PRODUCTS TO COMPANIES AND
INDIVIDUALS OR TO OTHER FINANCIAL SERVICES PROVIDERS. SEE "INVESTMENT
OBJECTIVE AND POLICIES."
Initial Offering--Shares are being offered in an underwriting by Dean
Witter Distributors Inc. at $10.00 per share with all proceeds going to the
Fund. All expenses in connection with the organization of the Fund and this
offering will be paid by Dean Witter InterCapital Inc. and the Underwriter
except for a maximum of $250,000 of organizational expenses to be reimbursed
by the Fund. The initial offering will run from approximately January 27, 1997
through February 21, 1997.
Continuous Offering--A continuous offering will commence approximately two
weeks after the closing date (anticipated for March 10, 1997) of the initial
offering. Shares of the Fund will be priced at the net asset value per share
next determined following receipt of an order without imposition of a sales
charge.
Repurchases and/or redemptions of shares 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 "Repurchases and
Redemptions--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 1.0% of the average daily net assets of the Fund. See
"Purchase of Fund Shares--Plan of Distribution."
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
The Fund and its Management ........................................... 4
Investment Objective and Policies ..................................... 4
Risk Considerations .................................................. 6
Investment Restrictions ............................................... 11
Underwriting .......................................................... 12
Purchase of Fund Shares--Continuous Offering .......................... 12
Shareholder Services .................................................. 14
Repurchases and Redemptions ........................................... 16
Dividends, Distributions and Taxes .................................... 18
Performance Information ............................................... 18
Additional Information ................................................ 19
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 January 14, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
DEAN WITTER
FINANCIAL SERVICES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR (800) 869-NEWS (TOLL FREE)
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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THE The Fund is organized as a Trust, commonly known as a
FUND Massachusetts business trust, and is an open-end, diversified
management investment company investing at least 65% of its
total assets in the equity securities of companies in the
financial services and financial services related industries.
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INITIAL Shares of beneficial interest with $0.01 par value are
OFFERING being offered in an underwriting by Dean Witter Distributors
Inc. at $10.00 per share. The minimum purchase is 100 shares
($1,000). The initial offering will run approximately from
January 27, 1997 through February 21, 1997. The closing will
take place on February 26, 1997 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.
Investors should request and read the money market fund
prospectus prior to investing in the money market fund. Any
purchase order may be cancelled at any time prior to the
Closing Date (see page 12).
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CONTINUOUS A continouous offering will commence within approximately
OFFERING two weeks after completion of the initial offering. During the
continuous offering, the minimum initial investment will be
$1,000 ($100 if the account is opened through EasyInvest
(Service Mark) ); and the minimum subsequent investment will be
$100 (see page 12).
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INVESTMENT The investment objective of the Fund is long-term capital
OBJECTIVE appreciation.
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INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of
MANAGER the Fund, and its wholly-owned subsidiary, Dean Witter Services
Company Inc., serve in various investment management, advisory,
management and administrative capacities to 100 investment
companies and other portfolios with net assets under management
of approximately $90 billion at December 31, 1996 (see page 4).
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MANAGEMENT The Investment Manager receives a monthly fee at the
FEE annual rate of 0.75% of daily net assets (see page 4).
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DIVIDENDS Dividends and capital gains will be distributed annually.
Dividends and capital gains distributions are automatically
reinvested in additional shares at net asset value unless the
shareholder elects to receive cash (see page 18).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). The
Distributor receives from the Fund a distribution fee accrued
daily and payable monthly at the rate of 1.0% per annum of the
Fund's average daily net assets. This fee compensates the
Distributor for services provided in distributing shares of the
Fund and for sales-related expenses. The Distributor also
receives the proceeds of any contingent deferred sales charges
(see pages 12-13).
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REDEMPTION-- Shares are redeemable by the shareholder at net asset
CONTINGENT value. An account may be involuntarily redeemed if the total
DEFERRED value of the account is less than $100 or, if the account was
SALES opened through EasyInvest, if after twelve months the
CHARGE shareholder has invested less than $1,000 in the account.
Although no commission or sales load is imposed upon the
purchase of shares, a contingent deferred sales charge (scaled
down from 5% to 1%) is imposed on any redemption of shares if
after such redemption the aggregate current value of an account
with the Fund falls below the aggregate amount of the
investor's purchase payments made during the six years
preceding the redemption. However, there is no charge imposed
on redemption of shares purchased through reinvestment of
dividends or distributions (see pages 16-18).
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RISK The net asset value of the Fund's shares will fluctuate
CONSIDERATIONS 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 economic or market factors
affecting companies and/or industries in which the Fund
invests. In addition, the value of the Fund's fixed-income and
convertible securities generally increases or decreases due to
economic and market factors, as well as changes in prevailing
interest rates. Generally, a rise in interest rates will result
in a decrease in value while a drop in interest rates will
result in an increase in value. There are also certain risks
associated with the Fund's investments in the financial
services and financial services related industries (see page
6). The Fund may invest in lower-rated convertible securities
and the securities of foreign issuers which entails certain
additional risks. The Fund may also invest in options and
futures transactions in order to hedge its portfolio securities
and may enter into forward foreign currency exchange contracts
in connection with its foreign securities investments and may
purchase securities on a when-issued, delayed delivery or
"when, as and if issued" basis, which involve certain special
risks (see pages 6-11). 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 the risks outlined in the
Prospectus (see page 6) before making an investment in the
Fund.
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
2
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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.
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SHAREHOLDER TRANSACTION EXPENSES
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%
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A contingent deferred sales charge is imposed at the following
declining rates:
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<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
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First ............................... 5.0%
Second .............................. 4.0%
Third ............................... 3.0%
Fourth .............................. 2.0%
Fifth ............................... 2.0%
Sixth ............................... 1.0%
Seventh and thereafter .............. None
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<CAPTION>
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Redemption Fees ............................................ None
Exchange Fee ................................................ None
</TABLE>
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<CAPTION>
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ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fees ...................................................... 0.75%
12b-1 Fees* .......................................................... 1.00%
Other Expenses ....................................................... 0.31%
Total Fund Operating Expenses** ...................................... 2.06%
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Management and 12b-1 Fees are annualized for the current fiscal period of
the Fund ending August 31, 1997. "Other Expenses," as shown above, are based
upon estimated amounts of expenses of the Fund for the fiscal period ending
August 31, 1997.
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* The 12b-1 fee is accrued daily and payable monthly, at an annual rate
of 1.00% 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. 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.
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EXAMPLE 1 YEAR 3 YEARS
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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: .......................... $71 $95
You would pay the following expenses on the same investment, assuming no redemption: $21 $65
</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.
3
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THE FUND AND ITS MANAGEMENT
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Dean Witter Financial Services Trust (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 November 8, 1996.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the
Fund's Investment Manager. The Investment Manager, which was incorporated in
July, 1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a balanced financial services organization providing a broad range
of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$86.9 billion at December 31, 1996. The Investment Manager also manages
portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.1 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 investment objective by investing, under
normal circumstances, at least 65% of its total assets in the equity
securities of companies in the financial services and financial services
related industries. Issuers in these industries provide financial services or
financial products to companies and individuals or to other financial services
providers.
The financial services companies in which the Fund may invest include but
are not limited to the following: asset management companies, securities
brokerage firms, financial planners, regional and money center banks, merchant
banks, mortgage companies, consumer finance companies, savings banks and
thrift institutions, insurance companies, insurance brokerage firms, leasing
companies, government-sponsored agencies, credit and finance companies and
foreign financial service companies. Examples of companies in which the Fund
may invest which provide products and services to the aforementioned financial
services companies include but are not limited to the following: providers of
financial publishing and news services, credit research and rating services,
financial advertising (including Internet site development), financial
equipment and technology (including financial software), data processing and
payroll services and other financial products or services which do not involve
the providing of credit, brokerage or management of assets.
4
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The equity securities in which the Fund may invest may be issued either by
large, established, well-capitalized companies or by newly-formed small
capitalization companies. There are no restrictions on the market
capitalization size of the Fund's holdings. While the equity securities in
which the Fund may invest will consist primarily of common stocks, the Fund
may also invest in other types of equity securities such as preferred and
convertible securities, rights and warrants.
The Fund's equity investments will be determined pursuant to an investment
process that seeks to identify companies that show good appreciation prospects
and value. This approach to stock selection involves a fundamental analysis of
individual companies through an analysis of their balance sheets, income
statements, products and services. Also, the Investment Manager will take into
consideration certain criteria which include, among other things, capable
management, attractive business niches or product innovation, sound financial
and accounting practices, ability to grow revenues, earnings and cash flows
consistently, and stock prices and growth potential which, in the opinion of
the Investment Manager, appear to be undervalued or temporarily unrecognized
by the market.
Companies considered to be in the financial services and financial services
related industries will be those which derive at least 35% of their revenues
or earnings from the aforementioned respective activities, or devote at least
35% of their assets to such respective activities.
Up to 35% of the Fund's total assets may be invested in equity securities
of issuers not in the financial services or financial services related
industries, investment grade fixed-income securities, convertible securities,
rights and warrants of issuers not in the financial services or financial
services related industries, U.S. Government securities (including zero coupon
securities) or money market instruments. With respect to corporate
non-convertible fixed-income securities, the term "investment grade" means
securities which are rated Baa or higher by Moody's Investors Services, Inc.
("Moody's") or BBB or higher by Standard & Poor's Corporation ("S&P") or, if
not rated, are deemed by the Investment Manager to be of comparable quality.
The Fund may invest up to 25% of its total assets in the securities of foreign
issuers.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make principal
and interest payments than would be the case with investments in securities
with higher credit ratings. If a fixed-income non-convertible security held by
the Fund is rated BBB or Baa and is subsequently downgraded by a rating
agency, or otherwise falls below investment grade the Fund will sell such
securities as soon as is practicable without undue market or tax consequences
to the Fund. See the Appendix to the Statement of Additional Information for a
discussion of ratings of fixed-income securities.
Money market instruments in which the Fund may invest are securities issued
or guaranteed by the U.S. Government or its agencies (Treasury bills, notes
and bonds); obligations of banks subject to regulation by the U.S. Government
and having total assets of $1 billion or more; Eurodollar certificates of
deposit; obligations of savings banks and savings and loan associations having
total assets of $1 billion or more; fully insured certificates of deposit; and
commercial paper rated within the two highest grades by Moody's or S&P or, if
not rated, issued by a company having an outstanding debt issue rated AA by
S&P or Aa by Moody's.
There may be periods during which, in the opinion of the Investment
Manager, market conditions warrant reduction of some or all of the Fund's
securities holdings. During such periods, the Fund may adopt a temporary
"defensive" posture in which up to 100% of its total assets is invested in
money market instruments or cash.
In accordance with SEC rules, the Fund will not purchase the security of
any company which in its most recent fiscal year derived more than 15% of its
gross revenues from securities related activities (defined by the SEC as
activities as a broker, dealer, underwriter or investment adviser) if
immediately after such purchase the Fund: (i) would own more than 5% of any
class of equity securities of the company; (ii) would own more than 10% of the
outstanding principal amount of the company's debt securities; or (iii) would
have invested more than 5% of its total assets in securities of such company.
CONVERTIBLE SECURITIES. The Fund may invest in 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" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
5
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Up to 20% of the Fund's assets in convertible fixed-income securities can
be rated below investment grade or, if unrated, are of comparable quality as
determined by the Investment Manager. Securities rated below investment grade
are the equivalent of high yield, high risk bonds (commonly known as "junk
bonds"). The Fund will not invest in convertible fixed-income securities that
are in default in payment of principal or interest. In the event that the
Fund's investments in convertible securities rated below investment grade,
including downgraded convertible securities, constitute more than 20% 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" 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.
FOREIGN SECURITIES. As noted above, the Fund may invest in securities of
foreign companies. Such investments may also be in the form of American
Depository Receipts (ADRs), European Depository Receipts (EDRs) or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying securities. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are designed for
use in European securities markets. The Fund's investments in unlisted foreign
securities are subject to the Fund's overall policy limiting its investment in
illiquid securities to 15% or less of its net assets. For a discussion of the
risks of investing in these securities, see "Risk Considerations" 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
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 affecting companies and/or industries in
which the Fund invests, which factors cannot be predicted. Additionally, the
value of the Fund's fixed-income and convertible securities may increase or
decrease due to changes in prevailing interest rates. Generally, a rise in
interest rates will result in a decrease in value, while a drop in interest
rates will result in an increase in value.
FINANCIAL SERVICES AND FINANCIAL SERVICES-RELATED INDUSTRIES. The Fund
concentrates its investments in the financial services and financial
services-related industries. Because of this concentration, the value of the
Fund's shares may be more volatile than that of investment companies that do
not similarly concentrate their investments. The financial services and
financial services-related industries will be particularly affected by certain
economic, competitive and regulatory developments. The profitability of
financial services companies as a group is largely dependent upon the
availability and cost of capital funds which in turn may fluctuate
significantly in response to changes in interest rates and general economic
conditions. Rising interest rates and inflation may negatively affect certain
financial services companies as the costs of lending money, attracting
deposits and doing business rise. Financial institutions are subject to
regulation and supervision by governmental authorities and changes in
governmental policies may impact the way financial institutions conduct
business. If regulation which would reduce the separation between commercial
and investment banking is ultimately enacted, financial services companies may
be significantly affected in terms of profitability and competition.
FOREIGN SECURITIES. Foreign securities investments may be affected by changes
in currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and
abroad) or changed circumstances in dealings between nations. Fluctuations in
the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign
currency. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency transactions
of the Fund will be conducted on a spot basis or through forward foreign
currency exchange contracts (described below). The Fund will incur certain
costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, restrictions on foreign investment
6
<PAGE>
and repatriation of capital, limitations on the use or transfer of Fund assets
and any effects of foreign social, economic or political instability. Foreign
companies are not subject to the regulatory requirements of U.S. companies
and, as such, there may be less publicly available information about such
companies. Moreover, foreign companies are not subject to uniform accounting,
auditing and financial reporting standards and requirements comparable to
those applicable to U.S. companies. Additionally, there may be less investment
community research and coverage with respect to certain foreign securities.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to
less government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition,
differences in clearance and settlement procedures on foreign markets may
occasion delays in settlements of the Fund's trades effected in such markets.
As such, the inability to dispose of portfolio securities due to settlement
delays could result in losses to the Fund due to subsequent declines in value
of such securities and the inability of the Fund to make intended security
purchases due to settlement problems could result in a failure of the Fund to
make potentially advantageous investments. To the extent the Fund purchases
Eurodollar certificates of deposit issued by foreign branches of domestic U.S.
banks, consideration will be given to their domestic marketability, the lower
reserve requirements normally mandated for overseas banking operations, the
possible impact of interruptions in the flow of international currency
transactions and future international political and economic developments
which might adversely affect the payment of principal or interest.
CONVERTIBLE SECURITIES. To the extent that a convertible security's investment
value is greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely to increase
when interest rates fall and decrease when interest rates rise, as with a
fixed-income security (the credit standing of the issuer and other factors may
also have an effect on the convertible security's value). If the conversion
value exceeds the investment value, the price of the convertible security will
rise above its investment value and, in addition, will generally sell at some
premium over its conversion value. (This premium represents the price
investors are willing to pay for the privilege of purchasing a fixed-income
security with a possibility of capital appreciation due to the conversion
privilege.) At such times the price of the convertible security will tend to
fluctuate directly with the price of the underlying equity security.
A portion of the convertible securities in which the Fund may invest will
generally be rated below investment grade. Securities below investment grade
are the equivalent of high yield, high risk bonds, commonly known as "junk
bonds." Investment grade is generally considered to be debt securities rated
BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's"). Fixed-income securities rated Baa
by Moody's or BBB by Standard & Poor's have speculative characteristics
greater than those of more highly rated securities, while fixed-income
securities rated Ba or BB or lower by Moody's and Standard & Poor's,
respectively, are considered to be speculative investments. The Fund will not
invest in convertible securities that are rated lower than B by S&P or Moody's
or, if not rated, determined to be of comparable quality by the Investment
Manager. The Fund will not invest in convertible fixed-income securities that
are in default in payment of principal or interest. The ratings of
fixed-income securities by Moody's and Standard & Poor's are a generally
accepted barometer of credit risk. However, as the creditworthiness of issuers
of lower-rated fixed-income securities is more problematic than that of
issuers of higher-rated fixed-income securities, the achievement of the Fund's
investment objective will be more dependent upon the Investment Manager's own
credit analysis than would be the case with a mutual fund investing primarily
in higher quality bonds. The Investment Manager will utilize a security's
credit rating as simply one indication of an issuer's creditworthiness and
will principally rely upon its own analysis of any security currently held by
the Fund or potentially purchasable by the Fund for its portfolio. See the
Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
Because of the special nature of the Fund's permitted investments in lower
rated or unrated convertible securities, the Investment Manager must take
account of certain special considerations in assessing the risks associated
with such investments. The prices of lower rated or unrated securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the
issuer of a fixed-income security owned by the Fund defaults, the Fund may
incur additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility of
market prices of lower rated or
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unrated securities and a corresponding volatility in the net asset value of a
share of the Fund.
The risks of other investment techniques which may be utilized by the Fund
described under "Other Investment Policies," "Options and Futures
Transactions" and "Forward Foreign Currency Exchange Contracts" are described
below.
OTHER INVESTMENT POLICIES
WARRANTS AND STOCK RIGHTS. The Fund may acquire warrants and stock rights
which are attached to other securities in its portfolio. Warrants and stock
rights are, in effect, an option to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting
rights, pay no dividends and have no rights with respect to the corporations
issuing them. The Fund may acquire warrants and stock rights.
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.
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 risks of defaults or bankruptcy of the selling institution, the Fund
follows procedures designed to minimize those risks. These procedures include
effecting repurchase transactions only with large, well-capitalized and
well-established financial institutions and maintaining adequate
collateralization. See the Statement of Additional Information for a further
discussion of such investments.
PRIVATE PLACEMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 5% of
its net 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 restricted. (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 of time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase securities
on a when-issued or delayed delivery basis or may purchase or sell securities
on a forward commitment basis. When such transactions are negotiated, the
price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. An increase in
the percentage of the Fund's assets committed to the purchase of securities on
a when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value.
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
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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.
INVESTMENT IN OTHER INVESTMENT VEHICLES. Under the Investment Company Act of
1940, as amended, the Fund generally may invest up to 10% of its total assets
in the aggregate in shares of other investment companies and up to 5% of its
total assets in any one investment company. The Fund may not own more than 3%
of the outstanding voting stock of any investment company. Investment in
foreign investment companies may be the sole or most practical means by which
the Fund may participate in certain foreign securities markets. As a
shareholder in an investment company, the Fund would bear its ratable share of
that entity'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 other investment companies.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at any
time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail
financially. However, loans of portfolio securities will only be made to firms
deemed by the Investment Manager to be creditworthy and when the income which
can be earned from such loans justifies the attendant risks.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased by
the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities and on the U.S. dollar or foreign currencies which are or may in
the future be listed on securities exchanges or are written in
over-the-counter transactions ("OTC Options"). Listed options are issued or
guaranteed by the exchange on which they trade or by a clearing corporation
such as the Options Clearing Corporation. OTC options are purchased from or
sold (written) to dealers or financial institutions which have entered into
direct agreements with the Fund. The Fund is permitted to write covered call
options on portfolio securities and the U.S. dollar or foreign currencies,
without limit, in order to aid it in achieving its investment objective. The
Fund may also write covered put options; however, the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 20% of the Fund's net assets.
The Fund may purchase listed and OTC call and put options on securities and
stock indexes in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a covered call position or to protect
against an increase in the price of a security it anticipates purchasing. The
Fund may purchase put options on securities which it holds in its portfolio
only to protect itself against a decline in the value of the security. The
Fund may also purchase put options to close out written put positions in a
manner similar to call option closing purchase transactions. There are no
other limits on the Fund's ability to purchase call and put options.
The Fund may also purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity
exchanges on underlying portfolio securities, on any of the foreign currencies
("currency futures"), on U.S. or foreign fixed-income securities ("interest
rate futures") and on such indexes of U.S. or foreign equity, fixed-income or
convertible securities as may exist or come into being ("index futures"). The
Fund will purchase or sell interest rate futures contracts for the purpose of
hedging its
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fixed-income portfolio (or anticipated portfolio) against changes in
prevailing interest rates. The Fund may purchase or sell index futures or
currency futures for the purpose of hedging some or all of its portfolio (or
anticipated portfolio) securities against changes in their prices (or the
currency in which they are denominated).
The Fund, for hedging purposes, also may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent
with its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position
as writer of an option, or as a buyer or seller of a futures contract, only if
a liquid secondary market exists for options or futures contracts of that
series. There is no assurance that such a market will exist, particularly in
the case of OTC options, as such options may generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
The futures contracts and options transactions to be engaged in by the Fund
are only for the purpose of hedging the Fund's portfolio securities and are
not speculative in nature; however, there are risks inherent in the use of
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. For example, if the Fund sold futures contracts for the sale of
securities in anticipation of an increase in interest rates, and then interest
rates went down instead, causing bond prices to rise, the Fund would lose
money on the sale. Another risk which will arise in employing futures
contracts to protect against the price volatility of portfolio securities is
that the prices of securities, currencies and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the dollar cash prices of the Fund's portfolio securities
and their denominated currencies. See the Statement of Additional Information
for a further discussion of such risks.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Fund may enter into forward foreign currency exchange contracts ("forward
contracts") in connection with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in"
the price of the security in U.S. dollars or some other foreign currency which
the Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying
security transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar or other currency which is being used for the security purchase
(by the Fund or the counterparty) and the foreign currency in which the
security is denominated during the period between the date on which the
security is purchased or sold and the date on which payment is made or
received.
At other times, when, for example, the Investment Manager believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar or some other foreign currency, the Fund may enter
into a forward contract to sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or
all of the Fund's securities holdings (or securities which the Fund has
purchased for its portfolio) denominated in such foreign currency. Under
identical circumstances, the Fund may enter into a forward contract to sell,
for a fixed amount of U.S. dollars or other currency, an amount of foreign
currency other than the currency in which the securities to be hedged are
denominated approximating the value of some or all of the portfolio securities
to be hedged. This method of hedging, called "cross-hedging," will be selected
by the Investment Manager when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or
is trading at a discount as compared with some other foreign currency with
which it tends to move in tandem.
In addition, when the Investment Manager anticipates purchasing securities
at some time in the future, and
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wishes to lock in the current exchange rate of the currency in which those
securities are denominated against the U.S. dollar or some other foreign
currency, the Fund may enter into a forward contract to purchase an amount of
currency equal to some or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency. The Fund may, however, close
out the forward contract without purchasing the security which was the subject
of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Fund's
securities holdings (or anticipated portfolio securities) are denominated
rises in value with respect to the currency which is being purchased (or
sold), then the Fund will have realized fewer gains than had the Fund not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and the
date it matures. The Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will not do so
unless deemed appropriate by the Investment Manager. The Fund generally will
not enter into a forward contract with a term of greater than one year,
although it may enter into forward contracts for periods of up to five years.
The Fund may be limited in its ability to enter into hedging transactions
involving forward contracts by the Internal Revenue Code requirements related
to qualification as a regulated investment company (see "Dividends,
Distributions, and Taxes").
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a view
to achieving the Fund's investment objective. The Fund's portfolio is managed
within InterCapital's Growth Group which manages 27 equity funds and fund
portfolios with approximately $12.1 billion in assets as of December 31, 1996.
Anita H. Kolleeny, Senior Vice President of InterCapital, and Michelle
Kaufman, Assistant Vice President of InterCapital, each a member of
InterCapital's Growth Group, have been designated the primary portfolio
co-managers of the Fund. Ms. Kolleeny has been a portfolio manager at
InterCapital for over five years. Prior to joining InterCapital in September,
1993, Ms. Kaufman was a securities analyst with Woodward and Associates
(March-August, 1993), JRO and Associates (December, 1992) and the First
Manhattan Company (January, 1990-November, 1992).
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 the
Investment Manager, and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors it deems
relevant.
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. It is not
anticipated that the portfolio trading will result in the Fund's portfolio
turnover rate exceeding 300% in any one year. The Fund will incur brokerage
costs commensurate with its portfolio turnover rate. Short-term gains and
losses may result from such portfolio transactions. See "Dividends,
Distributions and Taxes" for a discussion of the tax implications of the
Fund's trading policy. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundmental policies of the Fund and thus may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. (See the Statement of
Additional Information for a list of the Fund's other investment
restrictions.) Under the Act, a fundamental policy may not be changed without
the vote of a majority of the outstanding voting securities of the Fund, as
defined in the Act. 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. As to 75% of its total assets, invest more than 5% of the value of its
total assets in the securities of one
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issuer (other than obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities).
2. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry except that the Fund will invest at least 25%
of its total assets in the securities of issuers in the financial services
industry. This restriction does not apply to obligations issued or
guaranteed by the United States Government, its agencies or
instrumentalities.
3. The Fund may not, as to 75% of its total assets, purchase more than
10% of the voting securities of any issuer.
UNDERWRITING
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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 January 27, 1997 through February 21, 1997. 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 February 26, 1997, 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 100 shares. Certificates for shares purchased
will not be issued unless requested by the shareholder in writing.
PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
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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 Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by DWR and other dealers who have
entered into selected broker-dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Financial Services
Trust, 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 account executive. The minimum initial
purchase in the case of investments through EasyInvest, an automatic purchase
plan (see "Shareholder Services"), is $100, provided that the schedule of
automatic investments will result in investments totalling at lease $1,000
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 $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement
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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.
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of Net
Asset Value" below). 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 "Repurchases and Redemptions"). Sales personnel of a Selected
Broker-Dealer are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or Selected Broker-Dealer. In addition, some
sales personnel of the Selected Broker-Dealer will receive non-cash
compensation in the form of trips to educational seminars and merchandise as
special sales incentives. The Fund and the Distributor reserve the right to
reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the 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 maintenance of shareholder accounts.
Amounts paid under the Plan are 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, including the payment of commissions
for sales of the Fund's shares and compensation to and expenses of DWR account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses.
At any given time, the Distributor may incur expenses in distributing
shares of the Fund which may be in excess of the total of (i) the payments
made by the Fund pursuant to the Plan and the Fund's original plan of
distribution, and (ii) the proceeds of contingent deferred sales charges paid
by investors upon the redemption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if the
Distributor incurred $1 million in expenses in distributing shares of the Fund
and $750,000 had been received by the Distributor as described in (i) and (ii)
above, the excess expense would amount to $250,000.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all its expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Although there is no legal obligation for the Fund to pay expenses
incurred by the Distributor in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open (or
on days when the New York Stock Exchange closes prior to 4:00 p.m., at such
earlier time) by taking the value of all assets of the Fund, subtracting all
its liabilities, dividing by the number of shares outstanding and adjusting to
the nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time assets are valued; if there were no sales that day,
the security is valued at the latest bid price (in cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market pursuant to procedures adopted by the
Trustees); and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price.
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When market quotations are not readily available, including circumstances
under which it is determined by the Investment Manager that sale or bid prices
are not reflective of a security's market value, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of Trustees. For
valuation purposes, quotations of foreign portfolio securities, other assets
and liabilities and forward contracts stated in foreign currency are
translated into U.S. dollar equivalents at the prevailing market rates as of
the close of the New York Stock Exchange. Dividends receivable are accrued as
of the ex-dividend date or as of the time that the relevant ex-dividend date
and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of 60 days, whereupon
they will be valued at amortized cost using their value on the 61st day unless
the Trustees determine such does not reflect the securities' market value, in
which case these securities will be valued at their fair value as determined
by the Trustees. All other securities and other assets are valued at their
fair value as determined in good faith under procedures established by and
under the supervision of the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon as
the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Shares 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").
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
(net of any applicable contingent deferred sales charge) to the shareholder
will be the designated monthly or quarterly amount.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original investment
will be correspondingly reduced and ultimately exhausted.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
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<PAGE>
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 Intermediate 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 and five Dean Witter Funds which are money market funds (the
foregoing eleven non-CDSC funds are hereinafter collectively referred to in
this section as the "Exchange Funds.") Exchanges may be made after the shares
of the Fund acquired by purchase (not by exchange or dividend reinvestment)
have been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges
between any of the money market funds and any of the CDSC funds can be
effected on the same basis. No contingent deferred sales charge ("CDSC") is
imposed at the time of any exchange, although any applicable CDSC will be
imposed upon ultimate redemption. Shares of the Fund acquired in exchange for
shares of another CDSC fund having a different CDSC schedule than that of this
Fund will be subject to the CDSC schedule of this Fund, even if such shares
are subsequently re-exchanged for shares of the CDSC fund originally
purchased. During the period of time the shareholder remains invested in
shares of an Exchange Fund (calculated from the last day of the month in which
the shares were acquired) the holding period (for the purpose of determining
the rate of the contingent deferred sales charge) 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 for shares of an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to the
Exchange Fund 12b-1 distribution fees, if any, incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales charge
fund have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the best
interests of the Fund and its other shareholders, investors should be aware
that the Fund and each of the other Dean Witter Funds may in their discretion
limit or otherwise restrict the number of times this Exchange Privilege may be
exercised by any investor. Any such restriction will be made by the Fund on a
prospective basis only, upon notice to the shareholder not later than ten days
following such shareholder's most recent exchange.
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 (presently sixty days' prior written notice for termination or
material revision), provided that six months' prior written notice of
termination will be given to shareholders who hold shares of an Exchange Fund
pursuant to the Exchange Privilege, and provided further that the Exchange
Privilege may be terminated or materially revised without notice under certain
unusual circumstances. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive
regarding restrictions on exchange of shares of the Fund pledged in the margin
account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before
15
<PAGE>
investing. Exchanges are subject to the minimum investment requirement and any
other conditions imposed by each fund. In the case of any shareholder holding
a share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the Shareholder's account. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss. However, the
ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an
exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their DWR or other Selected Broker-Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those shareholders who are clients of DWR or another
Selected Broker-Dealer but who wish to make exchanges directly by 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 case
with the Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds may
be reduced by the amount of any applicable contingent deferred sales charges
(see below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption sent to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, 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
16
<PAGE>
current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset 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 or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability;
(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; and (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
or Dean Witter Trust FSB, each of which is an affiliate of the Investment
Manager, serves as Trustee ("Eligible 401(k) Plan"), provided that either: (A)
the plan continues to be an eligible 401(k) Plan after the redemption; or (B)
the redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate
may also be repurchased by DWR and other Selected Broker-Dealers upon the
telephonic or telegraphic request of the shareholder. The repurchase price is
the net asset value per share next determined (see "Purchase of Fund Shares")
after such purchase order is received by DWR or 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 on sixty days' notice, to
redeem and at net asset value, the
17
<PAGE>
shares of any shareholder (other than shares held in an Individual Retirement
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 as a result of redemptions or repurchases, or such lesser amount as may
be fixed by the Board of Trustees or, in the case of an account opened through
EasyInvest, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder
sixty days to make an additional investment in an amount which will increase
the value of the account to at least the applicable amount before the
redemption is processed. No CDSC will be imposed on any involuntary
redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute substantially
all of the Fund's net investment income and net realized capital gains, if
any, at least once each year. The Fund may, however, determine to retain all
or part of any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. (See
"Shareholder Services--Automatic Investment of Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax. Shareholders 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 income
regardless of whether the shareholder receives such payments in additional
shares or in cash. Any dividends declared with a record date in the last
quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior year.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. In this regard, a 46-day holding period generally must be met.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be
furnished and certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and makes the appropriate election with the Internal Revenue Service, the Fund
will report annually to its shareholders the amount per share of such taxes to
enable shareholders to claim United States foreign tax credits or deductions
with respect to such taxes. In the absence of such an election, the Fund would
deduct foreign tax in computing the amount of its distributable income.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or
18
<PAGE>
decrease) in the value of an initial investment in the Fund of $1,000 over
one, five and ten years, or the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the Fund,
any appreciation or depreciation of the Fund's assets, all expenses incurred
by the Fund and all sales charges which would be incurred by redeeming
shareholders, for the period. It also assumes reinvestment of all dividends
and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. The Fund 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.).
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 circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
Fund obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitation 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 60 days of a sale or a sale within 60 days of a purchase) of
a security. In addition, investment personnel may not purchase or sell a
security for their personal account within 30 days before or after any
transaction in any Dean Witter Fund managed by them. Any violations of the
Code of Ethics are subject to sanctions, including reprimand, demotion or
suspension or termination of employment. The Code of Ethics comports with
regulatory requirements and the recommendations in the 1994 report by the
Investment Company Institute Advisory Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment 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.
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.
InterCapital provided the initial capital for the Fund by purchasing 10,000
shares of the Fund for $100,000 on December 10, 1996. As of the date of this
Prospectus, InterCapital owned 100% of the outstanding shares of the Fund.
InterCapital may be deemed to control the Fund until such time as it owns less
than 25% of the outstanding shares of the Fund.
19
<PAGE>
DEAN WITTER
FINANCIAL SERVICES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary
and General Counsel
Anita H. Kolleeny
Vice President
Michelle Kaufman
Assistant 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.
