<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1996
REGISTRATION NOS.: 2-81151
811-3639
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 14 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 16 [X]
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
X on November 25, 1996 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of rule 485.
The Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Section (a)(1) of Rule 24f-2 under the
Investment Company Act of 1940. Pursuant to Section (b)(2) of Rule 24f-2, the
Registrant filed a Rule 24f-2 Notice for its fiscal year ended September 30,
1996 with the Securities and Exchange Commission on October 18, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ------------------------- -----------------------------------------------------------------
PART A PROSPECTUS
<S> <C>
1. ...................... Cover Page
2. ...................... Prospectus Summary; Summary of Fund Expenses
3. ...................... Financial Highlights; Performance Information
4. ...................... Prospectus Summary; Financial Highlights; Investment Objective and
Policies; The Fund and Its Management; Cover Page; Investment
Restrictions
5. ...................... The Fund and Its Management; Back Cover; Investment Objectives and
Policies
6. ...................... Dividends, Distributions and Taxes; Additional Information
7. ...................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. ...................... Redemptions and Repurchases; Shareholder Services
9. ...................... Not applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ..................... Cover Page
11. ..................... Table of Contents
12. ..................... The Fund and Its Management
13. ..................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ..................... The Fund and Its Management; Trustees and Officers
15. ..................... The Fund and Its Management; Trustees and Officers
16. ..................... The Fund and Its Management; The Distributor; Shareholder Services;
Custodian and Transfer Agent; Independent Accountants
17. ..................... Portfolio Transactions and Brokerage
18. ..................... Description of Shares of the Fund
19. ..................... The Distributor; Redemptions and Repurchases; Financial Statements;
Shareholder Services; Determination of Net Asset Value
20. ..................... Dividends, Distributions and Taxes; Financial Statements
21. ..................... The Distributor
22. ..................... Performance Information
23. ..................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS -- NOVEMBER 25, 1996
- -----------------------------------------------------------------------------
Dean Witter Developing Growth Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is
long-term capital growth. While the Fund may invest in all types of equity
and debt securities, it invests primarily in common stocks of smaller and
medium-sized companies that, in the opinion of the Investment Manager, have
the potential for growing more rapidly than the economy and which may benefit
from new products or services, technological developments or changes in
management. (See "Investment Objective and Policies.")
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, redemptions and/or repurchases are
subject in most cases to a contingent deferred sales charge, scaled down from
5% to 1% of the amount redeemed, if made within six years of purchase, which
charge will be paid to the Fund's Distributor, Dean Witter Distributors Inc.
(See "Redemptions and Repurchases--Contingent Deferred Sales Charge.") In
addition, the Fund pays the Distributor a Rule 12b-1 distribution fee
pursuant to a Plan of Distribution at the annual rate of 1% of the lesser of
the (i) average daily aggregate net sales or (ii) average daily net assets of
the Fund. (See "Purchase of Fund Shares--Plan of Distribution.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated November 25, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
Dean Witter Distributors Inc.,
Distributor
Table of Contents
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 4
Investment Objective and Policies ..................................... 5
Risk Considerations ................................................. 6
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 11
Shareholder Services .................................................. 13
Redemptions and Repurchases ........................................... 16
Dividends, Distributions and Taxes .................................... 18
Performance Information ............................................... 18
Additional Information ................................................ 19
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter
Developing Growth Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end
Fund diversified management investment company investing primarily in securities of smaller and medium-sized
companies that have the potential to grow much more rapidly than the economy (see page 5).
- ------------------- ------------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 19).
Offered
- ------------------- ------------------------------------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 11). Shares redeemed within six years of purchase are
Price subject to a contingent deferred sales charge under most circumstances (see page 16).
- ------------------- ------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment is $1,000 ($100 if the account is opened through EasyInvest (Service Mark))
Purchase and the minimum subsequent investment is $100 (see page 11).
- ------------------- ------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is long-term capital growth.
Objective
- ------------------- ------------------------------------------------------------------------------------------------------------
Investment The Fund invests primarily in common stock of companies believed to have potential for significant
Policies growth. However, it may also invest in convertible securities, preferred stock, bonds and warrants of such
companies and may engage in certain portfolio techniques, including leveraging (see page 5).
- ------------------- ------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its
Manager wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory,
management and administrative capacities to 100 investment companies and other portfolios with net assets of
approximately $88 billion at October 31, 1996 (see page 4).
- ------------------- ------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.50% of the Fund's daily net assets
Fee on assets not exceeding $500 million and 0.475% of the Fund's daily net assets on assets exceeding $500
million (see page 5).
- ------------------- ------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains, if any, are paid at least
Capital Gains once per year. Dividends and capital gains distributions are automatically reinvested in additional shares
Distributions at net asset value unless the shareholder elects to receive cash (see pages 13 and 18).
- ------------------- ------------------------------------------------------------------------------------------------------------
Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a distribution
Distribution fee accrued daily and payable monthly at the rate of 1% per annum of the lesser of (i) the Fund's average
Fee daily aggregate net sales or (ii) the Fund's average daily net assets. This fee compensates the Distributor
for the services provided in distributing shares of the Fund and for sales-related expenses. The Distributor
also receives the proceeds of any contingent deferred sales charges (see pages 11 and 16).
- ------------------- ------------------------------------------------------------------------------------------------------------
Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if
Contingent the total value of the account is less than $100 or, if the account was opened through EasyInvest (Service
Deferred Mark), if after twelve months the shareholder has invested less than $1,000 in the account. Although no
Sales commission or sales load is imposed upon the purchase of shares, a contingent deferred sales charge (scaled
Charge down from 5% to 1%) is imposed on any redemption of shares if after such redemption the aggregate current
value of an account with the Fund is less than the aggregate amount of the investor's purchase payments made
during the six years preceding the redemption. However, there is no charge imposed on redemption of shares
purchased through reinvestment of dividends or distributions (see pages 16-18).
- ------------------- ------------------------------------------------------------------------------------------------------------
Risks The net asset value of the Fund's shares will fluctuate with changes in the market value of its
portfolio securities. The Fund is intended for long-term investors who can accept the risks involved in
seeking long-term growth of capital through investment primarily in the securities of small and medium-sized
growth companies. It should be recognized that investing in such companies involves greater risk than is
customarily associated with more established companies. In addition, investors should consider the risks
which may be involved in certain of the investment policies and techniques which the Fund may employ in its
operations, including leveraging and investments in foreign securities (see pages 5-10).
- ------------------- ------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information
appearing elsewhere in this Prospectus
and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended September 30, 1996.
<TABLE>
<CAPTION>
<S> <C>
Shareholder Transaction Expenses
- -------------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases ............................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ................................. None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) . 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following
declining rates:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- ------------------------------------ --------------
<S> <C>
First ............................... 5.0%
Second .............................. 4.0%
Third ............................... 3.0%
Fourth .............................. 2.0%
Fifth ............................... 2.0%
Sixth ............................... 1.0%
Seventh and thereafter .............. None
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees .... None
Exchange Fee ....... None
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Annual Fund Operating Expenses (as a Percentage of Average Net
Assets)
- ---------------------------------------------------------------------
Management Fees ...................................................... 0.49%
12b-1 Fees* .......................................................... 1.00%
Other Expenses ....................................................... 0.20%
Total Fund Operating Expenses ........................................ 1.69%
</TABLE>
- ------------
*A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net
assets is characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines (see
"Purchase of Fund Shares").
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end
of each time period: ........................................ $67 $83 $112 $200
You would pay the following expenses on the same investment,
assuming no redemption: ..................................... $17 $53 $ 92 $200
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants, which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
------------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ........ $25.54 $17.55 $20.50 $12.20 $14.05
---------- ---------- ---------- ---------- ------------
Net investment income (loss) (0.23) (0.19) -- (0.12) (0.12)
Net realized and
unrealized gain (loss) .... 4.32 8.34 (1.82) 8.42 (1.73)
---------- ---------- ---------- ---------- ------------
Total from investment
operations ................. 4.09 8.15 (1.82) 8.30 (1.85)
---------- ---------- ---------- ---------- ------------
Less dividends and
distributions from:
Net investment income .... -- -- -- -- --
Net realized gain ......... (1.92) (0.16) (1.13) -- --
---------- ---------- ---------- ---------- ------------
Total dividends and
distributions .............. (1.92) (0.16) (1.13) -- --
---------- ---------- ---------- ---------- ------------
Net asset value,
end of period .............. $27.71 $25.54 $17.55 $20.50 $12.20
========== ========== ========== ========== ============
TOTAL INVESTMENT RETURN+ ... 17.53% 46.87 % (8.88)% 67.95 % (13.17)%
RATIOS TO AVERAGE NET
ASSETS:
Expenses .................... 1.69% 1.77 % 1.78 % 1.84 % 1.86 %
Net investment income (loss) (1.03%) (1.04)% (1.32)% (1.52)% (1.14)%
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands ............... $799,201 $534,869 $340,169 $240,389 $112,982
Portfolio turnover rate .... 149% 114 % 160 % 203 % 153 %
Average commission rate paid $0.0571 -- -- -- --15
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
- ---------------------------- ---------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period ........ $8.92 $11.33 $9.67 $10.96 $8.57
---------- ------------ --------- ----------- ----------
Net investment income (loss) (0.07) (0.15) 0.04 (0.03) (0.02)
Net realized and
unrealized gain (loss) .... 5.20 (2.21) 1.62 (1.26) 2.42
---------- ------------ --------- ----------- ----------
Total from investment
operations ................. 5.13 (2.36) 1.66 (1.29) 2.40
---------- ------------ --------- ----------- ----------
Less dividends and
distributions from:
Net investment income .... -- (0.05) -- -- (0.01)
Net realized gain ......... -- -- -- -- --
---------- ------------ --------- ----------- ----------
Total dividends and
distributions .............. -- (0.05) -- -- (0.01)
---------- ------------ --------- ----------- ----------
Net asset value,
end of period .............. $14.05 $8.92 $11.33 $9.67 $10.96
========== ============ ========= =========== ==========
TOTAL INVESTMENT RETURN+ ... 57.51 % (20.87)% 17.17% (11.77)% 28.07 %
RATIOS TO AVERAGE NET
ASSETS:
Expenses .................... 1.92 % 2.02 % 1.89% 1.90 % 1.83 %
Net investment income (loss) (0.73)% (1.32)% 0.59% (0.28)% (0.20)%
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands ............... $115,337 $67,604 $89,236 $108,411 $179,276
Portfolio turnover rate .... 88 % 53 % 84% 70 % 68 %
Average commission rate paid -- -- -- -- --
</TABLE>
- ------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Developing Growth Securities Trust (the "Fund") is an open-end
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under
the laws of Massachusetts on December 28, 1982.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, manage-
4
<PAGE>
ment and administrative capacities to 100 investment companies, thirty of
which are listed on the New York Stock Exchange, with combined total assets
of approximately $85 billion as of October 31, 1996. The Investment Manager
also manages portfolios of pension plans, other institutions and individuals
which aggregated approximately $3 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 Board of Trustees reviews the various services provided by or
under the direction of the Investment Manager to ensure that the Fund's
general investment policies and programs are being properly carried out and
that administrative services are being provided to the Fund in a satisfactory
manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 0.50% to the Fund's net assets not exceeding $500 million and
0.475% to the Fund's net assets exceeding $500 million. For the fiscal year
ended September 30, 1996, the Fund accrued total compensation to the
Investment Manager amounting to 0.49% of the Fund's average daily net assets
and the Fund's total expenses amounted to 1.69% of the Fund's average daily
net assets.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the Fund is long-term capital growth. There is
no assurance that the objective will be achieved. This objective is
fundamental and may not be changed without shareholder approval. The
following policies may be changed by the Board of Trustees without
shareholder approval.
The Fund seeks to achieve capital growth which significantly exceeds the
historical total return of common stocks as measured by the Standard & Poor's
500 index. The primary emphasis is on the securities of smaller and
medium-sized companies that, in the opinion of the Investment Manager, have
the potential to grow much more rapidly than the economy; at times,
investments may also be made in the securities of larger, established
companies which also have such growth potential. The Fund will normally
invest at least 65% of its total assets in the securities of such companies.
In addition to common stock, this portion of the portfolio may also include
convertible securities, preferred stocks and warrants.
The Investment Manager attempts to identify companies whose earnings
growth will be significantly higher than the average. Dividend income is not
generally a consideration in the selection of stocks for purchase.
The Investment Manager focuses its stock selection for the Fund upon a
diversified group of emerging growth companies which have moved beyond the
difficult and extremely risky "start-up" phase and which at the time of
selection show positive earnings with the prospects of achieving significant
further profit gains in at least the next two-to-three years after
acquisition. New technologies, techniques, products or services,
cost-reducing measures, changes in management, capitalization or asset
deployment, changes in government regulations or favorable shifts in other
external circumstances may all contribute to the anticipated phase of growth.
The application of the Fund's investment policies is basically dependent
upon the judgment of the Investment Manager. The proportions of the Fund's
assets invested in particular industries will shift from time to time in
accordance with the judgment of the Investment Manager.
5
<PAGE>
The Fund may invest up to 35% of its total assets in corporate debt
securities which are rated at the time of purchase Baa or better by Moody's
Investors Service Inc. or BBB or better by Standard & Poor's Corporation or
which, if not rated, are deemed to be of comparable quality by the Investment
Manager, and money market instruments. There may be periods during which, in
the opinion of the Investment Manager, general market conditions warrant
reduction of some or all of the Fund's securities holdings. During such
periods, the Fund may adopt a temporary "defensive" posture in which greater
than 35% of its total assets are invested in cash or money market
instruments, including obligations issued or guaranteed as to principal or
interest by the United States Government, its agencies or instrumentalities,
certificates of deposit, bankers' acceptances and other obligations of
domestic banks having total assets of $1 billion or more, and short-term
commercial paper of corporations organized under the laws of any state or
political subdivision of the United States.
The securities in which the Fund invests may or may not be listed on a
national stock exchange, but if they are not so listed, will generally have
an established over-the-counter market.
The Fund may invest in foreign securities, real estate investment trusts
and private placements, enter into repurchase agreements, borrow money for
the purpose of leveraging its investments, purchase securities on a
when-issued or delayed delivery basis, purchase or sell securities on a
forward commitment basis, purchase securities on a "when, as and if issued"
basis, and lend its portfolio securities, as discussed under "Risk
Considerations" below.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in
the market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund is intended
for long-term investors who can accept the risks involved in seeking
long-term growth of capital through investment primarily in the securities of
small and medium-sized growth companies. It should be recognized that
investing in such companies involves greater risk than is customarily
associated with investing in more established companies.
Foreign Securities. The Fund may invest in securities of foreign
companies. However, the Fund will not invest more than 10% of the value of
its total assets, at the time of purchase, in foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange Act
of 1934 or American Depository Receipts, on which there is no such limit).
Foreign securities investments may be affected by changes in currency rates
or exchange control regulations, changes in governmental administration or
economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates
of exchange between the currencies of different nations will affect the value
of the Fund's investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and thereby
impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The Fund will incur costs in
connection with conversions between various currencies.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. For-
6
<PAGE>
eign companies are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Finally, in the event of a
default of any foreign debt obligations, it may be more difficult for the
Fund to obtain or enforce a judgment against the issuers of such securities.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of the Fund's trades effected in
such markets. As such, the inability to dispose of portfolio securities due
to settlement delays could result in losses to the Fund due to subsequent
declines in value of such securities and the inability of the Fund to make
intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments. Investments
in certain Canadian issuers may be speculative due to certain political risks
and may be subject to substantial price fluctuations.
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, the Fund follows procedures designed to minimize those risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continually monitored by the Investment Manager subject to
procedures established by the Board of Trustees of the Fund. In addition, the
value of the collateral underlying the repurchase agreement will be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral
could involve certain costs or delays and, to the extent that proceeds from
any sale upon a default of the obligation to repurchase were less than the
repurchase price, the Fund could suffer a loss. The Fund may not invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts
to more than 15% of its net assets.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed below, are not subject to the
foregoing restriction.) These securities are generally referred to as private
placements or restricted securities. The Securities and Exchange Commission
has adopted Rule 144A under the Securities Act, which permits the Fund to
sell restricted securities to qualified institutional buyers without
limitation. The Investment Manager, pursuant to procedures adopted by the
Trustees of the Fund, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," such
7
<PAGE>
security will not be included within the category "illiquid securities",
which under current policy may not exceed 15% of the Fund's net assets.
Limitations on the resale of private placements may have an adverse effect on
their marketability, and may prevent the Fund from disposing of them promptly
at reasonable prices. The Fund may have to bear the expense of registering
such securities for resale and the risk of substantial delays in effecting
such registration. In the case of restricted securities determined to be
"liquid" pursuant to Rule 144A under the Securities Act, the Fund's
illiquidity could increase if qualified institutional buyers become
unavailable.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for
a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The
value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion
value" (the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege). To the
extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on
the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, the convertible security will sell at some
premium over its conversion value. (This premium represents the price
investors are willing to pay for the privilege of purchasing a fixed-income
security with a possibility of capital appreciation due to the conversion
privilege.) At such times the price of the convertible security will tend to
fluctuate directly with the price of the underlying equity security.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts.
Leveraging. The Fund may borrow money, but only from a bank and in an
amount up to 25% of the value of the Fund's total assets (including the
amount borrowed) less its liabilities (not including any borrowings but
including the fair market value at the time of computation of any other
senior securities then outstanding). When the Fund borrows it will be because
it seeks to enhance capital appreciation by leveraging its investments
through purchasing securities with the borrowed funds. The Fund will be
required to maintain an asset coverage (including the proceeds of borrowings)
of at least 300% of such borrowings in accordance with the provisions of the
Investment Company Act of 1940 (the "Act"). The investment policy also
provides that the Fund may not purchase or sell a security on margin.
Borrowings for leveraging will be subject to current margin requirements
of the Federal Reserve Board and where necessary the Fund may use any or all
of its securities as collateral for such borrowings. Any investment gains
made with the additional monies in excess of interest paid will cause the net
asset value of the Fund's shares to rise to a greater extent than would
otherwise be the case. Conversely, if the investment performance of the
additional monies fails to cover their cost to the Fund, net asset value will
decrease to a greater extent than would otherwise be the case. This is the
8
<PAGE>
speculative factor involved in leverage. If, due to market fluctuations or
other reasons, the value of the Fund's assets (including the proceeds of
borrowings) becomes at any time less than three times the amount of any
outstanding bank debt, the Fund, within three business days, will reduce its
bank debt to the extent necessary to meet the required 300% asset coverage.
In doing this, the Fund may have to sell a portion of its investments at a
time when it may be disadvantageous to do so.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
There is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of the Fund's net asset
value.
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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. No particular emphasis is
given to investments in securities for the purpose of earning current income.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Investment Manager will rely on information from
various sources, including research, analysis and appraisals of brokers and
dealers, including Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital, the views of Trustees of the Fund and others
regarding economic developments and interest rate trends, and the Investment
Manager's own analysis of factors it deems relevant. The Fund is managed
within InterCapital's Growth Group, which manages twenty-seven funds and fund
portfolios, with approximately $11.6 billion in assets at October 31, 1996.
Jayne Stevlingson, Vice President of InterCapital and a member of
InterCapital's Growth Group, is the primary portfolio manager of the Fund.
9
<PAGE>
Ms. Stevlingson has been a portfolio manager of the Fund since September,
1994 and has been the sole portfolio manager of the Fund since November,
1995. She has been a portfolio manager with InterCapital since October, 1992,
prior to which time she was an analyst with Bankers Trust New York Corp.
Orders for transactions in portfolio securities are placed for the Fund
with a number of brokers, including DWR. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal
transactions in certain money market instruments with DWR. In addition, the
Fund may incur brokerage commissions on transactions conducted through DWR.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 200%, although it is not anticipated that this rate
will exceed 300%. The Fund will incur brokerage costs commensurate with its
portfolio turnover rate, and thus a higher level (over 100%) of portfolio
transactions will increase the Fund's overall brokerage expenses. See
"Dividends, Distributions and Taxes" for a discussion of the tax implications
of the Fund's trading policy. A more extensive discussion of the Fund's
portfolio brokerage policies is set forth in the Statement of Additional
Information.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below have been adopted by the Fund as
fundamental policies, along with certain other investment restrictions. Under
the Act, a fundamental policy may not be changed without the vote of a
majority of the outstanding voting securities of the Fund, as defined in the
Act.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed, by the
United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Concentrate its investments in any particular industry, but if deemed
appropriate for attainment of its investment objective, up to 25% of its
total assets (valued at the time of investment) may be invested in any one
industry classification used by the Fund for investment purposes. This
restriction does not apply to obligations issued or guaranteed by the United
States Government or its agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years
of continuous operation. This restriction shall not apply to any obligation
of the United States Government, its agencies or instrumentalities.
5. Borrow money, except from banks for investment purposes or as a
temporary measure for extraordinary or emergency purposes, within the limits
set forth in the Act (see "Leveraging," above).
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
10
<PAGE>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into selected dealer agreements with
the Distributor ("Selected Broker-Dealers"). The principal executive office
of the Distributor is located at Two World Trade Center, New York, New York
10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Developing Growth
Securities Trust, directly to Dean Witter Trust Company (the "Transfer
Agent") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account
executive of DWR or other Selected Broker-Dealer. 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
$1,000 within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, in its discretion, may accept investments without regard to any
minimum amounts which would otherwise be required, if the Fund has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless requested by the shareholder in writing
to the Transfer Agent. The offering price will be the net asset value per
share next determined following receipt of an order (see "Determination of
Net Asset Value" below).
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital gains distributions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions. While no sales charge is imposed at the time
shares are purchased, a contingent deferred sales charge may be imposed at
the time of redemption (see "Redemptions and Repurchases"). Sales personnel
are compensated for selling shares of the Fund at the time of their sale by
the Distributor and/or Selected Broker-Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation as special sales incentives, including trips,
educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 of the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived, or (b) the
Fund's average daily net assets. This fee is treated by the Fund as an
expense in the year it is accrued. A portion of the fee payable pursuant to
the Plan, equal to 0.25% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of NASD guidelines. The
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
11
<PAGE>
Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by the Distributor and
others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR account executives and others who engage in or support
distribution of shares or who service shareholder accounts, including
overhead and telephone expenses; printing and distribution of prospectuses
and reports used in connection with the offering of the Fund's shares to
other than current shareholders; and preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor
may utilize fees paid pursuant to the Plan to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses.
For the fiscal year ended September 30, 1996, the Fund accrued payments
under the Plan amounting to $6,461,408, which amount is equal to 1.0% of the
Fund's average daily net assets for the fiscal year. The payments accrued
under the Plan were calculated pursuant to clause (b) of the compensation
formula under the Plan.
At any given time, the expenses of distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing shares of the Fund had been incurred and $750,000
had been received as described in (i) and (ii) above, the excess expense
would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above, totalled
$28,270,501 at September 30, 1996, which was equal to 3.54% of the Fund's net
assets 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 of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or contingent deferred sales charges, may
or may not be recovered through future distribution fees or contingent
deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign exchange is valued at its latest sale price on that
exchange prior to the time assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where a
security is traded on more than one exchange, the security is valued on the
exchange designated as the primary market pursuant to procedures adopted by
the Trustees), and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price. When market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that
sale and bid prices are not reflective of a security's market value,
portfolio securities are val-
12
<PAGE>
ued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of 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).
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued by
such pricing service.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Shares so acquired are not
subject to the imposition of a contingent deferred sales charge upon their
redemption (see "Redemptions and Repurchases").
Investment of Dividends and Distributions Received in Cash. Any
shareholder who receives a cash payment representing a dividend or capital
gains distribution may invest such dividend or distribution at the net asset
value per share next determined after receipt by the Transfer Agent, by
returning the check or the proceeds to the Transfer Agent within thirty days
after the payment date. Shares so acquired are not subject to the imposition
of a contingent deferred sales charge upon their redemption (see "Redemptions
and Repurchases.")
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Redemptions and Repurchases").
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 dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. Any
applicable contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed
from his or her account so that the proceeds (net of any applicable
contingent deferred sales charge) to the shareholder will be the designated
monthly or quarterly amount.
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-
13
<PAGE>
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 account executive or the
Transfer Agent.
Exchange Privilege. The Fund makes available to its shareholders an
"Exchange Privilege" allowing the exchange of shares of the Fund for shares
of other Dean Witter Funds sold with a contingent deferred sales charge
("CDSC funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund,
Dean Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean
Witter Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which
are money market funds (the foregoing eleven non-CDSC funds are hereinafter
referred to as the "Exchange Funds"). Exchanges may be made after the shares
of the Fund acquired by purchase (not by exchange or dividend reinvestment)
have been held for thirty days. There is no waiting period for exchanges of
shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges
between any of the money market funds and any of the CDSC funds can be
effected on the same basis. No contingent deferred sales charge ("CDSC") is
imposed at the time of any exchange, although any applicable CDSC will be
imposed upon ultimate redemption. Shares of the Fund acquired in exchange for
shares of another CDSC fund having a different CDSC schedule than that of
this Fund will be subject to the CDSC schedule of this Fund, even if such
shares are subsequently re-exchanged for shares of the CDSC fund originally
purchased. During the period of time the shareholder remains in the Exchange
Fund (calculated from the last day of the month in which the Exchange Fund
shares were acquired), the holding period (for the purpose of determining the
rate of the CDSC) is frozen. If those shares are subsequently reexchanged for
shares of a CDSC fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
CDSC fund are reacquired. Thus, the CDSC is based upon the time (calculated
as described above) the shareholder was invested in a CDSC fund (see
"Redemptions and Repurchases--Contingent Deferred Sales Charge"). However, in
the case of shares exchanged into an Exchange Fund on or after April 23,
1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount
equal to the Exchange Fund 12b-1 distribution fees incurred on or after that
date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or
14
<PAGE>
exchanges from the investor. Although the Fund does not have any specific
definition of what constitutes a pattern of frequent exchanges, and will
consider all relevant factors in determining whether a particular situation
is abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other
Dean Witter Funds may in their discretion limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such Dean Witter
Funds for which shares of the Fund have been exchanged, upon such notice as
may be required by applicable regulatory agencies. Shareholders maintaining
margin accounts with DWR or another Selected Broker-Dealer are referred to
their account executive regarding restrictions on exchange of shares of the
Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their account executive (no Exchange
Privilege Authorization Form is required). Other shareholders (and those
shareholders who are clients of DWR or another Selected Broker-Dealer but who
wish to make exchanges directly by 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 case
with the Dean Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
15
<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charges (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption, along with any additional
information required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), which will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- -------------------------- -----------------------
<S> <C>
First ..................... 5.0%
Second .................... 4.0%
Third ..................... 3.0%
Fourth .................... 2.0%
Fifth ..................... 2.0%
Sixth ..................... 1.0%
Seventh and thereafter ... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in exchange for shares of Dean Witter Funds sold with a front-end
sales charge or of other Dean Witter Funds acquired in exchange for such
shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first. In addition, no CDSC will be imposed on redemptions of
shares which are attributable to reinvestment of dividends or distributions
from, or the proceeds of, certain Unit Investment Trusts.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (b) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account ("IRA") or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code ("403(b) Custodial Account"), provided in either
case that the redemption is requested within one year of the death or initial
determination of disability;
(2) redemptions in connection with the following retirement plan
distributions: (a) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or, in the
case of a "key employee" of a "top heavy" plan, following attainment of age
59 1/2); (b) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (c) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the
16
<PAGE>
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust
Company, an affiliate of the Investment Manager, serves as recordkeeper or
Trustee ("Eligible 401(k) Plan"), provided that either: (a) the plan
continues to be an Eligible 401(k) Plan after the redemption; or (b) the
redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next computed (see "Purchase of Fund Shares") after such
purchase order is received by DWR or other Selected Broker-Dealer, reduced by
any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the
Distributor, DWR or other Selected Broker-Dealers. 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 executives regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption
or repurchase in shares of the Fund at their net asset value next determined
after a reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right, on sixty days'
notice, to redeem, at their net asset value, the shares of any shareholder
(other than shares held in an Individual Retirement Account or custodial
account under Section 403(b)(7) of the Internal Revenue Code) whose shares
due to redemptions by the shareholder have a value of less than $100, or such
lesser amount as may be fixed by the Board of Trustees or, in the case of an
account opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $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
17
<PAGE>
amount and allow the shareholder sixty days to make an additional investment
in an amount which will increase the value of his or her account to at least
the applicable amount before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to distribute substantially
all of its net investment income and net realized short-term and long-term
capital gains, if any, at least once each year. The Fund may, however,
determine to retain all or part of any net long-term capital gains in any
year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automati-cally credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
(See "Shareholder Services--Automatic Investment of Dividends and
Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and net capital gains (to the extent not offset by capital loss
carryovers) to shareholders and 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 any dividends and
distributions they receive from the Fund. Such dividends and distributions,
to the extent they are derived from net investment income and net short-term
capital gains, are taxable to the shareholder as ordinary dividend income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
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 corporate dividends received deduction.
After the end of the calendar year, shareholders will receive full
information on their dividends and capital gains distributions for tax
purposes. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by
the Fund and all sales charges which will be incurred by redeeming
shareholders, for the stated periods. It also assumes reinvestment of all
dividends and distributions paid by the Fund.
18
<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year by year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations, such as mutual fund performance rankings of Lipper Analytical
Services, Inc.
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for 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 Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the property of the
Fund 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.
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.
19
<PAGE>
DEAN WITTER
DEVELOPING GROWTH SECURITIES TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
BOARD OF TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Jayne Stevlingson
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
DEAN WITTER
DEVELOPING
GROWTH
SECURITIES
PROSPECTUS -- NOVEMBER 25, 1996
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 25, 1996
DEAN WITTER
DEVELOPING
GROWTH
SECURITIES TRUST
- -----------------------------------------------------------------------------
Dean Witter Developing Growth Securities Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is
long-term capital growth. While the Fund may invest in all types of equity
and debt securities, it will invest primarily in common stocks of smaller and
medium sized companies that, in the opinion of the Investment Manager, have
the potential for growing more rapidly than the economy and which may benefit
from new products or services, technological developments or changes in
management. (See "Investment Practices and Policies.")
A Prospectus for the Fund dated November 25, 1996, which provides the
basic information you should know before investing in the Fund, may be
obtained without charge from the Fund at its address or telephone numbers
listed below or from the Fund's Distributor, Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc. at any of its branch offices. This
Statement of Additional Information is not a Prospectus. It contains
information in addition to and more detailed than that set forth in the
Prospectus. It is intended to provide you additional information regarding
the activities and operations of the Fund, and should be read in conjunction
with the Prospectus.
Dean Witter
Developing Growth Securities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ........... 3
Trustees and Officers ................. 6
Investment Practices and Policies .... 11
Investment Restrictions ............... 14
Portfolio Transactions and Brokerage . 15
The Distributor ....................... 16
Determination of Net Asset Value ..... 20
Shareholder Services .................. 20
Redemptions and Repurchases ........... 24
Dividends, Distributions and Taxes ... 26
Performance Information ............... 27
Description of Shares of The Fund .... 28
Custodian and Transfer Agent .......... 29
Independent Accountants ............... 29
Reports to Shareholders ............... 29
Legal Counsel ......................... 29
Experts ............................... 29
Registration Statement ................ 29
Financial Statements--September 30,
1996 ................................. 30
Report of Independent Accountants .... 42
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund was organized under the laws of the Commonwealth of Massachusetts
on December 28, 1982 and is a trust of the type commonly known as a
"Massachusetts Business Trust."
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York, 10048, is the Fund's investment manager.
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a Delaware corporation. In an internal reorganization which took
place in January, 1993, InterCapital assumed the investment advisory,
administrative and management activities previously performed by the
InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital. (As hereinafter used in this Statement of
Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
Dean Witter InterCapital Inc. thereafter.) The daily management of the Fund
and research relating to the Fund's portfolio are conducted by or under the
direction of officers of the Fund and of the Investment Manager, subject to
review by the Fund's Board of Trustees. In addition, Trustees of the Fund
provide guidance on economic factors and interest rate trends. Information as
to these Trustees and officers is contained under the caption "Trustees and
Officers."
InterCapital is also the investment manager or investment adviser of the
following investment companies: Dean Witter Liquid Asset Fund Inc.,
InterCapital Income Securities Inc., Dean Witter High Yield Securities Inc.,
Dean Witter Tax-Free Daily Income Trust, Dean Witter Value-Added Market
Series, Dean Witter Tax-Exempt Securities Trust, Dean Witter Natural Resource
Development Securities Inc., Dean Witter Dividend Growth Securities Inc.,
Dean Witter American Value Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter Variable Investment Series, Dean Witter World Wide
Investment Trust, Dean Witter Select Municipal Reinvestment Fund, Dean Witter
U.S. Government Securities Trust, Dean Witter California Tax-Free Income
Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, High Income Advantage
Trust, High Income Advantage Trust II, High Income Advantage Trust III, Dean
Witter Government Income Trust, Dean Witter Utilities Fund, Dean Witter
California Tax-Free Daily Income Trust, Dean Witter Strategist Fund, Dean
Witter World Wide Income Trust, Dean Witter Intermediate Income Securities,
Dean Witter New York Municipal Money Market Trust, Dean Witter Capital Growth
Securities, Dean Witter European Growth Fund Inc., Dean Witter Precious
Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund Inc.,
Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, InterCapital Quality
Municipal Investment Trust, InterCapital Quality Municipal Income Trust,
InterCapital Quality Municipal Securities, InterCapital California Quality
Municipal Securities, InterCapital New York Quality Municipal Securities,
Dean Witter Diversified Income Trust, Dean Witter Health Sciences Trust, Dean
Witter Retirement Series, Dean Witter Global Dividend Growth Securities, Dean
Witter Limited Term Municipal Trust, InterCapital Insured Municipal
Securities, InterCapital Insured California Municipal Securities, Dean Witter
Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter National
Municipal Trust, Dean Witter High Income Securities, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Select Dimensions Investment Series, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter
Capital Appreciation Fund, Dean Witter Information Fund, Dean Witter
Intermediate Term U.S. Treasury Trust, Dean Witter Capital Appreciation Fund,
Dean Witter Information Fund, Dean Witter Japan Fund, Dean Witter Income
Builder Fund, Dean Witter Special Value Fund, Active Assets Money Trust,
Active Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active
Assets Government Securities Trust, Municipal Income Trust, Municipal Income
Trust II, Municipal Income Trust III, Municipal Income Opportunities Trust,
Municipal Income Opportunities Trust II, Municipal Income Opportunities Trust
III,
3
<PAGE>
Municipal Premium Income Trust and Prime Income Trust. The foregoing
investment companies, together with the Fund, are collectively referred to as
the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following companies for
which TCW Funds Management, Inc. is the investment adviser: TCW/DW Core
Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity
Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW
Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term
Trust 2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also
serves as: (i) sub-adviser to Templeton Global Opportunities Trust, an
open-end investment company; (ii) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; and (iii) sub-administrator
of MassMutual Participation Investors and Templeton Global Governments Income
Trust, closed-end investment companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective and policies.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help, bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the
preparation of prospectuses, proxy statements and reports required to be
filed with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in
the opinion of the Investment Manager, necessary or desirable). In addition,
the Investment Manager pays the salaries of all personnel, including officers
of the Fund, who are employees of the Investment Manager. The Investment
Manager also bears the cost of telephone service, heat, light, power and
other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to
the Fund which were previously performed directly by InterCapital. On April
17, 1995, DWSC was reorganized in the State of Delaware, necessitating the
entry into a new Services Agreement by InterCapital and DWSC on that date.
The foregoing internal reorganizations did not result in any change in the
nature or scope of the administrative services being provided to the Fund or
any of the fees being paid by the Fund for the overall services being
performed under the terms of the existing Agreement.
Expenses not expressly assumed by the Investment Manager under the
Agreement or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The
Distributor"), will be paid by the Fund. The expenses borne by the Fund
include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1 (see "The Distributor"); charges and expenses of any
registrar, custodian, share transfer and dividend disbursing agent; brokerage
commissions; taxes; engraving and printing share certificates; registration
costs of the Fund and its shares under federal and state securities laws; the
cost and expenses of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders;
all expenses of shareholders' and Trustees' meetings and of preparing,
printing and mailing proxy statements and reports to shareholders; fees and
travel expenses of Trustees or members of any advisory board or committee who
are not employees of the Investment Manager or any corporate affiliate of the
Investment Manager; all expenses incident to any dividend, withdrawal or
redemption options; charges and expenses of any outside service used for
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Fund or of the
Investment Manager (not including compensation or expenses of attorneys who
are employees of the
4
<PAGE>
Investment Manager) and independent accountants; membership dues of industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the Fund's daily net assets: 0.50% of the portion
of the daily net assets not exceeding $500 million and 0.475% of the portion
of the daily net assets exceeding $500 million. For the fiscal years ended
September 30, 1994, 1995 and 1996, the Fund accrued to the Investment Manager
total compensation in the amounts of $1,515,547, $1,916,827 and $3,194,151,
respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on October
30, 1992 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on January 12, 1993. The Agreement is substantially
identical to a prior investment management agreement which was initially
approved by the Trustees on January 18, 1983, by DWR as the then sole
shareholder on March 2, 1983, and by the shareholders of the Fund at a
Special Meeting of Shareholders held on July 16, 1984. The Agreement took
effect on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. The Agreement may be terminated at any time,
without penalty, on thirty days' notice by the Board of Trustees of the Fund,
by the holders of a majority, as defined in the Investment Company Act of
1940 (the "Act"), of the outstanding shares of the Fund, or by the Investment
Manager. The Agreement will automatically terminate in the event of its
assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1994,
and will remain in effect from year to year thereafter, provided continuance
of the Agreement is approved at least annually by the vote of the holders of
a majority, as defined in the Act, of the outstanding shares of the Fund, or
by the Board of Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Trustees of
the Fund who are not parties to the Agreement or "interested persons" (as
defined in the Act) of any such party (the "Independent Trustees"), which
vote must be cast in person at a meeting called for the purpose of voting on
such approval. At their meeting held on April 8, 1994, the Fund's Board of
Trustees, including all of the Independent Trustees, approved an amendment to
the Agreement to lower the management fees charged on the Fund's daily net
assets in excess of $500 million and approved continuation of the Agreement,
as so amended, until April 30, 1995. At their meeting held on April 17, 1996,
the Fund's Board of Trustees, including all of the Independent Trustees,
approved continuation of the Agreement until April 30, 1997.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate
the name "Dean Witter" from its name if DWR or its parent company shall so
request.
5
<PAGE>
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 82 Dean Witter Funds and the 14 TCW/DW Funds are
shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- ----------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture Corporation
Trustee (since November, 1995); Director or Trustee of the Dean Witter Funds;
c/o Levitz Furniture Corporation formerly President and Chief Executive Officer of Hills Department
6111 Broken Sound Parkway, N.W. Stores (May, 1991-July, 1995); formerly variously Chairman, Chief
Boca Raton, Florida Executive Officer, President and Chief Operating Officer (1987-1991)
of the Sears Merchandise Group of Sears, Roebuck and Co.; Director
of Eaglemark Financial Services, Inc., the United Negro College Fund
and Weirton Steel Corporation.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of InterCapital, DWSC
Chairman of the Board, and Distributors; Executive Vice President and Director of DWR; Chairman,
President, Chief Executive Officer Director or Trustee, President and Chief Executive Officer of the
and Trustee Dean Witter Funds; Chairman, Chief Executive Officer and Trustee of
Two World Trade Center the TCW/DW Funds; Chairman and Director of Dean Witter Trust Company
New York, New York ("DWTC"); Director and/or officer of various DWDC subsidiaries; formerly
Executive Vice President and Director of DWDC (until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United States
Trustee Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Chemical Corporation (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974); formerly
500 Huntsman Way Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice Chairman,
Salt Lake City, Utah Huntsman Chemical Corporation (since January, 1993); Director of
Franklin Quest (time management systems) and John Alden Financial
Corp.; member of the board of various civic and charitable organizations.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Directors or Trustees and Director or Trustee of the Dean
Two World Trade Center Witter Funds; Chairman of the Audit Committee and Chairman of the
New York, New York Committee of the Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education (1978-1989) and Chairman
and Chief Executive Officer of Anchor Corporation, an Investment Advisor
(1964-1978); Director of Washington National Corporation (insurance).
6
<PAGE>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- ----------------------------------------------------------------
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Koch Professer of International Economics and Director of the Center
c/o Johnson Smick International, Inc. for Global Market Studies at George Mason University; Co-Chairman
1133 Connecticut Avenue, N.W. and a founder of the Group of Seven Council (G7C), an international
Washington, DC economic commission; Director or Trustee of the Dean Witter Funds;
Trustee of the TCW/DW Funds; Director of NASDAQ (since June, 1995);
Director of Greenwich Capital Markets Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S. Treasury (1982-1986).
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds; Trustee
c/o Triumph Capital, L.P. of the TCW/DW Funds; formerly Vice President, Bankers Trust Company
237 Park Avenue and BT Capital Corporation (1984-1988); Director of various business
New York, New York organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive Officer of
Trustee DWDC, DWR and Novus Credit Services Inc.; Director of InterCapital,
Two World Trade Center DWSC and Distributors; Director or Trustee of the Dean Witter Funds;
New York, New York Director and/or officer of various DWDC subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds; Trustee of
Trustee the TCW/DW Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Executive Vice President and Chief Investment Officer of the Home
Weitzen Shalov & Wein Insurance Company (August, 1991-September, 1995) and Chairman and
Counsel to the Independent Trustees Chief Investment Officer of Axe-Houghton Management and the Axe-Houghton
114 West 47th Street Funds (April, 1983-June, 1991).
New York, New York
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and DWSC; Senior Vice President, Assistant Secretary and Assistant
and General Counsel General Counsel of Distributors; Senior Vice President and Secretary
Two World Trade Center of DWTC; Assistant Secretary of DWR; Vice President, Secretary and
New York, New York General Counsel of the Dean Witter Funds and the TCW/DW Funds.
Jayne Stevlingson (36) Vice President of InterCapital (since October, 1992); Vice President
Vice President of various Dean Witter Funds; formerly Assistant Vice President of
Two World Trade Center Bankers Trust New York Corp.
New York, New York
Thomas F. Caloia (50) First Vice President and Assistant Treasurer of InterCapital and DWSC;
Treasurer Treasurer of the Dean Witter Funds and the TCW/DW Funds.
Two World Trade Center
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons", as defined in the Act.
7
<PAGE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Robert S. Giambrone, Senior Vice President of InterCapital,
DWSC, Distributors and DWTC and Director of DWTC, Joseph J. McAlinden,
Executive Vice President and Chief Investment Officer of InterCapital and
Director of DWTC, and Ronald J. Worobel, Kenton J. Hinchliffe, Ira N. Ross
and Paul D. Vance, Senior Vice Presidents of InterCapital, are Vice
Presidents of the Fund, and Marilyn K. Cranney and Barry Fink, First Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, Lou Anne
D. McInnis and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso and Carsten Otto, Staff
Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of eight (8) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 82 Dean Witter
Funds, comprised of 122 portfolios. As of September 30, 1996, the Dean Witter
Funds had total net assets of approximately $79.4 billion and more than five
million shareholders.
Six Trustees (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four
of the six independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
8
<PAGE>
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since
July 1, 1996, as Chairman of the Committee of the Independent Trustees and
the Audit Committee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $1,200). The Fund
also reimburses such Trustees for travel and other out-of-pocket expenses
incurred by them in connection with attending such meetings. Trustees and
officers of the Fund who are or have been employed by the Investment Manager
or an affiliated company receive no compensation or expense reimbursement
from the Fund.
9
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended September 30,
1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
Michael Bozic ............. $1,780
Edwin J. Garn ............. 1,850
John R. Haire ............. 3,850
Dr. Manuel H. Johnson .... 1,800
Michael E. Nugent ......... 1,750
John L. Schroeder ......... 1,800
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds. Mr.
Schroeder was elected as a Trustee of the TCW/DW Funds on April 20, 1995.
COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF TOTAL
FOR SERVICE AS COMMITTEES OF COMPENSATION
DIRECTOR OR FOR SERVICE AS INDEPENDENT PAID FOR
TRUSTEE AND TRUSTEE AND DIRECTORS/ SERVICES TO 79
COMMITTEE MEMBER COMMITTEE MEMBER TRUSTEES AND DEAN WITTER
OF 79 DEAN WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ----------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350(1) 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>
- ----------------
(1) For the 79 Dean Witter Funds in operation at December 31, 1995. As
noted above, on July 1, 1996, Mr. Haire became Chairman of the
Committee of the Independent Trustees and the Audit Committee of the
TCW/DW Funds in addition to continuing to serve in such positions for
the Dean Witter Funds.
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666%
of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the
10
<PAGE>
Board.(2) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting Fund in the five
year period prior to the date of the Eligible Trustee's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended September
30, 1996 and by the 57 Dean Witter Funds (including the Fund) as of December
31, 1995, and the estimated retirement benefits for the Fund's Independent
Trustees from the Fund as of September 30, 1996 and from the 57 Dean Witter
Funds as of December 31, 1995.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
--------------------------------
ESTIMATED ANNUAL
RETIREMENT BENEFITS BENEFITS UPON
ACCRUED AS EXPENSES RETIREMENT(3)
-------------------- -------------------
ESTIMATED
CREDITED YEARS ESTIMATED
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- --------------------------- --------------- --------------- -------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 399 $ 26,359 $ 950 $ 51,550
Edwin J. Garn ............. 10 50.0 675 41,901 950 51,550
John R. Haire ............. 10 50.0 4,576 261,763 2,343 130,404
Dr. Manuel H. Johnson .... 10 50.0 268 16,748 950 51,550
Michael E. Nugent ......... 10 50.0 507 30,370 950 51,550
John L. Schroeder ......... 8 41.7 776 51,812 792 42,958
</TABLE>
- ---------------
(2) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (2)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
Leveraging. As discussed in the Prospectus, the Fund may borrow money, but
only from a bank and in an amount up to 25% of the value of the Fund's total
assets (including the amount borrowed) less its liabilities (not including
any borrowings but including the fair market value at the time of computation
of any other senior securities then outstanding), in an effort to enhance
capital appreciation by leveraging its investments through purchasing
securities with the borrowed funds. Such borrowings will be subject to
current margin requirements of the Federal Reserve Board and where necessary
the Fund may use any or all of its securities as collateral for such
borrowings. Any investment gains made with the additional monies in excess of
interest paid will cause the net asset value of the Fund's shares to rise to
a greater extent than would otherwise be the case. Conversely, if the
investment performance of the additional monies fails to cover their cost to
the Fund, net asset value will decrease to a greater extent than would
otherwise be the case. This is the speculative factor involved in leverage.
The Fund will be required to maintain an asset coverage (including the
proceeds of borrowings) of at least 300% of such borrowings in accordance
with the provisions of the Act. If, due to market fluctuations or other
reasons, the value of the Fund's assets (including the proceeds of
borrowings) becomes at any time less than three times the amount of any
outstanding bank debt, the Fund, within
11
<PAGE>
three business days, will reduce its bank debt to the extent necessary to
meet the required 300% asset coverage. In restoring the 300% asset coverage,
the Fund may have to sell a portion of its investments at a time when it may
be disadvantageous to do so.
The investment policy provides that the Fund may not purchase or sell a
security on margin. The margin and bank borrowing restrictions will prevent
the ordinary purchase of a security which involves a cash borrowing from a
broker of any part of the purchase price of a security.
In addition to borrowings for leverage, the Fund may also borrow from
banks an additional amount as a temporary measure for extraordinary or
emergency purposes, and for these purposes, in no event an amount greater
than 5% of the value of the Fund's total assets. The Fund did not borrow any
money during its fiscal year ended September 30, 1996.
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, and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are at least equal to the market value,
determined daily, of the loaned securities. The advantage of such loans is
that the Fund continues to receive the income on the loaned securities while
at the same time earning interest on the cash amounts deposited as
collateral, which will be invested in short-term obligations. The Fund will
not lend its portfolio securities if such loans are not permitted by the laws
or regulations of any state in which its shares are qualified for sale and
will not lend more than 25% of the value of its total assets.
A loan may be terminated by the borrower on one business day's notice, or
by the Fund on four business days' notice. If the borrower fails to deliver
the loaned securities within four days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over the value of the collateral.
As with any extensions of credit, there are risks of delay in recovery and in
some cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Fund's management to be creditworthy
and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the value of the
securities during the period would inure to the Fund. The creditworthiness of
firms to which the Fund lends its portfolio securities will be monitored on
an ongoing basis by the Investment Manager pursuant to procedures adopted and
reviewed, on an ongoing basis, by the Board of Trustees of the Fund. The Fund
will pay reasonable finder's, administrative and custodial fees in connection
with a loan of its securities.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned
securities, to be delivered within one day after notice, to permit the
exercise of such rights if the matters involved would have a material effect
on the Fund's investment in such loaned securities. The Fund has not to date
lent any of its portfolio securities.
Repurchase Agreements. As discussed in the Prospectus, when cash may be
available for only a few days, it may be invested by the Fund in repurchase
agreements until such time as it may otherwise be invested or used for
payments of obligations of the Fund. These agreements, which may be viewed as
a type of secured lending by the Fund, typically involve the acquisition by
the Fund of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution
will repurchase, the underlying security ("collateral") at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be maintained in a segregated account
and will be marked to market daily to determine that the value of the
collateral, as specified in the agreement, does not decrease below the
purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject
to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include
12
<PAGE>
effecting repurchase transactions only with large, well-capitalized and
well-established financial institutions whose financial condition will be
continually monitored by the Investment Manager subject to procedures
established by the Board of Trustees of the Fund. In addition, as described
above, the value of the collateral underlying the repurchase agreement will
always be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to
liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amounts to more than 15% of its
total assets. The Fund's investments in repurchase agreements may at times be
substantial when, in the view of the Investment Manager, liquidity, tax or
other considerations warrant.
Warrants. The Fund may invest in warrants, which are, in effect, an option
to purchase equity securities at a specific price, generally valid for a
specific period of time, and have no voting rights, pay no dividends and have
no rights with respect to the corporation issuing them. If warrants remain
unexercised at the end of the exercise period, they will lapse and the Fund's
investment in them will be lost. The prices of warrants do not necessarily
move parallel to the prices of the underlying securities.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
While the Fund will only purchase securities on a when-issued, delayed
delivery or forward commitment basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if
it is deemed advisable. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. At the time the Fund makes the commitment to purchase
or sell securities on a when-issued, delayed delivery or forward commitment
basis, it will record the transaction and thereafter reflect the value, each
day, of such security purchased or, if a sale, the proceeds to be received,
in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price.
The Fund will also establish a segregated account with its custodian bank in
which it will continually maintain cash or U.S. Government securities or
other liquid portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis. It
is anticipated that the aggregate amount of the Fund's commitments to
purchase securities on a when-issued, delayed delivery or forward commitment
basis will not exceed 5% of the Fund's total assets.
When, As and If Issued Securities. As discussed in the Prospectus, the
Fund may purchase securities on a "when, as and if issued" basis under which
the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged
buy-out or debt restructuring. The commitment for the purchase of any such
security will not be recognized in the portfolio of the Fund until the
Investment Manager determines that issuance of the security is probable. At
such time, the Fund will record the transaction and, in determining its net
asset value, will reflect the value of the security daily. At such time, the
Fund will also establish a segregated account with its custodian bank in
which it will maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities. Once a segregated account has been established, if the
anticipated event does not occur and the securities are not issued the Fund
will have lost an investment opportunity. It is anticipated that the
aggregate amount of the Fund's commitments to purchase securities on a "when,
as and if issued" basis at any one time will not exceed 5% of the Fund's
total assets. An increase in the percentage of the Fund's assets committed to
the purchase of securities on a "when, as and if issued" basis may increase
the volatility of its net asset value. The Investment Manager and the
Trustees do not believe that the net asset value of the Fund will be
adversely affected by its purchase of securities on such basis. In addition,
the value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all
13
<PAGE>
securities of such issuer owned by the Fund, may not exceed 5% of the value
of the Fund's total assets at the time the initial commitment to purchase
such securities is made (see "Investment Restrictions"). The Fund may also
sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
Portfolio Trading. It is anticipated that the Fund's portfolio turnover
rate will not exceed 300% in any one year. A 300% turnover rate would occur,
for example, if 300% of the securities held in the Fund's portfolio
(excluding all securities whose maturities at acquisition were one year or
less) were sold and replaced within one year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of shareholders of the Fund, if the holders of more than 50% of the
outstanding shares are present or represented by proxy, or (b) more than 50%
of the outstanding shares of the Fund.
The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or trustee of the Fund or any officer or director of the
Investment Manager owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers, trustees and directors who own more
than 1/2 of 1% own in the aggregate more than 5% of the outstanding
securities of such issuer.
2. Purchase or sell real estate or interests therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities which are secured by real estate or interests therein.
3. Purchase or sell commodities or commodity futures contracts.
4. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs, except that the Fund
may invest in the securities of companies which operate, invest in, or
sponsor such programs.
5. Write, purchase or sell puts, calls, or combinations thereof.
6. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
7. Invest more than 5% of its total assets in warrants, including not
more than 2% of such assets in warrants not listed on either the New York
or American Stock Exchange. However, the acquisition of warrants attached
to other securities is not subject to this restriction.
8. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(5) in the Prospectus. To meet the requirements of regulations in certain
states, the Fund, as a matter of operating policy but not as a fundamental
policy, will limit any pledge of its assets to 5% of its net assets so
long as shares of the Fund are being sold in those states.
9. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above and in the Prospectus; or (c) lending
portfolio securities.
10. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
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<PAGE>
11. Make short sales of securities.
12. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of purchases of portfolio securities.
13. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
14. Invest for the purpose of exercising control or management of any
other issuer.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred
to as the underwriter's concession or discount. On occasion, the Fund may
also purchase certain money market instruments directly from an issuer, in
which case no commissions or discounts are paid. During the fiscal years
ended September 30, 1994, 1995 and 1996, the Fund paid a total of $938,464,
$662,758 and $1,361,260, respectively, in brokerage commissions.
The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, various factors are considered, including the respective investment
objectives, the relative size of portfolio holdings of the same or comparable
securities, the availability of cash for investment, the size of investment
commitments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts. In the case of
certain initial and secondary public offerings, the Investment Manager may
utilize a pro-rata allocation process based on the size of the Dean Witter
Funds involved and the number of shares available from the public offering.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient execution of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest commission cost could impede effective
portfolio management and preclude the Fund and the Investment Manager from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes such price
and execution are obtainable from more than one broker or dealer, it may give
consideration to placing portfolio
15
<PAGE>
transactions with those brokers and dealers who also furnish research and
other services to the Fund or the Investment Manager. Such services may
include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. During the
fiscal year ended September 30, 1996, the Fund directed the payment of
$1,041,291 in brokerage commissions in connection with transactions in the
aggregate amount of $469,988,319 to brokers because of research services
provided.
The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and thus
reduce its expenses, it is of indeterminable value and the management fee
paid to the Investment Manager is not reduced by any amount that may be
attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. Such transactions
will be effected with DWR only when the price available from DWR is better
than that available from other dealers. During the fiscal years ended
September 30, 1994, 1995 and 1996, the Fund did not effect any principal
transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow DWR to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Trustees of the Fund, including a majority of the Trustees
who are not interested persons of the Fund, as defined in the Act, have
adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. The Fund does not reduce the management fee it pays to
the Investment Manager by any amount of the brokerage commissions it may pay
to DWR. During the fiscal years ended September 30, 1994, 1995 and 1996, the
Fund paid a total of $118,670, $91,840 and $133,555, respectively, in
brokerage commissions to DWR. For the fiscal year ended September 30, 1996,
the brokerage commissions paid to DWR represented approximately 9.81% of the
total brokerage commissions paid by the Fund for the year and were paid on
account of transactions having an aggregate dollar value equal to
approximately 11.26% of the aggregate dollar value of all portfolio
transactions of the Fund during the year for which commissions were paid.
During the fiscal year ended September 30, 1996, the Fund did not acquire
any securities of the ten brokers who executed the largest dollar amounts of
the Fund's portfolio transactions or of the ten dealers who executed the
largest dollar amounts of principal transactions with the Fund during the
period, or securities of the parents of those broker-dealers.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC.
The Trustees of the Fund, including a majority of the Trustees who are not,
and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Trustees"), approved, at their meeting
held on October 30, 1992, the current
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<PAGE>
Distribution Agreement appointing the Distributor as exclusive distributor of
the Fund's shares and providing for the Distributor to bear distribution
expenses not borne by the Fund. The current Distribution Agreement is
substantively identical to the Fund's previous distribution agreements. The
Distribution Agreement took effect on June 30, 1993 upon the spin-off by
Sears, Roebuck and Co. of its remaining shares of DWDC. By its terms, the
Distribution Agreement had an initial term ending April 30, 1994, and will
remain in effect from year to year thereafter if approved by the Board. At
their meeting held on April 17, 1996, the Trustees, including all of the
Independent Trustees, approved the continuation of the Distribution Agreement
until April 30, 1997.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. Under the Distribution Agreement, the Distributor uses its best
efforts in rendering services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan") pursuant to which the Fund pays the Distributor
compensation accrued daily and payable monthly at the annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
shares since the inception of the Fund (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived, or (b) the average daily net assets of the Fund. The
Distributor also receives the proceeds of contingent deferred sales charges
imposed on certain redemptions of shares, which are separate and apart from
payments made pursuant to the Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received approximately
$450,000, $991,000 and $810,000 in contingent deferred sales charges for the
fiscal years ended September 30, 1994, 1995 and 1996, respectively.
The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year pursuant to the Plan equal to 0.25% of the Fund's
average daily net assets is characterized as a "service fee" under the Rules
of Fair Practice of the National Association of Securities Dealers, Inc. (of
which the Distributor is a member). Such portion of the fee is a payment made
for personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by the Fund is characterized as an
"asset-based sales charge" as such is defined by the aforementioned Rules of
Fair Practice.
The Plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees of the Fund who are not "interested persons" of
the Fund (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent 12b-1 Trustees"),
cast in person at a meeting called for the purpose of voting on the Plan, on
January 18, 1983, by DWR as the then sole shareholder of the Fund on March 1,
1983 and by the shareholders holding a majority, as defined in the Act, of
the outstanding voting securities of the Fund at a Special Meeting of
Shareholders of the Fund held on July 16, 1984.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments
to the Plan which took effect in January, 1993 and were
17
<PAGE>
designed to reflect the fact that upon the reorganization described above the
share distribution activities theretofore performed for the Fund by DWR were
assumed by the Distributor and DWR's sales activities are now being performed
pursuant to the terms of a selected dealer agreement between the Distributor
and DWR. The amendments provide that payments under the Plan will be made to
the Distributor rather than to DWR as before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other selected broker-dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution-related expenses. At their meeting held
on April 28, 1993, the Trustees, including a majority of the Independent
12b-1 Trustees, approved certain technical amendments to the Plan in
connection with amendments adopted by the National Association of Securities
Dealers, Inc. to its Rules of Fair Practice. At their meeting held on October
26, 1995, the Trustees of the Fund, including all of the Independent 12b-1
Trustees, approved an amendment to the Plan to permit payments to be made
under the Plan with respect to certain distribution expenses incurred in
connection with the distribution of shares, including personal services to
shareholders with respect to holdings of such shares, of an investment
company whose assets are acquired by the Fund in a tax-free reorganization.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. The Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended
September 30, 1996, of $6,461,408. This amount is equal to 1.0% of the Fund's
average daily net assets for the fiscal year and was calculated pursuant to
clause (b) of the compensation formula under the Plan. This amount is treated
by the Fund as an expense in the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund are subject in
most cases to a contingent deferred sales charge, payable to the Distributor,
if redeemed during the six years after their purchase. DWR compensates its
account executives by paying them, from its own funds, commissions for the
sale of the Fund's shares, currently a gross sales credit of up to 5% of the
amount sold and an annual residual commission of up to 0.25 of 1% of the
current value (not including reinvested dividends or distributions) of the
amount sold. The gross sales credit is a charge which reflects commissions
paid by DWR to its account executives and DWR's Fund-associated
distribution-related expenses, including sales compensation, and overhead and
other branch office distribution-related expenses including (a) the expenses
of operating DWR's branch offices in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies, (b) the costs of client sales seminars, (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund shares
and (d) other expenses relating to branch promotion of Fund sales. The
distribution fee that the Distributor receives from the Fund under the Plan,
in effect, offsets distribution expenses incurred under the Plan on behalf of
the Fund and opportunity costs, such as the gross sales credit and an assumed
interest charge thereon ("carrying charge"). In the Distributor's reporting
of the distribution expenses to the Fund, such assumed interest (computed at
the "broker's call rate") has been calculated on the gross credit as it is
reduced by amounts received by the Distributor under the Plan and any
contingent deferred sales charges received by the Distributor upon redemption
of shares of the Fund. No other interest charge is included as a distribution
expense in the Distributor's calculation of its distribution costs for this
purpose. The broker's call rate is the interest rate charged to securities
brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $6,461,408 accrued under the Plan for the fiscal
year ended September 30, 1996 to the Distributor. The Distributor and DWR
estimate that they have spent, pursuant to the Plan, $66,280,910 on behalf of
the Fund since the inception of the Plan. It is estimated that this amount
was spent in approximately the following ways: (i) 6.42%
($4,258,503)--advertising and promotional expenses; (ii) 0.51%
($334,858)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 93.07% ($61,687,549)--other expenses, including the
gross sales credit
18
<PAGE>
and the carrying charge, of which 18.84% ($11,624,343) represents carrying
charges, 33.58% ($20,716,155) represents commission credits to DWR branch
offices for payments of commissions to account executives and 47.58%
($29,347,051) represents overhead and other branch office
distribution-related expenses.
At any given time, the expenses of distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to
the Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund
that the excess distribution expenses, including the carrying charge designed
to approximate the opportunity costs incurred by DWR which arise from it
having advanced monies without having received the amount of any sales
charges imposed at the time of sale of the Fund's shares, totalled
$28,270,501 as of September 30, 1996. 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 of contingent
deferred sales charges paid by investors upon redemption of shares, if for
any reason the Plan is terminated, the Trustees will consider at that time
the manner in which to treat such expenses. Any cumulative expenses incurred,
but not yet recovered through distribution fees or contingent deferred sales
charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR or certain of their employees may be deemed to
have such an interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
Under its terms, the Plan had an initial term ending December 31, 1983 and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Most recent continuance of the Plan for one year, until April 30, 1997, was
approved by the Board of Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at a Board meeting held on April 17, 1996. Prior
to approving the continuation of the Plan, the Trustees requested and
received from the Distributor and reviewed all the information which they
deemed necessary to arrive at an informed determination. In making their
determination to continue the Plan, the Trustees considered: (1) the Fund's
experience under the Plan and whether such experience indicates that the Plan
is operating as anticipated; (2) the benefits the Fund had obtained, was
obtaining and would be likely to obtain under the Plan; and (3) what services
had been provided and were continuing to be provided under the Plan to the
Fund and its shareholders. Based upon their review, the Trustees of the Fund,
including each of the Independent 12b-1 Trustees, determined that
continuation of the Plan would be in the best interest of the Fund and would
have a reasonable likelihood of continuing to benefit the Fund and its
shareholders. In the Trustees' quarterly review of the Plan, they will
consider its continued appropriateness and the level of compensation provided
therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of
the Fund, and all material amendments to the Plan must also be approved by
the Trustees in the manner described above. The Plan may be terminated at any
time, without payment of any penalty, by vote of a majority of the
Independent 12b-1 Trustees or by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Act) on not more than thirty
days' written notice to any other party to the Plan. So long as the Plan is
in effect, the election and nomination of Independent 12b-1 Trustees shall be
committed to the discretion of the Independent 12b-1 Trustees.
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<PAGE>
DETERMINATION OF NET ASSET VALUE
- -----------------------------------------------------------------------------
As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. All other securities and other assets are valued at their fair
value as determined in good faith under procedures established by and under
the supervision of the Trustees.
The net asset value per share of the Fund is determined once daily as of
4:00 p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open. The New York Stock Exchange currently observes the
following holidays: New Year's Day; Presidents' Day; Good Friday; Memorial
Day; Independence Day; Labor Day; Thanksgiving Day; and Christmas Day.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is
no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction
from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid, at the net asset value per share, in shares
of the Fund (or in cash if the shareholder so requests) as of the close of
business on the record date. At any time an investor may request the Transfer
Agent, in writing, to have subsequent dividends and/or capital gains
distributions paid to him or her in cash rather than shares. To assure
sufficient time to process the change, such request should be received by the
Transfer Agent at least five business days prior to the record date of the
dividend or distribution. In the case of recently purchased shares for which
registration instructions have not been received on the record date, cash
payments will be made to DWR or other selected broker-dealer, and will be
forwarded to the shareholder, upon the receipt of proper instructions.
Targeted Dividends. (Service Mark) In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of an open-end Dean
Witter Fund other than Dean Witter Developing Growth Securities Trust. Such
investment will be made as described above for automatic investment in shares
of the Fund, at the net asset value per share of the selected Dean Witter
Fund as of the close of business on the payment date of the dividend or
distribution and will begin to earn dividends, if any, in the selected Dean
Witter Fund the next business day. To participate in the Targeted Dividends
program, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent. Shareholders of the
Fund must be shareholders of the Dean Witter Fund targeted to receive
investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted Dean Witter
Fund before entering the program.
EasyInvest. (Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings
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<PAGE>
account, on a semi-monthly, monthly or quarterly basis, to the Transfer Agent
for investment in shares of the Fund. Shares purchased through EasyInvest
will be added to the shareholder's existing account at the net asset value
calculated the same business day the transfer of funds is effected. For
further information or to subscribe to EasyInvest, shareholders should
contact their DWR or other selected broker-dealer account executive or the
Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at net
asset value, without the imposition of a contingent deferred sales charge
upon redemption, by returning the check or the proceeds to the Transfer Agent
within thirty days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or the proceeds by
the Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed
from his or her account so that the proceeds (net of any applicable
contingent deferred sales charge) to the shareholder will be the designated
monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's DWR or other selected broker-dealer brokerage account, within
five business days after the date of redemption. The Withdrawal Plan may be
terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the 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. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six
years (see "Redemptions and Repurchases--Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her account executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.
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<PAGE>
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Developing Growth Securities Trust, directly to the Fund's Transfer Agent.
Such amounts will be applied to the purchase of Fund shares at the net asset
value per share next computed after receipt of the check or purchase payment
by the Transfer Agent. The shares so purchased will be credited to the
investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other Dean Witter Funds sold with a
contingent deferred sales charge ("CDSC funds"), and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Balanced Growth Fund,
Dean Witter Balanced Income Fund, Dean Witter Intermediate Term U.S. Treasury
Trust and five Dean Witter Funds which are money market funds (the foregoing
eleven non-CDSC funds are hereinafter referred to as the "Exchange Funds").
Exchanges may be made after the shares of the Fund acquired by purchase (not
by exchange or dividend reinvestment) have been held for thirty days. There
is no waiting period for exchanges of shares acquired by exchange or dividend
reinvestment. An exchange will be treated for federal income tax purposes the
same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge", a contingent deferred
sales charge ("CDSC") may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of the Fund or
any other CDSC fund are exchanged for shares of an Exchange Fund, the
exchange is executed at no charge to the shareholder, without the imposition
of the CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period or
"year since purchase payment made" is frozen. When shares are redeemed out of
the Exchange Fund, they will be subject to a CDSC which would be based upon
the period of time the shareholder held shares in a CDSC fund. However, in
the case of shares exchanged into an Exchange Fund on or after April 23,
1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount
equal to the Exchange Fund 12b-1 distribution fees incurred on or after that
date which are attributable to those shares. Shareholders acquiring shares of
an Exchange Fund pursuant to this exchange privilege may exchange those
shares back into a CDSC fund from the Exchange Fund, with no CDSC being
imposed on such exchange. The holding period previously frozen when shares
were first exchanged for shares of the Exchange Fund resumes on the last day
of the month in which shares of a CDSC fund are reacquired. A CDSC is imposed
only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a CDSC fund.
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
22
<PAGE>
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions and (iii) acquired in
exchange for shares of front-end sales charge funds, or for shares of other
Dean Witter Funds for which shares of front-end sales charge funds have been
exchanged (all such shares called "Free Shares"), will be exchanged first.
Shares of Dean Witter American Value Fund acquired prior to April 30, 1984,
shares of Dean Witter Dividend Growth Securities Inc. and Dean Witter Natural
Resource Development Securities Inc. acquired prior to July 2, 1984, and
shares of Dean Witter Strategist Fund acquired prior to November 8, 1989, are
also considered Free Shares and will be the first Free Shares to be
exchanged. After an exchange, all dividends earned on shares in an Exchange
Fund will be considered Free Shares. If the exchanged amount exceeds the
value of such Free Shares, an exchange is made, on a block-by-block basis, of
non-Free Shares held for the longest period of time (except that if shares
held for identical periods of time but subject to different CDSC schedules
are held in the same Exchange Privilege account, the shares of that block
that are subject to a lower CDSC rate will be exchanged prior to the shares
of that block that are subject to a higher CDSC rate). Shares equal to any
appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares
of the fund exchanged into will be equal to the lesser of (a) the purchase
payments for, or (b) the current net asset value of, the exchanged non-Free
Shares. If an exchange between funds would result in exchange of only part of
a particular block of non-Free Shares, then shares equal to any appreciation
in the value of the block (up to the amount of the exchange) will be treated
as Free Shares and exchanged first, and the purchase payment for that block
will be allocated on a pro rata basis between the non-Free Shares of that
block to be retained and the non-Free Shares to be exchanged. The prorated
amount of such purchase payment attributable to the retained non-Free Shares
will remain as the purchase payment for such shares, and the amount of
purchase payment for the exchanged non-Free Shares will be equal to the
lesser of (a) the prorated amount of the purchase payment for, or (b) the
current net asset value of, those exchanged non-Free Shares. Based upon the
procedures described in the Prospectus under the caption "Contingent Deferred
Sales Charge", any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected broker-dealer, if any, in the performance of such
functions. With respect to exchanges, redemptions or repurchases, the
Transfer Agent shall be liable for its own negligence and not for the default
or negligence of its correspondents or for losses in transit. The Fund shall
not be liable for any default or negligence of the Transfer Agent, the
Distributor or any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter California Tax-Free Daily Income Trust and Dean Witter New
York Municipal Money Market Trust, although those funds may, in their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment is $10,000 for Dean Witter Short-Term U.S. Treasury Trust,
although that fund, in its discretion, may accept initial purchases of as low
as $5,000. The minimum initial investment is $5,000 for Dean Witter Special
Value Fund. The minimum
23
<PAGE>
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter funds for
whichshares of the Fund have been exchanged, upon such notice as may be
required by applicable regulatory agencies (presently sixty days' prior
written notice for termination or material revision), provided that six
months' prior written notice of termination will be given to the shareholders
who hold shares of Exchange Funds pursuant to the Exchange Privilege, and
provided further that the Exchange Privilege may be terminated or materially
revised without notice at times (a) when the New York Stock Exchange is
closed for other than customary weekends and holidays, (b) when trading on
that Exchange is restricted, (c) when an emergency exists as a result of
which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to
determine the value of its net assets, (d) during any other period when the
Securities and Exchange Commission by order so permits (provided that
applicable rules and regulations of the Securities and Exchange Commission
shall govern as to whether the conditions prescribed in (b) or (c) exist) or
(e) if the Fund would be unable to invest amounts effectively in accordance
with its investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds may be reduced by the amount of
any applicable contingent deferred sales charges (see below). If shares are
held in a shareholder's account without a share certificate, a written
request for redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303 is required. If certificates are held by the shareholder, the
shares may be redeemed by surrendering the certificates with a written
request for redemption. The share certificate, or an accompanying stock
power, and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent
to the Fund's Transfer Agent, which will redeem the shares at their net asset
value next computed (see "Purchase of Fund Shares" in the Prospectus) after
it receives the request, and certificate, if any, in good order. Any
redemption request received after such computation will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary,
the Transfer Agent may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.
24
<PAGE>
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding six years.
However, no CDSC will be imposed to the extent that the net asset value of
the shares redeemed does not exceed: (a) the current net asset value of
shares purchased more than six years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another Dean Witter Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) the current net asset value of
shares acquired in exchange for (i) shares of Dean Witter front-end sales
charge funds, or (ii) shares of other Dean Witter Funds for which shares of
front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six years. The CDSC will be paid to the
Distributor. In addition, no CDSC will be imposed on redemptions of shares
which are attributable to reinvestment of dividends or distributions from, or
the proceeds of, certain Unit Investment Trusts.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last six years will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount
redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in exchange for shares of Dean Witter front-end sales
charge funds, or for shares of other Dean Witter funds for which shares of
front-end sales charge funds have been exchanged. A portion of the amount
redeemed which exceeds an amount which represents both such increase in value
and the value of shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
and/or shares acquired in the above-described exchanges will be subject to a
CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years
from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- --------------------------- -----------------------
<S> <C>
First ...................... 5.0%
Second ..................... 4.0%
Third ...................... 3.0%
Fourth ..................... 2.0%
Fifth ...................... 2.0%
Sixth ...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any such CDSC being
imposed at the lowest possible rate. Accordingly, shareholders may redeem,
without incurring any CDSC, amounts equal to any net increase in the value of
their shares above the amount of their purchase payments made within the past
six years and amounts equal to the current value of shares purchased more
than six years prior to the redemption and shares purchased through
reinvestment of dividends or distributions or acquired in exchange for shares
of Dean Witter front-end sales charge funds, or for shares of other Dean
Witter Funds for which shares of front-end sales charge funds have been
exchanged. The CDSC will be imposed, in accordance with the table shown
above, on any redemptions within six years of purchase which are in excess of
these amounts and which redemptions are not (a) requested within one year of
death or initial determination of disability of a shareholder, or (b) made
pursuant to certain taxable distributions from retirement plans or retirement
accounts, as described in the Prospectus.
25
<PAGE>
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the Securities and Exchange Commission by
order so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. If the shares to be redeemed have recently
been purchased by check (including a certificate or bank cashier's check),
payment of 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 investment 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.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same
proportion that the transferred shares bear to the total shares in the
account immediately prior to the transfer). The transferred shares will
continue to be subject to any applicable contingent deferred sales charge as
if they had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within thirty days after the date
of the redemption or repurchase, reinstate any portion or all of the proceeds
of such redemption or repurchase in shares of the Fund at the net asset value
next determined after a reinstatement request, together with such proceeds,
is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and will notify shareholders that, following an
election by the Fund, the shareholders will be required to include such
undistributed gains in determining their taxable income and may claim their
share of the tax paid by the Fund as a credit against their individual
federal income tax.
Because the Fund intends to distribute all of its net investment income
and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any federal income
tax. Shareholders will normally have to pay federal income taxes, and any
state income taxes, on the dividends and distributions they receive from the
Fund. Such dividends and distributions, to the extent that they are derived
from net investment income or short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are
26
<PAGE>
paid in the following year prior to February 1 will be deemed received by the
shareholder in the prior calendar year.
Gains or losses on the sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than one year. Gains or losses on the sale of securities held for one year or
less will be short-term capital gains or losses.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
Any ordinary income dividends or capital gains distributions received by a
shareholder from any investment company will have the effect of reducing the
net asset value of the shareholder's shares in that company by the exact
amount of the dividend or capital gains distribution. Furthermore, capital
gains distributions and ordinary income dividends are subject to federal
income taxes. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of dividends or realized
long-term capital gains, such payment would be in part a return of the
shareholder's investment to the extent of such reduction below the
shareholder's cost, but nonetheless would be taxable to the shareholder.
Therefore, an investor should consider the tax implications of purchasing
Fund shares immediately prior to a dividend or distribution record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. The amount of dividends paid by the Fund which may qualify for the
dividends received deduction is limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments which the
Fund has held for a minimum period, usually 46 days. Any distributions made
by the Fund will not be eligible for the dividends received deduction with
respect to shares which are held by the shareholder for 45 days or less. Any
long-term capital gain distributions will also not be eligible for the
dividends received deduction. The ability to take the dividends received
deduction will also be limited in the case of a Fund shareholder which incurs
or continues indebtedness which is directly attributable to its investment in
the Fund.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable
as long-term capital gains and the portion eligible for the dividends
received deduction. 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 are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a specified period and is computed by finding the annual percentage rate
which will result in the ending redeemable value of a hypothetical $1,000
investment made at the beginning of a one, five or ten year period, or for
the period from the date of commencement of the Fund's operations, if shorter
than any of the foregoing. The ending redeemable value is reduced by any
contingent deferred sales charge at the end of the one, five or ten year or
other period. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing the
average annual total return involves a percentage obtained by dividing the
ending redeemable value by the amount of the initial investment, taking a
root of the quotient (where the root is equivalent to the number of years in
the period) and subtracting 1 from the result. The average annual
27
<PAGE>
total returns of the Fund for the one, five and ten year periods ended
September 30, 1996 were 12.53%, 17.86% and 14.24%, respectively.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund may be calculated in the manner described in the preceding
paragraph, but without deduction for any applicable contingent deferred sales
charge. Based on this calculation, the average annual total returns of the
Fund for the one, five and ten year periods ended September 30, 1996 were
17.53%, 18.06% and 14.24%, respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total return for the year ended September 30, 1996
was 17.53%, the total return for the five-year period ended September 30,
1996 was 129.38%, and the total return for the ten-year period ended
September 30, 1996 was 278.50%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable contingent deferred sales charge)
and multiplying by $10,000, $50,000 or $100,000, as the case may be.
Investments of $10,000, $50,000 and $100,000 in the Fund at inception would
have grown to $33,935, $169,675 and $339,350, respectively, at September 30,
1996.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
DESCRIPTION OF SHARES OF THE FUND
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. All of the Trustees, except for Messrs. Bozic, Purcell and
Schroeder, have been elected by the shareholders of the Fund, most recently
at a Special Meeting of Shareholders held on January 12, 1993. Messrs. Bozic,
Purcell and Schroeder were elected by the other Trustees of the Fund on April
8, 1994. The Trustees themselves have the power to alter the number and the
terms of office of the Trustees, and they may at any time lengthen their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right under certain circumstances to remove the Trustees. The voting
rights of shareholders are not cumulative, so that holders of more than 50
percent of the shares voting can, if they choose, elect all Trustees being
selected, while the holders of the remaining shares would be unable to elect
any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). The Trustees have not
presently authorized any such additional series or classes of shares.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his/her
or its own bad
28
<PAGE>
faith, willful misfeasance, gross negligence, or reckless disregard of
his/her or its duties. It also provides that all third persons shall look
solely to the Fund property for satisfaction of claims arising in connection
with the affairs of the Fund. With the exceptions stated above, the
Declaration of Trust provides that a Trustee, officer, employee or agent is
entitled to be indemnified against all liability in connection with the
affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest. The Fund shall be of unlimited duration, subject to the
provisions in the Declaration of Trust concerning termination by action of
the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager, and of Dean Witter Distributors Inc.,
the Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company receives a per shareholder account fee from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent accountants, will be
sent to shareholders each year.
The Fund's fiscal year ends on September 30. The financial statements of
the Fund must be audited at least once a year by independent accountants
whose selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The financial statements of the Fund for the year ended September 30, 1996
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
29
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
<S> <C> <C>
COMMON STOCKS (100.1%)
Advertising (0.6%)
183,100 Eagle River Interactive, Inc.* ..... $ 1,876,775
11,500 Lamar Advertising Co.* .............. 468,625
58,300 Outdoor Systems, Inc.* .............. 2,710,950
--------------
5,056,350
--------------
Aerospace (0.9%)
175,000 Hexcel Corp.* ....................... 3,390,625
242,300 Orbital Sciences Corp.* ............. 4,300,825
--------------
7,691,450
--------------
Biotechnology (4.0%)
40,000 Alteon, Inc.* ....................... 330,000
100,500 Biochem Pharma, Inc.* ............... 3,994,875
95,000 Centocor, Inc.* ..................... 3,360,625
50,000 Genetics Institute, Inc.* ........... 3,450,000
160,000 Genzyme Corp. General Division* .... 4,020,000
115,000 Gilead Sciences, Inc.* .............. 3,248,750
225,000 Liposome Co., Inc.* ................. 4,246,875
140,000 PathoGenesis Corp.* ................. 2,450,000
100,000 Regeneron Pharmaceuticals, Inc.* ... 2,000,000
103,000 SangStat Medical Corp.* ............. 2,613,625
83,000 Vertex Pharmaceuticals, Inc.* ...... 2,407,000
--------------
32,121,750
--------------
Broadcast Media (2.9%)
80,000 American Radio Systems Corp.* ...... 2,940,000
93,200 Cinar Films Inc. (Class B)* (Canada) 2,399,900
89,800 Film Roman, Inc.* ................... 898,000
50,000 Infinity Broadcasting Corp. (Class
A)* ................................. 1,575,000
95,000 Jacor Communications, Inc.* ......... 3,230,000
130,000 Lin Television Corp.* ............... 5,330,000
160,000 Mecklermedia Corp.* ................. 2,880,000
85,000 SFX Broadcasting, Inc. (Class A)* .. 3,846,250
--------------
23,099,150
--------------
Building Materials (0.1%)
100,000 Universal Forest Products, Inc. .... 1,262,500
--------------
Business Services (3.1%)
48,700 CCC Information Services, Inc.* .... 1,010,525
185,000 CFI Proservices, Inc.* .............. 3,515,000
239,750 Checkfree Corp.* .................... 4,795,000
120,000 CSG Systems International, Inc.* ... 2,340,000
119,500 Dendrite International, Inc.* ...... 3,614,875
95,000 DST Systems, Inc.* .................. 3,040,000
30,000 Gartner Group, Inc. (Class A)* ..... 1,005,000
70,000 Restrac, Inc.* ...................... 1,312,500
29,200 RMH Teleservices, Inc.* ............. 430,700
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
70,000 Sitel Corp.* ........................ $ 3,115,000
23,800 USCS International, Inc.* ........... 407,575
--------------
24,586,175
--------------
Commercial Equipment (0.8%)
130,000 Checkpoint Systems, Inc.* ........... 3,445,000
140,000 Watsco, Inc. ........................ 2,852,500
--------------
6,297,500
--------------
Commercial Services (4.8%)
25,900 Abacus Direct Corp.* ................ 524,475
52,000 APAC Teleservices, Inc.* ............ 2,665,000
74,100 Barnett, Inc.* ...................... 1,704,300
120,000 Career Horizons, Inc.* .............. 4,665,000
132,900 Coinmach Laundry Corp.* ............. 2,691,225
5,800 International Network Services* .... 203,725
200,000 Iron Mountain, Inc.* ................ 5,900,000
105,000 On Assignment, Inc.* ................ 3,491,250
110,000 Pittston Services Group ............. 3,451,250
73,400 Precision Response Corp.* ........... 2,770,850
240,000 Reynolds & Reynolds Co. (Class A) .. 6,270,000
100,000 Sunguard Data Systems, Inc.* ....... 4,500,000
--------------
38,837,075
--------------
Communications - Equipment &
Software (1.9%)
130,000 Cellular Technical Services Co.* ... 2,567,500
135,000 Geoworks* ........................... 3,493,125
72,000 Proxim, Inc. ........................ 2,034,000
95,000 Raptor Systems, Inc.* ............... 1,615,000
60,000 Shiva Corp.* ........................ 3,435,000
120,000 Sync Research, Inc.* ................ 1,845,000
--------------
14,989,625
--------------
Communications -
Equipment/Manufacturers (0.7%)
115,000 Dynatech Corp.* ..................... 5,261,250
54,000 TCSI Corp.* ......................... 715,500
--------------
5,976,750
--------------
Computer - Aided Design (0.8%)
75,000 IKOS Systems, Inc.* ................. 1,490,625
231,000 Silicon Valley Research Inc.* ...... 1,126,125
80,000 Synopsys, Inc.* ..................... 3,680,000
--------------
6,296,750
--------------
Computer Software (5.3%)
62,500 Aspect Development, Inc.* ........... 2,078,125
25,000 Axent Technologies, Inc.* ........... 581,250
14,100 Check Point Software
Technologies Ltd.* (Israel) ......... 475,875
170,000 Cheyenne Software, Inc. ............. 3,655,000
SEE NOTES TO FINANCIAL STATEMENTS
30
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1996
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
95,000 Citrix Systems, Inc.* ............... $ 4,821,250
106,000 Edify Corp.* ........................ 2,067,000
42,000 HNC Software, Inc.* ................. 1,680,000
58,000 Integrated Systems, Inc.* ........... 1,885,000
42,600 Lightbridge, Inc.* .................. 500,550
50,000 Manugistics Group, Inc.* ............ 1,975,000
165,500 MetaTools, Inc.* .................... 3,475,500
90,000 Peoplesoft, Inc.* ................... 7,470,000
15,000 Remedy Corp.* ....................... 1,196,250
45,000 Security Dynamics Technologies,
Inc.* ............................... 3,223,125
200,000 Symantec Corp.* ..................... 2,175,000
200,000 TriTeal Corp.* ...................... 2,900,000
135,000 Visigenic Software, Inc.* ........... 1,518,750
50,000 Yahoo! Inc.* ........................ 1,056,250
--------------
42,733,925
--------------
Computer Software & Services (4.6%)
46,500 Affiliated Computer Services, Inc.* 2,708,625
100,000 American Management Systems, Inc.* . 2,800,000
40,000 Analysts International Corp. ....... 1,840,000
130,000 Ciber, Inc.* ........................ 4,940,000
240,000 Document Sciences Corp.* ............ 3,030,000
55,000 ISG International Software Group
Ltd.* (Israel) ...................... 935,000
72,100 Renaissance Solutions, Inc.* ....... 2,974,125
120,000 Saville Systems Ireland PLC (ADR)*
(Ireland) ........................... 4,230,000
58,400 Sykes Enterprises, Inc.* ............ 2,744,800
15,900 The Registry, Inc.* ................. 592,275
200,000 Transaction Network Services, Inc.* 2,850,000
90,000 Transaction Systems Architects,
Inc. (Class A)* ..................... 3,802,500
21,100 Transition Systems, Inc.* ........... 432,550
125,000 Vanstar Corp.* ...................... 3,031,250
--------------
36,911,125
--------------
Computers (0.6%)
55,000 Network Appliance, Inc.* ............ 1,650,000
42,000 Verifone, Inc.* ..................... 1,879,500
35,500 VideoServer, Inc.* .................. 1,220,312
--------------
4,749,812
--------------
Computers - Peripheral Equipment (0.5%)
80,000 Lexmark International Group,
Inc.* ............................... 1,630,000
1,900 Nimbus CD International, Inc.* ..... 18,525
180,000 Proxima Corp.* ...................... 2,070,000
--------------
3,718,525
--------------
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
Consumer Products (0.8%)
85,000 Blyth Industries, Inc.* ............. $ 4,122,500
72,000 Galoob (Lewis) Toys, Inc.* .......... 2,106,000
20,000 Gargoyles, Inc.* .................... 415,000
17,800 RockShox, Inc.* ..................... 267,000
--------------
6,910,500
--------------
Consumer Services (1.1%)
102,400 Apollo Group, Inc. (Class A)* ...... 2,739,200
100,000 Protection One, Inc.* ............... 1,250,000
180,000 Spyglass, Inc.* ..................... 3,375,000
35,000 Sylvan Learning Systems, Inc.* ..... 1,426,250
--------------
8,790,450
--------------
Distribution (1.4%)
65,000 Arrow Electronics, Inc.* ............ 2,892,500
65,000 Avnet Inc. .......................... 3,152,500
32,500 Central Garden & Pet Co.* ........... 654,062
80,000 Peak Technologies Group (The)* ..... 1,700,000
95,000 Tech Data Corp.* .................... 2,624,375
--------------
11,023,437
--------------
Education (0.4%)
15,000 Learning Tree International, Inc.* . 551,250
165,400 National Education Corp.* ........... 3,163,275
--------------
3,714,525
--------------
Electronics (3.1%)
145,000 Gemstar International Group Ltd.* 4,277,500
130,000 ITI Technologies, Inc.* ............. 4,582,500
135,000 Komag Inc.* ......................... 2,835,000
45,000 Linear Technology Corp. ............. 1,653,750
7,300 Orckit Communications Ltd. (Israel)* 134,137
174,000 Ortel Corp.* ........................ 4,089,000
50,000 Read Rite Corp.* .................... 787,500
75,000 SCI Systems, Inc.* .................. 4,218,750
130,000 Trimble Navigation Ltd.* ............ 2,128,750
--------------
24,706,887
--------------
Entertainment/Gaming (1.4%)
135,000 International Game Technology ...... 2,767,500
43,000 Premier Parks, Inc.* ................ 1,252,375
135,000 Primadonna Resorts, Inc.* ........... 2,430,000
100,000 Showboat, Inc. ...................... 2,200,000
114,000 Sodak Gaming, Inc.* ................. 2,565,000
--------------
11,214,875
--------------
Environmental (2.1%)
145,000 Memtec Ltd. (ADR)* (Australia) ..... 4,060,000
200,000 Philip Environmental, Inc.* (Canada) 1,900,000
SEE NOTES TO FINANCIAL STATEMENTS
31
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1996
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
104,500 U.S. Filter Corp.* .................. $ 3,566,062
51,000 U.S.A. Waste Services, Inc.* ....... 1,606,500
160,000 United Waste Systems, Inc.* ......... 5,480,000
--------------
16,612,562
--------------
Financial Services (4.2%)
70,000 CMAC Investment Corp. ............... 4,445,000
90,000 Finova Group Inc. ................... 5,400,000
110,000 GreenPoint Financial Corp. .......... 4,193,750
70,000 NAC Re Corp. ........................ 2,520,000
80,000 PennFed Financial Services, Inc.* .. 1,450,000
140,000 People's Bank ....................... 3,447,500
181,400 Sterling Commerce, Inc.* ............ 5,351,300
190,000 SunAmerica, Inc. .................... 6,555,000
--------------
33,362,550
--------------
Forest Products, Paper &
Packaging (0.3%)
100,000 Buckeye Cellulose Corp.* ............ 2,600,000
--------------
Healthcare - Distribution (0.4%)
75,000 Physician Support Systems, Inc. .... 1,762,500
45,000 Schein (Henry), Inc.* ............... 1,732,500
--------------
3,495,000
--------------
Healthcare Services (3.5%)
100,000 Access Health, Inc.* ................ 5,625,000
150,000 ADAC Laboratories ................... 2,962,500
22,500 National Surgery Centers, Inc.* .... 601,875
40,200 NCS HealthCare, Inc. (Class A)* .... 1,261,275
240,000 Orthodontic Centers of America,
Inc.* ............................... 4,890,000
120,000 PhyCor, Inc.* ....................... 4,560,000
96,000 Total Renal Care Holdings, Inc.* ... 3,816,000
200,000 Veterinary Centers of America, Inc.* 4,350,000
--------------
28,066,650
--------------
Hospital Management & Health
Maintenance Organizations (1.5%)
185,000 American Oncology Resources, Inc.* . 2,035,000
80,000 Healthsouth Corp.* .................. 3,070,000
90,000 Inphynet Medical Management, Inc.* . 1,597,500
100,000 Oxford Health Plans, Inc.* .......... 4,975,000
--------------
11,677,500
--------------
Hotels/Motels (2.6%)
190,000 HFS, Inc.* .......................... 12,706,250
200,000 La Quinta Inns, Inc. ................ 3,900,000
70,000 Red Roof Inns, Inc.* ................ 953,750
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
110,000 Renaissance Hotel Group NV* (Hong
Kong) ............................... $ 2,200,000
50,100 Suburban Lodges of America, Inc.* 1,052,100
--------------
20,812,100
--------------
Household Furnishings &
Appliances (0.1%)
24,500 Alrenco, Inc.* ...................... 505,312
--------------
Insurance (2.3%)
67,700 CRA Managed Care, Inc.* ............. 3,621,950
170,000 Delphi Financial Group, Inc.
(Class A)* .......................... 4,675,000
105,900 Fremont General Corp. ............... 3,124,050
100,000 HCC Insurance Holdings, Inc. ....... 2,887,500
70,000 Triad Guaranty, Inc.* ............... 1,960,000
50,000 Vesta Insurance Group, Inc. ......... 1,918,750
--------------
18,187,250
--------------
Local Area Networking (0.5%)
160,000 Network General Corp.* .............. 3,660,000
--------------
Manufacturing (0.4%)
72,500 Shelby Williams Industries, Inc. ... 924,375
75,000 Waters Corp.* ....................... 2,456,250
--------------
3,380,625
--------------
Medical Products & Supplies (2.7%)
150,000 Capstone Pharmacy Services* ......... 1,856,250
100,000 ClinTrials Research Inc.* ........... 3,950,000
80,000 Dentsply International, Inc. ....... 3,540,000
35,000 ESC Medical Systems Ltd. (Israel)* 1,102,500
60,000 Guidant Corp. ....................... 3,315,000
220,000 Physician Sales & Service, Inc.* ... 5,170,000
170,000 TECNOL Medical Products, Inc.* ..... 2,443,750
--------------
21,377,500
--------------
Medical Services (3.2%)
30,000 Advanced Technology Laboratories,
Inc.* ............................... 952,500
135,000 Amisys Managed Care Systems* ....... 3,223,125
8,700 Applied Analytical Industries, Inc.* 196,837
75,000 Boston Scientific Corp.* ............ 4,312,500
80,000 Envoy Corp.* ........................ 3,080,000
300,000 Novacare, Inc.* ..................... 2,812,500
83,000 Protocol Systems, Inc.* ............. 1,359,125
200,000 Staar Surgical Co.* ................. 2,625,000
65,000 Thermolase Corp.* ................... 1,616,875
150,000 Vivra, Inc.* ........................ 4,893,750
--------------
25,072,212
--------------
Metals (0.3%)
65,100 Mueller Industries, Inc.* ........... 2,644,688
--------------
SEE NOTES TO FINANCIAL STATEMENTS
32
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1996
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
Office Equipment & Supplies (2.8%)
95,000 Corporate Express, Inc.* ............ $ 3,669,375
52,000 Daisytek International Corp.* ...... 2,249,000
130,000 Danka Business Systems PLC (ADR)
(United Kingdom) .................... 5,151,250
48,700 Diebold, Inc. ....................... 2,842,863
165,800 Staples, Inc.* ...................... 3,668,325
162,000 Viking Office Products, Inc.* ...... 4,839,750
--------------
22,420,563
--------------
Oil & Gas Exploration (0.4%)
80,000 Noble Affiliates, Inc. .............. 3,380,000
--------------
Oil & Gas Products (1.6%)
60,000 Cairn Energy USA, Inc.* ............. 577,500
52,000 Chesapeake Energy Corp.* ............ 3,256,500
155,000 Comstock Resources Inc.* ............ 1,724,375
60,400 Stone Energy Corp.* ................. 1,117,400
203,000 Tesoro Petroleum Corp.* ............. 2,613,625
80,000 Triton Energy Ltd.* ................. 3,580,000
--------------
12,869,400
--------------
Oil Drilling & Services (3.1%)
95,000 ENSCO International, Inc.* .......... 3,087,500
220,000 Global Industries Ltd.* ............. 3,465,000
150,000 Global Marine, Inc.* ................ 2,362,500
100,000 Input/Output, Inc.* ................. 2,975,000
259,000 Marine Drilling Company, Inc.* ..... 2,460,500
140,000 Noble Drilling Corp.* ............... 2,117,500
130,000 Smith International, Inc.* .......... 4,566,250
55,000 Western Atlas, Inc.* ................ 3,423,750
--------------
24,458,000
--------------
Pharmaceuticals (3.0%)
130,500 Alliance Pharmaceutical Corp.* ..... 2,234,813
47,000 Depotech Corp.* ..................... 763,750
200,000 Dura-Pharmaceuticals, Inc.* ......... 7,350,000
79,200 Guilford Pharmaceuticals, Inc.* .... 2,138,400
140,000 IDEC Pharmaceuticals Corp.* ......... 3,307,500
60,000 Interneuron Pharmaceuticals, Inc.* 1,680,000
100,000 Jones Medical Industries, Inc. ..... 4,775,000
28,200 Medicis Pharmaceutical Corp. (Class
A)* ................................. 1,360,650
--------------
23,610,113
--------------
Retail - Department Stores (0.9%)
60,000 Neiman-Marcus Group, Inc.* .......... 2,115,000
32,000 Saks Holdings, Inc.* ................ 1,120,000
160,000 Stein Mart, Inc.* ................... 3,540,000
--------------
6,775,000
--------------
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
Retail -Specialty (6.3%)
36,400 Abercrombie & Fitch Co. (Class A)* . $ 891,800
100,000 Bed Bath & Beyond, Inc.* ............ 2,737,500
110,000 Borders Group, Inc. ................. 4,097,500
40,000 CDW Computer Centers, Inc.* ......... 2,730,000
65,000 CompUSA, Inc.* ...................... 3,510,000
74,700 Consolidated Stores Corp.* .......... 2,988,000
150,000 Damark International, Inc.* ......... 1,912,500
115,000 Dollar Tree Stores, Inc.* ........... 4,355,625
91,700 Eagle Hardware & Garden, Inc.* ..... 2,475,900
50,000 Finish Line, Inc.* .................. 2,362,500
35,000 Gucci Group NV (ADR) (Italy) ....... 2,537,500
70,000 Marks Bros. Jewelers, Inc.* ......... 1,890,000
135,000 Movie Gallery, Inc. ................. 1,755,000
142,000 PetSmart, Inc.* ..................... 3,638,750
270,000 Sports & Recreation, Inc.* .......... 2,261,250
207,000 Stride Rite Corp. ................... 1,863,000
102,100 TAG Heuer International S.A. (ADR)
(Luxembourg)* ....................... 2,016,475
172,500 The Sports Authority, Inc.* ......... 4,592,813
70,000 Williams-Sonoma Inc.* ............... 1,986,250
--------------
50,602,363
--------------
Retail - Specialty Apparel (2.0%)
90,000 Gymboree Corp. (The)* ............... 2,733,750
11,100 Hot Topic, Inc.* .................... 253,913
65,000 Loehmann's, Inc.* ................... 1,738,750
115,000 Men's Wearhouse, Inc. (The)* ....... 2,788,750
60,000 Pacific Sunwear of California, Inc.* 1,950,000
103,000 Talbot's, Inc. (The) ................ 3,090,000
90,000 Wet Seal, Inc. ...................... 3,240,000
--------------
15,795,163
--------------
Semiconductors (1.9%)
70,000 Altera Corp.* ....................... 3,543,750
35,000 Analog Devices, Inc.* ............... 949,375
80,000 Atmel Corp.* ........................ 2,460,000
160,000 S3, Inc.* ........................... 3,160,000
210,000 Triquint Semiconductor, Inc.* ...... 4,882,500
--------------
14,995,625
--------------
Steel & Iron (0.8%)
99,500 Gibraltar Steel Corp.* .............. 2,238,750
150,000 Olympic Steel, Inc.* ................ 4,031,250
--------------
6,270,000
--------------
SEE NOTES TO FINANCIAL STATEMENTS
33
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PORTFOLIO OF INVESTMENTS September 30, 1996
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
Telecommunication Equipment (1.8%)
9,800 Advanced Fibre Communications* ...... $ 245,000
95,000 Andrew Corp.* ....................... 4,726,250
70,000 Aspect Telecommunications Corp.* 4,357,500
80,000 Comverse Technology, Inc.* .......... 3,110,000
60,000 Picturetel Corp.* ................... 2,100,000
--------------
14,538,750
--------------
Telecommunications (2.1%)
164,500 Boston Communications Group, Inc.* . 2,652,563
100,000 ICG Communications, Inc.* ........... 2,100,000
150,000 IDT Corp.* .......................... 2,475,000
120,000 Intercel, Inc.* ..................... 2,460,000
120,000 Intermedia Communications of
Florida, Inc.* ...................... 3,510,000
120,000 LCI International, Inc.* ............ 3,780,000
--------------
16,977,563
--------------
Telecommunications - Wireless (1.2%)
100,000 Arch Communications Group, Inc.* 1,362,500
115,000 CommNet Cellular, Inc.* ............. 3,320,625
70,000 Globalstar Telecommunications Ltd.*
(Bermuda) ........................... 3,500,000
80,000 Paging Network, Inc.* ............... 1,580,000
--------------
9,763,125
--------------
Textiles -Apparel Manufacturers (1.8%)
70,000 Jones Apparel Group, Inc.* .......... 4,462,500
75,000 Kenneth Cole Productions, Inc.
(Class A)* .......................... 1,415,625
120,000 Nautica Enterprises, Inc.* .......... 3,870,000
18,600 The North Face, Inc.* ............... 523,125
157,500 Wolverine World Wide, Inc. .......... 4,370,625
--------------
14,641,875
--------------
Transportation (1.7%)
90,000 Atlas Air, Inc.* .................... 3,825,000
100,000 Hub Group, Inc.* .................... 2,125,000
100,000 Midwest Express Holdings, Inc.* .... 2,987,500
210,000 Offshore Logistics, Inc.* ........... 2,992,500
74,600 Team Rental Group, Inc. ............. 1,361,450
--------------
13,291,450
--------------
Truckers (0.4%)
70,000 Miller Industries, Inc.* ............ 2,765,000
--------------
Wide Area Networking (4.0%)
90,000 ACT Networks, Inc.* ................. 2,497,500
65,000 ADC Telecommunications, Inc.* ...... 4,143,750
60,000 Adtran, Inc.* ....................... 2,970,000
70,000 Ascend Communications, Inc.* ....... 4,620,000
78,000 Cascade Communications Corp.* ...... 6,347,250
NUMBER OF
SHARES VALUE
- ----------- ------------------------------------ --------------
90,000 Tellabs, Inc.* ...................... $ 6,345,000
115,000 Teltrend, Inc.* ..................... 4,830,000
--------------
31,753,500
--------------
Wireless Communication (0.4%)
90,000 Cellular Communications
International, Inc.* ................ 3,015,000
--------------
TOTAL COMMON STOCKS (Identified Cost
$644,748,437) ....................... 800,065,575
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ------------------------------------ ---------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (1.9%)
U.S. GOVERNMENT AGENCY (a) (1.3%)
$ 9,955 Federal Home Loan Mortgage
Corp. 5.70% due 10/01/96 ............ 9,955,000
--------------
REPURCHASE AGREEMENT (0.6%)
5,142 The Bank of New York 5.00%
due 10/01/96 (dated 09/30/96;
proceeds $5,142,605;
collateralized by $5,136,631
U.S. Treasury Note 5.625% due
10/31/97 valued at $5,244,729)
(Identified Cost $5,141,891) ........ 5,141,891
--------------
TOTAL SHORT-TERM
INVESTMENTS
(Identified Cost $15,096,891) ....... 15,096,891
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $659,845,328) (b) 102.0% 815,162,466
LIABILITIES IN EXCESS OF
OTHER ASSETS ....................... (2.0) (15,961,962)
-------- --------------
NET ASSETS ......................... 100.0% $799,200,504
======== ==============
</TABLE>
- ------------
American Depository Receipt. ADR
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes was $661,411,180.
The aggregate gross unrealized appreciation was $177,724,047 and the
aggregate gross unrealized depreciation was $23,972,761, resulting in
net unrealized appreciation of $153,751,286.
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $659,845,328) ............ $815,162,466
Receivable for:
Investments sold ......................... 11,338,194
Shares of beneficial interest sold ...... 1,782,183
Dividends ................................ 79,255
Interest ................................. 714
Prepaid expenses and other assets .......... 36,865
--------------
TOTAL ASSETS ............................. 828,399,677
--------------
LIABILITIES:
Payable for:
Investments purchased .................... 25,507,131
Shares of beneficial interest
repurchased ............................ 2,466,048
Plan of distribution fee ................. 648,071
Investment management fee ................ 318,421
Accrued expenses and other payables ....... 259,502
--------------
TOTAL LIABILITIES ........................ 29,199,173
--------------
NET ASSETS:
Paid-in-capital ............................ 532,239,205
Net unrealized appreciation ................ 155,317,138
Accumulated net investment loss ............ (39,118)
Accumulated undistributed net realized gain 111,683,279
--------------
NET ASSETS ............................... $799,200,504
==============
NET ASSET VALUE PER SHARE,
28,838,582 shares outstanding (unlimited
shares authorized of $.01 par value) ..... $27.71
======
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest .............................. $ 3,545,756
Dividends (net of $10,018 foreign
withholding tax) ..................... 760,163
--------------
TOTAL INCOME ........................ 4,305,919
--------------
EXPENSES
Plan of distribution fee .............. 6,461,408
Investment management fee ............. 3,194,151
Transfer agent fees and expenses ..... 893,014
Registration fees ..................... 119,398
Custodian fees ........................ 86,966
Shareholder reports and notices ...... 78,448
Professional fees ..................... 51,738
Trustees' fees and expenses ........... 37,475
Other ................................. 12,915
--------------
TOTAL EXPENSES ...................... 10,935,513
--------------
NET INVESTMENT LOSS ................. (6,629,594)
--------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain ..................... 132,830,087
Net change in unrealized appreciation (16,804,216)
--------------
NET GAIN ............................ 116,025,871
--------------
NET INCREASE .......................... $109,396,277
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
- ------------------------------------------------------ ------------------ ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ................................... $ (6,629,594) $ (3,969,410)
Net realized gain ..................................... 132,830,087 32,573,927
Net change in unrealized appreciation ................. (16,804,216) 129,339,870
------------------ ------------------
NET INCREASE ........................................ 109,396,277 157,944,387
Distributions from net realized gain .................. (42,760,549) (2,979,381)
Net increase from transactions in shares of beneficial
interest ............................................. 197,696,272 39,734,514
------------------ ------------------
TOTAL INCREASE ...................................... 264,332,000 194,699,520
NET ASSETS:
Beginning of period ................................... 534,868,504 340,168,984
------------------ ------------------
END OF PERIOD
(Including accumulated net investment loss of
$39,118 and $33,774, respectively) .................. $799,200,504 $534,868,504
================== ==================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Developing Growth Securities Trust (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 long-term capital growth. The Fund was organized as a
Massachusetts business trust on December 28, 1982 and commenced operations on
April 29, 1983.
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 or American 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; (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that
sale or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (4) short-term debt securities having a maturity date
of more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost
based on their value on the 61st day. Short-term 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 life of the respective
securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
37
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1996, continued
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records
dividends and distributions to its shareholders on the record 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.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.50% to the portion of the daily net assets not exceeding $500
million and 0.475% to the portion of the daily net assets exceeding $500
million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted
a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act
pursuant to which the Fund pays the Distributor compensation, accrued daily
and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such
38
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1996, continued
charge has been waived; or (b) the Fund's average daily net assets. Amounts
paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution
of the Fund's shares, including the payment of commissions for sales of the
Fund's shares and incentive compensation to, and expenses of, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's shares or
who service shareholder accounts, including overhead and telephone expenses,
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be
in the form of a carrying charge on any unreimbursed expenses incurred by the
Distributor.
Although there is no legal obligation for the Fund to pay expenses incurred
in excess of payments made to the Distributor under the Plan and the proceeds
of contingent deferred sales charges paid by investors upon redemption of
shares, if for any reason the Plan is terminated, the Trustees will consider
at that time the manner in which to treat such expenses. The Distributor has
advised the Fund that such excess amount, including carrying charges, totaled
$28,270,501 at September 30, 1996.
Provided that the Plan continues in effect, any cumulative expenses incurred
by the Distributor but not yet recovered may be recovered through future
distribution fees from the Fund and contingent deferred sales charges from
the Fund's shareholders.
The Distributor has informed the Fund that for the year ended September 30,
1996, it received approximately $810,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended September 30, 1996
aggregated $1,095,944,214 and $881,579,783, respectively.
For the year ended September 30, 1996, the Fund incurred $133,555 in
brokerage commissions with DWR for portfolio transactions executed on behalf
of the Fund.
The Fund has an unfunded noncontributory defined benefit pension plan
covering all independent Trustees of the Fund who will have served as
independent Trustees for at least five years at the time of retirement.
Benefits under this plan are based on years of service and compensation
during the last five years of service. Aggregate pension costs for the year
ended September 30, 1996 included in Trustees'
39
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
NOTES TO FINANCIAL STATEMENTS September 30, 1996, continued
fees and expenses in the Statement of Operations amounted to $23,261. At
September 30, 1996, the Fund had an accrued pension liability of $39,122
which is included in accrued expenses in the Statement of Assets and
Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1996, the Fund
had transfer agent fees and expenses payable of approximately $88,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Sold ............................ 20,988,017 $ 532,804,011 20,063,775 $ 404,852,064
Reinvestment of distributions ... 1,750,437 40,382,573 166,910 2,830,799
-------------- --------------- -------------- ---------------
22,738,454 573,186,584 20,230,685 407,682,863
Repurchased ..................... (14,839,539) (375,490,312) (18,669,019) (367,948,349)
-------------- --------------- -------------- ---------------
Net increase .................... 7,898,915 $ 197,696,272 1,561,666 $ 39,734,514
============== =============== ============== ===============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of September 30, 1996, the Fund had temporary book/tax differences
primarily attributable to capital loss deferrals on wash sales and permanent
book/tax differences primarily attributable to a net operating loss. To
reflect reclassifications arising from permanent book/tax differences for the
year ended September 30, 1996, accumulated undistributed net realized gain
was charged $6,660,503, paid-in-capital was credited $36,253 and accumulated
net investment loss was credited $6,624,250.
40
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30
------------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ........ $25.54 $17.55 $20.50 $12.20 $14.05
---------- ---------- ---------- ---------- ------------
Net investment income (loss) (0.23) (0.19) -- (0.12) (0.12)
Net realized and
unrealized gain (loss) .... 4.32 8.34 (1.82) 8.42 (1.73)
---------- ---------- ---------- ---------- ------------
Total from investment
operations ................. 4.09 8.15 (1.82) 8.30 (1.85)
---------- ---------- ---------- ---------- ------------
Less dividends and
distributions from:
Net investment income .... -- -- -- -- --
Net realized gain ......... (1.92) (0.16) (1.13) -- --
---------- ---------- ---------- ---------- ------------
Total dividends and
distributions .............. (1.92) (0.16) (1.13) -- --
---------- ---------- ---------- ---------- ------------
Net asset value,
end of period .............. $27.71 $25.54 $17.55 $20.50 $12.20
========== ========== ========== ========== ============
TOTAL INVESTMENT RETURN+ ... 17.53% 46.87 % (8.88)% 67.95 % (13.17)%
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................... 1.69% 1.77 % 1.78 % 1.84 % 1.86 %
Net investment income (loss) (1.03%) (1.04)% (1.32)% (1.52)% (1.14)%
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands ............... $799,201 $534,869 $340,169 $240,389 $112,982
Portfolio turnover rate .... 149% 114 % 160 % 203 % 153 %
Average commission rate paid $0.0571 -- -- -- --
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987
- ---------------------------- ---------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of period ........ $8.92 $11.33 $9.67 $10.96 $8.57
---------- ------------ --------- ----------- ----------
Net investment income (loss) (0.07) (0.15) 0.04 (0.03) (0.02)
Net realized and
unrealized gain (loss) .... 5.20 (2.21) 1.62 (1.26) 2.42
---------- ------------ --------- ----------- ----------
Total from investment
operations ................. 5.13 (2.36) 1.66 (1.29) 2.40
---------- ------------ --------- ----------- ----------
Less dividends and
distributions from:
Net investment income .... -- (0.05) -- -- (0.01)
Net realized gain ......... -- -- -- -- --
---------- ------------ --------- ----------- ----------
Total dividends and
distributions .............. -- (0.05) -- -- (0.01)
---------- ------------ --------- ----------- ----------
Net asset value,
end of period .............. $14.05 $8.92 $11.33 $9.67 $10.96
========== ============ ========= =========== ==========
TOTAL INVESTMENT RETURN+ ... 57.51 % (20.87)% 17.17% (11.77)% 28.07 %
RATIOS TO
AVERAGE NET ASSETS:
Expenses .................... 1.92 % 2.02 % 1.89% 1.90 % 1.83 %
Net investment income (loss) (0.73)% (1.32)% 0.59% (0.28)% (0.20)%
SUPPLEMENTAL DATA:
Net assets, end of period,
in thousands ............... $115,337 $67,604 $89,236 $108,411 $179,276
Portfolio turnover rate .... 88 % 53 % 84% 70 % 68 %
Average commission rate paid -- -- -- -- --
</TABLE>
- ------------
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Developing Growth Securities Trust (the "Fund") at September 30, 1996, the
results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended and the financial
highlights for each of the ten years in the period then ended, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
September 30, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 8, 1996
1996 FEDERAL TAX NOTICE (unaudited)
During the year ended September 30, 1996, the Fund paid to shareholders
$1.68 per share from long-term capital gains.
42
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights for the fiscal years ended
September 30, 1987, 1988, 1989, 1990, 1991,
1992, 1993, 1994, 1995 and 1996.................... 4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
-------
Portfolio of Investments at September 30, 1996 .... 30
Statement of assets and liabilities at
September 30, 1996 ............................... 35
Statement of operations for the year ended
September 30, 1996 ................................ 35
Statement of changes in net assets for
the years ended September 30, 1995 and 1996 ....... 36
Notes to Financial Statements ..................... 37
Financial highlights for the fiscal years ended
September 30, 1987, 1988, 1989, 1990, 1991,
1992, 1993, 1994, 1995 and 1996 ................... 41
(3) Financial statements included in Part C:
None
(b) Exhibits:
2. -- Amended and Restated By-Laws of the Registrant
8. -- Form of Amendment to the Custodian Agreement between
Registrant and The Bank of New York.
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotation
<PAGE>
27. -- Financial Data Schedule
- --------------------
All other exhibits previously filed and incorporated by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at November 4, 1996
-------------- ---------------------
Shares of Beneficial Interest 84,273
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was
not unlawful. In addition, indemnification is permitted only if it is
determined that the actions in question did not render them liable by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of reckless disregard of their obligations and
duties to the Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined that they are
entitled to indemnification against any liability established in such
litigation. The Registrant may also advance money for these expenses provided
that they give their undertakings to repay the Registrant unless their conduct
is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised
2
<PAGE>
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the
Registrant in connection with the successful defense of any action, suit or
proceeding) is asserted against the Registrant by such trustee, officer or
controlling person in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940,
so long as the interpretation of Sections 17(h) and 17(i) of such Act remains
in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act
for which Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following
registered investment companies:
Closed-End Investment Companies
- -------------------------------
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
3
<PAGE>
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
- ------------------------------
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Premier Income Trust
(32) Dean Witter Short-Term U.S. Treasury Trust
(33) Dean Witter Diversified Income Trust
(34) Dean Witter U.S. Government Money Market Trust
4
<PAGE>
(35) Dean Witter Global Dividend Growth Securities
(36) Active Assets California Tax-Free Trust
(37) Dean Witter Natural Resource Development Securities Inc.
(38) Active Assets Government Securities Trust
(39) Active Assets Money Trust
(40) Active Assets Tax-Free Trust
(41) Dean Witter Limited Term Municipal Trust
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
- -----------------------------
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
Closed-End Investment Companies
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust Company
("DWTC"); Chairman, Director or Trustee,
President and Chief Executive Officer of the Dean
Witter Funds and Chairman, Chief Executive
Officer and Trustee of the TCW/DW Funds; Formerly
Executive Vice President and Director of Dean
Witter, Discover & Co. ("DWDC"); Director and/or
officer of various DWDC subsidiaries.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of DWDC and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
DWDC subsidiaries.
Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;
Director of DWR, DWSC, Distributors and DWTC;
Trustee of the TCW/DW Funds; Member (since
January, 1993) and Chairman (since January, 1995)
of the Board of Directors of NASDAQ.
James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director
Christine A. Edwards Executive Vice President, Secretary and General
Director Counsel of DWDC and DWR; Executive Vice
President, Secretary and Chief Legal Officer of
Distributors; Director of DWR, DWSC and
Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Joseph J. McAlinden
Executive Vice President
and Chief Investment
Officer Vice President of the Dean Witter Funds and
Director of DWTC.
Sheldon Curtis Assistant Secretary of DWR; Senior Vice
Senior Vice President, President, Secretary and General Counsel of DWSC;
General Counsel and Senior Vice President, Assistant General Counsel
Secretary and Assistant Secretary of Distributors; Senior
Vice President and Secretary of DWTC; Vice
President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC,
Distributors and DWTC and Director of DWTC; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
Robert Zimmerman
First Vice President
Joan Allman
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Douglas Brown
Vice President
Philip Casparius
Vice President
Thomas Chronert
Vice President
Rosalie Clough
Vice President
Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Dwight Doolan
Vice President
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Peter W. Gurman
Vice President
John Hechtlinger
Vice President
Peter Hermann
Vice President Vice President of various Dean Witter Funds
Elizabeth Hinchman
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
David Hoffman
Vice President
David Johnson
Vice President
Christopher Jones
Vice President
James Kastberg
Vice President
Stanley Kapica
Vice President
Michael Knox
Vice President Vice President of various Dean Witter Funds
Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard Lian
Vice President Vice President of various Dean Witter Funds.
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
David Myers
Vice President
James Nash
Vice President
Richard Norris
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President
Robert Rossetti
Vice President
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Rafael Scolari
Vice President Vice President of Prime Income Trust
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Jayne M. Stevlingson
Vice President Vice President of various Dean Witter Funds.
Kathleen Stromberg
Vice President Vice President of various Dean Witter Funds.
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
11
<PAGE>
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
12
<PAGE>
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
13
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York and
State of New York on the 20th day of November, 1996.
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
By /s/ Sheldon Curtis
-------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 14 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 11/20/96
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 11/20/96
----------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Sheldon Curtis 11/20/96
----------------------------
Sheldon Curtis
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/ David M. Butowsky 11/20/96
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
-------------
2. -- Amended and Restated By-Laws of the Registrant
8. -- Amendment to the Custodian Agreement between
Registrant and The Bank of New York
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotation
27. -- Financial Data Schedule
--------------------------------
All other exhibits previously filed and incorporated
by reference.
<PAGE>
BY-LAWS
OF
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of Dean Witter
Developing Growth Securities Trust dated December 28, 1982, as amended from
time to time.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote not less than twenty-five percent
(25%) of all the votes entitled to be cast at such meeting. Such request
shall state the purpose or purposes of such meeting and the matters proposed
to be acted on thereat. The Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the
meeting, and upon payment to the Trust of such costs, the Secretary shall
give notice stating the purpose or purposes of the meeting to all entitled to
vote at such meeting. No meeting need be called upon the request of the
holders of Shares entitled to cast less than a majority of all votes entitled
to be cast at such meeting, to consider any matter which is substantially the
same as a matter voted upon at any meeting of Shareholders held during the
preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares issued and outstanding
and entitled to vote thereat, present in person or represented by proxy,
shall be requisite and shall constitute a quorum for the transaction of
business. In the absence of a quorum, the Shareholders present or represented
by proxy and entitled to vote thereat shall have power to adjourn the
<PAGE>
meeting from time to time. Any adjourned meeting may be held as adjourned
without further notice. At any adjourned meeting at which a quorum shall be
present, any business may be transacted as if the meeting had been held as
originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under the Corporations and Associations Law of
the State of Maryland.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the President and shall
be called by the President or the Secretary upon the written request of any
two (2) Trustees.
2
<PAGE>
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the Trust, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
3
<PAGE>
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of duties as described
in Section 17(h) and (i) of the Investment Company Act of 1940
("disabling conduct"). A person shall be deemed not liable by reason of
disabling conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
4
<PAGE>
(3) either, (i) such person provides a security for his undertaking,
or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately
will be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
5
<PAGE>
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the President the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the President to
the extent provided by the Trustees with respect to officers appointed by the
President.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. The Chairman shall preside at all meetings of
the Shareholders and of the Trustees, shall be a signatory on all Annual and
Semi-Annual Reports as may be sent to shareholders, and he shall perform such
other duties as the Trustees may from time to time prescribe.
SECTION 6.7. The President. (a) The President shall be the chief executive
officer of the Trust; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the Board
of Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to one or more Vice Presidents such of his powers and
duties at such times and in such manner as he may deem advisable.
(b) In the absence of the Chairman, the President shall preside at all
meetings of the shareholders and the Board of Trustees; and he shall perform
such other duties as the Board of Trustees may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the President, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
President may from time to time prescribe.
6
<PAGE>
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the President.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
President, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the President, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
President may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the President, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the President, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the President, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the President, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of
7
<PAGE>
the Trust by the President, or a Vice President, and countersigned by the
Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees,
provided that in every case such sub-custodian shall be a bank or trust
company organized under the laws of the United States or one of the states
thereof and having capital, surplus and undivided profits of at least five
million dollars ($5,000,000).
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of
8
<PAGE>
any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal
only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
9
<PAGE>
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing Dean Witter Developing Growth
Securities Trust, dated December 28, 1982, a copy of which is on file in the
office of the Secretary of the Commonwealth of Massachusetts, provides that
the name Dean Witter Developing Growth Securities Trust refers to the
Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, Shareholder, officer, employee or
agent of Dean Witter Developing Growth Securities Trust shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said Dean Witter Developing Growth Securities Trust, but the Trust
Estate only shall be liable.
10
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between
Dean Witter Developing Growth Securities Trust (the "Fund") and The Bank of New
York (the "Custodian") to the Custody Agreement between the Fund and the
Custodian dated September 20, 1991 (the "Custody Agreement"). The Custody
Agreement is hereby amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto and as amended from time
to time upon mutual agreement of the parties (each, a "Subcustodian") to
exercise reasonable care with respect to the safekeeping of such Securities
and moneys to the same extent that the Custodian would be liable to the Fund
if the Custodian were holding such securities and moneys in New York. In the
event of any loss to the Fund by reason of the failure of the Custodian or a
Subcustodian to utilize reasonable care, the Custodian shall be liable to the
Fund only to the extent of the Fund's direct damages, to be determined based
on the market value of the Securities and moneys which are the subject of the
loss at the date of discovery of such loss and without reference to any
special conditions or circumstances.
8. (b) The Custodian shall not be liable for any loss which results
from (i) the general risk of investing, or (ii) investing or holding
Securities and moneys in a particular country including, but not limited to,
losses resulting from nationalization, expropriation or other governmental
actions; regulation of the banking or securities industry; currency
restrictions, devaluations or fluctuations; or market conditions which prevent
the orderly execution of securities transactions or affect the value of
Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due
to forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
DEAN WITTER DEVELOPING GROWTH SECURITIES TRUST
[SEAL] By: /s/ David A. Hughey
------------------------
Attest:
/s/ R. M. Scanlan
- ------------------
THE BANK OF NEW YORK
[SEAL] By: /s/ S. Grunston
-------------------------
Attest:
/s/ V. Blazewicz
- -------------------
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de Chile
China Standard Chartered Bank
Colombia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking Corp.
Indonesia Hong Kong and Shanghai Banking Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Ltd.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico (Banamex)
Netherlands Mees Pierson
New Zealand ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
- -------------- ------------
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank, N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
* Not yet 17(f) 5 compliant
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 14 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 8, 1996, relating to the financial statements and financial highlights
of Dean Witter Developing Growth Securities Trust, which appears in such
Statement of Additional Information, and to the incorporation by reference of
our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 8, 1996
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEVELOPING GROWTH SECURITIES
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
<TABLE>
<S><C>
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Sep-96 YEARS - n TOTAL RETURN - T
- ------------ --------- --------- ----------------
30-Sep-95 $1,125.30 1 12.53%
30-Sep-91 $2,273.80 5 17.86%
30-Sep-86 $3,785.00 10 14.24%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Sep-96 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ ----------- ----------- ----------- ----------------
30-Sep-95 $1,175.30 17.53% 1 17.53%
30-Sep-91 $2,293.80 129.38% 5 18.06%
30-Sep-86 $3,785.00 278.50% 10.00 14.24%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- ---------------------- -----------------------
29-Apr-83 239.35 $33,935 $169,675 $339,350
</TABLE>
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