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Filed Pursuant to Rule 497(e)
Registration File No.: 333-29721
DEAN WITTER
S&P 500 INDEX FUND
PROSPECTUS -- MARCH 31, 1998
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Dean Witter S&P 500 Index Fund (the "Fund") is an open-end, diversified
management investment company whose investment objective is to provide
investment results that, before expenses, correspond to the total return
(i.e., the combination of capital changes and income) of the Standard &
Poor's(Registered Trademark) 500 Composite Stock Price Index (the "S&P 500
Index"). The Fund seeks to meet its investment objective by investing, under
normal circumstances, at least 80% of the value of its total assets in common
stocks included in the S&P 500 Index in approximately the same weightings as
the Index. (See "Investment Objective and Policies.")
The Fund offers four classes of shares (each, a "Class"), each with a
different combination of sales charges, ongoing fees and other features. The
different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated March 31, 1998, 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.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 4
Financial Highlights .................................................. 5
The Fund and its Management ........................................... 6
Investment Objective and Policies ..................................... 6
Risk Considerations and Investment Practices ......................... 7
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 10
Shareholder Services .................................................. 18
Redemptions and Repurchases ........................................... 21
Dividends, Distributions and Taxes .................................... 21
Performance Information ............................................... 22
Additional Information ................................................ 22
Financial Statements (unaudited)-- February 28, 1998 .................. 24
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
S&P 500 INDEX FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 869-NEWS (TOLL-FREE)
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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. The Fund
invests primarily in common stocks included in the
Standard & Poor's(Registered Trademark) 500 Composite
Stock Price Index (the "S&P 500 Index").
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see
page 22). The Fund offers four Classes of shares, each
with a different combination of sales charges, ongoing
fees and other features (see pages 10-18).
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MINIMUM PURCHASE The minimum initial investment for each Class is $1,000
($100 if the account is opened through EasyInvest (Service
Mark)). Class D shares are only available to persons
investing $5 million ($25 million for certain qualified
plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5
million (or $25 million) investment for Class D shares,
and subject to the $1,000 minimum initial investment for
each Class of the Fund, an investor's existing holdings of
Class A shares and shares of funds for which Dean Witter
InterCapital Inc. serves as investment manager ("Dean
Witter Funds") that are sold with a front-end sales
charge, and concurrent investments in Class D shares of
the Fund and other Dean Witter Funds that are multiple
class funds, will be aggregated. The minimum subsequent
investment is $100 (see page 10).
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INVESTMENT The investment objective of the Fund is to provide
OBJECTIVE investment results that, before expenses, correspond to
the total return (i.e., the combination of capital changes
and income) of the S&P 500 Index (see page 6).
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INVESTMENT MANAGER Dean Witter InterCapital Inc., the Investment Manager of
the Fund, and its wholly-owned subsidiary, Dean Witter
Services Company Inc., serve in various investment
management, advisory, management and administrative
capacities to 101 investment companies and other
portfolios with net assets under management of
approximately $110 billion at February 28, 1998 (see
page 6).
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MANAGEMENT FEE The Investment Manager receives a monthly fee at the
annual rate of 0.40% of the Fund's average daily net
assets. The Investment Manager has agreed to assume all
expenses (except for brokerage and 12b-1 fees) and to
waive the compensation provided for in its Management
Agreement to the extent that such expenses and
compensation on an annualized basis exceed 0.50% of the
daily net assets of the Fund (see page 6).
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DISTRIBUTOR AND Dean Witter Distributors Inc. (the "Distributor"). The
DISTRIBUTION FEE Fund has adopted a distribution plan pursuant to Rule
12b-1 under the Investment Company Act (the "12b-1 Plan")
with respect to the distribution fees paid by the Class A,
Class B and Class C shares of the Fund to the Distributor.
The entire 12b-1 fee payable by Class A and a portion of
the 12b-1 fee payable by each of Class B and Class C equal
to 0.25% of the average daily net assets of the Class are
currently each characterized as a service fee within the
meaning of the National Association of Securities Dealers,
Inc. guidelines. The remaining portion of the 12b-1 fee,
if any, is characterized as an asset-based sales charge
(see pages 10 and 17).
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ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS o Class A shares are offered with a front-end sales
charge, starting at 5.25% and reduced for larger
purchases. Investments of $1 million or more (and
investments by certain other limited categories of
investors) are not subject to any sales charge at the time
of purchase but a contingent deferred sales charge
("CDSC") of 1.0% may be imposed on redemptions within one
year of purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting
the distribution of the Fund's Class A shares and
servicing shareholder accounts pursuant to the Fund's
12b-1 Plan. Reimbursement may in no event exceed an amount
equal to payments at an annual rate of 0.25% of average
daily net assets of the Class (see pages 10, 13 and 17).
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o Class B shares are offered without a front-end sales
charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six
years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the
aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's
purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to
investments by certain qualified plans. Class B shares are
also subject to a 12b-1 fee assessed at the annual rate of
1.0% of the average daily net assets of Class B. Class B
shares convert to Class A shares approximately ten years
after the date of the original purchase (see pages 10, 14
and 17).
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2
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o Class C shares are offered without a front-end sales
charge, but will in most cases be subject to a CDSC of
1.0% if redeemed within one year after purchase. The Fund
is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the
Fund's Class C shares and servicing shareholder accounts
pursuant to the Fund's 12b-1 Plan. Reimbursement may in no
event exceed an amount equal to payments at an annual rate
of 1.0% of average daily net assets of the Class (see
pages 10, 16 and 17).
o Class D shares are offered only to investors meeting an
initial investment minimum of $5 million ($25 million for
certain qualified plans) and to certain other limited
categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not
subject to any 12b-1 fee (see pages 10, 16 and 17).
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DIVIDENDS AND Dividends from net investment income and distributions
CAPITAL GAINS from net capital gains, if any, are paid at least once
DISTRIBUTIONS each year. The Fund may, however, determine to retain all
or part of any net long-term capital gains in any year for
reinvestment. Dividends and capital gains distributions
paid on shares of a Class are automatically reinvested in
additional shares of the same Class at net asset value
unless the shareholder elects to receive cash. Shares
acquired by dividend and distribution reinvestment will
not be subject to any sales charge or CDSC (see pages 18
and 21).
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REDEMPTION Shares are redeemable by the shareholder at net asset
value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed
if the total value of the account is less than $100 or, if
the account was opened through EasyInvest (Service Mark),
if after twelve months the shareholder has invested less
than $1,000 in the account (see page 21).
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RISK CONSIDERATIONS An investment in the Fund should be considered a long-term
holding and subject to all the risks associated with
investing in equity securities. The market value of the
Fund's portfolio securities and, therefore, the Fund's net
asset value per share, will increase or decrease due to a
variety of economic, market or political factors which
cannot be predicted. The Fund operates as a "straight"
index fund and will therefore not be actively managed; as
such, the adverse performance of a portfolio security will
ordinarily not result in the elimination of the security
from the Fund's portfolio. The Fund may enter into
repurchase agreements, may lend its portfolio securities
and may utilize transactions involving stock index futures
which may be considered speculative in nature and may
involve greater risks than those customarily assumed by
other investment companies which do not invest in such
instruments. An investment in shares of the Fund should
not be considered a complete investment program and is not
appropriate for all investors. Investors should carefully
consider their ability to assume these risks and the risks
outlined under the heading "Risk Considerations and
Investment Practices" (page 7) 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.
3
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The estimated annualized fees and expenses set forth
in the table below are based on the expenses and fees for the fiscal period
ending August 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ................................................. 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ................... None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds).................. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................................... None None None None
Exchange Fee...................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fees+ ................................................. 0.23% 0.23% 0.23% 0.23%
12b-1 Fees (5)(6)................................................. 0.24% 1.00% 1.00% None
Other Expenses+ .................................................. 0.27% 0.27% 0.27% 0.27%
Total Fund Operating Expenses+.................................... 0.74% 1.50% 1.50% 0.50%
</TABLE>
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+ The Investment Manager has agreed to assume all expenses (except for
brokerage and 12b-1 fees) and to waive the compensation provided for in
its Investment Management Agreement to the extent that such expenses
and compensation on an annualized basis exceed 0.50% of the daily net
assets of the Fund. The fees and expenses disclosed above reflect the
assumption of such expenses and waiver of compensation by the
Investment Manager to the extent that such expenses and compensation on
an annualized basis exceed 0.50% of the daily net assets of the Fund.
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Class A and a portion of the 12b-1 fee payable by each
of Class B and Class C equal to 0.25% of the average daily net assets
of the Class are currently each characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc.
("NASD") guidelines and are payments made for personal service and/or
maintenance of shareholder accounts. The remainder of the 12b-1 fee, if
any, is an asset-based sales charge, and is a distribution fee paid to
the Distributor to compensate it for the services provided and the
expenses borne by the Distributor and others in the distribution of the
Fund's shares (see "Purchase of Fund Shares--Plan of Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will
be subject to the lower 12b-1 fee applicable to Class A shares. No
sales charge is imposed at the time of conversion of Class B shares to
Class A shares. Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing 1.00% distribution fee (see
"Purchase of Fund Shares--Alternative Purchase Arrangements").
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS
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<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Class A .................................................................... $60 $75
Class B .................................................................... $65 $77
Class C .................................................................... $25 $47
Class D .................................................................... $ 5 $16
You would pay the following expenses on the same $1,000 investment assuming
no redemption at the end of the period:
Class A .................................................................... $60 $75
Class B .................................................................... $15 $47
Class C .................................................................... $15 $47
Class D .................................................................... $ 5 $16
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR LESS
THAN THOSE SHOWN.
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The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of
Distribution" and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
4
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FINANCIAL HIGHLIGHTS (unaudited)
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The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been taken from the records of the
Fund without examination by the independent accountants. The financial
highlights should be read in conjunction with the unaudited financial
statements and the notes thereto which are contained in this Prospectus
commencing on page 24.
<TABLE>
<CAPTION>
FOR THE PERIOD SEPTEMBER 26, 1997* THROUGH FEBRUARY 28, 1998++
--------------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
------ ------ ------ ------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Net investment income ..................... 0.05 0.02 0.02 0.06
Net realized and unrealized gain .......... 1.10 1.09 1.09 1.09
------ ------ ------ ------
Total from investment operations .......... 1.15 1.11 1.11 1.15
------ ------ ------ ------
Less dividends from net investment income (0.03) (0.01) (0.01) (0.03)
------ ------ ------ ------
Net asset value, end of period ............ $11.12 $11.10 $11.10 $11.12
====== ====== ====== ======
TOTAL INVESTMENT RETURN+ (1) ............... 11.47% 11.09% 11.08% 11.53%
RATIOS TO AVERAGE NET ASSETS (2) (3):
Expenses .................................. 0.74% 1.50% 1.50% 0.50%
Net investment income ..................... 1.10% 0.36% 0.37% 1.29%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ... $19,089 $380,009 $24,126 $12,705
Portfolio turnover rate (1) ............... 1% 1% 1% 1%
Average commission rate paid .............. $0.0157 $0.0157 $0.0157 $0.0157
</TABLE>
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* Commencement of operations.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or
waived by the Investment Manager, the annualized expense and net
investment income ratios would have been 0.91% and 0.93%, respectively,
for Class A shares, 1.67% and 0.19%, respectively, for Class B shares,
1.67% and 0.20%, respectively, for Class C shares and 0.67% and 1.12%,
respectively, for Class D shares.
5
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THE FUND AND ITS MANAGEMENT
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Dean Witter S&P 500 Index Fund (the "Fund") is an open-end, diversified
management investment company. The Fund is a trust of the type commonly known
as a "Massachusetts business trust" and was organized under the laws of The
Commonwealth of Massachusetts on June 18, 1997.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co., a preeminent global financial services firm that maintains
leading market positions in each of its three primary businesses --
securities, asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 101 investment companies, 28 of which are listed
on the New York Stock Exchange, with combined assets of approximately $106
billion at February 28, 1998. The Investment Manager also manages portfolios
of pension plans, other institutions and individuals which aggregated
approximately $4 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 0.40% to the Fund's net assets. The Investment Manager has
agreed to assume all expenses (except for brokerage and 12b-1 fees) and to
waive the compensation provided for in its Management Agreement to the extent
that such expenses and compensation on an annualized basis exceed 0.50% of
the daily net assets of the Fund.
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; certain legal fees, and printing
and other expenses relating to the Fund's operations which are not expressly
assumed by the Investment Manager under its Investment Management Agreement
with the Fund.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to provide investment results
that, before expenses, correspond to the total return (i.e., the combination
of capital changes and income) of the Standard & Poor's(Registered Trademark)
500 Composite Stock Price Index (the "S&P 500 Index"). The objective is a
fundamental policy of the Fund and may not be changed without a vote of a
majority of the outstanding voting securities of the Fund. There is no
assurance that the objective will be achieved. The following policies may be
changed by the Board of Trustees without shareholder approval.
The Fund seeks to achieve its objective by investing, under normal
circumstances, at least 80% of its total assets in common stocks included in
the S&P 500 Index in approximately the same weightings as the Index. The Fund
intends to invest in substantially all of the stocks that comprise the S&P
500 Index in approximately the same weightings as they are represented in the
Index. The Fund operates as a "straight" index fund and will not be actively
managed; as such, adverse performance of a security will ordinarily not
result in the elimination of the security from the Fund's portfolio. The Fund
will remain invested in common stocks even when stock prices are generally
falling. Ordinarily, portfolio securities will not be sold except to reflect
additions or deletions of the stocks that comprise the S&P 500 Index,
including mergers, reorganizations and similar transactions, or as may be
necessary to satisfy redemption requests.
Over the long term, the Investment Manager seeks a correlation between the
performance of the Fund, before expenses, and that of the S&P 500 Index of
0.95 or better. A figure of 1.00 would indicate perfect correlation. The
Fund's ability to correlate its performance, before expenses, with the S&P
500 Index may be affected by, among other things, changes in securities
markets, the manner in which the S&P 500 Index is calculated and the
6
<PAGE>
timing of purchases and redemptions. The Fund's ability to correlate its
performance to the Index also depends to some extent on the size of the
Fund's portfolio and the size of cash flows into and out of the Fund. To
accomodate these cash flows, investment changes may be made to maintain the
similarity of the Fund's portfolio to the S&P 500 Index to the maximum
practicable extent. The Investment Manager regularly monitors the correlation
and, in the event the desired correlation is not achieved, the Investment
Manager will determine what additional investment changes may need to be
made.
STOCK INDEX FUTURES CONTRACTS. The Fund may purchase and sell stock index
futures contracts ("futures contracts") that are traded on U.S. commodity
exchanges on the S&P 500 Index ("stock index" futures). As a futures contract
purchaser, the Fund incurs an obligation to take delivery of a specified
amount of the obligation underlying the contract at a specified time in the
future for a specified price. As a seller of a futures contract, the Fund
incurs an obligation to deliver the specified amount of the underlying
obligation at a specified time in return for an agreed upon price. The Fund
will purchase or sell stock index futures contracts for the following
reasons: to simulate full investment in the S&P 500 Index while retaining a
cash balance for fund management purposes, to facilitate trading, to reduce
transaction costs or to seek higher investment returns when a futures
contract is priced more attractively than stocks comprising the S&P 500
Index. The Fund may enter into such instruments provided that not more than
5% of its assets are required as an initial margin deposit and provided that
the contract prices of the stock index futures contracts do not exceed 20% of
its total assets. While such instruments can be used as leveraged
investments, the Fund may not use them to leverage its assets.
ADDITIONAL INFORMATION CONCERNING THE S&P 500 INDEX. The S&P 500 Index is a
well-known stock market index that includes common stocks of 500 companies
from several industrial sectors representing a significant portion of the
market value of all common stocks publicly traded in the United States, most
of which are listed on the New York Stock Exchange Inc. (the "NYSE"). Stocks
in the S&P 500 Index are weighted according to their market capitalization
(i.e., the number of shares outstanding multiplied by the stock's current
price). The Investment Manager believes that the performance of the S&P 500
Index is representative of the performance of publicly traded common stocks
in general. The composition of the S&P 500 Index is determined by S&P and is
based on such factors as the market capitalization and trading activity of
each stock and its adequacy as a representation of stocks in a particular
industry group, and may be changed from time to time.
"Standard & Poor's(Registered Trademark)," "S&P(Registered Trademark),"
"S&P 500(Registered Trademark)," "Standard & Poor's 500," and "500" are
trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use
by the Fund. The Fund is not sponsored, endorsed, sold or promoted by
Standard & Poor's, a division of The McGraw Hill Companies, Inc. ("Standard &
Poor's") and Standard & Poor's makes no representation regarding the
advisability of investing in the Fund.
The Fund may also invest in Standard & Poor's Depositary Receipts,
repurchase agreements and zero coupon securities and may lend its portfolio
securities, as discussed under "Risk Considerations and Investment Practices"
below.
The Fund reserves the right to seek to achieve its investment objective by
converting to a "master/feeder" fund structure (see "Additional
Information").
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
The net asset value of the Fund's shares will fluctuate with changes in the
market value of the Fund's portfolio securities. The market value of the
Fund's portfolio securities will increase or decrease due to a variety of
economic, market or political factors which cannot be predicted.
RISKS OF FUTURES TRANSACTIONS. The Fund may close out its position as a buyer
or seller of a futures contract only if a liquid secondary market exists for
futures contracts of that series. There is no assurance that such a market
will exist. Also, exchanges may limit the amount by which the price of many
futures contracts may move on any day. If the price moves equal the daily
limit on successive days, then it may prove impossible to liquidate a futures
position until the daily limit moves have ceased.
The extent to which the Fund may enter into transactions involving futures
contracts may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes."
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of
the securities which are the subject of the contract. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the securities and futures markets could result.
7
<PAGE>
CASH FLOWS; EXPENSES. The ability of the Fund to meet its investment
objective depends to some extent on the Investment Manager's ability to
manage cash flows (primarily from purchases and redemptions and distributions
from the Fund's portfolio investments). Generally, the Investment Manager
will employ stock index futures to provide liquidity necessary to meet
anticipated redemptions or for day-to-day operating purposes. In addition, if
considered appropriate in the opinion of the Investment Manager, a portion of
a Fund's assets not exceeding 20% of its total assets may be invested in
money market instruments. The Investment Manager will also make investment
changes to the Fund's portfolio to accommodate cash flows while continuing to
seek to replicate the total return of the S&P 500 Index. Investors should
also be aware that the investment performance of the S&P 500 Index is a
hypothetical number which does not take into account brokerage commissions
and other transaction costs, custody and other costs of investing, which will
be borne by the Fund, and any incremental operating costs (e.g., transfer
agency, accounting) borne by the Fund. Finally, since the Fund seeks to
provide investment results that, before expenses, correspond to the total
return of the S&P 500 Index. S&P 500 Index, the Investment Manager will
generally not attempt to judge the merits of any particular security as an
investment.
TEMPORARY INVESTMENTS. A portion of the Fund's assets, not exceeding 20% of
its total assets, may be invested temporarily in money market instruments
under any one or more of the following circumstances: (a) pending investment
of proceeds of sale of shares of the Fund; (b) pending settlement of
purchases of portfolio securities; or (c) to maintain liquidity for the
purposes of meeting anticipated redemptions. The money market instruments in
which the Fund may invest are certificates of deposit of U.S. domestic banks
with assets of $1 billion or more; bankers' acceptances; time deposits; U.S.
Government and U.S. Government agency securities; or commercial paper rated
within the two highest grades by S&P or Moody's Investors Service, Inc., or,
if not rated, are of comparable quality as determined by the Trustees, and
which mature within one year from the date of purchase.
FOREIGN SECURITIES. The Fund may purchase common stocks, including American
Depository Receipts, of foreign corporations represented in the S&P 500 Index
(such securities are listed on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ Market System). Investments in foreign
securities may be affected by changes in governmental administration or
economic policy (in the United States and abroad) or changed circumstances in
dealings between nations. Foreign companies may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies
may be more volatile than securities of U.S. companies. As noted above, the
Fund's investment in common stock of foreign corporations represented in the
S&P 500 Index may also be in the form of American Depository Receipts (ADRs).
ADRs are receipts typically issued by a United States bank or trust company
evidencing ownership of the underlying securities and are designed for use in
the U.S. securities markets.
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS"). The Fund may purchase
interests in a unit investment trust holding a portfolio of securities linked
to the S&P 500 Index. SPDRs closely track the underlying portfolio of
securities, trade like a share of common stock and pay periodic dividends
proportionate to those paid by the portfolio of stocks that comprise the S&P
500 Index. The Fund may invest up to 10% of its total assets in the aggregate
in SPDRs and up to 5% of its total assets in SPDRs issued by a single unit
investment trust. As a holder of interests in a unit investment trust, the
Fund would indirectly bear its ratable share of that unit investment trust's
expenses. At the same time the Fund would continue to pay its own management
and advisory 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 such unit investment trusts. The liquidity of small
holdings of SPDRs will depend upon the existence and liquidity of a secondary
market. See the Statement of Additional Information for a further discussion
of SPDRs.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase. While repurchase agreements
involve certain risks not associated with direct investments in debt
securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures designed to minimize such
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
ZERO COUPON SECURITIES. A portion of the money market instruments in which
the Fund may invest 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
8
<PAGE>
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
fluctuationsduring periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the securities fail
financially. However, loans of portfolio securities will only be made to
firms deemed by the Investment Manager to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks.
For additional risk disclosure, please refer to the "Investment Objective
and Policies" section of the Prospectus and to the "Investment Practices and
Policies" section of the Statement of Additional Information.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the
Distributor and the Transfer Agent depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Distributor and the Transfer Agent have
been actively working on necessary changes to their own computer systems to
prepare for the year 2000 and expect that their systems will be adapted
before that date, but there can be no assurance that they will be successful,
or that interaction with other non-complying computer systems will not impair
their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. In addition, corporate and governmental data processing errors may
result in production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S.
and foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.
PORTFOLIO MANAGEMENT
The Fund's portfolio is managed by its Investment Manager with a view to
achieving the Fund's investment objective. The assets of the Fund are managed
within InterCapital's Growth Group, which manages 26 equity funds and fund
portfolios with approximately $9 billion in assets as of February 28, 1998.
Kenton J. Hinchliffe, Senior Vice President of InterCapital and a member of
InterCapital's Growth Group, is the primary portfolio manager of the Fund.
Mr. Hinchliffe has been a portfolio manager at InterCapital for over 5 years.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"), Morgan Stanley & Co. Incorporated and other brokers
and dealers that are affiliates of the Investment Manager. The Fund may incur
brokerage commissions on transactions conducted through such affiliates.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR.
It is not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 100% in any one year. Ordinarily,
securities will be sold from the portfolio only to reflect certain
administrative changes in the S&P 500 Index or to accommodate cash flows into
or out of the Fund while maintaining the similarity of the Fund to the
9
<PAGE>
S&P 500 Index. The Fund will incur brokerage costs commensurate with its
portfolio turnover rate. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's trading policy.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the 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 any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities), except that the Fund may invest all or substantially all
of its assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as the Fund (a "Qualifying Portfolio").
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one issuer,
except that the Fund may invest all or substantially all of its assets in a
Qualifying Portfolio.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
GENERAL
Dean Witter Distributors Inc. (the "Distributor") will act as the
Distributor of each Class of the Fund's shares during the continuous
offering. Pursuant to a Distribution Agreement between the Fund and the
Distributor, an affiliate of the Investment Manager, shares of the Fund are
distributed by the Distributor and offered by DWR and other dealers which
have entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is
located at Two World Trade Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales
charge are subject to a contingent deferred sales charge ("CDSC") of 1.0% if
redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but
are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most
redemptions within six years after purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0%
if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold
without an initial sales charge or CDSC and are available only to investors
meeting an initial investment minimum of $5 million ($25 million for certain
qualified plans), and to certain other limited categories of investors. At
the discretion of the Board of Trustees of the Fund, Class A shares may be
sold to categories of investors in addition to those set forth in this
prospectus at net asset value without a front-end sales charge, and Class D
shares may be sold to certain other categories of investors, in each case as
may be described in the then current prospectus of the Fund. See "Alternative
Purchase Arrangements -- Selecting a Particular Class" for a discussion of
factors to consider in selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25
million for certain qualified plans) or more and to certain other limited
categories of investors. For the purpose of meeting the minimum $5 million
(or $25 million) initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares of the Fund and other Dean Witter Funds
that are multiple class funds ("Dean Witter Multi-Class Funds") and shares of
10
<PAGE>
Dean Witter Funds sold with a front-end sales charge ("FSC Funds") and
concurrent investments in Class D shares of the Fund and other Dean Witter
Multi-Class Funds will be aggregated. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter S&P 500 Index Fund,
directly to Morgan Stanley Dean Witter Trust FSB (the "Transfer Agent" or
"MSDW Trust") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an
account executive of DWR or other Selected Broker-Dealer. When purchasing
shares of the Fund, investors must specify whether the purchase is for Class
A, Class B, Class C or Class D shares. If no Class is specified, the Transfer
Agent will not process the transaction until the proper Class is identified.
The minimum initial purchase in the case of investments through EasyInvest
(Service Mark), an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling at least $1,000 within the first twelve months. The
minimum initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase
the investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset
allocation program and (iii) fee-based programs approved by the Distributor,
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory, administrative and/or brokerage services, the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required, provided, in the case of
Systematic Payroll Deduction Plans, that the Distributor has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital gains distributions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions. Sales personnel of a Selected Broker-Dealer are
compensated for selling shares of the Fund by the Distributor and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their
needs. The general public is offered three Classes of shares: Class A shares,
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors
(see "No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class.
This summary is qualified in its entirety by detailed discussion of each
Class that follows this summary.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain
other limited categories of investors) are not subject to any sales charges
at the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase, except for certain specific circumstances.
Class A shares are also subject to a 12b-1 fee of up to 0.25% of the average
daily net assets of the Class. See "Initial Sales Charge Alternative--Class A
Shares."
11
<PAGE>
CLASS B SHARES. Class B shares are offered at net asset value with no initial
sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%) if
redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if
redeemed within three years after purchase.) This CDSC may be waived for
certain redemptions. Class B shares are also subject to an annual 12b-1 fee
of 1.0% of the average daily net assets of Class B. The Class B shares'
distribution fee will cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition,
a certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class C shares. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class A or
Class D shares. See "Level Load Alternative -- Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are
not subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any
other relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are
not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C
shares over the term of the investment. As an alternative, Class B and Class
C shares are sold without any initial sales charge so the entire purchase
price is immediately invested in the Fund. Any investment return on these
additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to
an ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a
front-end sales charge and they are uncertain as to the length of time they
intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Dean
Witter Multi-Class Funds, shares of FSC Funds and shares of Dean Witter Funds
for which such shares have been exchanged, will be included together with the
current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
12
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
- -----------------------------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- -----------------------------------------------------------------------------
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- -----------------------------------------------------------------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically after
to 0 after six years approximately
ten years
- -----------------------------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- -----------------------------------------------------------------------------
D None None No
- -----------------------------------------------------------------------------
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees
for each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase (calculated from the last day of the month in which the
shares were purchased), except for certain specific circumstances. The CDSC
will be assessed on an amount equal to the lesser of the current market value
or the cost of the shares being redeemed. The CDSC will not be imposed (i) in
the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references
to six years in the first paragraph of that section shall mean one year in
the case of Class A shares, and (ii) in the circumstances identified in the
section "Additional Net Asset Value Purchase Options" below. Class A shares
are also subject to an annual 12b-1 fee of up to 0.25% of the average daily
net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
----------- ----- ---------------
<S> <C> <C>
Less than $25,000 .. 5.25% 5.54%
$25,000 but less
than $50,000 ....... 4.75% 4.99%
$50,000 but less
than $100,000 ...... 4.00% 4.17%
$100,000 but less
than $250,000 ...... 3.00% 3.09%
$250,000 but less
than $1 million ... 2.00% 2.04%
$1 million and over 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the
sales charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; and for
investments in Individual Retirement Accounts of employees of a single
employer through Systematic Payroll Deduction plans; or (g) any other
organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced sales
charges in accordance with the above schedule by combining purchases of Class
A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The
sales charge payable on the purchase of the Class A shares of the Fund, the
Class A shares of the other Dean Witter Multi-Class Funds and the shares of
the FSC Funds will
13
<PAGE>
be at their respective rates applicable to the total amount of the combined
concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single
transaction, together with shares of the Fund and other Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Dean Witter Funds acquired in exchange for those
shares, and including in each case shares acquired through reinvestment of
dividends and distributions), which are held at the time of such transaction,
amounts to $25,000 or more. If such investor has a cumulative net asset value
of shares of FSC Funds and Class A and Class D shares that, together with the
current investment amount, is equal to at least $5 million ($25 million for
certain qualified plans), such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Selected Broker-Dealer or the Transfer Agent
fails to confirm the investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the
Fund from DWR or other Selected Broker-Dealers. The cost of Class A shares of
the Fund or shares of other Dean Witter Funds which were previously purchased
at a price including a front-end sales charge during the 90-day period prior
to the date of receipt by the Distributor of the Letter of Intent, or of
Class A shares of the Fund or shares of other Dean Witter Funds acquired in
exchange for shares of such funds purchased during such period at a price
including a front-end sales charge, which are still owned by the shareholder,
may also be included in determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of $1
million or more, Class A shares also may be purchased at net asset value by
the following:
(1) trusts for which MSDW Trust (an affiliate of the Investment Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for
services in the nature of investment advisory, administrative and/or
brokerage services (such investments are subject to all of the terms and
conditions of such programs, which may include termination fees, mandatory
redemption upon termination and such other circumstances as specified in the
programs' agreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class
A shares, regardless of the plan's asset size or number of eligible
employees;
(5) investors who are clients of a Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if the shares are
being purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase
was made within sixty days after the redemption and the proceeds of the
redemption had been maintained in the interim in cash or a money market fund;
and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an initial
sales charge so that the full
14
<PAGE>
amount of an investor's purchase payment may be immediately invested in the
Fund. A CDSC, however, will be imposed on most Class B shares redeemed within
six years after purchase. The CDSC will be imposed on any redemption of
shares if after such redemption the aggregate current value of a Class B
account with the Fund falls below the aggregate amount of the investor's
purchase payments for Class B shares made during the six years (or, in the
case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption. In addition, Class B shares are subject to an
annual 12b-1 fee of 1.0% of the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may,
however, be subject to a CDSC which will be a percentage of the dollar amount
of shares 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 following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ ------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third...................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In the case of Class B shares of the Fund purchased by Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement, shares held for three years or more after purchase
(calculated as described in the paragraph above) will not be subject to any
CDSC upon redemption. However, shares redeemed earlier than three years after
purchase may be subject to a CDSC (calculated as described in the paragraph
above), the percentage of which will depend on how long the shares have been
held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
------------ ------------------
<S> <C>
First ..................... 2.0%
Second .................... 2.0%
Third ..................... 1.0%
Fourth and thereafter .... None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which represents
an increase in value of shares purchased within the six years (or, in the
case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
Qualified Retirement Plans, three years) prior to the redemption; and (iii)
the current net asset value of shares purchased through reinvestment of
dividends or distributions and/or shares acquired in exchange for shares of
FSC Funds or of other Dean Witter Funds acquired in exchange for such shares.
Moreover, in determining whether a CDSC is applicable it will be assumed that
amounts described in (i), (ii) and (iii) above (in that order) are redeemed
first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account ("IRA") or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code ("403(b) Custodial Account"), provided in either
case that the redemption is requested within one year of the death or initial
determination of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or, in the
case of a "key employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
<PAGE>
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan 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 MSDW Trust serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to
a written Recordkeeping Services Agreement ("Eligible Plan"), provided that
either: (A) the plan continues to be an Eligible Plan after the redemption;
or (B) the redemption is in connection with the complete termination of the
plan involving the distribution of all plan assets to participants.
15
<PAGE>
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
CONVERSION TO CLASS A SHARES. Class B shares will convert automatically to
Class A shares, based on the relative net asset values of the shares of the
two Classes on the conversion date, which will be approximately ten (10)
years after the date of the original purchase. The ten year period is
calculated from the last day of the month in which the shares were purchased
or, in the case of Class B shares acquired through an exchange or a series of
exchanges, from the last day of the month in which the original Class B
shares were purchased, provided that shares acquired in exchange for shares
of another fund originally purchased before May 1, 1997 will convert to Class
A shares in May, 2007. The conversion of shares purchased on or after May 1,
1997 will take place in the month following the tenth anniversary of the
purchase. There will also be converted at that time such proportion of Class
B shares acquired through automatic reinvestment of dividends and
distributions owned by the shareholder as the total number of his or her
Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the
case of Class B shares held by a Qualified Retirement Plan for which MSDW
Trust serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement, the plan
is treated as a single investor and all Class B shares will convert to Class
A shares on the conversion date of the first shares of a Dean Witter
Multi-Class Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired) is excluded from the holding period for
conversion. If those shares are subsequently re-exchanged for Class B shares
of a Dean Witter Multi-Class Fund, the holding period resumes on the last day
of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior
to the date for conversion. Class B shares evidenced by share certificates
that are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an initial
sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount
equal to the lesser of the current market value or the cost of the shares
being redeemed. The CDSC will not be imposed in the circumstances set forth
above in the section "Contingent Deferred Sales Charge Alternative--Class B
Shares -- CDSC Waivers," except that the references to six years in the first
paragraph of that section shall mean one year in the case of Class C shares.
Class C shares are subject to an annual 12b-1 fee of up to 1.0% of the
average daily net assets of the Class. Unlike Class B shares, Class C shares
have no conversion feature and, accordingly, an investor that purchases Class
C shares will be subject to 12b-1 fees applicable to Class C shares for an
indefinite period subject to annual approval by the Fund's Board of Trustees
and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or redemption
and without any 12b-1 fee. Class D shares are offered only to investors
meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the InterCapital mutual fund asset allocation
program pursuant to which such
16
<PAGE>
persons pay an asset based fee; (ii) persons participating in a fee-based
program approved by the Distributor, pursuant to which such persons pay an
asset based fee for services in the nature of investment advisory,
administrative and/or brokerage services (subject to all of the terms and
conditions of such programs referred to in (i) and (ii) above, which may
include termination fees, mandatory redemption upon termination and such
other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) 401(k) plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR)
for their employees; (iv) certain Unit Investment Trusts sponsored by DWR;
(v) certain other open-end investment companies whose shares are distributed
by the Distributor; and (vi) other categories of investors, at the discretion
of the Board, as disclosed in the then current prospectus of the Fund.
Investors who require a $5 million (or $25 million) minimum initial
investment to qualify to purchase Class D shares may satisfy that requirement
by investing that amount in a single transaction in Class D shares of the
Fund and other Dean Witter Multi-Class Funds, subject to the $1,000 minimum
initial investment required for that Class of the Fund. In addition, for the
purpose of meeting the $5 million (or $25 million) minimum investment amount,
holdings of Class A shares in all Dean Witter Multi-Class Funds, shares of
FSC Funds and shares of Dean Witter Funds for which such shares have been
exchanged, will be included together with the current investment amount. If a
shareholder redeems Class A shares and purchases Class D shares, such
redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares
of the Fund. In the case of Class A and Class C shares, the Plan provides
that the Fund will reimburse the Distributor and others for the expenses of
certain activities and services incurred by them specifically on behalf of
those shares. Reimbursements for these expenses will be made in monthly
payments by the Fund to the Distributor, which will in no event exceed
amounts equal to payments at the annual rates of 0.25% and 1.0% of the
average daily net assets of Class A and Class C, respectively. In the case of
Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 1.0% of
the average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of
the NASD guidelines. In the case of Class B and Class C shares, a portion of
the fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently characterized as a service fee.
A service fee is a payment made for personal service and/or the maintenance
of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses
borne by the Distributor and others in the distribution of the shares of
those Classes, including the payment of commissions for sales of the shares
of those Classes and incentive compensation to and expenses of DWR's account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan in the case of Class B shares to compensate DWR and other Selected
Broker-Dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
For the fiscal period September 26, 1997 (commencement of operations)
through February 28, 1998, Class A, Class B and Class C shares of the Fund
accrued payments under the Plan amounting to $12,848, $1,127,620, and
$75,709, respectively, which amounts on an annualized basis are equal to
0.24%, 1.0% and 1.0% of the average daily net assets of Class A, Class B and
Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B shares. For example,
if $1 million in expenses in distributing Class B shares of the Fund had been
incurred and $750,000 had been received as described in (i) and (ii) above,
the excess expense would amount to $250,000. The Distributor has advised the
Fund that such excess amounts, including the carrying charge described above,
totalled $15,470,964 at February 28, 1998, which was equal to 4.07% of the
net assets of Class B on such date. Because there is no requirement under the
Plan that the Distributor be reimbursed for all distribution expenses or any
requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made
to the Distributor under the Plan, and the proceeds
17
<PAGE>
of CDSCs paid by investors upon redemption of shares, if for any reason the
Plan is terminated the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or CDSCs, may or may not be recovered
through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses
representing a gross sales commission credited to account executives at the
time of sale may be reimbursed in the subsequent calendar year. The
Distributor has advised the Fund that unreimbursed expenses representing a
gross sales commission credited to account executives at the time of sale
totalled $145,457 in the case of Class C at December 31, 1997, which amount
was equal to 0.76% of the net assets of Class C on such date, and that there
were no such expenses that may be reimbursed in the subsequent year in the
case of Class A on such date. No interest or other financing charges will be
incurred on any Class A or Class C distribution expenses incurred by the
Distributor under the Plan or on any unreimbursed expenses due to the
Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New York
time, on each day that the New York Stock Exchange is open (or, on days when
the New York Stock Exchange closes prior to 4:00 p.m., at such earlier time),
by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the
Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange prior to
the time assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more
than one exchange, the security is valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price; (3) when market quotations are
not readily available, including circumstances under which it is determined
by the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Fund's Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors); (4) the value
of short-term debt securities which mature at a date less than sixty days
subsequent to valuation date will be determined on an amortized cost or
amortized value basis; and (5) the value of other assets will be determined
in good faith at fair value under procedures established by and under the
general supervision of the Fund's Trustees. Dividends receivable are accrued
as of the ex-dividend date. Interest income is accrued daily. Certain
securities in the Fund's portfolio may be valued by an outside pricing
service approved by the Fund's Trustees.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Dean Witter Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are
acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value next determined after receipt by the
Transfer Agent, by returning the check or the proceeds to the Transfer Agent
within thirty days after the payment date. Shares so acquired are acquired at
net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases").
EASYINVEST (SERVICE MARK) . Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automati-
18
<PAGE>
cally from a checking or savings account or following redemption of shares of
a Dean Witter money market fund, on a semi-monthly, monthly or quarterly
basis, to the Transfer Agent for investment in shares of the Fund (see
"Purchase of Fund Shares" and "Redemptions and 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 CDSC will be imposed on shares redeemed under the Withdrawal Plan
(see "Purchase of Fund Shares"). Therefore, any shareholder participating in
the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable CDSC) to the shareholder
will be the designated monthly or quarterly amount. Withdrawal plan payments
should not be considered as dividends, yields or income. If periodic
withdrawal plan payments continuously exceed net investment income and net
capital gains, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Each withdrawal constitutes a redemption of
shares and any gain or loss realized must be recognized for federal income
tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange
fee. Shares may also be exchanged for shares of the following funds: Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S.
Treasury Trust and five Dean Witter funds which are money market funds (the
"Exchange Funds"). Class A shares may also be exchanged for shares of Dean
Witter Multi-State Municipal Series Trust and Dean Witter Hawaii Municipal
Trust, which are Dean Witter Funds sold with a front-end sales charge ("FSC
Funds"). Class B shares may also be exchanged for shares of Dean Witter
Global Short-Term Income Fund Inc. ("Global Short-Term") which is a Dean
Witter Fund offered with a CDSC. Exchanges may be made after the shares of
the Fund acquired by purchase (not by exchange or dividend reinvestment) have
been held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the
basis of the next calculated net asset value per share of each fund after the
exchange order is received. When exchanging into a money market fund from the
Fund, shares of the Fund are redeemed out of the Fund at their next
calculated net asset value and the proceeds of the redemption are used to
purchase shares of the money market fund at their net asset value determined
the following day. Subsequent exchanges between any of the money market funds
and any of the Dean Witter Multi-Class Funds, FSC Funds, Global Short-Term or
any Exchange Fund that is not a money market fund can be effected on the same
basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains invested in an Exchange Fund (calculated from
the last day of the month in which the Exchange Fund shares were acquired)
the holding period (for the purpose of determining the rate of the CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a Dean
Witter Multi-Class Fund or shares of Global Short-Term, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a Dean Witter Multi-Class Fund or shares of
Global Short-Term are reacquired. Thus, the CDSC is based upon the time
(calculated as described above) the shareholder was invested in shares of a
Dean Witter Multi-Class Fund or in shares of Global Short-Term (see "Purchase
of Fund Shares"). In the case of exchanges of Class A shares which are
subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC Fund. In the
case of shares exchanged into an Exchange Fund on or after April 23, 1990,
upon a redemption of
19
<PAGE>
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.) Class B shares of the Fund
acquired in exchange for shares of Global Short-Term or Class B shares of
another Dean Witter Multi-Class Fund having a different CDSC schedule than
that of this Fund will be subject to the higher CDSC schedule, even if such
shares are subsequently re-exchanged for shares of the fund with the lower
CDSC schedule.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should be
made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional
purchases and/or exchanges from the investor. Although the Fund does not have
any specific definition of what constitutes a pattern of frequent exchanges,
and will consider all relevant factors in determining whether a particular
situation is abusive and contrary to the best interests of the Fund and its
other shareholders, investors should be aware that the Fund and each of the
other Dean Witter Funds may in their discretion limit or otherwise restrict
the number of times this Exchange Privilege may be exercised by any investor.
Any such restriction will be made by the Fund on a prospective basis only,
upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such Dean Witter
Funds for which shares of the Fund have been exchanged, upon such notice as
may be required by applicable regulatory agencies. Shareholders maintaining
margin accounts with DWR or another Selected Broker-Dealer are referred to
their account executive regarding restrictions on exchange of shares of the
Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and read it carefully
before investing. Exchanges are subject to the minimum investment requirement
of each Class of shares and any other conditions imposed by each fund. In the
case of a shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder has realized a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the above
Dean Witter Funds (for which the Exchange Privilege is available) pursuant to
this Exchange Privilege by contacting their DWR or other Selected Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those who are clients of DWR or another Selected
Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the
experience of the other Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their account executive or the Transfer Agent.
20
<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at any
time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along
with any additional documentation required by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic or telegraphic request of the shareholder. The repurchase
price is the net asset value per share next determined (see "Purchase of Fund
Shares") after such repurchase order is received by DWR or other Selected
Broker-Dealer, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the Fund
or the Distributor. The offer by DWR and other Selected Broker-Dealers to
repurchase shares may be suspended without notice by them at any time. In
that event, shareholders may redeem their shares through the Fund's Transfer
Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances, e.g., when normal trading is not
taking place on the New York Stock Exchange. If the shares to be redeemed
have recently been purchased by check, payment of the redemption proceeds may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 35 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund in the same Class from which such shares were redeemed or
repurchased, at the net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, upon sixty
days' notice and at net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100 or such lesser
amount as may be fixed by the Board of Trustees or, in the case of an account
opened through EasyInvest, if after twelve months the shareholder has
invested less than $1,000 in the account. However, before the Fund redeems
such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than the applicable amount
and allow the shareholder to make an additional investment in an amount which
will increase the value of the account to at least the applicable amount
before the redemption is processed. No CDSC will be imposed on any
involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for each
Class of shares and intends to distribute substantially all of the Fund's net
investment income and net realized short-term and long-term capital gains, if
there are any, at least once each year. The Fund may, however, determine
either to distribute or to retain all or part of any net long-term capital
gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash. Shares
acquired by dividend and distribution reinvestments will not be subject to
any front-end sales charge or CDSC. Class B shares acquired through dividend
and
21
<PAGE>
distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment income
and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code, it is not expected that the Fund will be required to
pay any federal income tax. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. Any dividends
declared in the last quarter of any calendar year which are paid in the
following year prior to February 1 will be deemed, for tax purposes, to have
been received by the shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources 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. Shareholders will also be notified of their proportionate share of
long-term capital gains distributions that are eligible for a reduced rate of
tax under the Taxpayer Relief Act of 1997. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and the proceeds of redemptions and repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to their
accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements and
sales literature. These figures are computed separately for Class A, Class B,
Class C and Class D shares. The total return of the Fund is based on
historical earnings and is not intended to indicate future performance. The
"average annual total return" of the Fund refers to a figure reflecting the
average annualized percentage increase (or decrease) in the value of an
initial investment in a Class of the Fund of $1,000 over periods of one, five
and ten years, or over the life of the Fund, if less than any of the
foregoing. Total return and average annual total return reflect all income
earned by the Fund, any appreciation or depreciation of the Fund's assets and
all expenses incurred by the applicable Class and all sales charges which
will be incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any 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 each Class of
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 except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote
22
<PAGE>
on any proposed material increase in Class A's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein,
Class A, Class B and Class C bear the expenses related to the distribution of
their respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
obligations of the Fund. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Fund, requires that notice of such Fund obligations include such disclaimer,
and provides for indemnification out of the Fund's property for any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Fund itself would be
unable to meet its obligations. Given the above limitations on shareholder
personal liability, and the nature of the Fund's assets and operations, the
possibility of the Fund being unable to meet its obligations is remote and
thus, in the opinion of Massachusetts counsel to the Fund, the risk to Fund
shareholders of personal liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
23
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (98.2%)
Advertising/Marketing Services (0.3%)
8,466 Cognizant Corp. ................................................ $ 422,771
Interpublic Group of
6,575 Companies, Inc. ................................................ 358,337
8,460 Omnicom Group, Inc. ............................................ 387,045
-----------
1,168,153
-----------
Aerospace & Defense (1.2%)
52,223 Boeing Co. ..................................................... 2,833,098
3,265 General Dynamics Corp. ......................................... 283,239
10,127 Lockheed Martin Corp. .......................................... 1,181,694
3,481 Northrop Grumman Corp. ......................................... 483,859
-----------
4,781,890
-----------
Agriculture Related (0.2%)
29,108 Archer-Daniels-Midland Co. ..................................... 653,111
Pioneer Hi-Bred International,
3,433 Inc. ........................................................... 356,174
-----------
1,009,285
-----------
Air Freight (0.1%)
7,626 Federal Express Corp. .......................................... 485,681
-----------
Airlines (0.4%)
4,790 AMR Corp.* ..................................................... 606,234
3,840 Delta Air Lines, Inc. .......................................... 434,160
11,426 Southwest Airlines Co. ......................................... 327,783
4,739 US Airways Group Inc.* ......................................... 300,038
-----------
1,668,215
-----------
Aluminum (0.3%)
11,845 Alcan Aluminium Ltd. (Canada) .................................. 367,935
9,006 Aluminum Co. of America ........................................ 660,815
3,849 Reynolds Metals Co. ............................................ 239,841
-----------
1,268,591
-----------
Auto Parts - After Market (0.5%)
4,108 Cooper Tire & Rubber Co. ....................................... 94,741
5,454 Dana Corp. ..................................................... 297,584
3,288 Echlin, Inc. ................................................... 166,249
9,330 Genuine Parts Co. .............................................. 345,210
8,142 Goodyear Tire & Rubber Co. ..................................... 562,816
6,179 ITT Industries, Inc. ........................................... 211,631
6,427 TRW, Inc. ...................................................... 352,280
-----------
2,030,511
-----------
Automobiles (1.7%)
34,588 Chrysler Corp. ................................................. 1,346,770
62,651 Ford Motor Co. ................................................. 3,543,697
36,926 General Motors Corp. ........................................... 2,545,586
-----------
7,436,053
-----------
Banks - Money Center (3.8%)
36,206 BankAmerica Corp. .............................................. 2,805,965
5,115 Bankers Trust New York Corp. ................................... 604,849
22,004 Chase Manhattan Corp. .......................................... 2,729,871
23,887 Citicorp ....................................................... 3,165,027
15,188 First Chicago NBD Corp. ........................................ 1,248,264
32,760 First Union Corp. .............................................. 1,726,042
9,275 Morgan (J.P.) & Co., Inc. ...................................... 1,108,362
49,094 NationsBank Corp. .............................................. 3,362,939
-----------
16,751,319
-----------
Banks - Regional (4.6%)
33,709 Banc One Corp. ................................................. 1,904,558
19,665 Bank of New York Co., Inc. ..................................... 1,151,632
7,598 BankBoston Corp. ............................................... 757,426
7,143 BB&T Corporation ............................................... 443,312
2,864 Cincinnati Financial Corp. ..................................... 386,282
5,502 Comerica, Inc. ................................................. 554,670
10,328 CoreStates Financial Corp. ..................................... 872,070
8,041 Fifth Third Bancorp ............................................ 633,229
14,225 Fleet Financial Group, Inc. .................................... 1,121,108
9,971 Huntington Bancshares, Inc. .................................... 357,710
11,469 KeyCorp ........................................................ 803,547
13,292 Mellon Bank Corp. .............................................. 828,258
6,801 Mercantile Bancorporation, Inc. ................................ 378,306
11,157 National City Corp. ............................................ 727,994
5,828 Northern Trust Corp. ........................................... 441,471
39,434 Norwest Corp. .................................................. 1,614,329
15,926 PNC Bank Corp. ................................................. $ 883,893
2,858 Republic New York Corp. ........................................ 345,818
8,381 State Street Corp. ............................................. 518,051
9,187 Summit Bancorp ................................................. 456,479
11,009 SunTrust Banks, Inc. ........................................... 811,914
9,128 Synovus Financial Corp. ........................................ 320,621
12,818 U.S. Bancorp ................................................... 1,474,871
10,650 Wachovia Corp. ................................................. 846,675
4,527 Wells Fargo & Co. .............................................. 1,457,694
-----------
20,091,918
-----------
Beverages - Alcoholic (0.5%)
25,579 Anheuser-Busch Companies, Inc. ................................. 1,199,016
3,601 Brown-Forman Corp. (Class B) ................................... 199,855
1,933 Coors (Adolph) Co. (Class B) ................................... 60,406
18,610 Seagram Co. Ltd. (Canada) ...................................... 707,180
-----------
2,166,457
-----------
Beverages - Soft Drinks (2.7%)
129,126 Coca Cola Co.** ................................................ 8,869,342
79,206 PepsiCo, Inc. .................................................. 2,895,969
-----------
11,765,311
-----------
Biotechnology (0.1%)
13,741 Amgen Inc.* .................................................... 729,991
-----------
Broadcast Media (1.0%)
36,755 CBS Corp. ...................................................... 1,137,108
5,116 Clear Channel Communications, Inc.* ............................ 463,637
Tele-Communications, Inc.
26,481 (Class A)* ..................................................... 769,604
31,693 U.S. West Media Group, Inc.* ................................... 1,020,118
18,418 Viacom, Inc. (Class B)* ........................................ 884,064
-----------
4,274,531
-----------
Building Materials (0.2%)
Armstrong World Industries
2,126 Inc. ........................................................... 166,891
8,610 Masco Corp. .................................................... 468,169
2,785 Owens-Corning .................................................. 85,987
-----------
721,047
-----------
Chemicals (1.7%)
5,720 Air Products & Chemicals, Inc. ................................. 480,122
11,839 Dow Chemical Co. ............................................... 1,083,268
59,079 DuPont (E.I.) de Nemours & Co., Inc. ........................... 3,622,281
4,087 Eastman Chemical Co. ........................................... 267,698
3,750 Goodrich (B.F.) Co. ............................................ 185,859
5,044 Hercules, Inc. ................................................. 243,688
9,300 PPG Industries, Inc. ........................................... 602,756
8,240 Praxair, Inc. .................................................. 393,975
3,209 Rohm & Haas Co. ................................................ 327,117
6,469 Union Carbide Corp. ............................................ 300,404
-----------
7,507,168
-----------
Chemicals - Diversified (0.4%)
7,533 Engelhard Corp. ................................................ 136,536
1,936 FMC Corp.* ..................................................... 140,118
30,959 Monsanto Co. ................................................... 1,575,039
-----------
1,851,693
-----------
Chemicals - Specialty (0.3%)
3,876 Grace (W. R.) & Co. ............................................ 325,342
3,123 Great Lakes Chemical Corp. ..................................... 151,856
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
5,701 International Flavors & Fragrances, Inc. ....................... $ 262,246
6,946 Morton International, Inc. ..................................... 229,652
3,485 Nalco Chemical Co. ............................................. 140,271
5,232 Sigma-Aldrich Corp. ............................................ 206,664
-----------
1,316,031
-----------
Commercial & Consumer
Services (0.7%)
5,432 Block (H.&R.), Inc. ............................................ 255,643
41,270 Cendant Corp.* ................................................. 1,547,625
8,893 Dun & Bradstreet Corp. ......................................... 297,915
17,150 Laidlaw, Inc. (Canada) ......................................... 251,891
13,128 Service Corp. International .................................... 497,223
-----------
2,850,297
-----------
Communications Equipment (1.0%)
4,706 Andrew Corp.* .................................................. 130,003
4,158 Harris Corp. ................................................... 210,759
31,166 Motorola, Inc. ................................................. 1,737,504
27,358 Northern Telecom Ltd. (Canada) ................................. 1,458,523
4,058 Scientific-Atlanta, Inc. ....................................... 71,015
9,452 Tellabs, Inc.* ................................................. 570,664
-----------
4,178,468
-----------
Computer - Networking (1.0%)
18,062 3Com Corp.* .................................................... 645,716
11,047 Bay Networks, Inc.* ............................................ 374,217
8,229 Cabletron Systems, Inc.* ....................................... 127,549
52,531 Cisco Systems, Inc.* ........................................... 3,460,480
-----------
4,607,962
-----------
Computer Software & Services (3.5%)
3,804 Adobe Systems, Inc. ............................................ 168,089
2,504 Autodesk, Inc. ................................................. 118,627
28,543 Computer Associates International, Inc. ........................ 1,345,089
4,032 Computer Sciences Corp.* ....................................... 422,100
11,033 HBO & Co. ...................................................... 597,161
126,001 Microsoft Corp.*_** ............................................ 10,678,585
18,218 Novell, Inc.* .................................................. 191,289
51,192 Oracle Corp.* .................................................. 1,260,603
6,648 Parametric Technology Corp.* ................................... 402,204
1,300 Shared Medical Systems Corp. ................................... 99,369
-----------
15,283,116
-----------
Computers - Peripheral
Equipment (0.3%)
25,893 EMC Corp.* ..................................................... 990,407
12,760 Seagate Technology, Inc.* ...................................... 310,227
-----------
1,300,634
-----------
Computers - Systems (2.7%)
6,644 Apple Computer, Inc.* .......................................... 156,964
79,046 COMPAQ Computer Corp. .......................................... 2,534,412
2,495 Data General Corp.* ............................................ 51,459
17,043 Dell Computer Corp.* ........................................... 2,382,824
7,717 Digital Equipment Corp.* ....................................... 439,387
50,757 International Business Machines Corp.** ........................ 5,300,934
19,559 Sun Microsystems, Inc.* ........................................ 931,497
-----------
11,797,477
-----------
Consumer - Noncyclical (0.0%)
American Greetings Corp.
3,843 (Class A) ...................................................... 175,337
2,040 Jostens, Inc. .................................................. 47,940
-----------
223,277
-----------
Containers - Metal & Glass (0.1%)
1,574 Ball Corp. ..................................................... 51,352
6,696 Crown Cork & Seal Co., Inc. .................................... 361,584
7,322 Owens-Illinois, Inc.* .......................................... 280,982
-----------
693,918
-----------
Containers - Paper (0.1%)
2,767 Bemis Company, Inc. ............................................ $ 124,688
5,181 Stone Container Corp. .......................................... 58,286
2,970 Temple-Inland, Inc. ............................................ 177,086
3,622 Union Camp Corp. ............................................... 216,414
-----------
576,474
-----------
Data Processing (0.5%)
15,275 Automatic Data Processing, Inc. ................................ 932,730
3,985 Ceridian Corp.* ................................................ 185,552
7,867 Equifax, Inc. .................................................. 282,720
22,347 First Data Corp. ............................................... 759,798
-----------
2,160,800
-----------
Distributors - Food & Health (0.2%)
5,709 Cardinal Health, Inc. .......................................... 467,424
3,158 Supervalu, Inc. ................................................ 150,400
8,930 Sysco Corp. .................................................... 420,268
-----------
1,038,092
-----------
Electrical Equipment (3.9%)
11,465 AMP, Inc. ...................................................... 506,610
23,138 Emerson Electric Co. ........................................... 1,476,494
170,868 General Electric Co.** ......................................... 13,284,987
2,619 General Signal Corp. ........................................... 106,397
6,651 Honeywell, Inc. ................................................ 527,092
4,489 Raychem Corp. .................................................. 194,991
10,896 Rockwell International Corp. ................................... 659,208
2,868 Thomas & Betts Corp. ........................................... 162,580
-----------
16,918,359
-----------
Electronic Components (0.0%)
2,593 Grainger (W.W.), Inc. .......................................... 251,035
9,775 Silicon Graphics, Inc.* ........................................ 147,236
-----------
398,271
-----------
Electronics - Defense (0.2%)
17,694 Raytheon Co. (Class B) ......................................... 1,040,628
-----------
Electronics - Instrumentation (0.9%)
2,382 EG & G, Inc. ................................................... 64,165
54,273 Hewlett-Packard Co. ............................................ 3,636,291
2,509 Perkin-Elmer Corp. ............................................. 183,627
2,618 Tektronix, Inc. ................................................ 116,828
-----------
4,000,911
-----------
Electronics - Semiconductors (2.2%)
7,361 Advanced Micro Devices, Inc.* .................................. 172,523
85,413 Intel Corp.** .................................................. 7,655,140
7,402 LSI Logic Corp.* ............................................... 175,335
10,999 Micron Technology, Inc.* ....................................... 365,029
8,523 National Semiconductor Corp.* .................................. 203,487
20,374 Texas Instruments, Inc. ........................................ 1,179,145
-----------
9,750,659
-----------
Engineering & Construction (0.0%)
4,378 Fluor Corp. .................................................... 206,040
2,122 Foster Wheeler Corp. ........................................... 56,763
2,902 McDermott International, Inc. .................................. 114,266
-----------
377,069
-----------
Entertainment (0.9%)
3,836 King World Productions Inc.* ................................... 102,373
35,226 Walt Disney Co. ................................................ 3,943,110
-----------
4,045,483
-----------
Facilities & Environmental
Services (0.0%)
3,043 Safety-Kleen Corp. ............................................. 81,590
-----------
Finance - Consumer (0.6%)
2,773 Beneficial Corp. ............................................... 327,214
5,635 Countrywide Credit Industries, Inc. ............................ 250,405
7,090 Green Tree Financial Corp. ..................................... 162,627
SEE NOTES TO FINANCIAL STATEMENTS
25
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
5,575 Household International, Inc. .................................. $ 724,053
26,149 MBNA Corp. ..................................................... 936,461
4,967 Providian Financial Corp. ...................................... 281,877
-----------
2,682,637
-----------
Finance - Diversified (2.8%)
24,265 American Express Co. ........................................... 2,185,367
12,718 American General Corp. ......................................... 739,234
55,357 Fannie Mae ..................................................... 3,532,469
36,260 Freddie Mac .................................................... 1,713,285
Hartford Financial Services
6,155 Group Inc. ..................................................... 604,729
5,320 Lehman Brothers Holdings, Inc. ................................. 335,492
5,957 MGIC Investment Corp. .......................................... 438,956
30,930 Morgan Stanley, Dean Witter, Discover & Co. (Note 4) ........... 2,155,434
10,178 SunAmerica, Inc. ............................................... 461,191
-----------
12,166,157
-----------
Foods (2.0%)
7,495 Bestfoods ...................................................... 789,786
23,888 Campbell Soup Co. .............................................. 1,386,997
24,664 ConAgra, Inc. .................................................. 739,920
8,262 General Mills, Inc. ............................................ 594,348
19,171 Heinz (H.J.) Co. ............................................... 1,079,567
7,453 Hershey Foods Corp. ............................................ 497,022
21,454 Kellogg Co. .................................................... 914,477
7,230 Quaker Oats Company (The) ...................................... 389,516
5,560 Ralston-Ralston Purina Group ................................... 563,992
25,057 Sara Lee Corp. ................................................. 1,415,720
6,063 Wrigley (WM.) Jr. Co. (Class A) ................................ 463,062
-----------
8,834,407
-----------
Footwear (0.2%)
15,164 Nike, Inc. (Class B) ........................................... 665,320
2,934 Reebok International Ltd. (United Kingdom) ..................... 91,504
-----------
756,824
-----------
Gaming, Lottery, & Pari-mutuel Companies (0.0%)
5,266 Harrah's Entertainment, Inc.* .................................. 110,915
9,335 Mirage Resorts, Inc.* .......................................... 213,538
-----------
324,453
-----------
Gold & Precious Metals Mining (0.2%)
19,447 Barrick Gold Corp. (Canada) .................................... 375,570
11,986 Battle Mountain Gold Co. ....................................... 71,916
7,655 Homestake Mining Co. ........................................... 76,550
8,156 Newmont Mining Corp. ........................................... 236,014
12,497 Placer Dome Inc. (Canada) ...................................... 160,899
-----------
920,949
-----------
Hardware & Tools (0.1%)
4,930 Black & Decker Corp. ........................................... 248,349
3,189 Snap-On, Inc. .................................................. 135,532
4,647 Stanley Works .................................................. 222,185
-----------
606,066
-----------
Healthcare - Diversified (4.4%)
39,933 Abbott Laboratories ............................................ 2,987,488
3,387 Allergan, Inc. ................................................. 118,545
33,918 American Home Products Corp. ................................... 3,179,813
51,910 Bristol-Myers Squibb Co. ....................................... 5,200,733
70,214 Johnson & Johnson .............................................. 5,301,157
3,823 Mallinckrodt Group, Inc. ....................................... 148,380
14,218 Warner-Lambert Co. ............................................. 2,079,383
-----------
19,015,499
-----------
Healthcare - Drugs (5.0%)
57,917 Lilly (Eli) & Co. .............................................. 3,811,663
62,560 Merck & Co., Inc.** ............................................ 7,980,310
67,521 Pfizer, Inc. ................................................... 5,975,609
26,484 Pharmacia & Upjohn, Inc. ....................................... $ 1,047,773
38,222 Schering-Plough Corp. .......................................... 2,907,261
-----------
21,722,616
-----------
Healthcare - HMOs (0.2%)
8,543 Humana, Inc.* .................................................. 217,313
9,833 United Healthcare Corp. ........................................ 596,740
-----------
814,053
-----------
Healthcare - Long Term (0.2%)
20,551 Healthsouth Corp.* ............................................. 554,877
3,320 Manor Care, Inc. ............................................... 124,708
-----------
679,585
-----------
Healthcare - Specialized Services (0.0%)
4,439 ALZA Corp. (Class A)* .......................................... 165,908
-----------
Heavy Duty Trucks & Parts (0.1%)
1,994 Cummins Engine Co., Inc. ....................................... 115,403
3,932 Navistar International Corp.* .................................. 119,435
4,060 PACCAR, Inc. ................................................... 256,288
-----------
491,126
-----------
Home Building (0.0%)
1,522 Centex Corp. ................................................... 111,201
1,875 Fleetwood Enterprises, Inc. .................................... 87,891
2,029 Kaufman & Broad Home Corp. ..................................... 52,500
1,106 Pulte Corp. .................................................... 50,323
-----------
301,915
-----------
Hospital Management (0.3%)
33,809 Columbia/HCA Healthcare Corp. .................................. 917,069
15,937 Tenet Healthcare Corp.* ........................................ 594,649
-----------
1,511,718
-----------
Household Furnishings &
Appliances (0.1%)
4,958 Maytag Corp. ................................................... 223,110
3,893 Whirlpool Corp. ................................................ 260,101
-----------
483,211
-----------
Household Products -
Non-durable (2.7%)
5,392 Clorox Co. ..................................................... 473,148
15,437 Colgate-Palmolive Co. .......................................... 1,253,291
10,903 Fort James Corp. ............................................... 494,724
28,671 Kimberly-Clark Corp. ........................................... 1,596,616
70,169 Procter & Gamble Co. ........................................... 5,959,979
Unilever N.V. & PLC
33,404 (Netherlands) .................................................. 2,148,295
-----------
11,926,053
-----------
Housewares (0.2%)
8,942 Fortune Brands, Inc. ........................................... 354,886
8,302 Newell Co. ..................................................... 380,854
7,819 Rubbermaid, Inc. ............................................... 226,751
3,193 Tupperware Corp. ............................................... 85,812
-----------
1,048,303
-----------
Insurance Brokers (0.4%)
8,729 AON Corp. ...................................................... 522,103
8,868 Marsh & McLennan Co., Inc. ..................................... 768,745
5,111 MBIA Inc. ...................................................... 374,061
-----------
1,664,909
-----------
Investment Banking/Brokerage (0.4%)
17,392 Merrill Lynch & Co., Inc. ...................................... 1,244,615
13,866 Schwab (Charles) Corp. ......................................... 523,441
-----------
1,768,056
-----------
Leisure Time - Products (0.2%)
5,185 Brunswick Corp. ................................................ 164,624
6,619 Hasbro, Inc. ................................................... 240,352
15,157 Mattel, Inc. ................................................... 641,331
-----------
1,046,307
-----------
Life & Health Insurance (0.6%)
7,757 Aetna Inc. ..................................................... 677,768
9,808 Conseco, Inc. .................................................. 460,363
3,694 Jefferson-Pilot Corp. .......................................... 309,834
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
7,310 Torchmark Corp. ................................................ $ 340,372
3,299 Transamerica Corp. ............................................. 384,127
7,271 UNUM Corp. ..................................................... 374,002
-----------
2,546,466
-----------
Lodging - Hotels (0.2%)
13,048 Hilton Hotels Corp. ............................................ 388,994
6,643 Marriot International, Inc. .................................... 503,207
-----------
892,201
-----------
Machinery - Diversified (0.8%)
3,895 Case Corp. ..................................................... 253,418
19,436 Caterpillar Inc. ............................................... 1,061,692
2,080 Cincinnati Milacron, Inc. ...................................... 64,220
6,319 Cooper Industries, Inc. ........................................ 354,654
13,154 Deere & Co. .................................................... 738,268
11,603 Dover Corp. .................................................... 448,166
2,577 Harnischfeger Industries, Inc. ................................. 91,161
8,654 Ingersoll-Rand Co. ............................................. 412,147
424 NACCO Industries, Inc. (Class A) ................................ 55,147
3,284 Timken Co. ..................................................... 105,909
-----------
3,584,782
-----------
Manufacturing - Diversified (2.2%)
1,468 Aeroquip-Vickers, Inc. ......................................... 85,236
29,452 AlliedSignal, Inc. ............................................. 1,253,551
12,044 Corning, Inc. .................................................. 489,288
2,394 Crane Co. ...................................................... 117,306
4,030 Eaton Corp. .................................................... 387,132
13,014 Illinois Tool Works Inc. ....................................... 780,027
4,371 Johnson Controls, Inc. ......................................... 242,864
21,337 Minnesota Mining & Manufacturing Co. ........................... 1,820,313
2,255 National Service Industries, Inc. .............................. 125,012
8,883 Tenneco, Inc. .................................................. 365,313
8,599 Textron Inc. ................................................... 644,388
7,901 Thermo Electron Corp.* ......................................... 323,941
27,800 Tyco International Ltd. ........................................ 1,410,850
12,164 United Technologies Corp. ...................................... 1,086,397
9,594 UST, Inc. ...................................................... 339,987
-----------
9,471,605
-----------
Manufacturing - Specialized (0.2%)
5,375 Avery Dennison Corp. ........................................... 271,438
1,315 Briggs & Stratton Corp. ........................................ 58,271
2,273 Millipore Corp. ................................................ 85,948
6,641 Pall Corp. ..................................................... 139,046
5,825 Parker-Hannifin Corp. .......................................... 271,591
-----------
826,294
-----------
Medical Products & Supplies (1.0%)
2,992 Bard (C.R.), Inc. .............................................. 104,346
2,890 Bausch & Lomb, Inc. ............................................ 129,508
14,621 Baxter International, Inc. ..................................... 827,914
6,376 Becton, Dickinson & Co. ........................................ 405,673
5,806 Biomet, Inc. ................................................... 173,091
10,135 Boston Scientific Corp.* ....................................... 605,566
7,732 Guidant Corp. .................................................. 563,953
24,487 Medtronic, Inc. ................................................ 1,300,872
4,792 St. Jude Medical, Inc.* ........................................ 174,908
3,953 United States Surgical Corp. ................................... 121,061
-----------
4,406,892
-----------
Metals & Mining (0.1%)
2,106 ASARCO, Inc. ................................................... 46,595
4,875 Cyprus Amax Minerals Co. ....................................... 79,828
10,098 Freeport-McMoran Copper & Gold, Inc. (Class B) ................. 152,101
8,711 Inco Ltd. (Canada) ............................................. 154,076
3,067 Phelps Dodge Corp. ............................................. 194,755
-----------
627,355
-----------
Multi-line Insurance (2.2%)
36,625 American International Group, Inc. ............................. $ 4,401,867
3,862 CIGNA Corp. .................................................... 737,642
5,322 Lincoln National Corp. ......................................... 445,718
6,001 Loews Corp. .................................................... 601,975
59,868 Travelers Group, Inc. .......................................... 3,337,641
-----------
9,524,843
-----------
Office Equipment & Supplies (0.2%)
4,629 Moore Corp. Ltd. (Canada) ...................................... 72,617
15,070 Pitney Bowes, Inc. ............................................. 706,406
9,134 Unisys Corp.* .................................................. 163,270
-----------
942,293
-----------
Oil & Gas - Exploration &
Production (0.2%)
8,156 Burlington Northern Santa Fe Corp. ............................. 812,542
-----------
Oil & Gas - Refining &
Marketing (0.0%)
3,899 Ashland, Inc. .................................................. 217,126
-----------
Oil & Gas Drilling (0.8%)
8,805 Baker Hughes, Inc. ............................................. 360,455
9,137 Dresser Industries, Inc. ....................................... 408,310
13,678 Halliburton Co. ................................................ 636,027
2,604 Helmerich & Payne, Inc. ........................................ 75,353
4,516 Rowan Companies, Inc.* ......................................... 127,295
25,828 Schlumberger Ltd. .............................................. 1,946,786
2,819 Western Atlas, Inc.* ........................................... 214,068
-----------
3,768,294
-----------
Oil - Exploration & Production (0.2%)
3,116 Anardarko Petroleum Corp.* ..................................... 200,982
4,737 Apache Corp.* .................................................. 161,058
9,204 Burlington Resources, Inc. ..................................... 411,879
5,502 Oryx Energy Co.* ............................................... 139,957
-----------
913,876
-----------
Oil - Integrated - Domestic (1.0%)
4,787 Amerada Hess Corp. ............................................. 283,929
16,737 Atlantic Richfield Co. ......................................... 1,301,302
2,487 Kerr-McGee Corp. ............................................... 168,183
17,687 Occidental Petroleum Corp. ..................................... 452,124
2,466 Pennzoil Co. ................................................... 165,068
13,741 Phillips Petroleum Co. ......................................... 673,309
3,774 Sun Co., Inc. .................................................. 150,724
13,241 Union Pacific Resources Group, Inc. ............................ 296,267
12,880 Unocal Corp. ................................................... 485,415
15,032 USX-Marathon Group ............................................. 519,544
-----------
4,495,865
-----------
Oil - Integrated - International (5.4%)
25,423 Amoco Corp. .................................................... 2,160,955
34,288 Chevron Corp. .................................................. 2,781,614
128,744 Exxon Corp.** .................................................. 8,223,523
40,988 Mobil Corp. .................................................... 2,969,068
Royal Dutch Petroleum Co.
111,878 (ADR)(Netherlands)** ........................................... 6,076,374
28,613 Texaco, Inc. ................................................... 1,596,963
-----------
23,808,497
-----------
Paper & Forest Products (0.6%)
2,907 Boise Cascade Corp. ............................................ 96,839
5,007 Champion International Corp. ................................... 255,670
4,835 Georgia-Pacific Corp. .......................................... 283,754
15,777 International Paper Co. ........................................ 735,603
5,704 Louisiana-Pacific Corp. ........................................ 125,132
5,459 Mead Corp. ..................................................... 186,630
1,507 Potlatch Corp. ................................................. 65,272
5,322 Westvaco Corp. ................................................. 172,965
10,406 Weyerhaeuser Co. ............................................... 519,650
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
5,797 Willamette Industries, Inc. .................................... $ 214,127
-----------
2,655,642
-----------
Personal Care (0.8%)
2,929 Alberto-Culver Co. (Class B) ................................... 89,151
6,903 Avon Products, Inc. ............................................ 486,230
29,241 Gillette Co. ................................................... 3,154,373
-----------
3,729,754
-----------
Photography/Imaging (0.6%)
16,992 Eastman Kodak Co. .............................................. 1,115,100
6,931 Ikon Office Solutions, Inc. .................................... 226,557
2,370 Polaroid Corp. ................................................. 108,576
17,016 Xerox Corp. .................................................... 1,509,107
-----------
2,959,340
-----------
Property - Casualty Insurance (1.1%)
22,388 Allstate Corp. ................................................. 2,087,681
8,885 Chubb Corp. .................................................... 709,134
4,095 General Re Corp. ............................................... 872,235
3,764 Progressive Corp. .............................................. 436,154
7,369 SAFECO Corp. ................................................... 385,951
4,376 St. Paul Companies, Inc. ....................................... 387,823
5,882 USF&G Corp. .................................................... 143,741
-----------
5,022,719
-----------
Publishing (0.7%)
5,009 Dow Jones & Co., Inc. .......................................... 257,337
5,161 McGraw-Hill, Inc. .............................................. 390,301
2,789 Meredith Corp. ................................................. 119,753
29,208 Time Warner, Inc. .............................................. 1,971,540
4,618 Times Mirror Co. (Class A) ..................................... 284,296
-----------
3,023,227
-----------
Publishing - Newspaper (0.4%)
14,791 Gannett Co., Inc. .............................................. 954,944
4,408 Knight-Ridder Newspapers, Inc. ................................. 247,950
5,004 New York Times Co. (Class A) ................................... 327,449
6,407 Tribune Co. .................................................... 413,652
-----------
1,943,995
-----------
Railroads (0.4%)
11,370 CSX Corp. ...................................................... 636,009
19,668 Norfolk Southern Corp. ......................................... 677,317
12,892 Union Pacific Corp. ............................................ 657,492
-----------
1,970,818
-----------
Restaurants (0.5%)
7,979 Darden Restaurants, Inc. ....................................... 107,717
35,895 McDonald's Corp. ............................................... 1,965,251
7,923 TRICON Global Restaurants, Inc.* ............................... 224,815
6,877 Wendy's International, Inc. .................................... 149,145
-----------
2,446,928
-----------
Retail - Building Supplies (0.7%)
38,194 Home Depot, Inc. ............................................... 2,437,255
9,113 Lowe's Companies, Inc. ......................................... 532,541
9,009 Sherwin-Williams Co. ........................................... 301,238
-----------
3,271,034
-----------
Retail - Computers & Electronics (0.1%)
5,142 Circuit City Stores, Inc. ...................................... 198,610
5,397 Tandy Corp. .................................................... 240,167
-----------
438,777
-----------
Retail - Department Stores (0.6%)
5,815 Dillard Department Stores, Inc. (Class A) ...................... 207,159
10,917 Federated Department Stores, Inc.* ............................. 511,734
3,691 Harcourt General, Inc. ......................................... 199,314
12,075 May Department Stores Co. ...................................... 733,556
1,918 Mercantile Stores Co., Inc. .................................... 126,228
4,031 Nordstrom, Inc. ................................................ 230,775
13,049 Penney (J.C.) Co., Inc. ........................................ 922,401
-----------
2,931,167
-----------
Retail - Drug Stores (0.5%)
8,977 CVS Corp. ...................................................... $ 664,859
2,040 Longs Drug Stores Corp. ........................................ 64,643
13,021 Rite Aid Corp. ................................................. 421,555
25,683 Walgreen Co. ................................................... 942,245
-----------
2,093,302
-----------
Retail - Food Chains (0.5%)
12,820 Albertson's, Inc. .............................................. 600,136
14,214 American Stores Co. ............................................ 358,015
3,130 Giant Food, Inc. (Class A) ..................................... 113,658
Great Atlantic & Pacific Tea
1,995 Co., Inc. ...................................................... 60,723
13,278 Kroger Co.* .................................................... 560,996
7,768 Winn-Dixie Stores, Inc. ........................................ 418,987
-----------
2,112,515
-----------
Retail - General Merchandise (2.0%)
5,601 Consolidated Stores Corp.* ..................................... 230,341
11,089 Costco Companies, Inc.* ........................................ 541,975
11,359 Dayton-Hudson Corp. ............................................ 878,193
25,411 Kmart Corp.* ................................................... 339,872
20,437 Sears, Roebuck & Co. ........................................... 1,084,438
117,651 Wal-Mart Stores, Inc. .......................................... 5,448,712
-----------
8,523,531
-----------
Retail - Specialty (0.2%)
7,882 AutoZone, Inc.* ................................................ 238,431
3,302 Pep Boys-Manny, Moe & Jack ..................................... 84,614
14,888 Toys 'R' Us, Inc.* ............................................. 390,810
7,039 Woolworth Corp.* ............................................... 167,176
-----------
881,031
-----------
Retail - Specialty Apparel (0.4%)
5,519 Charming Shoppes, Inc.* ........................................ 24,491
20,982 Gap, Inc. (The) ................................................ 937,633
14,172 Limited (The), Inc. ............................................ 410,988
8,520 TJX Companies, Inc. ............................................ 329,085
-----------
1,702,197
-----------
Savings & Loan Companies (0.3%)
5,714 Ahmanson (H.F.) & Co. .......................................... 356,768
2,959 Golden West Financial Corp. .................................... 264,091
13,434 Washington Mutual, Inc. ........................................ 900,918
-----------
1,521,777
-----------
Semiconductor Equipment (0.2%)
19,023 Applied Materials, Inc.* ....................................... 700,284
4,417 KLA-Tencor Corp.* .............................................. 203,734
-----------
904,018
-----------
Specialty Printing (0.1%)
4,289 Deluxe Corp. ................................................... 146,094
7,629 Donnelley (R.R.) & Sons Co. .................................... 302,299
6,753 Ecolab, Inc. ................................................... 194,571
1,617 Harland (John H.) Co. .......................................... 24,558
-----------
667,522
-----------
Steel & Iron (2.0%)
9,099 Allegheny Teledyne Inc. ........................................ 246,810
5,596 Armco, Inc. .................................................... 29,729
5,876 Bethlehem Steel Corp.* ......................................... 62,433
2,549 Inland Steel Industries, Inc. .................................. 52,573
4,584 Nucor Corp. .................................................... 236,076
4,476 USX-U.S. Steel Group, Inc. ..................................... 157,220
5,048 Worthington Industries, Inc. ................................... 86,447
-----------
871,288
-----------
Telecommunications -
Cellular/Wireless (0.3%)
26,352 Airtouch Communications, Inc.* ................................. 1,184,193
6,132 DSC Communications Corp.* ...................................... 120,341
7,693 General Instrument Corp. ....................................... 128,377
-----------
1,432,911
-----------
SEE NOTES TO FINANCIAL STATEMENTS
28
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
PORTFOLIO OF INVESTMENTS February 28, 1998 (unaudited) continued
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
Telecommunications - Long Distance (2.3%)
84,801 AT&T Corp. ..................................................... $ 5,162,261
36,364 MCI Communications Corp. ....................................... 1,738,654
22,452 Sprint Corp. ................................................... 1,481,832
52,872 WorldCom, Inc.* ................................................ 2,019,050
------------
10,401,797
------------
Telephones (5.0%)
9,676 Alltel Corp. ................................................... 442,072
57,143 Ameritech Corp. ................................................ 2,382,149
40,548 Bell Atlantic Corp. ............................................ 3,639,183
51,771 BellSouth Corp. ................................................ 3,158,031
18,200 Comcast Corp. (Class A Special) ................................ 637,000
8,564 Frontier Corp. ................................................. 237,116
49,993 GTE Corp. ...................................................... 2,705,871
33,479 Lucent Technologies Inc. ....................................... 3,628,287
47,856 SBC Communications, Inc. ....................................... 3,619,110
U.S. West Communications
25,224 Group .......................................................... 1,313,225
------------
21,762,044
------------
Textiles - Apparel (0.1%)
3,822 Fruit of the Loom, Inc. (Class A)* ............................. 122,782
3,491 Liz Claiborne, Inc. ............................................ 174,550
1,899 Russell Corp. .................................................. 51,510
6,380 VF Corp. ....................................................... 304,246
------------
653,088
------------
Textiles - Home Furnishings (0.0%)
Springs Industries, Inc.
1,051 (Class A) ...................................................... 58,790
------------
Tobacco (1.2%)
126,577 Philip Morris Companies, Inc. .................................. 5,498,188
------------
Truckers (0.0%)
3,995 Ryder System, Inc. ............................................. 146,567
------------
Utilities - Electric (2.4%)
7,160 Ameren Corp. ................................................... 275,213
9,876 American Electric Power Co., Inc. ............................... 474,048
7,704 Baltimore Gas & Electric Co. ................................... 243,158
7,887 Carolina Power & Light Co. ..................................... 329,282
11,074 Central & South West Corp. ..................................... 296,922
8,226 CINergy Corp. .................................................. 286,368
12,262 Consolidated Edison Co. of New York, Inc. ...................... 521,135
9,760 Dominion Resources, Inc. ....................................... 389,180
7,572 DTE Energy Co. ................................................. 278,271
18,774 Duke Power Co. ................................................. 1,043,130
19,917 Edison International ........................................... 550,207
12,734 Entergy Corp. .................................................. 368,490
12,016 FirstEnergy Corp.* ............................................. 347,713
9,498 FPL Group, Inc. ................................................ 551,478
6,621 GPU, Inc. ...................................................... 266,081
14,884 Houston Industries, Inc. ....................................... 385,124
7,534 Niagara Mohawk Power Corp.* .................................... 96,529
3,858 Northern States Power Co. ...................................... 211,949
15,459 PacifiCorp ..................................................... 373,915
11,610 PECO Energy Co. ................................................ 229,298
22,877 PG & E Corp. ................................................... 690,599
8,624 PP&L Resources, Inc. ........................................... 192,962
12,103 Public Service Enterprise Group, Inc. .......................... 390,322
36,031 Southern Co. ................................................... 889,515
12,867 Texas Utilities Co. ............................................ 520,309
11,286 Unicom Corp. ................................................... 361,857
------------
10,563,055
------------
Utilities - Natural Gas (0.6%)
5,531 Coastal Corp. .................................................. 351,910
2,891 Columbia Gas System, Inc. ...................................... 220,619
4,977 Consolidated Natural Gas Co. ................................... 286,178
1,062 Eastern Enterprises ............................................ 47,060
16,604 Enron Corp. .................................................... 780,388
2,531 NICOR, Inc. .................................................... 104,087
1,619 ONEOK, Inc. .................................................... $ 56,665
4,347 Pacific Enterprises ............................................ 157,850
1,831 Peoples Energy Corp. ........................................... 66,145
5,739 Sonat, Inc. .................................................... 247,494
16,687 Williams Companies, Inc. ....................................... 545,456
------------
2,863,852
------------
Waste Management (0.2%)
10,320 Browning-Ferris Industries, Inc. ............................... 343,785
23,757 Waste Management Inc. .......................................... 593,925
------------
937,710
------------
TOTAL COMMON STOCKS
(Identified Cost $390,140,659) ................................. 428,105,597
------------
PRINCIPAL
AMOUNT IN
THOUSANDS
- -----------
SHORT-TERM INVESTMENT (0.7%)
REPURCHASE AGREEMENT
$2,915 The Bank of New York 5.4375%
due 03/02/98 (dated 02/27/98;
proceeds $2,916,669)(a)
(Identified Cost $2,915,348) .................................. 2,915,348
------------
TOTAL INVESTMENTS .............................................. 431,020,945
------------
DESCRIPTION,
NUMBER OF DELIVERY YEAR,
CONTRACTS AND MONTH
--------- ---------
FINANCIAL FUTURES (B)(0.0%)
SHORT POSITION
23 S&P 500 Index/March 1998 ..................................... (8,150)
------------
TOTAL INVESTMENTS
(Identified Cost $393,056,007)(c) ................................ 98.9% 431,020,945
TOTAL FINANCIAL FUTURES .......................................... 0.0 (8,150)
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES ...................................................... 1.1 4,916,185
----- ------------
NET ASSETS ....................................................... 100.0% $435,928,980
===== ============
</TABLE>
- --------------
ADR American Depository Receipt.
* Non-income producing security.
** Some or all of these securities are segregated in connection with
open futures contracts.
(a) Collateralized by $330,862 Federal Home Loan Banks 6.55% due 03/04/02
valued at $343,209, $1,015,000 Federal Home Loan Banks 6.25% due
10/29/01 valued at $1,039,968, $1,000,000 Federal National Mortgage
Assoc. 7.15% due 09/15/05 valued at $1,038,943 and $530,069 Federal
National Mortgage Assoc. 6.65% due 03/08/06 valued at $551,535.
(b) Value represents variation margin on open futures contracts at
February 28, 1998. The market value of these futures contracts is
$5,901,900 and the unrealized appreciation is $138,268.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$42,956,830 and the aggregate gross unrealized depreciation is
$4,991,892, resulting in net unrealized appreciation of $37,964,938.
SEE NOTES TO FINANCIAL STATEMENTS
29
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $393,056,007)................ $431,020,945
Cash........................................... 25,567
Receivable for:
Shares of beneficial interest sold ......... 5,630,771
Dividends.................................... 637,467
Deferred organizational expenses .............. 45,271
Prepaid expenses and other assets ............. 980
------------
TOTAL ASSETS ................................ 437,361,001
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ... 855,292
Plan of distribution fee .................... 300,567
Investment management fee ................... 57,587
Variation margin on futures contracts ...... 8,150
Organizational expenses ....................... 49,500
Accrued expenses and other payables ........... 160,925
------------
TOTAL LIABILITIES ........................... 1,432,021
------------
NET ASSETS................................... $435,928,980
============
COMPOSITION OF NET ASSETS:
Paid-in-capital................................ $397,807,150
Net unrealized appreciation ................... 38,103,206
Undistributed net investment income............ 219,833
Net realized loss ............................. (201,209)
------------
NET ASSETS................................... $435,928,980
============
CLASS A SHARES:
Net Assets..................................... $ 19,088,917
Shares Outstanding (unlimited authorized, $.01
par value) ................................... 1,716,869
NET ASSET VALUE PER SHARE.................... $11.12
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset
value)...................................... $11.74
======
CLASS B SHARES:
Net Assets..................................... $380,009,145
Shares Outstanding (unlimited authorized, $.01
par value) ................................... 34,233,805
NET ASSET VALUE PER SHARE ................... $11.10
======
CLASS C SHARES:
Net Assets..................................... $24,126,224
Shares Outstanding (unlimited authorized, $.01
par value) ................................... 2,173,252
NET ASSET VALUE PER SHARE ................... $11.10
======
CLASS D SHARES:
Net Assets..................................... $12,704,694
Shares Outstanding (unlimited authorized, $.01
par value) ................................... 1,142,033
NET ASSET VALUE PER SHARE ................... $11.12
======
</TABLE>
STATEMENT OF OPERATIONS
For the period September 26, 1997*
through February 28, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $3,216 foreign withholding
tax).......................................... $ 1,967,904
Dividends from affiliate (Note 4).............. 7,287
Interest ...................................... 398,787
-----------
TOTAL INCOME ................................ 2,373,978
-----------
EXPENSES
Plan of distribution fee (Class A shares) .... 12,848
Plan of distribution fee (Class B shares) .... 1,127,620
Plan of distribution fee (Class C shares) ..... 75,709
Investment management fee...................... 510,357
Registration fees ............................. 136,736
Transfer agent fees and expenses............... 117,693
Custodian fees................................. 38,277
Professional fees ............................. 17,577
S&P license fees .............................. 12,759
Shareholder reports and notices ............... 6,426
Trustees' fees and expenses.................... 6,145
Organizational expenses ....................... 4,229
-----------
TOTAL EXPENSES............................... 2,066,376
Less: amounts waived/reimbursed................ (212,252)
-----------
NET EXPENSES ................................ 1,854,124
-----------
NET INVESTMENT INCOME........................ 519,854
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments ................................. (67,320)
Futures contracts............................ (133,889)
-----------
NET LOSS..................................... (201,209)
-----------
Net unrealized appreciation on:
Investments ................................. 37,964,938
Futures contracts............................ 138,268
-----------
NET GAIN..................................... 38,103,206
-----------
NET INCREASE................................... $38,421,851
===========
</TABLE>
- --------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 26, 1997*
THROUGH
FEBRUARY 28, 1998
- ------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................................... $ 519,854
Net realized loss............................................... (201,209)
Net unrealized appreciation..................................... 38,103,206
------------
NET INCREASE ................................................. 38,421,851
------------
DIVIDENDS TO SHAREHOLDERS FROM NET INVESTMENT INCOME:
Class A shares.................................................. (32,194)
Class B shares.................................................. (218,935)
Class C shares.................................................. (12,314)
Class D shares.................................................. (36,578)
------------
TOTAL DIVIDENDS ............................................. (300,021)
------------
Net increase from transactions in shares of beneficial interest. 397,707,150
------------
NET INCREASE ................................................. 435,828,980
NET ASSETS:
Beginning of period............................................. 100,000
------------
END OF PERIOD
(Including undistributed net investment income of $219,833) .. $435,928,980
============
</TABLE>
- --------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter S&P 500 Index Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is to
provide investment results that, before expenses, correspond to the total
return of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index"). The Fund seeks to achieve its objective by investing at least 80% of
its total assets in common stocks included in the S&P 500 Index in
approximately the same weighting as the Index. The Fund was organized as a
Massachusetts business trust on June 18, 1997 and had no other operations
other than those relating to organizational matters and the issuance of 2,500
shares of beneficial interest by each class for $25,000 of each class to Dean
Witter InterCapital Inc. (the "Investment Manager") to effect the Fund's
initial capitalization. The Fund commenced operations on September 26, 1997.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where a security is traded on more than one exchange, the
security is valued on the exchange designated as the primary market pursuant
to procedures adopted by the Trustees); (2) all other portfolio securities
for which over-the-counter market quotations are readily available are valued
at the latest available bid price prior to the time of valuation; (3) when
market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager that sale or bid prices are
not reflective of a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established
by and under the general supervision of the Trustees; and (4) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and other distributions are recorded on the
ex-dividend date. Discounts are accreted over the respective life of the
securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
32
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager incurred the
organizational expenses of the Fund in the amount of approximately $49,500
which will be reimbursed for the full amount thereof. Such expenses have been
deferred and are being amortized on the straight-line method over a period
not to exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.40% to the net assets of the Fund determined as of the close
of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
The Investment Manager has agreed to assume all operating expenses (except
for 12b-1 fees) and to waive the compensation provided for in its Investment
Management Agreement to the extent that such expenses and compensation on an
annualized basis exceed 0.50% of the daily net assets of the Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -up to
0.25% of the average daily net assets of Class A; (ii) Class B -1.0% of the
average daily net assets of Class B; and (iii) Class C -up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In the
case of Class B and Class C shares, amounts paid under the Plan are paid to
the Distributor for services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these
33
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued
Classes and incentive compensation to, and expenses of, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and others who engage in or support
distribution of the shares or who service shareholder accounts, including
overhead and telephone expenses; printing and distribution of prospectuses
and reports used in connection with the offering of these shares to other
than current shareholders; and preparation, printing and distribution of
sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate DWR and other selected broker-dealers for their opportunity costs
in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. The Distributor has advised the Fund that such
excess amounts, including carrying charges, totaled $15,470,964 at February
28, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant
to the Plan in any calendar year in excess of 0.25% or 1.0% of the average
daily net assets of Class A or Class C, respectively, will not be reimbursed
by the Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended February 28, 1998, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.24% and 1.0%, respectively.
The Distributor has informed the Fund that for the period ended February 28,
1998, it received contingent deferred sales charges from certain redemptions
of the Fund's Class A shares, Class B shares and Class C shares of $1,233,
$176,043 and $2,465, respectively and received $317,745 in front-end sales
charges from sales of the Fund's Class A shares. The respective shareholders
pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the period ended February 28, 1998
aggregated $391,998,552 and $1,790,565, respectively. Included in the
aforementioned are purchases of U.S. Government securities of $4,238,575, and
purchases of Morgan Stanley, Dean Witter, Discover & Co. common stock of
$1,744,549.
34
<PAGE>
DEAN WITTER S&P 500 INDEX FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1998 (unaudited) continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 26, 1997*
THROUGH
FEBRUARY 28, 1998
--------------------------
SHARES AMOUNT
---------- ------------
<S> <C> <C>
CLASS A
Sold............................................ 2,174,952 $ 22,337,813
Reinvestment of
dividends...................................... 2,992 30,640
Redeemed........................................ (463,575) (4,833,628)
---------- ------------
Net increase - Class A ......................... 1,714,369 17,534,825
---------- ------------
CLASS B
Sold............................................ 35,877,610 363,073,563
Reinvestment of
dividends...................................... 19,650 201,230
Redeemed........................................ (1,665,955) (17,145,091)
---------- ------------
Net increase - Class B ......................... 34,231,305 346,129,702
---------- ------------
CLASS C
Sold............................................ 2,361,111 23,865,804
Reinvestment of
dividends...................................... 1,135 11,618
Redeemed........................................ (191,494) (1,986,049)
---------- ------------
Net increase - Class C ......................... 2,170,752 21,891,373
---------- ------------
CLASS D
Sold............................................ 2,170,273 22,597,466
Reinvestment of
dividends...................................... 189 1,939
Redeemed........................................ (1,030,929) (10,448,155)
---------- ------------
Net increase - Class D ......................... 1,139,533 12,151,250
---------- ------------
Net increase in Fund ........................... 39,255,959 $397,707,150
========== ============
</TABLE>
- --------------
* Commencement of operations.
6. FINANCIAL HIGHLIGHTS
See the "Financial Highlights" table on page 5 of this prospectus.
35
<PAGE>
DEAN WITTER
S&P 500 INDEX FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and
General Counsel
Kenton J. Hinchliffe
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
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
