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PROSPECTUS
OCTOBER 31, 1995
Dean Witter World Wide Investment Trust (the "Fund") is an
open-end diversified management investment company whose investment objective is
total return on its assets primarily through long-term capital growth and to a
lesser extent from income. The Fund will seek to achieve such objective through
investments in all types of common stocks and equivalents, preferred stocks and
bonds and other debt obligations of domestic and foreign companies and
governments and international organizations.
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 October 31, 1995, 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/5
Investment Objective and Policies/5
Risk Considerations/6
Investment Restrictions/12
Purchase of Fund Shares/13
Shareholder Services/15
Redemptions and Repurchases/18
Dividends, Distributions and Taxes/20
Performance Information/21
Additional Information/21
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter
World Wide Investment Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS
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PROSPECTUS SUMMARY
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<TABLE>
<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 in all types of common stocks and equivalents (such as
convertible debt securities and warrants), preferred stocks and bonds and other debt obligations of domestic and
foreign companies and governments and international organizations.
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Shares Offered Shares of beneficial interest with $.01 par value (see page 21).
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Offering At net asset value without sales charge (see page 13). Shares redeemed within six years of purchase are subject
Price to a contingent deferred sales charge under most circumstances (see page 18).
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Minimum Minimum initial investment, $1,000; minimum subsequent investment, $100 (see page 13).
Purchase
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Investment The investment objective of the Fund is total return on its assets primarily through long-term capital growth
Objective and to a lesser extent from income.
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Investment The Fund maintains a flexible investment policy and invests in a diversified portfolio of securities of
Policies companies and countries located throughout the world. The percentage of the Fund's assets invested in particular
geographic sectors will shift from time to time in accordance with the judgment of the Investment Manager and
the Sub-Adviser (see pages 5-12).
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Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager and subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
Sub-Adviser administrative capacities to ninety-seven investment companies with assets of approximately $76.4 billion at
September 30, 1995. InterCapital has retained Morgan Grenfell Investment Services Limited as Sub-Adviser to
provide investment advice and manage the Fund's non-U.S. portfolio. Morgan Grenfell Investment Services Limited
currently serves as investment adviser for U.S. corporate and public employee benefit plans, endowments,
investment companies and foundations with assets of approximately $11.7 billion at June 30, 1995.
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Management Fees The Investment Manager receives a monthly fee from the Fund at the annual rate of 1.0% of daily net assets not
exceeding $500 million and 0.95% of daily net assets exceeding $500 million. The Sub-Adviser receives a monthly
fee from the Investment Manager equal to 40% of the Investment Manager's monthly fee (see page 5). Although the
management fee is higher than that paid by most other investment companies, the fee reflects the specialized
nature of the Fund's investment policies.
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Dividends and Dividends from net investment income and distributions from net capital gains are paid at least once per year.
Capital Gains Dividends and capital gains distributions are automatically reinvested in additional shares at net asset value
Distributions unless the shareholder elects to receive cash (see page 20).
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Distributor Dean Witter Distributors Inc. is the distributor of the Fund's shares. The Distributor receives from the Fund a
distribution fee accrued daily and payable monthly at the rate of 1.0% per annum of the lesser of (i) the Fund's
average 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 14 and 18).
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Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if the
Contingent total value of the account is less than $100. Although no commission or sales charge is imposed upon the
Deferred Sales purchase of shares, a contingent deferred sales charge (scaled down from 5% to 1%) is imposed on any redemption
Charge 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 page 18).
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Risks The Fund is intended for long-term investors who can accept the risks involved in investments in the securities
of companies and countries located throughout the world. The net asset value of the Fund's shares will fluctuate
with changes in the market value of its portfolio securities. It should be recognized that the foreign
securities and markets in which the Fund will invest pose different and greater risks than those customarily
associated with domestic securities and their markets. Furthermore, investors should consider other risks
associated with a portfolio of international securities, including fluctuations in foreign currency exchange
rates (i.e., if a substantial portion of the Fund's assets is denominated in foreign currencies which decrease
in value with respect to the U.S. dollar, the value of the investor's shares and the distributions made on those
shares will, likewise, decrease in value), foreign securities exchange controls and foreign tax rates, as well
as risks associated with transactions in forward currency contracts, options and futures contracts (see pages
5-12).
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended March 31, 1995.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
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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%
A contingent deferred sales charge is imposed at the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
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<S> <C>
First....................................................................................... 5.0%
Second...................................................................................... 4.0%
Third....................................................................................... 3.0%
Fourth...................................................................................... 2.0%
Fifth....................................................................................... 2.0%
Sixth....................................................................................... 1.0%
Seventh and thereafter...................................................................... None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees....................................................................... None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Management Fees....................................................................... 0.99%
12b-1 Fees*........................................................................... 1.00%
Other Expenses........................................................................ 0.42%
Total Fund Operating Expenses......................................................... 2.41%
<FN>
- ------------
* 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>
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
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<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:.............................................................. $ 74 $ 105 $ 148 $ 274
You would pay the following expenses on the same investment, assuming
no redemption:....................................................... $ 24 $ 75 $ 128 $ 274
</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
charge permitted by the NASD.
3
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FINANCIAL HIGHLIGHTS
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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 MARCH 31,
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 18.20 $ 14.72 $ 14.65 $ 14.57 $ 14.84 $ 14.98 $ 14.93 $ 17.36 $ 15.45 $ 10.30
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income (loss)... (0.02) (0.05) -- -- 0.23 0.11 0.08 0.04 0.11 0.10
Net realized and
unrealized gain
(loss).......... (1.83) 4.24 0.39 1.05 0.18 0.82 1.24 (0.07) 3.88 5.30
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... (1.85) 4.19 0.39 1.05 0.41 0.93 1.32 (0.03) 3.99 5.40
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions:
From net
investment
income........ -- -- -- (0.05) (0.23) (0.11) (0.08) (0.15) (0.10) (0.25)
In excess of
net investment
income........ (0.02) -- -- -- -- -- -- -- -- --
From net
realized
gain.......... (0.39) (0.71) (0.32) (0.92) (0.45) (0.96) (1.19) (2.25) (1.98) --
In excess of
net realized
gain.......... (0.23) -- -- -- -- -- -- -- -- --
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.64) (0.71) (0.32) (0.97) (0.68) (1.07) (1.27) (2.40) (2.08) (0.25)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 15.71 $ 18.20 $ 14.72 $ 14.65 $ 14.57 $ 14.84 $ 14.98 $ 14.93 $ 17.36 $ 15.45
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+......... (10.37)% 28.40% 2.69% 7.33% 2.80% 6.09% 9.31% 0.39% 28.22% 53.76%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.41% 2.40% 2.42% 2.27% 2.29% 2.21% 2.18% 2.13% 2.10% 2.35%*
Net investment
income (loss)... (0.32)% (0.61)% 0.06% 0.03% 1.53% 0.70% 0.50% 0.23% 0.86% 1.21%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands....... $512,258 $493,568 $217,759 $262,852 $278,676 $306,448 $311,803 $368,026 $469,501 $226,621
Portfolio
turnover rate... 67% 68% 139% 89% 68% 75% 67% 70% 65% 69%
<FN>
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+ Does not reflect the deduction of sales charge.
* Net of expense reimbursement.
</TABLE>
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter World Wide Investment Trust (the "Fund") is an open-end
diversified management investment company organized under the laws of the
Commonwealth of Massachusetts as a business trust on July 11, 1983.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-seven investment companies, thirty of which
are listed on the New York Stock Exchange, with combined total assets of
approximately $74.0 billion at September 30, 1995. InterCapital also manages
portfolios of pension plans, other institutions and individuals which aggregated
approximately $2.4 billion at such date.
The Fund has retained the Investment Manager to manage its business affairs
and manage the investment of the Fund's United States assets, including the
placing of orders for the purchase and sale of portfolio securities, and to
supervise the investment of all the Fund's assets. In addition, the Fund has
retained InterCapital to provide it with administrative services and
InterCapital has, in turn, retained Dean Witter Services Company Inc. to perform
these administrative services.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Adviser") and the Investment Manager, the Sub-Adviser provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities issued by issuers located outside the United States,
subject to the overall supervision of the Investment Manager. The Sub-Adviser,
whose address is 20 Finsbury Circus, London, England, manages, as of June 30,
1995, assets of approximately $11.7 billion for U.S. corporate and public
employee benefit plans, endowments, investment companies and foundations. The
Sub-Adviser is an indirect subsidiary of Deutsche Bank AG, the largest
commercial bank in Germany.
The Fund's Trustees review the various services provided by the Investment
Manager and the Sub-Adviser 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 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
1.0% to the portion of the net assets of the Fund not exceeding $500 million and
0.95% to the portion of the net assets of the Fund exceeding $500 million. As
compensation for the services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays the Sub-Adviser monthly compensation equal to 40% of
its monthly compensation. The total fee is greater than that paid by most other
investment companies.
For the fiscal year ended March 31, 1995, the Fund accrued total
compensation to the Investment Manager and the Fund's two former investment
advisers (which served the Fund until July 31, 1995) amounting to 0.99% of the
Fund's average daily net assets and the Fund's total expenses amounted to 2.41%
of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to seek to obtain total return on
its assets primarily through long-term capital growth and to a lesser extent
from income. This objective is fundamental and may not
5
<PAGE>
be changed without shareholder approval. There can be no assurance that the Fund
will achieve its objective. The Fund will seek to achieve such objective through
investments in all types of common stocks and equivalents (such as convertible
debt securities and warrants), preferred stocks and bonds and other debt
obligations of domestic and foreign companies and governments and international
organizations. There is no limitation on the percent or amount of the Fund's
assets which may be invested for growth or income.
The application of the Fund's investment policies is basically dependent
upon the judgment of the Investment Manager and the Sub-Adviser. As a
fundamental policy, the Fund will maintain a flexible investment policy and,
based on a worldwide investment strategy, will invest in a diversified portfolio
of securities of companies and governments located throughout the world.
The percentage of the Fund's assets invested in particular geographic areas
will shift from time to time in accordance with the judgment of the Investment
Manager and the Sub-Adviser. The Investment Manager will meet with the
Sub-Adviser, at least quarterly, to discuss the Fund's overall strategy and the
geographic distribution of the Fund's assets between the United States and the
rest of the world. The final determination of such geographic distribution will
be made by the Investment Manager. Once the determination of such geographic
distribution has been made, each of the Investment Manager and the Sub-Adviser
will be responsible for the individual security selection within its geographic
areas of responsibility and will act on behalf of the Fund in the purchase, sale
and disposition of assets in such areas.
Notwithstanding the Fund's investment objective of seeking total return, the
Fund may, for defensive purposes, without limitation, invest in: obligations of
the United States Government, its agencies or instrumentalities; cash and cash
equivalents in major currencies; repurchase agreements; money market
instruments; and high quality commercial paper.
The Fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets and EDRs, in bearer form, are designed for use in European
securities markets.
The Fund may also invest in repurchase agreements, private placements,
foreign investment companies and real estate investment trusts, may purchase
securities on a when-issued or delayed delivery basis, may purchase securities
on a "when, as and if issued" basis, and may lend its portfolio securities, as
discussed under "Risk Considerations" below.
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the Fund
may engage in transactions in forward foreign currency exchange contracts,
options on securities and currencies, and futures contracts on securities,
currencies and indexes and options on such futures contracts. The Fund may also
write (sell) put and call options on securities to aid in achieving its
investment objective. A discussion of these transactions follows under "Risk
Considerations" below and is supplemented by further disclosure in the Statement
of Additional Information.
RISK CONSIDERATIONS
The Fund is intended to provide individual and institutional investors with
the opportunity to invest in a diversified portfolio of securities of companies
and governments located throughout the world and is intended for long-term
investors who can accept the risks involved in such investments. In making
6
<PAGE>
the allocation of assets among the various markets, the Investment Manager or
the Sub-Adviser will consider such factors as recent developments in the various
countries, the condition and growth potential of various economies and
securities markets, currency and tax considerations and other pertinent
financial, social, national and political factors. The Fund has an unlimited
right to purchase equity securities if they are listed on a stock exchange and
may invest up to 25% of the Fund's total assets in such securities not listed on
any exchange, including not more than 10% of the Fund's total assets invested in
securities for which no readily available market exists.
FOREIGN SECURITIES. Investors should carefully consider the risks of
investing in securities of foreign issuers and securities denominated in
non-U.S. currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot (i.e., cash) basis or through forward
foreign currency exchange contracts (see below). The Fund may incur certain
costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Political and economic developments in Europe, especially as they
relate to changes in the structure of the European Union and the anticipated
development of a unified common market, may have profound effects upon the value
of a large segment of the Fund's portfolio. Continued progress in the evolution
of, for example, a united European common market may be slowed by unanticipated
political or social events and may, therefore, adversely affect the value of
certain of the securities held in the Fund's portfolio.
Foreign companies are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. 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. In
addition, the tax implications of the Fund's investments in passive foreign
investment companies are discussed below under "Dividends, Distributions and
Taxes."
Certain of the foreign markets in which the Fund may invest will be emerging
markets. These new and incompletely formed markets will have increased risk
levels above those occasioned by investing in foreign markets generally. The
types of
7
<PAGE>
these risks are set forth above. The Fund's management will take cognizance of
these risks in allocating any of the Fund's investments in either fixed-income
or equity securities issued by issuers in emerging market countries.
The operating expense ratio of the Fund can be expected to be higher than
that of an investment company investing exclusively in domestic securities since
the expenses of the Fund, such as the management fee and the custodial costs,
are higher.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") involves an obligation to purchase or
sell a currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase and the foreign
currency in which the security is denominated during the period between the date
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, the Investment Manager or Sub-Adviser
believes that the currency of a particular foreign country may suffer a
substantial decline against the U.S. dollar or some other foreign currency, the
Fund may enter into a forward contract to sell, for a fixed amount of dollars or
other currency, the amount of foreign currency approximating the value of some
or all of the Fund's portfolio securities (or securities which the Fund has
purchased for its portfolio) denominated in such foreign currency. Under
identical circumstances, the Fund may enter into a forward contract to sell, for
a fixed amount of U.S. dollars or other currency, an amount of foreign currency
other than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be hedged.
This method of hedging, called "cross-hedging," will be selected when it is
determined by the Investment Manager or Sub-Adviser that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or is
trading at a discount as compared with some other foreign currency with which it
tends to move in tandem.
In addition, when the Fund anticipates purchasing securities at some time in
the future, and wishes to lock in the current exchange rate of the currency in
which those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount of
currency equal to some or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not
8
<PAGE>
required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager and/or Sub-Adviser.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Fund may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Internal Revenue Code requirements relating to qualifications as a regulated
investment company (see "Dividends, Distributions and Taxes").
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 10% of its
total assets.
PRIVATE PLACEMENTS. The Fund may invest 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. 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 security will not be included within the
category "illiquid securities", which is limited by the Fund's investment
restrictions to 10% of the Fund's total 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. Among the fixed-income securities in which the Fund
may invest are "convertible" securities. A convertible security is a bond,
debenture, note, preferred stock or other
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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).
RIGHTS AND WARRANTS. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting rights,
pay no dividends and have no rights with respect to the corporation issuing
them.
INVESTMENT IN OTHER INVESTMENT VEHICLES. Under the Investment Company Act of
1940, as amended, the Fund generally may invest up to 10% of its total assets in
shares of foreign investment companies. In addition, the Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in foreign investment companies
may be the sole or most practical means by which the Fund may participate in
certain foreign securities markets, and 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 an investment company or real estate investment
trust, the Fund would bear its ratable share of that entity's expenses,
including its advisory and administration fees. At the same time the Fund would
continue to pay its own investment management fees and other expenses, as a
result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of fees with respect to investments in other investment
companies and in real estate investment trusts.
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.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities which are denominated in either U.S. dollars or foreign currencies,
on stock indexes and on the U.S. dollar and foreign currencies, which are or may
in the future be listed on several U.S. and foreign securities exchanges or are
written in over-the-counter transactions ("OTC options"). OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the Fund.
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The Fund is permitted to write covered put and call options on portfolio
securities, the currencies in which such securities are denominated and stock
indexes, without limit, in order to hedge against the decline in the value of a
security or currency in which such security is denominated (although such hedge
is limited to the value of the premium received), to close out long call option
positions and to generate income. The Fund may write covered put options, under
which the Fund incurs an obligation to buy the security (or currency) underlying
the option from the purchaser of the put at the option's exercise price at any
time during the option period, at the purchaser's election.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the price
of a security it anticipates purchasing or, in the case of call options on a
foreign currency, to hedge against an adverse exchange rate change of the
currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund may
purchase put options on securities which it holds in its portfolio to protect
itself against a decline in the value of the security and to close out written
put positions in a manner similar to call option closing purchase transactions.
There are no limits on the Fund's ability to purchase call and put options other
than compliance with the foregoing policies.
The Fund may purchase and sell futures contracts that are currently traded,
or may in the future be traded, on U.S. and foreign commodity exchanges and that
are based on any currency ("currency" futures), on U.S. and foreign fixed-income
securities ("interest rate" futures) and on such indexes of U.S. or foreign
equity or fixed-income securities as may exist or come into being ("index"
futures). The Fund may purchase or sell interest rate futures contracts for the
purpose of attempting hedging some or all of the value of its portfolio
securities (or anticipated portfolio securities) against anticipated changes in
prevailing interest rates. The Fund may purchase or sell index futures contracts
for the purpose of hedging some or all of its portfolio (or anticipated
portfolio) securities against changes in their prices. The Fund may purchase or
sell currency futures contracts to hedge against an anticipated rise or decline
in the value of the currency in which a portfolio security is denominated
vis-a-vis another currency. As a futures contract purchaser, the Fund incurs an
obligation to take delivery of a specified amount of the obligation underlying
the contract at a specified time in the future for a specified price. As a
seller of a futures contract, the Fund incurs an obligation to deliver the
specified amount of the underlying obligation at a specified time in return for
an agreed upon price.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options may generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer. Also,
exchanges may limit the amount by which the price of any futures contracts may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Investment Manager or Sub-Adviser could be
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<PAGE>
incorrect in its expectations as to the direction or extent of various interest
rate or price movements or the time span within which the movements take place.
For example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went down
instead, causing bond prices to rise, the Fund would lose money on the sale.
Another risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities is that the prices of securities,
currencies and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the U.S. dollar
cash prices of the Fund's portfolio securities and their denominated currencies.
See the Statement of Additional Information for a further discussion of risks of
options and futures transactions.
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 the Investment Manager and the
Sub-Adviser with a view to achieving the Fund's investment objective. Mark
Bavoso, Senior Vice President of InterCapital, has been the primary portfolio
manager of the Fund with respect to investments in securities of United States
issuers since August, 1995 and has been a portfolio manager at InterCapital for
over five years. Patrick W.W. Disney, Managing Director of the Sub-Adviser, has
been the primary portfolio manager of the Fund with respect to non-United States
investments since August, 1995 and has been a manager of international
portfolios at the Sub-Adviser for over five years.
Personnel of the Investment Manager and Sub-Adviser have substantial
experience in the use of the investment techniques described above under the
heading "Options and Futures Transactions," which techniques require skills
different from those needed to select the portfolio securities underlying
various options and futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR and two
affiliated broker-dealers of the Sub-Adviser (Morgan Grenfell Asia and Partners
Securities Pte. Limited and Morgan Grenfell Asia Securities (Hong Kong)
Limited). Pursuant to an order of the Securities and Exchange Commission, the
Fund may effect principal transactions in certain money market instruments with
Dean Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Investment
Manager. In addition, the Fund may incur brokerage commissions on transactions
conducted through DWR and the two above-mentioned affiliated broker-dealers of
the Sub-Adviser.
Although the Fund does not intend to engage in short-term trading as a means
of achieving its investment objective, it may sell portfolio securities without
regard to the length of time they have been held when such sale will, in the
opinion of the Investment Manager or the Sub-Adviser, strengthen the Fund's
position and contribute to its investment objective.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act.
For purposes of the following restrictions: (i) all percentage limitations
apply immediately after a
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<PAGE>
purchase or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total
assets in the voting securities of any one issuer or with respect to 75% of the
Fund's total assets invest more than 5% in the securities of any one issuer
(other than obligations of the United States Government, its agencies or
instrumentalities).
2. Purchase more than 10% of the outstanding
voting securities or any class of securities of any one issuer.
3. Invest more than 25% of the value of its total
assets in securities of issuers in any one industry other than for defensive
purposes.
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 issued or guaranteed by the United States Government, its
agencies or instrumentalities.
5. Purchase securities of other United States
investment companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets. However, the Fund may invest up to 10%
of the value of its total assets in the securities of foreign investment
companies.
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 InterCapital, shares of
the Fund are distributed by the Distributor and offered by DWR and other dealers
which have entered into selected dealer agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the Distributor
is located at Two World Trade Center, New York, New York, 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter World Wide Investment
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. 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 each account 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.
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 through the Transfer Agent must
be accompanied by payment. Investors will be entitled to receive income
dividends and capital gain distributions if their order is received by the close
of business on the day prior to the record date for such dividends and
distributions.
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value" below).
While no sales charge is imposed at the time shares are purchased, a contingent
deferred sales charge may be imposed at the time of redemption (see "Redemptions
and Repurchases"). Sales personnel are compensated for selling shares of the
Fund at the time of their sale by the Distributor and/or the Selected
Broker-Dealer. In addition, some sales personnel of the Selected Broker-Dealer
will receive
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<PAGE>
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 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the 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.
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's
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses.
For the fiscal year ended March 31, 1995, the Fund accrued payments under
the Plan amounting to $5,619,558, which amount is equal to 1.00% 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 in distributing shares of the Fund may be in
excess of the total of (i) the payments made by the Fund pursuant to the Plan,
and (ii) the proceeds of contingent deferred sales charges paid by investors
upon the 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 amount, including the carrying
charge described above, totalled $22,880,218 at March 31, 1995, which was equal
to 4.47% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all 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
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<PAGE>
each day that the New York Stock Exchange is open, by taking the value of all
the assets of the Fund, subtracting all liabilities, dividing by the number of
shares outstanding and adjusting the result to the nearest cent. The net asset
value per share will not be calculated on Good Friday and on such other federal
and non-federal holidays observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity security
listed or traded on the New York or American Stock Exchange or other domestic or
foreign stock exchange or quoted by NASDAQ is valued at its latest sale price on
that exchange or quotation service prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange, the securities are
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 available bid price prior to the time of valuation. When market
quotations are not readily available, including circumstances under which it is
determined by the Investment Manager or the Sub-Adviser that sale or bid prices
are not reflective of a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established by
and under the general supervision of the Fund's Trustees. For valuation
purposes, quotations of foreign portfolio securities, other assets and
liabilities and forward contracts stated in foreign currency are translated into
U.S. dollar equivalents at the prevailing market rates prior to the close of the
New York Stock Exchange. Dividends receivable are accrued as of the ex-dividend
date or as of the time that the relevant ex-dividend date and amounts become
known, if after the ex-dividend date.
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' fair value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, 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").
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<PAGE>
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent, by returning the check or
the proceeds to the Transfer Agent within thirty days after the payment date.
Shares so acquired are not subject to the imposition of a contingent deferred
sales charge upon their redemption (see "Redemptions and Repurchases").
EASYINVEST-SM-. 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.
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-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Broker-
Dealer account executive or the Transfer Agent.
EXCHANGE PRIVILEGE
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
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<PAGE>
if such shares are subsequently reexchanged 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, if any,
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 InterCapital to be abusive and
contrary to the best interests of the Fund's other shareholders and, at
InterCapital's discretion, may be limited by the Fund's refusal to accept
additional purchases and/or exchanges from the investor. Although the Fund does
not have any specific definition of what constitutes a pattern of frequent
exchanges, and will consider all relevant factors in determining whether a
particular situation is abusive and contrary to the best interests of the Fund
and its other shareholders, investors should be aware that the Fund and each of
the other Dean Witter Funds may in their discretion limit or otherwise restrict
the number of times this Exchange Privilege may be exercised by any investor.
Any such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such shareholder's
most recent exchange. Also, the Exchange Privilege may be terminated or revised
at any time by the Fund and/or any of such Dean Witter Funds for which shares of
the Fund have been exchanged, upon such notice as may be required by applicable
regulatory agencies. Shareholders maintaining margin accounts with DWR or
another Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each Fund. In the case of a shareholder
holding a share certificate or certificates, no exchanges may be made until all
applicable share certificates have been received by the Transfer Agent and
deposited in the shareholder's account. An exchange will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder 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
17
<PAGE>
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
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean Witter
Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their account executive or the Transfer Agent.
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 charge
(see below). If shares are held in a shareholder's account without a share
certificate, a written request to the Fund's Transfer Agent at P.O. Box 983,
Jersey City, NJ 07303 for redemption 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;
18
<PAGE>
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 which are attributable to reinvestment of distributions
from, or the proceeds of, certain Unit Investment Trusts or which were purchased
by the employee benefit plans established by DWR and SPS Transaction Services,
Inc. (an affiliate of DWR) for their employees as qualified under Section 401(k)
of the Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) 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 Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2; and (c) a tax-free return of an
excess contribution to an IRA. 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. 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 repurchase
order is received by DWR or other Selected Broker-Dealer, reduced by any
applicable CDSC.
The CDSC, if any, will be the only fee imposed by any of the Fund, the
Distributor, DWR or other Selected Broker-Dealer. The offer by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended by them at any
time. In that event, shareholders may redeem their shares through the Fund's
Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
19
<PAGE>
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, 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 shareholders have a value of less than $100 or such lesser amount as may
be fixed by the Fund's Trustees. 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 $100 and allow the shareholder sixty days
to make an additional investment in an amount which will increase the value of
the account to $100 or more 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 all of its net
investment income and net capital gains, if any, at least once per year. The
Fund may, however, determine either to distribute or to retain all or part of
any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends be paid in cash. (See "Shareholder Services--Automatic Investment
of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise 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 on any such income and capital gains, other than any tax
resulting from investing in passive foreign investment companies, as discussed
below.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures traded on U.S. exchanges
generally are treated as 60% long-term gain or loss and 40% short-term gain or
loss. When the Fund engages in options and futures transactions, various tax
regulations applicable to the Fund may have the effect of causing the Fund to
recognize a gain or loss for tax purposes before that gain or loss is realized,
or to defer recognition of a realized loss for tax purposes. Recognition, for
tax purposes, of an unrealized loss may result in a lesser amount of the Fund's
realized net gains being available for distribution.
As a regulated investment company, the Fund is subject to the requirement
that less than 30% of its gross income be derived from the sale of certain
investments held for less than three months. This requirement may limit the
Fund's ability to engage in options and futures transactions.
Shareholders will normally have to pay federal income taxes, and any state
and local income taxes, on the dividends and distributions they receive from the
Fund. Such dividends and distributions, to the extent 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
distributions in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed, for tax purposes, to have been received by the
shareholder in the prior year.
20
<PAGE>
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.
The Fund may purchase the securities of certain foreign investment funds or
trusts called passive foreign investment companies. Capital gains on the sale of
such holdings may be deemed to be ordinary income regardless of how long the
Fund holds its investment. In addition, the Fund may be subject to income tax
and an interest charge on certain dividends and capital gains earned from these
investments, regardless of whether such income and gains were distributed to
shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund from foreign sources may
give rise to withholding and other taxes imposed by foreign countries. If it
qualifies for and makes the appropriate election with the Internal Revenue
Service, the Fund will report annually to its shareholders the amount per share
of such taxes to enable shareholders to claim United States foreign tax credits
or deductions with respect to such taxes. In the absence of such an election,
the Fund would deduct such foreign taxes in computing the amount of its
distributable income. The Fund did not make such election for its fiscal year
ended March 31, 1995.
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 would be incurred by redeeming shareholders for the stated periods. It
also assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return 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 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.
21
<PAGE>
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 Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and option 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 recent 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.
22
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS FIXED-INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Dean Witter California Tax-Free Income Fund
Trust Dean Witter New York Tax-Free Income Fund
Dean Witter U.S. Government Money Market Trust Dean Witter Convertible Securities Trust
EQUITY FUNDS Dean Witter Federal Securities Trust
Dean Witter American Value Fund Dean Witter World Wide Income Trust
Dean Witter Natural Resource Development Dean Witter Intermediate Income Securities
Securities Inc. Dean Witter Global Short-Term Income Fund
Dean Witter Dividend Growth Securities Inc. Inc.
Dean Witter Developing Growth Securities Trust Dean Witter Multi-State Municipal Series
Dean Witter World Wide Investment Trust Trust
Dean Witter Value-Added Market Series Dean Witter Premier Income Trust
Dean Witter Utilities Fund Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Precious Metals and Minerals Trust Dean Witter Diversified Income Trust
Dean Witter Capital Growth Securities Dean Witter Limited Term Municipal Trust
Dean Witter European Growth Fund Inc. Dean Witter Short-Term Bond Fund
Dean Witter Pacific Growth Fund Inc. Dean Witter High Income Securities
Dean Witter Health Sciences Trust Dean Witter National Municipal Trust
Dean Witter Global Dividend Growth Securities Dean Witter Balanced Income Fund
Dean Witter Global Utilities Fund Dean Witter Hawaii Municipal Trust
Dean Witter International SmallCap Fund Dean Witter Intermediate Term U.S. Treasury
Dean Witter Mid-Cap Growth Fund Trust
Dean Witter Balanced Growth Fund DEAN WITTER RETIREMENT SERIES
Dean Witter Capital Appreciation Fund Liquid Asset Series
Dean Witter Information Fund U.S. Government Money Market Series
ASSET ALLOCATION FUNDS U.S. Government Securities Series
Dean Witter Managed Assets Trust Intermediate Income Securities Series
Dean Witter Strategist Fund American Value Series
Dean Witter Global Asset Allocation Fund Capital Growth Series
ACTIVE ASSETS ACCOUNT PROGRAM Dividend Growth Series
Active Assets Money Trust Strategist Series
Active Assets Tax-Free Trust Utilities Series
Active Assets Government Securities Trust Value-Added Market Series
Active Assets California Tax-Free Trust Global Equity Series
</TABLE>
<PAGE>
Dean Witter
World Wide Investment Trust
Dean Witter
Two World Trade Center
New York, New York 10048
TRUSTEES World Wide
Jack F. Bennett Investment
Michael Bozic Trust
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
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
Mark Bavoso
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, New York 10081
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.
SUB-ADVISER
Morgan Grenfell Investment Services
Limited
PROSPECTUS -- OCTOBER 31, 1995
<PAGE>
STATEMENT OF ADDITIONAL
INFORMATION
DEAN WITTER
WORLD WIDE
INVESTMENT TRUST
OCTOBER 31, 1995
- --------------------------------------------------------------------------------
Dean Witter World Wide Investment Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is total
return on its assets primarily through long-term capital growth and to a lesser
extent from income. The Fund will seek to achieve such objective through
investments in all types of common stocks and equivalents, preferred stocks and
bonds and other debt obligations of domestic and foreign companies and
governments and international organizations. (See "Investment Practices and
Policies".)
A Prospectus for the Fund dated October 31, 1995, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the 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
World Wide Investment Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Trustees and Officers.................................................................. 9
Investment Practices and Policies...................................................... 16
Investment Restrictions................................................................ 32
Portfolio Transactions and Brokerage................................................... 33
The Distributor........................................................................ 35
Shareholder Services................................................................... 39
Redemptions and Repurchases............................................................ 43
Dividends, Distributions and Taxes..................................................... 46
Performance Information................................................................ 48
Custodian and Transfer Agent........................................................... 48
Independent Accountants................................................................ 49
Description of Shares of the Fund...................................................... 49
Reports to Shareholders................................................................ 50
Legal Counsel.......................................................................... 50
Experts................................................................................ 50
Registration Statement................................................................. 50
Financial Statements................................................................... 51
Report of Independent Accountants...................................................... 78
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
July 11, 1983.
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 is conducted by or under the direction of officers of the
Fund and of the Investment Manager and Sub-Adviser, subject to periodic 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 management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, InterCapital Income Securities Inc., InterCapital
Insured Municipal Bond Trust, InterCapital Insured Municipal Trust, InterCapital
Insured Municipal Income Trust, InterCapital Insured Municipal Securities,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
California Municipal Securities, 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, High Income Advantage Trust,
High Income Advantage Trust II, High Income Advantage Trust III, Dean Witter
Government Income Trust, Dean Witter High Yield Securities Inc., Dean Witter
Tax-Free Daily Income Trust, Dean Witter Tax-Exempt Securities Trust, Dean
Witter Dividend Growth Securities Inc., Dean Witter Natural Resource Development
Securities Inc., Dean Witter American Value Fund, Dean Witter Developing Growth
Securities Trust, 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 World Wide Income Trust, Dean Witter California Tax-Free
Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter Convertible
Securities Trust, Dean Witter Federal Securities Trust, Dean Witter Value-Added
Market Series, Dean Witter Utilities Fund, Dean Witter Managed Assets Trust,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist Fund,
Dean Witter Intermediate Income Securites, Dean Witter Capital Growth
Securities, Dean Witter Precious Metals and Minerals Trust, Dean Witter New York
Municipal Money Market Trust, Dean Witter European Growth Fund Inc., Dean Witter
Global Short-Term Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean
Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Premier Income Trust, Dean Witter Diversified Income Trust,
Dean Witter Health Sciences Trust, Dean Witter Retirement Series, Dean Witter
Global Dividend Growth Securities, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter
High Income Securities, Dean Witter National Municipal Trust, Dean Witter
International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter Select
Dimensions Investment Series, Dean Witter Global Asset Allocation Fund, Dean
Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Hawaii Municipal Trust, Dean Witter Capital Appreciation Fund, Dean Witter
Information Fund, Dean Witter Intermediate Term U.S. Treasury Trust, Municipal
Income Trust, Municipal Income Trust II, Municipal Income Trust III, Municipal
3
<PAGE>
Income Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, 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 investment
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 North American Intermediate Income Trust,
TCW/DW Global Convertible Trust, TCW/DW Total Return 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.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which are not available for purchase in the United States
or by American citizens outside the United States.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
manage the investment of the Fund's United States investments, including the
placing of orders for the purchase and sale of portfolio securities, and to
supervise the investment of all of the Fund's assets. The Investment Manager, in
conjunction with Morgan Grenfell Investment Services Ltd. (the "Sub-Adviser"),
obtains and evaluates such information and advice relating to the economy,
securities markets, and specific securities as it considers necessary or useful
to continuously manage the assets of the Fund in a manner consistent with its
investment objective.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's books
and records and furnishes, at its own expense, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the Fund
may reasonably require in the conduct of its business, including the preparation
of prospectuses, statements of additional information, proxy statements and
reports required to be filed with federal and state securities commissions
(except insofar as the participation or assistance of independent accountants
and attorneys is, in the opinion of the Investment Manager, necessary or
desirable). In addition, the Investment Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.
Pursuant to a Services Agreement between InterCapital and DWSC, InterCapital
has retained DWSC to provide administrative services to the Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, by the Sub-Adviser pursuant to the Sub-Advisory Agreement
(see below), 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, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing of share certificates; registration costs of the Fund and its
shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing prospectuses and statements of
additional information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing 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 the Sub-Adviser or
any corporate affiliate of the Investment Manager or the Sub-Adviser; all
expenses
4
<PAGE>
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 the Fund's legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Investment Manager or the Sub-Adviser
(not including compensation or expenses of attorneys who are employees of the
Investment Manager or the Sub-Adviser) and independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation.
The Management 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 Management Agreement in no
way restricts the Investment Manager from acting as investment manager or
adviser to others.
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: 1.00% of the portion of
daily net assets not exceeding $500 million and 0.95% of the portion of daily
net assets exceeding $500 million.
Pursuant to a Sub-Advisory Agreement between the Investment Manager and
Sub-Adviser, the Sub-Adviser has been retained, subject to the overall
supervision of the Investment Manager and the Trustees of the Fund, to
continuously furnish investment advice concerning individual security
selections, asset allocations and overall economic trends with respect to
issuers located outside the United States, and to manage the portion of the
Fund's portfolio invested in securities issued by issuers located outside the
United States.
Morgan Grenfell Investment Services Limited ("MGIS") was organized as a
British corporation in 1972 and manages, as of June 30, 1995, assets of
approximately $11.7 billion for U.S. corporate and public employee benefit
plans, investment companies, endowments and foundations. MGIS' principal office
is located at 20 Finsbury Circus, London, England. MGIS is a subsidiary of
London based Morgan Grenfell Asset Management Limited which is itself a
subsidiary of London-based Morgan Grenfell Group plc (which is owned by Deutsche
Bank AG, an international commercial and investment banking group) and is
registered as an investment adviser under the Investment Advisers Act of 1940.
In 1838 Morgan Grenfell was founded to provide merchant banking services,
primarily trade financing between Great Britain and the United States. In 1958,
its investment management arm began operations. In recent years Morgan Grenfell
Group plc has achieved a prominent position in the securities industry by
providing investment and commercial banking services, financial services, and
discretionary management and advisory services covering all of the world's
leading securities markets. Morgan Grenfell Asset Management Limited, through
its various investment management subsidiaries, which have extensive experience
in global investment management, is managing, as of June 30, 1995, approximately
$56.1 billion worldwide.
Both the Investment Manager and the Sub-Adviser have authorized any of their
directors, officers and employees who have been elected as Trustees or officers
of the Fund to serve in the capacities in which they have been elected. Services
furnished by the Investment Manager and the Sub-Adviser may be furnished by
directors, officers and employees of the Investment Manager and the Sub-Adviser.
In connection with the services rendered by the Sub-Adviser, the Sub-Adviser
bears the following expenses: (a) the salaries and expenses of its personnel;
and (b) all expenses incurred by it in connection with performing the services
provided by it as Sub-Adviser, as described above.
5
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and the Investment Manager and expenses of the Fund and the Investment Manager
assumed by the Sub-Adviser, the Investment Manager pays the Sub-Adviser monthly
compensation equal to 40% of the Investment Manager's monthly compensation
payable under the Management Agreement.
Pursuant to the Management Agreement and the Sub-Advisory Agreement, total
operating expenses of the Fund are subject to applicable limitations under rules
and regulations of states where the Fund is authorized to sell its shares.
Therefore, operating expenses are effectively subject to the most restrictive of
such limitations as the same may be amended from time to time. Presently, the
most restrictive limitation is as follows. If, in any fiscal year, the Fund's
total operating expenses, exclusive of taxes, interest, brokerage fees,
distribution fees and extraordinary expenses (to the extent permitted by
applicable state securities laws and regulations), exceed 2 1/2% of the first
$30,000,000 of average daily net assets, 2% of the next $70,000,000 and 1 1/2%
of any excess over $100,000,000, the Investment Manager will reimburse the Fund
for the amount of such excess. Pursuant to the Sub-Advisory Agreement, if any
such reimbursement is made by the Investment Manager, the Investment Manager
will, in turn, be reimbursed for 40% of such payment by the Sub-Adviser. The
reimbursement, if any, will be calculated daily and credited on a monthly basis.
The Management Agreement and the Sub-Advisory Agreement (the "Agreements")
were initially approved by the Board of Trustees on July 26, 1995 and by the
shareholders of the Fund at a Special Meeting of Shareholders held on October
31, 1995. Both Agreements may be terminated at any time, without penalty, on
thirty days' notice by the Trustees of the Fund, by the holders of a majority,
as defined in the Investment Company Act of 1940, as amended (the "Act"), of the
outstanding shares of the Fund, or by the Investment Manager or (in the case of
the Sub-Advisory Agreement) by the Sub-Adviser. The Agreements will
automatically terminate in the event of their assignment (as defined in the
Act).
Under their terms, both Agreements have an initial term ending April 30,
1997 and will continue from year to year thereafter, provided continuance of
each 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 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 Agreements or "interested persons" (as defined in the Act) of
any such party (the "Independent Trustees"), which votes must be cast in person
at a meeting called for the purpose of voting on such approval.
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 Investment Management Agreement between InterCapital and the Fund
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.
PRIOR INVESTMENT MANAGEMENT AND INVESTMENT ADVISORY AGREEMENTS. Prior to
August, 1995, the Fund was advised by three separate investment advisers:
InterCapital, Daiwa International Capital Management Corp. ("DICAM") and NatWest
Investment Management Limited ("NWIM"). InterCapital, DICAM and NWIM are
sometimes collectively referred to herein as the "Prior Investment Advisers."
Each of the Prior Investment Advisers had exclusive investment responsibility
with respect to the Fund's investments in a particular area of the world.
InterCapital was responsible for investing in North America and South America,
pursuant to an Investment Management Agreement with the Fund, DICAM was
responsible for investing in the Pacific Basin pursuant to an Investment
Advisory Agreement with the Fund, and NWIM was responsible for investing in
Europe and all other areas of the world not covered by InterCapital or DICAM,
pursuant to an Investment Advisory Agreement with the Fund. These agreements are
sometimes collectively referred to as the "Prior Agreements" and sometimes
individually referred to as the "Prior Investment Management Agreement" or the
"Prior Investment Advisory Agreement(s)," as
6
<PAGE>
applicable. DICAM was assisted in providing services to the Fund by its parent,
Daiwa International Capital Management Co., Ltd. ("DICAM, Ltd."), at cost,
pursuant to a sub-advisory agreement between DICAM and DICAM, Ltd. (sometimes
referred to as the "Prior Sub-Advisory Agreement").
Under the terms of the Prior Investment Management Agreement with
InterCapital and the Prior Investment Advisory Agreements with DICAM and NWIM,
each of InterCapital, DICAM and NWIM, subject to the supervision of the Fund's
Trustees and in conformity with the stated policies of the Fund, provided
advisory services with regard to the investment operations and composition of
the Fund's portfolio in the respective geographic regions as noted above,
including the purchase, retention, disposition and loan of securities.
Each of the Prior Investment Advisers had authorized any of its directors,
officers and employees who had been elected as Trustees or officers of the Fund
to serve in the capacities in which they had been elected. Services furnished by
the Prior Investment Advisers could have been furnished by directors, officers
and employees of the respective Prior Investment Adviser. In connection with the
services rendered by each Prior Investment Adviser, such Prior Investment
Adviser bore the following expenses: (a) the salaries and expenses of all
personnel of such Prior Investment Adviser; and (b) all expenses incurred by
such Prior Investment Adviser in connection with performing the services
provided by it as described above.
Under the terms of the Prior Investment Management Agreement, in addition to
managing the Fund's North and South American investments, InterCapital
maintained the Fund's books and records and InterCapital furnished, at its
expense, such office space, facilities, equipment, clerical help, bookkeeping
and legal services as the Fund may reasonably have required in the conduct of
its business, including the preparation of prospectuses and statements of
additional information, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys was, in the opinion of
InterCapital, necessary or desirable). InterCapital also bore 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 such 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 Prior Investment Management Agreement.
Expenses not expressly assumed by the Prior Investment Advisers under the
Prior Agreements or by the Distributor (see "The Distributor"), were paid by the
Fund. The expenses borne by the Fund included, but were not limited to: fees
pursuant to the Plan of Distribution (see "The Distributor"); charges and
expenses of any registrar, custodian, subcustodian, share transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of share
certificates; registration costs of the Fund and its shares under federal and
state securities laws; the cost and expense of printing, including typesetting,
and distributing prospectuses and statements of additional information of the
Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and trustees' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who were not employees of
the Prior Investment Advisers or any corporate affiliate of the Prior Investment
Advisers; 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 were not interested persons of the Fund or of the Prior Investment
Advisers (not including compensation or expenses of attorneys who are employees
of the Prior Investment Advisers) 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
7
<PAGE>
which inured 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 Prior Investment Advisers, the Fund paid
the Prior Investment Advisers aggregate monthly compensation calculated daily by
applying the annual rate of 1.0% to the net assets of the Fund up to $500
million and 0.95% to the net assets of the Fund over $500 million, determined as
of the close of each business day. Pursuant to their respective Prior Agreements
with the Fund, InterCapital, DICAM and NWIM received fees at the annual rates of
0.55%, 0.225% and 0.225%, respectively, of average daily net assets up to $500
million and 0.5225%, 0.21375% and 0.21375%, respectively, of the Fund's average
daily net assets over $500 million. This total fee was greater than that paid by
most other investment companies. For the fiscal years ended March 31, 1993, 1994
and 1995, the Fund paid to the Prior Investment Advisers compensation totalling
$2,398,451, $3,072,025 and $5,588,682, respectively.
Pursuant to the Prior Agreements, total operating expenses of the Fund were
subject to applicable limitations under rules and regulations of states where
the Fund is authorized to sell its shares. Therefore, operating expenses were
effectively subject to the most restrictive of such applicable expense
limitations as the same may have been amended from time to time. The most
restrictive limitation applicable to the Fund was as follows: If, in any fiscal
year, the Fund's total operating expenses, exclusive of taxes, interest,
brokerage fees, distribution fees, extraordinary expenses and certain excludable
expenses (to the extent permitted by applicable state securities laws and
regulations), exceeded the lower of 2 1/2% of the first $30,000,000 of average
daily net assets, 2% of the next $70,000,000 and 1 1/2% of any excess over
$100,000,000, then the Prior Investment Advisers would reimburse the Fund for
the amount of such excess. In the event reimbursement was required, InterCapital
was responsible for 55%, DICAM 22.5% and NWIM 22.5%. Such amount, if any, would
have been calculated daily and paid on a monthly basis. The Fund's expenses did
not exceed the limitation set forth above during the fiscal years ended March
31, 1993, 1994 and 1995.
The respective Prior Agreements provided that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, no Prior Investment Adviser or Sub-adviser was liable to
the Fund or any of its investors for any act or omission by such Prior
Investment Adviser or Sub-adviser or for any losses sustained by the Fund or its
investors.
The Prior Investment Management Agreement with InterCapital was initially
approved by the Board of Trustees of the Fund on October 30, 1992 and by the
shareholders of the Fund at a Meeting of Shareholders held on January 12, 1993.
The Prior Investment Management Agreement was substantially identical to a prior
investment management agreement which was entered into on August 26, 1983 and
originally approved by DWR, the then sole shareholder of the Fund, and by the
Fund's Trustees, including the affirmative vote of a majority of the Independent
Trustees, which vote was cast in person at a meeting called for the purpose of
voting on the approval of such Agreement. The Prior Investment Management
Agreement took effect on June 30, 1993 upon the spin-off by Sears, Roebuck and
Co. of its remaining shares of DWDC. The Prior Agreement provided that it could
have been terminated at any time, without penalty, on thirty days' notice by the
Trustees of the Fund, by the holders of a majority, as defined in the Act, of
the Fund's shares, or by the Investment Manager. The Prior Investment Management
Agreement provided that it would automatically terminate in the event of its
assignment (as defined in the Act and the rules thereunder).
By its terms, the Prior Investment Management Agreement had an initial term
ended April 30, 1994 and provided that it would continue from year to year
thereafter, provided continuance of the Agreement was 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 was approved annually by the vote
of a majority of the Independent Trustees, 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 continuation of
8
<PAGE>
the Prior Investment Management Agreement until April 30, 1995 and amended its
terms to lower management fees charged on average daily net assets of the Fund
in excess of $500 million to 0.5225%. At their meeting held on April 20, 1995,
the Fund's Board of Trustees, including all of the Independent Trustees,
approved continuation of the Prior Investment Management Agreement until April
30, 1996.
The Prior Investment Advisory Agreements and the Prior Sub-Advisory
Agreement were entered into on August 26, 1983 and were originally approved by
DWR, the then sole shareholder of the Fund, and by the Fund's Trustees,
including the affirmative vote of a majority of the Independent Trustees. By
their terms, these agreements had initial terms ended July 31, 1984 and were
subject to the same renewal and termination provisions as the Prior Investment
Management Agreement. At their meeting held on April 8, 1994, the Fund's Board
of Trustees, including all of the Independent Trustees, approved continuation of
the Prior Investment Advisory Agreements until April 30, 1995 and amended the
terms of the Prior Investment Advisory Agreements to lower advisory fees charged
on average daily net assets of the Fund in excess of $500 million to 0.21375%.
At their meeting held on April 20, 1995, the Fund's Board of Trustees, including
all of the Independent Trustees, approved continuation of the Prior Investment
Advisory Agreements until April 30, 1996.
At their meeting held on July 26, 1995, the Trustees of the Fund, including
all of the Independent Trustees, approved the present management structure of
the Fund, as described above under "The Investment Manager," and also approved
an Investment Management Agreement with InterCapital and a Sub-Advisory
Agreement with InterCapital and MGIS (the "Interim Agreements"), which took
effect on August 1, 1995 and terminated on October 31, 1995 upon the
effectiveness of the present Investment Management and Sub-Advisory Agreements.
Other than the provisions pursuant to which the Interim Agreements took effect
and were terminated, the Interim Agreements were substantially identical to the
present Investment Management and Sub-Advisory Agreements except that under the
Interim Agreements: (i) InterCapital received an investment management fee at
the annual rate of 0.55% on assets up to $500 million and 0.5225% on assets over
$500 million, and (ii) MGIS received a sub-advisory fee directly from the Fund
at the annual rate of 0.45% on assets up to $500 million and 0.4275% on assets
over $500 million.
Mellon Bank, N.A., Mutual Funds, P.O. Box 320, Pittsburgh, Pennsylvania
15230-0320, as trustee of the Dean Witter START Plan and the SPS Transaction
Services, Inc. START Plan, employee benefit plans established by DWR and SPS
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code, owned approximately
5.55% of the outstanding shares of the Fund on October 23, 1995.
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 the
Investment Advisers, and with the 77 investment companies managed or advised by
InterCapital (the "Dean Witter Funds"), as well as with the 13 investment
companies for which InterCapital is the Manager and TCW Funds Management, Inc.
is the Investment Adviser ("TCW/DW Funds"), are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- --------------------------------------------------------------------
<S> <C>
Jack F. Bennett (71) Retired; Director or Trustee of the Dean Witter Funds; formerly
Trustee Senior Vice President and Director of Exxon Corporation
c/o Gordon Altman Butowsky (1975-January, 1989) and Under Secretary of the U.S. Treasury for
Weitzen Shalov & Wein Monetary Affairs (1974-1975); Director of Philips Electronics N.V.,
Counsel to the Independent Tandem Computers Inc. and Massachusetts Mutual Insurance Co.;
Trustees director or trustee of various not-for-profit and business
114 West 47th Street organizations.
New York, New York
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- --------------------------------------------------------------------
<S> <C>
Michael Bozic (54) Private investor; formerly President and Chief Executive Officer of
Trustee Hills Department Stores (May, 1991-July, 1995); formerly Chairman
c/o Gordon Altman Butowsky and Chief Executive Officer (January, 1987-August, 1990) and
Weitzen Shalov & Wein President and Chief Operating Officer (August, 1990-February, 1991)
Counsel to the Independent of the Sears Merchandise Group of Sears, Roebuck and Co.; Director
Trustees or Trustee of the Dean Witter Funds; Director of Eaglemark Financial
114 West 47th Street Services, Inc., the United Negro College Fund, Weirton Steel
New York, New York Corporation and Domain Inc. (home decor retailer).
Charles A. Fiumefreddo* (62) Chairman, Chief Executive Officer and Director of InterCapital, DWSC
Chairman, President, and Distributors; Executive Vice President and Director of DWR;
Chief Executive Officer and Trustee Chairman, Director or Trustee, President and Chief Executive Officer
Two World Trade Center of the Dean Witter Funds; Chairman, Chief Executive Officer and
New York, New York Trustee of the TCW/DW Funds; Chairman and Director of Dean Witter
Trust Company ("DWTC"); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and Director of DWDC
(until February, 1993).
Edwin J. Garn (63) 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 (1980-1986); formerly Mayor of Salt Lake City, Utah (1971-1974);
Corporation formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985);
2000 Eagle Gate Tower Vice Chairman, Huntsman Chemical Corporation (since January, 1993);
Salt Lake City, Utah 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 (70) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Directors or Trustees and Director or Trustee of the
Two World Trade Center Dean Witter Funds; Trustee of the TCW/DW Funds; formerly President,
New York, New York Council for Aid to Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978); Director of Washington National Corporation
(insurance).
Dr. Manuel H. Johnson (46) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director of the
c/o Johnson Smick International, Inc. Center for Global Market Studies at George Mason University (since
1133 Connecticut Avenue, N.W. September, 1980); Co-Chairman and a founder of the Group of Seven
Washington, DC Council (G7C), an international economic commission (since
September, 1990); Director or Trustee of the Dean Witter Funds;
Trustee of the TCW/DW Funds; Director of Greenwich Capital Markets,
Inc. (broker-dealer); Director of NASDAQ (since June, 1995);
formerly Vice Chairman of the Board of Governors of the Federal
Reserve System (February, 1988-August, 1990) and Assistant Secretary
of the U.S. Treasury (1982-1986).
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- --------------------------------------------------------------------
<S> <C>
Paul Kolton (72) Director or Trustee of the Dean Witter Funds; Chairman of the Audit
Trustee Committee and Chairman of the Committee of the Independent Trustees
c/o Gordon Altman Butowsky and Trustee of the TCW/DW Funds; formerly Chairman of the Financial
Weitzen Shalov & Wein Accounting Standards Advisory Council and Chief Executive Officer of
Counsel to the Independent the American Stock Exchange; Director of UCC Investors Holding Inc.
Trustees (Uniroyal Chemical Company Inc.); director or trustee of various
114 West 47th Street not-for-profit organizations.
New York, New York
Michael E. Nugent (59) General Partner, Triumph Capital, LP, a private investment
Trustee partnership (since April, 1988); Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice President,
237 Park Avenue Bankers Trust Company and BT Capital Corporation (1984-1988);
New York, New York Director of various business organizations.
Philip J. Purcell* (52) 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 (65) 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), Chairman and Chief
Counsel to the Independent Investment Officer of Axe-Houghton Management and the Axe-Houghton
Trustees Funds (April, 1983-June, 1991) and President of USF&G Financial
114 West 47th Street Services, Inc. (June 1990-June, 1991).
New York, New York
Sheldon Curtis (63) Senior Vice President, Secretary and General Counsel of InterCapital
Vice President, Secretary and and DWSC; Senior Vice President and Secretary of DWTC; Senior Vice
General Counsel President, Assistant Secretary and Assistant General Counsel of
Two World Trade Center Distributors; Assistant Secretary of DWR; Vice President, Secretary
New York, New York and General Counsel of the Dean Witter Funds and the TCW/DW Funds.
Mark Bavoso (34) Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Thomas F. Caloia (49) First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President and
Two World Trade Center Assistant Treasurer of DWSC; Treasurer of the Dean Witter Funds and
New York, New York the TCW/DW Funds; previously Vice President of InterCapital.
<FN>
- ------------------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
</TABLE>
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, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC, Edmund C. Puckhaber, Executive Vice President of InterCapital and
Director of DWTC, Robert S.
11
<PAGE>
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWTC,
and Joseph J. McAlinden, 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, and Lawrence S. Lafer, LouAnne D. McInnis and
Ruth Rossi, Vice Presidents and Assistant General Counsels of InterCapital and
DWSC, are Assistant Secretaries of the Fund.
BOARD OF TRUSTEES; RESPONSIBILITIES AND COMPENSATION OF INDEPENDENT TRUSTEES
As mentioned above under the caption "The Fund and its Management," the Fund
is one of the Dean Witter Funds, a group of investment companies managed by
InterCapital. As of the date of this Statement of Additional Information, there
are a total of 80 Dean Witter Funds, comprised of 120 portfolios. As of
September 30, 1995, the Dean Witter Funds had total net assets of approximately
$68.5 billion and more than five million shareholders.
The Board of Directors or Trustees, consisting of ten (10) directors or
trustees, is the same for each of the Dean Witter Funds. Some of the Funds are
organized as business trusts, others as corporations, but the functions and
duties of directors and trustees are the same. Accordingly, directors and
trustees of the Dean Witter Funds are referred to in this section as Trustees.
Eight Trustees, that is, 80% 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. Five of the eight
Independent Trustees are also Independent Trustees of the TCW/DW Funds. As of
the date of this Statement of Additional Information, there are a total of 13
TCW/DW Funds. Two of the Funds' Trustees, that is, the management Trustees, are
affiliated with InterCapital.
As noted in a federal court ruling, "[T]he independent directors . . . are
expected to look after the interests of shareholders by 'furnishing an
independent check upon management,' especially with respect to fees paid to the
investment company's sponsor." In addition to their general "watchdog" duties,
the Independent Trustees are charged with a wide variety of responsibilities
under the Act. In order to perform their duties effectively, the Independent
Trustees are required to review and understand large amounts of material, often
of a highly technical and legal nature.
The Dean Witter Funds seek as Independent Trustees individuals of
distinction and experience in business and finance, government service or
academia; that is, people whose advice and counsel are valuable and 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
of the demands made on their time by the Funds. Indeed, to serve on the Funds'
Boards, certain Trustees who would be qualified and in demand to serve on bank
boards would be prohibited by law from serving at the same time as a director of
a national bank and as a Trustee of a Fund.
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. Since most of the Dean Witter Funds have such a
plan, and since all of the Funds' Boards have the same members, the Independent
Trustees effectively control the selection of other Independent Trustees of all
the Dean Witter Funds.
GOVERNANCE STRUCTURE OF THE DEAN WITTER FUNDS
While the regulatory system establishes both general guidelines and specific
duties for the Independent Trustees, the governance arrangements from one
investment company group to another vary significantly. In some groups the
Independent Trustees perform their role by attendance at periodic meetings of
the board of directors with study of materials furnished to them between
meetings. At the other extreme, an investment company complex may employ a
full-time staff to assist the Independent Trustees in the performance of their
duties.
The governance structure of the Dean Witter Funds lies between these two
extremes. The Independent Trustees and the Funds' Investment Manager alike
believe that these arrangements are effective
12
<PAGE>
and serve the interests of the Funds' shareholders. 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.
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 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; advising the independent accountants and management personnel that
they have direct access to the Committee at all times; and preparing and
submitting Committee meeting minutes to the full Board.
Finally, the Board of each Fund has established 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.
During the calendar year ended December 31, 1994, the three Committees held
a combined total of eleven meetings. The Committee meetings are sometimes held
away from the offices of InterCapital and sometimes in the Board room of
InterCapital. These meetings are held without management directors or officers
being present, unless and until they may be invited to the meeting for purposes
of furnishing information or making a report. These separate meetings provide
the Independent Trustees an opportunity to explore in depth with their own
independent legal counsel, independent auditors and other independent
consultants, as needed, the issues they believe should be addressed and resolved
in the interests of the Funds' shareholders.
DUTIES OF CHAIRMAN OF COMMITTEES
The Chairman of the Committees 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 the issues, and arranges to have the information furnished.
He also arranges for the services of independent experts to be provided to the
Committees 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 all three 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 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 Committees 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 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.
13
<PAGE>
VALUE 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 is in the best
interests of all the Funds' shareholders. This arrangement 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. It is believed 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 likelihood 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, it is believed that 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 $1,200 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 $1,000 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $2,400, in each case
inclusive of the Committee meeting fees). The Fund also reimburses such Trustees
for travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Investment Manager or an affiliated company receive no
compensation or expense reimbursement from the Fund.
The Fund has 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 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 28.75% of his or her Eligible
Compensation plus 0.4791666% 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 57.50% after ten years of service. The
foregoing percentages may be changed by the Board.(1) "Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Trustee for service
to the 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 Fund. As of the date of this Statement of Additional Information, 58 Dean
Witter Funds have adopted the retirement program.
- ------------------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
14
<PAGE>
The following table illustrates the compensation paid and the retirement
benefits accrued to the Fund's Independent Trustees by the Fund for the fiscal
year ended March 31, 1995 and the estimated retirement benefits for the Fund's
Independent Trustees as of March 31, 1995.
<TABLE>
<CAPTION>
FUND COMPENSATION ESTIMATED RETIREMENT BENEFITS
------------------------------- -------------------------------------------------------------------
ESTIMATED ESTIMATED
RETIREMENT CREDIT YEARS ESTIMATED ANNUAL
AGGREGATE BENEFITS OF SERVICE AT PERCENTAGE OF ESTIMATED BENEFITS
NAME OF INDEPENDENT COMPENSATION ACCRUED AS RETIREMENT ELIGIBLE ELIGIBLE UPON
TRUSTEE FROM THE FUND FUND EXPENSES (MAXIMUM 10) COMPENSATION COMPENSATION(2) RETIREMENT(3)
- -------------------- -------------- -------------- ---------------- -------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jack F. Bennett..... $ 2,000 $ 876 8 46.0% $2,229 1$,025
Michael Bozic....... 1,850 114 10 57.5 1,950 1,121
Edwin J. Garn....... 1,950 513 10 57.5 1,950 1,121
John R. Haire....... 4,950(4) 2,101 10 57.5 5,162 2,968
Dr. Manuel H.
Johnson............ 1,950 213 10 57.5 1,950 1,121
Paul Kolton......... 2,000 939 10 57.0 2,445 1,394
Michael E. Nugent... 1,800 364 10 57.5 1,950 1,121
John L. Schroeder... 1,900 223 8 47.9 1,950 934
<FN>
- --------------------------
(2) Based on current levels of compensation.
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(4) Of Mr. Haire's compensation from the Fund, $3,400 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($1,000).
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1994 for services
to the 73 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Kolton
and Nugent, the 13 TCW/DW Funds that were in operation at December 31, 1994.
With respect to Messrs. Haire, Johnson, Kolton and Nugent, 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.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS TOTAL CASH
FOR SERVICE CHAIRMAN OF COMPENSATION
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 73 DEAN
OF 73 DEAN COMMITTEE MEMBER TRUSTEES AND WITTER
WITTER OF 13 TCW/DW AUDIT FUNDS AND 13
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Jack F. Bennett............ $125,761 -- -- $125,761
Michael Bozic.............. 82,637 -- -- 82,637
Edwin J. Garn.............. 125,711 -- -- 125,711
John R. Haire.............. 101,061 $66,950 $225,563(5) 393,574
Dr. Manuel H. Johnson...... 122,461 60,750 -- 183,211
Paul Kolton................ 128,961 51,850 34,200(6) 215,011
Michael E. Nugent.......... 115,761 52,650 -- 168,411
John L. Schroeder.......... 85,938 -- -- 85,938
<FN>
- ------------------------
(5) For the 73 Dean Witter Funds.
(6) For the 13 TCW/DW Funds.
</TABLE>
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.
15
<PAGE>
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large, commercial and investment banks) and their customers.
Such forward contracts will only be entered into with United States banks and
their foreign branches or foreign banks whose assets total $1 billion or more. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for trades.
When management of the Fund believes that the currency of a particular
foreign country may suffer a substantial movement against the U.S. dollar, it
may enter into a forward contract to purchase or sell, for a fixed amount of
dollars or other currency, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund will not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, management of the Fund believes that it is important to have the
flexibility to enter into such forward contracts when it determines that the
best interests of the Fund will be served. The Fund's custodian bank will place
cash, U.S. Government securities or other appropriate liquid high grade debt
securities in a segregated account of the Fund in an amount equal to the value
of the Fund's total assets committed to the consummation of forward contracts
entered into under the circumstances set forth above. If the value of the
securities placed in the segregated account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Fund's commitments with respect to such
contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the forward
contract for delivery by the Fund of a foreign currency, the Fund may either
sell the portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the foreign currency (however, the ability of the Fund to terminate a contract
is contingent upon the willingness of the currency trader with whom the contract
has been entered into to permit an offsetting transaction). It is impossible to
forecast the market value of portfolio securities at the expiration of the
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security is less than the amount of foreign currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of the foreign currency. Conversely, it may be necessary to sell
on the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Fund is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the
16
<PAGE>
purchase of the foreign currency, the Fund will realize a gain to the extent the
price of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, the Fund will suffer a
loss to the extent the price of the currency it has agreed to purchase exceeds
the price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a fixed-income security
or the currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a greater
extent than the value of the premium received for the option. The Fund will
maintain with its Custodian at all times, cash, U.S. Government securities, or
other appropriate high grade debt obligations in a segregated account equal in
value to all forward contract obligations and option contract obligations
entered into in hedge situations such as this.
Of course, the Fund is not required to enter into such transactions with
regard to its foreign currency-denominated securities and will not do so unless
deemed appropriate by the Investment Manager or the Sub-Adviser. It also should
be realized that this method of protecting the value of the Fund's portfolio
securities against a decline in the value of a currency does not eliminate
fluctuations in the underlying prices of the securities. It simply establishes a
rate of exchange which one can achieve at some future point in time.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time, they tend to
limit any potential gain which might result should the value of such currency
increase.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
CONVERTIBLE SECURITIES
The Fund may invest in fixed-income securities which are convertible into
common stock. 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, 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. Convertible securities may be purchased by the Fund
at varying price levels above their investment values and/or their conversion
values in keeping with the Fund's objective.
17
<PAGE>
PRIVATE PLACEMENTS
The Fund may invest up to 10% 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. These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund.
The procedures require that the following factors be taken into account in
making a liquidity determination: (1) the frequency of trades and price quotes
for the security; (2) the number of dealers and other potential purchasers who
have issued quotes on the security; (3) any dealer undertakings to make a market
in the security; and (4) the nature of the security and the nature of the
marketplace trades (the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer). If a restricted security is
determined to be "liquid", such security will not be included within the
category "illiquid securities", which is limited by the Fund's investment
restrictions to 10% of the Fund's total assets.
The Rule 144A marketplace of sellers and qualified institutional buyers is
new and still developing and may take a period of time to develop into a mature
liquid market. As such, the market for certain private placements purchased
pursuant to Rule 144A may be initially small or may, subsequent to purchase,
become illiquid. Furthermore, the Investment Manager may not possess all the
information concerning an issue of securities that it wishes to purchase in a
private placement to which it would normally have had access, had the
registration statement necessitated by a public offering been filed with the
Securities and Exchange Commission.
WARRANTS
The Fund may acquire warrants, including warrants which are attached to
fixed-income securities purchased for its portfolio, and hold such warrants
until the relevant Investment Adviser determines it is prudent to sell. Warrants
are, in effect, an option to purchase equity securities at a specific price,
generally valid for a specific period of time, and have no voting rights, pay no
dividends and have no rights with respect to the corporations issuing them.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
United States portfolio securities to brokers, dealers and other financial
institutions, provided that such loans are callable at any time by the Fund
(subject to notice provisions described below), and are at all times secured by
cash or appropriate high grade debt obligations, 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. 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.
A loan may be terminated by the borrower on one business day's notice, or by
the Fund on four business days' notice. If the borrower fails to deliver the
loaned securities within four days after receipt of notice, the Fund could use
the collateral to replace the securities while holding the borrower liable for
any excess of replacement cost over collateral. As with any extensions of
credit, there are risks of delay in recovery and in some cases, even loss of
rights in the collateral should the borrower of the securities fail financially.
However, these loans of portfolio securities will only be made to firms deemed
by the Fund's management to be creditworthy and when the income which can be
earned from such loans
18
<PAGE>
justifies the attendant risks. Upon termination of the loan, the borrower is
required to return the securities to the Fund. Any gain or loss in the market
price during the loan period would inure to the Fund. The Fund will pay
reasonable finder's, administrative and custodial fees in connection with a loan
of its securities. The creditworthiness of firms to which the Fund lends its
portfolio securities will be monitored on an ongoing basis by the Fund's
management pursuant to procedures adopted and reviewed, on an ongoing basis, by
the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will 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 10% of the value of
its total assets. The Fund may lend its non-United States portfolio securities
after the Trustees adopt procedures consistent with applicable regulatory
requirements. During the fiscal year ended March 31, 1995, the Fund did not loan
any of its portfolio securities.
BORROWING OF MONEY
The Fund did not borrow any money from any source during the fiscal year
ended March 31, 1995.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
From time to time the Fund may purchase securities on a when-issued or
delayed delivery basis or may purchase or sell securities on a forward
commitment basis. When such transactions are negotiated, the price is fixed at
the time of the commitment, but delivery and payment can take place a month or
more after the date of commitment. While the Fund will only purchase securities
on a when-issued, delayed delivery or forward commitment basis with the
intention of acquiring the securities, the Fund may sell the securities before
the settlement date, if it is deemed advisable. The securities so purchased or
sold are subject to market fluctuation and no interest or dividends accrue to
the purchaser prior to the settlement date. At the time the Fund makes the
commitment to purchase or sell securities on a when-issued, delayed delivery or
forward commitment basis, it will record the transaction and thereafter reflect
the value, each day, of such security purchased, or if a sale, the proceeds to
be received, in determining its net asset value. At the time of delivery of the
securities, their value may be more or less than the purchase or sale price. The
Fund will also establish a segregated account with its custodian bank in which
it will continually maintain cash or U.S. Government securities or other high
grade debt portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis;
subject to this requirement, the Fund may purchase securities on such basis
without limit. An increase in the percentage of the Fund's assets committed to
the purchase of securities on a when-issued or delayed delivery basis may
increase the volatility of the Fund's net asset value. The Fund's management and
the Trustees do not believe that the Fund's net asset value or income will be
adversely affected by its purchase of securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES
The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurence of a subsequent
event, such as approval of a merger, corporate reorganization or debt
restructuring. The commitment for the purchase of any such security will not be
recognized in the portfolio of the Fund until InterCapital 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 high grade debt portfolio securities equal in
value to recognized commitments for such securities. The value of the Fund's
commitments to purchase the securities of any one issuer, together with the
value of all securities of such issuer owned by the Fund, may not exceed 5% of
the value of the Fund's total assets at the time the initial commitment to
purchase such securities is made (see "Investment Restrictions"). Subject to the
foregoing, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a "when, as and if
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issued" basis may increase the volatility of its net asset value. The Fund's
management and the Trustees do not believe that the Fund's net asset value will
be adversely affected by its purchase of securities on such basis. The Fund may
also sell securities on a "when, as and if issued" basis provided the issuance
of the security will result automatically from the exchange or conversion of a
security owned by the Fund at the time of sale.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. A repurchase agreement may be
viewed as a type of secured lending by the Fund which typically involves the
acquisition by the Fund of government securities or other 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 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 and may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. Repurchase agreements will be transacted only with large,
well-capitalized and well-established United States financial institutions whose
financial condition will be continuously monitored by the management of the Fund
subject to procedures established by the Trustees. In addition, the collateral
will be maintained in a segregated account and will be marked-to-market daily to
determine that the full 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 maintain full collateralization. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercise 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, amount to more than 10% of its total assets. The Fund's
investments in repurchase agreements may at times be substantial when, in the
view of the Investment Manager or the Sub-Adviser, liquidity or other
considerations warrant. However, during the fiscal year ended March 31, 1995,
the Fund did not enter into any repurchase agreements.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write (sell) covered call
options and covered put options on eligible portfolio securities (and the
currencies in which they are denominated) and stock indexes to hedge against
potential changes in the market value of its investments (or anticipated
investments) and to aid in achieving its investment objective. For hedging
(including anticipatory hedging) purposes, the Fund may purchase put and call
options on eligible portfolio securities (and the currencies in which they are
denominated) and purchase and sell financial futures contracts and options on
such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC options"). Listed options
are issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Fund the right to buy from the OCC (in the U.S.) or
other clearing corporation or exchange, the underlying security or currency
covered by the option at the stated exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell, to the OCC (in
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the U.S.) or other clearing corporation or exchange, the underlying security or
currency at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security or currency to the
OCC (in the U.S.) or other clearing corporation or exchange at the stated
exercise price. Upon notice of exercise of the put option, the writer of the
option would have the obligation to purchase the underlying security or currency
from the OCC (in the U.S.) or other clearing corporation or exchange at the
exercise price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned issues,
the exchanges on which such securities trade will not continue indefinitely to
introduce options with new expirations to replace expiring options on particular
issues. Instead, the expirations introduced at the commencement of options
trading on a particular issue will be allowed to run their course, with the
possible addition of a limited number of new expirations as the original ones
expire. Options trading on each issue of bonds or notes will thus be phased out
as new options are listed on more recent issues, and options representing a full
range of expirations will not ordinarily be available for every issue on which
options are traded.
OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian, so that they will
be treated as being covered.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Fund may purchase call options on foreign currencies
in which securities it anticipates purchasing are denominated to secure a set
U.S. dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. The Fund may also purchase
call and put options to close out written option positions.
The Fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which
it is denominated and the U.S. dollar, then a loss to the Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. The Fund may also write options to close out long call
option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. While in the opinion of the management
of the Fund, the market for such options has developed sufficiently to ensure
that the risks in connection with such options are not greater than the risks in
connection with the underlying currency, there can be no assurance that a liquid
secondary market will exist for a particular option at any specific time. In
addition, options on foreign currencies are affected by all of those factors
which influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or
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both currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment portfolio.
Because foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
OTC OPTIONS. Exchange-listed options are issued by the OCC (in the U.S.) or
other clearing corporation or exchange which assures that all transactions in
such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Fund. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities or
amount of foreign currency underlying an option it has written, in accordance
with the terms of the option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
COVERED CALL WRITING. As stated in the Prospectus, the Fund is permitted to
write covered call options on portfolio securities, on stock indexes and on the
U.S. dollar and foreign currencies, without limit, in order to aid in achieving
its investment objectives. Generally, a call option is "covered" if the Fund
owns, or has the right to acquire, without additional cash consideration (or for
additional cash consideration held for the Fund by its Custodian in a segregated
account) the underlying security (currency) subject to the option except that in
the case of call options on U.S. Treasury Bills, the Fund might own U.S.
Treasury Bills of a different series from those underlying the call option, but
with a principal amount and value corresponding to the exercise price and a
maturity date no later than that of the security (currency) deliverable under
the call option. A call option is also covered if the Fund holds a call on the
same security as the underlying security (currency) of the written option, where
the exercise price of the call used for coverage is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the mark to market difference is maintained by the Fund in cash,
U.S. Government securities or other high grade debt obligations which the Fund
holds in a segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. Furthermore, a premium received on a call
written on a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency. The value of
the premium received will fluctuate with varying economic market conditions.
As regards listed options and certain OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price
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<PAGE>
on any calls it has written (exercise of certain listed and OTC options may be
limited to specific expiration dates). This obligation is terminated upon the
expiration of the option period or at such earlier time when the writer effects
a closing purchase transaction. A closing purchase transaction is accomplished
by purchasing an option of the same series as the option previously written.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on the option less the commission paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written. See "Risks of Options and Futures
Transactions," below.
COVERED PUT WRITING. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period, at
the purchaser's election (certain listed and OTC put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if the Fund maintains, in a segregated account maintained on its
behalf at the Fund's Custodian, cash, U.S. Government securities or other high
grade debt obligations in an amount equal to at least the exercise price of the
option, at all times during the option period. Similarly, a short put position
could be covered by the Fund by its purchase of a put option on the same
security as the underlying security of the written option, where the exercise
price of the purchased option is equal to or more than the exercise price of the
put written or less than the exercise price of the put written if the mark to
market difference is maintained by the Fund in cash, U.S. Government securities
or other high grade debt obligations which the Fund holds in a segregated
account maintained at its Custodian. In the case of listed options, during the
option period, the Fund may be required, at any time, to make payment of the
exercise price against delivery of the underlying security. The operation of and
limitations on covered put options in other respects are substantially identical
to those of call options.
The Fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager and/or the Sub-Adviser wishes to purchase the security underlying the
option at a price lower than its current market price, in which case it will
write the covered put at an exercise price reflecting the lower purchase price
sought. The potential gain on a covered put option is limited to the premium
received on the option (less the commissions paid on the transaction) while the
potential loss equals the difference between the exercise price of the option
and the current market price of the underlying securities when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).
The Fund may also purchase put options to close out written put positions in
a manner similar to call options closing purchase transactions. In addition, the
Fund may sell a put option which it has previously purchased prior to the sale
of the securities (currency) underlying such option. Such a sale would result
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in a net gain or loss depending on whether the amount received on the sale is
more or less than the premium and other transaction costs paid on the put option
which is sold. Any such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by the Fund expired without being sold or exercised, the
premium would be lost.
PURCHASING CALL AND PUT OPTIONS. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing or, in the case of a
call option on foreign currency, to hedge against an adverse exchange rate move
of the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The purchase
of the call option to effect a closing transaction on a call written
over-the-counter may be a listed or an OTC option. In either case, the call
purchased is likely to be on the same securities (currencies) and have the same
terms as the written option. If purchased over-the-counter, the option would
generally be acquired from the dealer or financial institution which purchased
the call written by the Fund.
The Fund may purchase put options on securities and currencies (or related
currencies) which it holds in its portfolio only to protect itself against a
decline in the value of the security (currency). If the value of the underlying
security (currency) were to fall below the exercise price of the put purchased
in an amount greater than the premium paid for the option, the Fund would incur
no additional loss. In addition, the Fund may sell a put option which it has
previously purchased prior to the sale of the securities (currencies) underlying
such option. Such a sale would result in a net gain or loss depending on whether
the amount received on the sale is more or less than the premium and other
transaction costs paid on the put option which is sold. And such gain or loss
could be offset in whole or in part by a change in the market value of the
underlying security (currency). If a put option purchased by the Fund expired
without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager and/or the Sub-Adviser to forecast correctly
interest rates and market movements. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written. In writing puts, the Fund assumes
the risk of loss should the market value of the underlying securities (or the
currencies in which they are denominated) decline below the exercise price of
the option (any loss being decreased by the receipt of the premium on the option
written). During the option period, the covered call writer has, in return for
the premium on the option, given up the opportunity for capital appreciation
above the exercise price should the market price of the underlying security (or
the currency in which it is denominated) increase, but has retained the risk of
loss should the price of the underlying security (currency) decline. The covered
put writer also retains the risk of loss should the market value of the
underlying security (currency) decline below the exercise price of the option
less the premium received on the sale of the option. In both cases, the writer
has no control over the time when it may be required to fulfill its obligation
as a writer of the option. Once an option writer has received an exercise
notice, it cannot effect a closing purchase transaction in order to terminate
its obligation under the option and must deliver or receive the underlying
securities at the exercise price. A covered put option writer who is unable to
effect a closing purchase transaction or to purchase an offsetting OTC option
would continue to bear the risk of decline in the market price of the underlying
security (currency) until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash or U.S.
Government or other high grade short-term debt obligations as security for the
put option for other investment purposes until the exercise or expiration of the
option.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option, it cannot sell the underlying security until the
option
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<PAGE>
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell (exchange) an underlying security (currency) at a time
when it might otherwise be advantageous to do so.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, the Fund may
be able to purchase an offsetting option which does not close out its position
as a writer but constitutes an asset of equal value to the obligation under the
option written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to maintain
the securities subject to the call, or the collateral underlying the put, even
though it might not be advantageous to do so, until a closing transaction can be
entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that exchange (or in that
class or series of options) would cease to exist, although outstanding options
on that exchange that had been issued by the OCC as a result of trades on that
exchange would generally continue to be exercisable in accordance with their
terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
Each of the exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes" in the Prospectus).
STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The multiplier for an index option
performs a function similar to the unit of trading for a
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stock option. It determines the total dollar value per contract of each point in
the difference between the exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a one-point difference will
yield $100. Options on different indexes may have different multipliers. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Unlike stock options, all settlements are in cash and a
gain or loss depends on price movements in the stock market generally (or in a
particular segment of the market) rather than the price movements in individual
stocks. Currently, options are traded on the Standard & Poor's 100 Index and the
Standard & Poor's 500 Index on the Chicago Board Options Exchange, the Major
Market Index and the Computer Technology Index, Oil Index and Institutional
Index on the American Stock Exchange and the NYSE Index and NYSE Beta Index on
the New York Stock Exchange, The Financial News Composite Index on the Pacific
Stock Exchange and the Value Line Index, National O-T-C Index and Utilities
Index on the Philadelphia Stock Exchange, each of which and any similar index on
which options are traded in the future which include stocks that are not limited
to any particular industry or segment of the market is referred to as a "broadly
based stock market index." Options on stock indexes provide the Fund with a
means of protecting against the risk of market wide price movements. If the
Investment Manager and/or the Sub-Adviser anticipates a market decline, the Fund
would be able to purchase a stock index put option. If the expected market
decline materialized, the resulting decrease in the value of the Fund's
portfolio would be offset to the extent of the increase in the value of the put
option. If the Investment Manager and/or the Sub-Adviser anticipates a market
rise, the Fund would be able to purchase a stock index call option to enable the
Fund to participate in such rise until completion of anticipated common stock
purchases by the Fund. Purchases and sales of stock index options also enable
the Investment Manager and/or the Sub-Adviser to more speedily achieve changes
in the Fund's equity positions.
The Fund will be able to write put options on stock indexes only if such
positions are covered by cash, U.S. Government securities or other high grade
debt obligations equal to the aggregate exercise price of the puts, which cover
is held for the Fund in a segregated account maintained for it by the Fund's
Custodian. All call options on stock indexes written by the Fund will be covered
either by a portfolio of stocks substantially replicating the movement of the
index underlying the call option or by holding a separate call option on the
same stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
RISKS OF INDEX OPTIONS. Because exercises of stock index options are
settled in cash, the Fund, as a call writer, would not be able to provide in
advance for potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index
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may have declined, with a corresponding decrease in the value of its stock
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. The Fund will not purchase or sell commodities or
commodity futures contracts, except that the Fund may purchase and sell
financial futures contracts and related options as described herein. As stated
in the Prospectus, the Fund may purchase and sell interest rate, currency, and
index futures contracts ("futures contracts"), that are traded on U.S. and
foreign commodity exchanges, on such underlying securities as U.S. Treasury
bonds, notes and bills and/or any foreign government fixed-income security
("interest rate futures"), on various currencies ("currency futures") and on
such indexes of U.S. and foreign securities as may exist or come into being
("index futures").
As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging some or all of the value of
its fixed-income portfolio securities (or anticipated portfolio securities)
against changes in prevailing interest rates. If the Investment Manager and/or
the Sub-Adviser anticipates that interest rates may rise and, concomitantly, the
price of fixed-income securities fall, the Fund may sell an interest rate
futures contract or a bond index futures contract. If declining interest rates
are anticipated, the Fund may purchase an interest rate futures contract to
protect against a potential increase in the price of fixed-income securities the
Fund intends to purchase. Subsequently, appropriate fixed-income securities may
be purchased by the Fund in an orderly fashion; as securities are purchased,
corresponding futures positions would be terminated by offsetting sales of
contracts.
The Fund will purchase or sell stock index futures contracts for the purpose
of hedging some or all of its equity portfolio (or anticipated portfolio)
securities against changes in their prices. If the Investment Manager and/or the
Sub-Adviser anticipates that the prices of stock held by the Fund may fall, the
Fund may sell a stock index futures contract. Conversely, if the Investment
Manager and/or the Sub-Adviser wishes to hedge against anticipated price rises
in those stocks which the Fund intends to purchase, the Fund may purchase a
stock index futures contract.
The Fund will purchase or sell futures contracts on the U.S. dollar and on
foreign currencies to hedge against an anticipated rise or decline in the value
of the U.S. dollar or foreign currency in which a portfolio security of the Fund
is denominated vis-a-vis another currency.
In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out a short or long position maintained by the
Fund in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the
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offsetting purchase price exceeds the sale price, the seller would pay the
difference and would realize a loss. Similarly, a futures contract purchase is
closed out by effecting a futures contract sale for the same aggregate amount of
the specific type of security (currency) and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser would realize a
gain, whereas if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss. There is no assurance that the Fund will be able
to enter into a closing transaction.
INTEREST RATE FUTURES. When the Fund enters into an interest rate futures
contract, it is initially required to deposit with the Fund's Custodian, in a
segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other high grade
short-term obligations equal to approximately 2% of the contract amount. Initial
margin requirements are established by the exchanges on which futures contracts
trade and may, from time to time, change. In addition, brokers may establish
margin deposit requirements in excess of those required by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin", with the Fund's futures contract clearing
broker, which are reflective of price fluctuations in the futures contract.
Currently, interest rate futures contracts can be purchased on debt securities
such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with Maturities
between 6 1/2 and 10 years, GNMA Certificates and Bank Certificates of Deposit.
CURRENCY FUTURES. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Investment Manager will assess such factors as cost spreads, liquidity and
transaction costs in determining whether to utilize futures contracts or forward
contracts its in foreign currency transactions and hedging strategy. Currently,
currency futures exist for, among other foreign currencies, the Japanese yen,
German mark, Canadian dollar, British pound, Swiss franc and European currency
unit.
Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Investment Manager's opinion, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying foreign
currency.
INDEX FUTURES. As discussed in the Prospectus, the Fund may invest in index
futures contracts. Futures contracts on indexes do not require the physical
delivery of securities, but provide for a final cash settlement on the
expiration date which reflects accumulated profits and losses credited or
debited to each party's account.
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The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in the
form of variation margin payments. The Fund may be required to make additional
margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
Currently, index futures contracts can be purchased or sold with respect to,
among others, the Standard & Poor's 500 Stock Price Index and the Standard &
Poor's 100 Stock Price Index on the Chicago Mercantile Exchange, the New York
Stock Exchange Composite Index on the New York Futures Exchange, the Major
Market Index on the American Stock Exchange, the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade and the Value Line Stock
Index on the Kansas City Board of Trade.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Fund's
management wished to protect against an increase in interest rates and the
resulting negative impact on the value of a portion of its fixed-income
portfolio, the Fund might write a call option on an interest rate futures
contract, the underlying security of which correlates with the portion of the
portfolio the Fund seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, provide a further hedge against
losses resulting from price declines in portions of the Fund's portfolio.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to initial margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts. In the case of an option that is
in-the-money (the exercise price of the call (put) option is less (more) than
the market price of the underlying security) at the time of purchase, the
in-the-money amount may be excluded in calculating the 5%. However, there is no
overall limitation on the percentage of the Fund's assets which may be subject
to a hedge position. In accordance with the regulations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempted from registration
as a commodity pool operator, the Fund may only enter into futures contracts and
options on futures contracts transactions in accordance with the limitation
described above. If the CFTC changes its regulations so that the Fund would be
permitted more latitude to write options on futures contracts for
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purposes other than hedging the Fund's investments without CFTC registration,
the Fund may engage in such transactions for those purposes. Except as described
above, there are no other limitations on the use of futures and options thereon
by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The
successful use of futures and related options depends on the ability of the
Investment Manager and/or the Sub-Adviser to accurately predict market, interest
rate and currency movements. As stated in the Prospectus, the Fund may sell a
futures contract to protect against the decline in the value of securities (or
the currency in which they are denominated) held by the Fund. However, it is
possible that the futures market may advance and the value of securities (or the
currency in which they are denominated) held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract and
also experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction as
the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Fund may determine not to invest in the securities as planned and will realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities.
In addition, if the Fund holds a long position in a futures contract or has
sold a call option on a futures contract, it will hold cash, U.S. Government
securities or other high grade debt obligations equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or variation margin on deposit) in a segregated account maintained for the Fund
by its Custodian. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
If the Fund maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in a
segregated account maintained at its Custodian, cash, U.S. Government securities
or other high grade debt obligations equal in value (when added to any initial
or variation margin on deposit) to the market value of the securities underlying
the futures contract or the exercise price of the option. Such position may also
be covered by owning the securities underlying the futures contract (in the case
of a stock index futures contract a portfolio of securities substantially
replicating the relevant index), or by holding a call option permitting the Fund
to purchase the same contract at a price no higher than the price at which a
short position was established.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions
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purchased or sold through the broker and/or incur a loss of all or part of its
margin deposits with the broker. Similarly, in the event of the bankruptcy of
the writer of an OTC option purchased by the Fund, the Fund could experience a
loss of all or part of the value of the option. Transactions are entered into by
the Fund only with brokers or financial institutions deemed creditworthy by the
Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted (a) temporarily, by short-term traders seeking to profit
from the difference between a contract or security price objective and their
cost of borrowed funds; (b) by investors in futures contracts electing to close
out their contracts through offsetting transactions rather than meet margin
deposit requirements; (c) by investors in futures contracts opting to make or
take delivery of underlying securities rather than engage in closing
transactions, thereby reducing liquidity of the futures market; and (d)
temporarily, by speculators who view the deposit requirements in the futures
markets as less onerous than margin requirements in the cash market. Due to the
possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities (currencies) at a time when it may
be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes" in the
Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities (currencies).
NEW INSTRUMENTS. New futures contracts, options and other financial
products and various combinations thereof continue to be developed. The Fund may
invest in any such futures, options or products as may be developed, to the
extent consistent with its investment objective and applicable regulatory
requirements.
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PORTFOLIO TRADING
It is anticipated that the Fund's portfolio turnover rate will not exceed
150% in any one year. A 150% turnover rate would occur, for example, if 150% 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 in the Act as the lesser of (a) sixty-seven percent or more
of the shares present at a meeting of shareholders, if the holders of more than
fifty percent of the outstanding shares of the Fund are present or represented
by proxy, or (b) more than fifty percent of the outstanding shares of the Fund.
For purposes of the following restrictions: (i) all percentage limitations apply
immediately after a purchase or initial investment; and (ii) any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in total or net assets does not require elimination of any security from
the portfolio.
The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the Fund,
any officer or Trustee of the Fund or any officer or director of
InterCapital or MGIS owns more than 1/2 of 1% of the outstanding securities
of such issuer, and such officers, trustees or 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 readily marketable securities of issuers which engage in real
estate operations and securities which are secured by real estate or
interests therein, including real estate investment trusts.
3. 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.
4. Invest more than 5% of the value 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.
5. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of the value of its total assets (not
including the amount borrowed).
6. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(7). (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 10% of its net assets so long as shares of the
Fund are being sold in those states.)
7. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above; (c) lending portfolio securities; (d)
entering into forward foreign currency contracts; or (e) purchasing or
selling futures contracts or options.
8. 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, but not to exceed 10% of its total
assets at the time of the loan.
9. Make short sales of securities.
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10. Purchase securities on margin.
11. 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.
12. Invest for the purpose of exercising control or management of any
other issuer.
13. Invest in securities which cannot be readily resold because of legal
or contractual restrictions or which are not otherwise readily marketable
if, regarding all such securities, more than 10% of its total assets, taken
at market value, would be invested in such securities.
In addition, as stated in the Prospectus, the Fund may not purchase
securities of other United States investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets. However,
the Fund may invest up to 10% of the value of its total assets in the securities
of foreign investment companies. The ability to invest in foreign investment
companies increases the Investment Advisers flexibility in the management of the
Fund's portfolio by enabling the Fund to access world markets, such as Korea and
Taiwan, in which markets the Fund may be limited in investing directly, due in
part to foreign laws and regulations.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Fund's Trustees, the Investment
Manager and the Sub-Adviser are responsible for decisions to buy and sell
securities of 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 non-affiliated 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. In the underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation to the underwriter, generally referred to as the underwriter's
concession or discount. On occasion, certain money market instruments may be
purchased directly from an issuer, in which case no commissions or discounts are
paid. For the fiscal years ended March 31, 1993, 1994 and 1995, the Fund paid a
total of $1,365,776, $1,506,380 and $1,884,537 respectively, in brokerage
commissions.
The Investment Manager and the Sub-Adviser currently serve as investment
advisers 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 each of the Investment Manager and the Sub-Adviser 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, the main factors considered are the respective
investment objectives, the relative size of the portfolio holdings of the same
or comparable securities, the availability of cash for investment, the size of
the investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
This procedure may, under certain circumstances, have an adverse effect on the
Fund.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest commission cost could impede effective portfolio management and preclude
the Fund and the Investment Manager and the Sub-Adviser 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
Advisers rely on their experience and knowledge regarding
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commissions generally charged by various brokers and on their 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.
The Fund anticipates that its transactions involving foreign securities will
be effected primarily on a principal stock exchange for such securities. Fixed
commissions on such transactions are generally higher than negotiated
commissions on domestic transactions. There is also generally less government
supervision and regulaton of foreign stock exchanges and brokers than in the
United States.
In seeking to implement the Fund's policies, the Investment Manager and the
Sub-Adviser effect transactions with those brokers and dealers who the
Investment Advisers believe provide the most favorable prices and which are
capable of providing efficient executions. If the Investment Advisers believe
such price and execution are obtainable from more than one broker or dealer,
they will give consideration to placing portfolio transactions with those
brokers and dealers who also furnish research and other services to the Fund or
the Investment Manager and the Sub-Adviser. Such services may include, but are
not limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investments; wire services; and appraisals
or evaluations of portfolio securities. During the fiscal year ended March 31,
1995, the Fund directed the payment of $247,201 in brokerage commissions in
connection with transactions in the aggregate amount of $121,298,645 to brokers
because of research services provided.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR and/or affiliated brokers of the Sub-Adviser. In order for
these broker-dealers to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by them 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 these broker-dealers 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
or of its Distributor, as defined in the Act, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to DWR and affiliates of the Sub-Adviser are consistent with the foregoing
standard. During the fiscal years ended March 31, 1993, 1994 and 1995, the Fund
paid a total of $77,926, $38,787 and $89,120, respectively, in brokerage
commissions to DWR. The Fund does not reduce the management fee it pays to
InterCapital by any amount of the brokerage commissions it may pay to DWR.
During the fiscal year ended March 31, 1995, the brokerage commissions paid to
DWR represented approximately 4.73% of the total brokerage commissions paid by
the Fund during the year and were paid on account of transactions having a
dollar value equal to approximately 12.22% of the aggregate dollar value of all
portfolio transactions by the Fund during the year for which commissions were
paid.
The information and services received by the Investment Manager and the
Sub-Adviser from brokers and dealers may be of benefit to the Investment Manager
and the Sub-Adviser in the management of accounts of some of their 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/or the Sub-Adviser, 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.
Under the investment advisory arrangements in effect prior to August 1,
1995, it had been contemplated that, consistent with the above policy, a
substantial amount of the Fund's brokerage transactions with respect to Pacific
Basin equities would be conducted through brokerage affiliates of DICAM, Ltd. In
order for brokerage affiliates of DICAM, Ltd. to effect any portfolio
transactions for the Fund, the
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commissions, fees or other remuneration received by those affiliates had to 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 allowed such affiliates 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
or of its Distributor, as defined in the Act, had adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to such affiliates were consistent with the foregoing standard. During the
fiscal years ended March 31, 1993, 1994 and 1995, the Fund paid a total of
$87,962, $80,826 and $2,667, respectively, in brokerage commissions to
affiliates of DICAM, Ltd. The Fund did not reduce the advisory fee it paid to
DICAM by any amount of the brokerage commissions it might have paid to such
affiliates. During the year ended March 31, 1995, the brokerage commissions paid
to affiliates of DICAM, Ltd. represented approximately 0.14% of the total
brokerage commissions paid by the Fund for the year and were paid to effect
transactions having a dollar value equal to approximately 0.09% of the aggregate
dollar value of all portfolio transactions of the Fund during the year for which
commissions were paid. The difference in the percentage of brokerage commissions
paid to affiliates of DICAM, Ltd. as opposed to the percentage of portfolio
transactions connected therewith is occasioned by the higher commission rates
customarily charged by broker-dealers in the Far East.
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 its fiscal years ended March 31, 1993, 1994 and 1995,
the Fund did not effect any principal transactions with DWR.
During the fiscal year ended March 31, 1995, the Fund purchased common stock
of Merrill Lynch & Co. Inc., which issuer was among the ten brokers or the ten
dealers which executed transactions for or with the Fund in the largest dollar
amounts during the year. At March 31, 1995, the Fund held common stock of
Merrill Lynch & Co. Inc. with a market value of $255,750.
The Trustees have considered the possibilities of seeking to recapture, for
the benefit of the Fund, brokerage commissions and other expenses of possible
portfolio transactions by conducting portfolio transactions through affiliated
entities. For example, brokerage commissions received by affiliated brokers
could be offset against the advisory fees paid by the Fund. After considering
all factors deemed relevant, the Trustees made a determination not to seek such
recapture. The Trustees will reconsider this matter from time to time.
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 similar
agreements with other selected broker-dealers. The Distributor, a Delaware
corporation, is a wholly-owned subsidiary of DWDC. 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 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. 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 20, 1995, the Trustees of the Fund, including all of the Independent
Trustees, approved the continuation of the Distribution Agreement until April
30, 1996.
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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 any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services provided and for the expenses
borne under the Distribution Agreement, 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 (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received approximately
$257,000, $179,000 and $755,000 in contingent deferred sales charges for the
fiscal years ended March 31, 1993, 1994 and 1995, 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 originally adopted by a majority vote of the Board of Trustees,
including all of the Independent Trustees (none of whom had or have any 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, at their Meeting held on July 19, 1983 (continued after adjournment
on July 27, 1983), and by DWR, the then sole shareholder of the Fund, on August
6, 1983. The Plan was amended (as a result of the resignation of Daiwa as a
Distributor of the Fund's shares) by the Trustees at their Meeting held on July
17, 1984, and such amendment was ratified by the shareholders holding a
majority, as defined in the Act, of the outstanding shares of the Fund, at their
Annual Meeting held on October 1, 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 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
36
<PAGE>
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 of the Fund, including all of the
Independent 12b-1 Trustees, approved certain technical amendments to the Plan in
connection with recent 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 by the Distributor under the Plan and
the purpose for which such expenditures were made. The Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended March
31, 1995, of $5,619,558. This amount is equal to payments required to be paid
monthly by the Fund which were computed at the annual rate of 1.0% of the
average daily net assets of the Fund for the fiscal year and was calculated
pursuant to clause (b) 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 may be subject 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 and 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 share sales. The distribution fee that the Distributor
receives from the Fund under the Plan, in effect, offsets distribution expenses
incurred on behalf of the Fund and 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
sales credit as it is reduced by amounts received by the Distributor under the
Plan and any contingent deferred sales charges received by the Distributor upon
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of its distribution costs
for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $5,619,558 accrued under the Plan for the fiscal
year ended March 31, 1995 to the Distributor. DWR and the Distributor estimate
that they have spent, pursuant to the Plan, $62,894,510 on behalf of the Fund
since the inception of the Fund. It is estimated that this amount was spent in
approximately the following ways: (i) 5.75% ($3,615,078)--advertising and
promotional expenses; (ii) 0.73% ($458,837)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 93.52%
($58,820,595)--other expenses, including the gross sales credit and the carrying
charge, of which 15.68% ($9,220,731) represents carrying charges, 34.58%
($20,340,904) represents commission credits to DWR branch offices for payments
of commissions to account executives and 49.74% ($29,258,960) represents
overhead and other branch office distribution-related expenses.
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<PAGE>
At any given time, the expenses in 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
such excess amount, 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 $22,880,218 as of March 31, 1995, which
amount constitutes 4.47% of the Fund's net assets on such date. Because there is
no requirement under the Plan that the Distributor be reimbursed for all
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, had any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Investment Manager or certain of its employees may be deemed to have such
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 July 31, 1984, and will
remain in effect from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Continuance of the Plan for one year, until April 30, 1996, 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 20, 1995. Prior to approving the
continuation of the Plan, the Board requested and received from the Distributor
and reviewed all the information which it 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 by the Distributor to the Fund and its shareholders. Based upon
their review, the Trustees of the Fund, including each of the Independent 12b-1
Trustees, determined that continuation of the Plan would be in the best interest
of the Fund and would have a reasonable likelihood of continuing to benefit the
Fund and its shareholders. In the Trustees' quarterly review of the Plan, they
will consider its continued appropriateness and the level of compensation
provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Fund, and all material amendments of the Plan must also be approved by the
Trustees in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Act) 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.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term debt securities with remaining
maturities of sixty days or less at the time of purchase are valued at amortized
cost, unless the Board of Trustees determines 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
38
<PAGE>
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.
As stated in the Prospectus, InterCapital will compute the Fund's net asset
value 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 days the New
York Stock Exchange is open for trading. The New York Stock Exchange currently
observes the following holidays: New Year's Day; Presidents' Day; Good Friday;
Memorial Day; Labor Day; Independence 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 distributrions
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 must 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 another
selected broker-dealer, which will be forwarded to the shareholder, upon the
receipt of proper instructions.
TARGETED DIVIDENDS.-SM- 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 World Wide Investment 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.-SM- 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. 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 account executive or the Transfer
Agent.
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<PAGE>
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 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" in the Prospectus). 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 DWR or other selected broker-dealer 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. Shareholders
wishing to enroll in the Withdrawal Plan should contact their account executive
or the Transfer Agent.
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
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<PAGE>
$100, payable to Dean Witter World Wide Investment 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 Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Short-Term U.S. Treasury
Trust, 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 of the
Fund 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 charge 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.
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<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.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone or telegraph instructions. Accordingly, in such event the
investor shall bear the risk of loss. The staff of the Securities and Exchange
Commission is currently considering the propriety of such a policy.
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 and 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
42
<PAGE>
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, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
for Dean Witter Short-Term U.S. Treasury Trust is $10,000, although that fund
may, at its discretion, accept purchases as low as $5,000. The minimum 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 which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to shareholders who hold shares of Exchange
Funds pursuant to this 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.
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. 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.
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
43
<PAGE>
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 acccount 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.
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. In addition, no
CDSC will be imposed on redemptions which are attributable to reinvestment of
distributions from, or the proceeds of, certain Unit Investment Trusts or which
were purchased by the employee benefit plans established by DWR and SPS
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code. The CDSC will be
paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years 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
44
<PAGE>
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
PURCHASE 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>
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.
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. 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 certified 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 receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
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 of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
45
<PAGE>
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
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with the proceeds, is
received by the Transfer Agent.
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 under "Dividends, Distributions and Taxes",
the Fund will determine either to distribute or to retain all or part of any net
long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will pay federal income tax thereon, and shareholders will
include such undistributed gains in determining their taxable income and will be
able to claim their share of the tax paid by the Fund as a credit against their
individual federal income tax.
Gains or losses on sales of securities by the Fund generally 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 generally will be short-term capital gains or losses.
The Fund has qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code (the "Code").
If so qualified, the Fund will not be subject to federal income tax on its net
investment income and net short-term capital gains, if any, realized during any
fiscal year to the extent that it distributes such income and capital gains to
its shareholders, other than any tax resulting from investing in passive foreign
investment companies, as discussed in the Prospectus. In addition, the Fund
intends to distribute to its shareholders each calendar year a sufficient amount
of ordinary income and capital gains to avoid the imposition of a 4% excise 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
year which are paid in the following year prior to February 1 will be deemed
received by the shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash.
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 investment 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.
46
<PAGE>
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and some
portion of the dividends are subject to federal income taxes. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
the payment of dividends or the distribution of realized long-term capital
gains, such payment or distribution would be in part a return of the
shareholder's investment to the extent of such reduction below the shareholder's
cost, but nonetheless would be fully taxable. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
Dividends and interest received by the Fund may give rise to withholding and
other taxes imposed by foreign countries. Tax conventions and treaties between
certain countries and the United States may reduce or eliminate such taxes.
Investors may be entitled to claim United States foreign tax credits with
respect to such taxes, subject to certain provisions and limitations contained
in the Code. If more than 50% of the Fund's total assets at the close of its
fiscal year consist of securities of foreign corporations, the Fund will be
eligible and will determine whether or not to file an election with the Internal
Revenue Service pursuant to which shareholders of the Fund will be required to
include their respective pro rata portions of such withholding taxes in their
United States income tax returns as gross income, treat such respective pro rata
portions as taxes paid by them, and deduct such respective pro rata portions in
computing their taxable incomes or, alternatively, use them as foreign tax
credits against their United States income taxes. If it qualifies for and elects
to file such election with the Internal Revenue Service, the Fund will report
annually to its shareholders the amount per share of such withholding. The Fund
did not make such election for its fiscal year ended March 31, 1995.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. It is not
anticipated that any taxes on the Fund with respect to investments in PFICs
would be significant.
The Fund may be subject to taxes in foreign countries in which it invests.
In addition, if the Fund were deemed to be a resident of the United Kingdom for
United Kingdom tax purposes or if the Fund were treated as being engaged in a
trading activity through an agent in the United Kingdom, there is a risk that
the United Kingdom would attempt to tax all or a portion of the Fund's gains or
income. In light of the terms and conditions of the Investment Management and
Sub-Advisory Agreements, it is believed by the Investment Manager that any such
risk is minimal.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward currency contracts will be valued for purposes of the
regulated investment company diversification requirements applicable to the
Fund.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts," and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than
47
<PAGE>
increasing or decreasing the amount of the Fund's net capital gain.
Additionally, if Code Section 988 losses exceed other investment company taxable
income during a taxable year, the Fund would not be able to make any ordinary
dividend distributions.
Shareholders are urged to consult their own 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 particular 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 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 total returns of the Fund for the one, five and ten year
periods ended March 31, 1995 were -14.68%, 5.13% and 11.59%, 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 March 31, 1995 were -10.37%, 5.45% and 11.59%,
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 March 31, 1995 was
- -10.37%, the total return for the five years ended March 31, 1995 was 30.40%,
and the total return for the ten year period ended March 31, 1995 was 199.30%.
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 CDSC) 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 $31,211, $156,055 and $312,110,
respectively, at March 31, 1995.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10081 is the
Custodian of the Fund's assets. As Custodian, The Chase Manhattan Bank has
contracted with various foreign banks and
48
<PAGE>
depositaries to hold portfolio securities of non-U.S. issues on behalf of the
Fund. 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 of 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 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, 1177 Avenue of the Americas, New York, New York 10036
serves as the independent accountants of the Fund. The independent accountants
are responsible for auditing the annual financial statements of the Fund.
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 Fund is not required to hold Annual
Meetings of Shareholders.
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). However, the Trustees have not authorized
any such additional series or classes of shares.
The Declaration of Trust further provides that no Trustee, officer, employee
or agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his or its
own bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. It also provides that all third persons shall look solely to the
Fund's property for satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated, the Declaration of Trust
provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liability in connection with the affairs of the Fund.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders.
49
<PAGE>
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 the independent accountants, will be sent to
shareholders each year. The Fund's fiscal year ends on March 31. 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
InterCapital, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund 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.
50
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, WARRANTS, RIGHTS
AND BONDS (83.5%)
ARGENTINA (0.3%)
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
55,000 Buenos Aires Embotelladera S.A.
(ADR).......................... $ 1,430,000
---------------
AUSTRALIA (0.9%)
APPLIANCES & HOUSEHOLD DURABLES
100,000 Email Ltd...................... 247,027
---------------
BUILDING & CONSTRUCTION
250,000 Clyde Industries Ltd........... 294,080
---------------
COMMERCIAL SERVICES
50,000 Mayne Nickless Ltd............. 218,354
---------------
INDUSTRIALS
100,000 Burns Philp & Co. Ltd.......... 235,264
---------------
INSURANCE
289,500 FAI Life Ltd................... 142,603
---------------
METALS & MINING
150,000 Ashton Mining Ltd.............. 231,588
67,000 Broken Hill Proprietary Co.
Ltd............................ 879,755
350,000 M.I.M. Holdings Ltd............ 481,188
120,000 Newcrest Mining Ltd............ 457,000
85,000 Western Mining Corp. Holdings
Ltd............................ 428,695
---------------
2,478,226
---------------
OIL RELATED
100,000 Ampolex Ltd.................... 255,850
120,000 Woodside Petroleum Ltd......... 478,174
---------------
734,024
---------------
PUBLISHING
100,000 News Corp. Ltd................. 480,086
---------------
TOTAL AUSTRALIA................ 4,829,664
---------------
AUSTRIA (0.1%)
BUSINESS SERVICES
200,000 Fotex.......................... 284,677
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
BELGIUM (0.4%)
CHEMICALS
1,110 Solvay S.A. (A Shares)......... $ 542,057
---------------
MANUFACTURING
10,000 Barco N.V. (Barco
Industries).................... 838,671
---------------
MISCELLANEOUS
15,000 Terca Brick Industries......... 836,017
---------------
TOTAL BELGIUM.................. 2,216,745
---------------
BOLIVIA (0.1%)
UTILITIES
30,000 Compania Boliviana de Energia
Electrica S.A. (ADR)........... 720,000
---------------
BRAZIL (1.5%)
INVESTMENT COMPANIES
1,000,000 Brazilian Smaller Co.
Investment Trust............... 1,280,000
200,000 Brazilian Smaller Co.
Investment Trust (Warrants due
9/30/07)*...................... 164,000
2,000,000 South America Fund............. 5,960,000
400,000 South America Fund (Warrants
due 8/19/96)*.................. 400,000
---------------
TOTAL BRAZIL................... 7,804,000
---------------
CANADA (2.7%)
ALUMINUM
50,000 Alcan Aluminium Ltd............ 1,331,250
---------------
BANKING
40,000 Bank of Montreal............... 765,105
30,000 Bank of Nova Scotia............ 579,192
---------------
1,344,297
---------------
BUILDING & CONSTRUCTION
60,000 Ainsworth Lumber Co............ 445,120
---------------
FOREST PRODUCTS, PAPER & PACKAGING
30,000 Alliance Forest Products,
Inc............................ 541,652
30,000 Pacific Forest Products........ 260,100
---------------
801,752
---------------
MANUFACTURING
98,700 Maxx, Inc...................... 776,332
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
METALS & MINING
50,000 Falconbridge Ltd............... $ 840,186
12,000 Inco Ltd....................... 334,500
50,000 Noranda, Inc................... 853,595
---------------
2,028,281
---------------
MISCELLANEOUS
30,000 Nowsco Well Service Ltd........ 324,455
---------------
NATURAL GAS
80,000 Renaissance Energy Ltd.*....... 1,673,221
---------------
OIL & GAS DRILLING
50,000 Talisman Energy, Inc.*......... 902,755
---------------
OIL & GAS EXPLORATION
40,000 Canadian Natural Resources
Ltd............................ 454,058
35,000 Canadian Occidental Petroleum
Ltd............................ 914,375
50,000 Northrock Resources Ltd........ 335,180
---------------
1,703,613
---------------
OIL RELATED
50,000 Suncor, Inc.................... 1,336,253
---------------
TELECOMMUNICATIONS
30,000 BCE Mobile Communications,
Inc.*.......................... 992,134
---------------
TOTAL CANADA................... 13,659,463
---------------
CHILE (1.6%)
BANKING
50,000 Banco O' Higgins (ADR)......... 887,500
---------------
CHEMICALS
30,000 Sociedad Quimica y Minera de
Chile S.A. (ADR)............... 900,000
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
55,000 Embotelladora Andina S.A.
(ADR).......................... 1,443,750
---------------
PHARMACEUTICALS
60,000 Laboratorio Chile S.A. (ADR)... 1,080,000
---------------
TELECOMMUNICATIONS
40,000 Compania de Telefonos de Chile
S.A. (ADR)..................... 2,670,000
60,000 Empresas Telex-Chile S.A.
(ADR).......................... 435,000
---------------
3,105,000
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
UTILITIES
35,000 Chilgener S.A. (ADR)........... $ 875,000
---------------
TOTAL CHILE.................... 8,291,250
---------------
CHINA (0.3%)
INVESTMENT COMPANIES
200,000 China Fund..................... 1,440,000
---------------
COLOMBIA (0.4%)
BUILDING & CONSTRUCTION
50,000 Cementos Diamante S.A. (ADR) -
144A**......................... 950,000
60,000 Cementos Paz Del Rio S.A. (ADR)
- 144A**....................... 1,042,800
---------------
TOTAL COLOMBIA................. 1,992,800
---------------
DENMARK (1.1%)
BANKING
20,000 Den Danske Bank................ 1,120,685
---------------
GOVERNMENT OBLIGATION
DKK13,860K Kingdom of Denmark 7.00% due
12/15/04....................... 2,235,689
---------------
MULTI - INDUSTRY
10,000 Sophus Berendsen............... 885,525
---------------
TELECOMMUNICATIONS
27,500 Tele Danmark A/S (B Shares).... 1,455,053
---------------
TOTAL DENMARK.................. 5,696,952
---------------
FINLAND (3.0%)
ELECTRONICS
21,000 Nokia Oy (Pref.)............... 3,063,209
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
39,000 Cultor Oy (Series "2")......... 1,137,763
---------------
FOREST PRODUCTS, PAPER & PACKAGING
104,000 Enso-Gutzeit Oy (R Shares)..... 799,444
51,000 Kymmene Oy..................... 1,322,528
47,000 Metsa-Serla Oy (B Shares)...... 1,730,262
67,000 Repola Oy...................... 1,115,374
---------------
4,967,608
---------------
LEISURE
110,000 Finnair Oy..................... 738,597
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MANUFACTURING
138,000 Rautaruukki Oy................. $ 952,165
---------------
METALS & MINING
100,000 Outokumpu Oy (A Shares)........ 1,488,771
---------------
MISCELLANEOUS
41,000 Aamulehti Yhtymae Oy........... 655,013
3,900 Benefon Oy..................... 1,237,092
---------------
1,892,105
---------------
MULTI - INDUSTRY
44,000 Valmet Corp.................... 855,754
---------------
TOTAL FINLAND.................. 15,095,972
---------------
FRANCE (5.4%)
AUTOMOTIVE
FRF3,500K Peugeot 2.00% due 01/01/01
(Conv.)........................ 658,412
3,300 Psa Peugeot Citroen............ 464,218
17,000 Renault S.A.................... 593,965
13,250 Valeo.......................... 715,508
---------------
2,432,103
---------------
BANKING
9,332 Compagnie Financiere de Paribas
(A Shares)..................... 557,337
---------------
BUILDING & CONSTRUCTION
5,400 CIE Saint Gobain............... 671,980
9,350 Lafarge-Coppee................. 708,619
8,500 Lafarge-Coppee (Warrants due
4/01/96)*...................... 30,423
---------------
1,411,022
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
10,000 Alcatel Alsthom................ 903,964
---------------
ENGINEERING & CONSTRUCTION
5,000 Bouygues....................... 555,613
---------------
FINANCIAL SERVICES
6,250 Compagnie Bancaire S.A......... 699,719
22,172 Credit Commercial de France.... 1,033,509
8,272 Credit Commercial de France
(Warrants due 6/30/96)*........ 10,500
4,850 Docks de France S.A............ 747,862
---------------
2,491,590
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD MANUFACTURER
14,200 Seita.......................... $ 393,304
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
3,000 Eridania Beghin-Say............ 486,318
1,000 Groupe Danone.................. 170,014
4,675 LVMH Moet-Hennessy Louis
Vuitton........................ 917,392
3,250 Saint-Louis.................... 1,019,197
---------------
2,592,921
---------------
GOVERNMENT OBLIGATION
FRF43,000K France O. A. T. 6.00% due
10/25/25....................... 6,635,002
---------------
INSURANCE
14,000 AXA............................ 714,348
11,000 Societe Centrale des Assurances
Generales de France............ 370,825
---------------
1,085,173
---------------
MACHINERY
2,650 Sidel S.A...................... 744,459
---------------
MANUFACTURING
25,000 CarnaudMetalbox................ 935,907
15,000 Vallourec...................... 639,892
---------------
1,575,799
---------------
MISCELLANEOUS
1,400 De Dietrich et Compagnie
S.A............................ 792,425
9,265 Gaumont S.A.................... 520,560
24,100 Rhone-Poulenc (A Shares)....... 565,702
14,000 Technip S.A.................... 788,055
---------------
2,666,742
---------------
MULTI - INDUSTRY
7,200 Burelle S.A.................... 476,454
---------------
OIL RELATED
8,300 Societe National Elf
Aquitaine...................... 649,768
---------------
PHARMACEUTICALS
4,400 Roussel-Uclaf.................. 654,667
---------------
TIRE & RUBBER GOODS
22,600 Michelin (B Shares)............ 973,039
FRF3,026K Michelin France 2.50% due
01/01/01 (Conv.)............... 154,590
---------------
1,127,629
---------------
UTILITIES
6,856 Cie Generale des Eaux.......... 696,800
---------------
TOTAL FRANCE................... 27,650,347
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
GERMANY (2.1%)
AUTOMOTIVE
1,636 BMW AG......................... $ 818,000
1,045 Daimler Benz AG................ 472,756
7,050 Kolbenschmidt AG............... 855,632
2,700 M.A.N. AG...................... 647,529
2,700 Volkswagen AG.................. 683,830
---------------
3,477,747
---------------
BUSINESS SERVICES
3,000 Rosenthal AG................... 414,244
---------------
CHEMICALS
2,900 BASF AG........................ 585,480
4,400 Bayer AG....................... 1,080,174
---------------
1,665,654
---------------
HEALTH & PERSONAL CARE
450 Rhon-Klinikum AG (Pref.)....... 313,953
---------------
INSURANCE
590 Allianz Holding AG............. 1,019,637
---------------
MACHINERY
1,750 Babcock-BSH AG................. 269,622
3,300 Mannesmann AG.................. 850,182
---------------
1,119,804
---------------
MACHINERY - DIVERSIFIED
14,200 Kloeckner Humboldt-Deutz AG.... 456,134
---------------
MANUFACTURING
9,400 Deutsche Babcock AG............ 1,058,866
---------------
PHARMACEUTICALS
1,300 Gehe AG........................ 539,935
---------------
TEXTILES
1,600 DLW AG......................... 389,535
---------------
TRANSPORTATION
3,875 Deutsche Lufthansa AG.......... 491,415
---------------
TOTAL GERMANY.................. 10,946,924
---------------
HONG KONG (2.5%)
BANKING
511,000 Guoco Group Ltd................ 1,896,876
100,000 HSBC Holdings PLC.............. 1,128,500
---------------
3,025,376
---------------
CONGLOMERATES
2,258,750 Guangdong Investments Ltd...... 1,095,559
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
ELECTRONIC & ELECTRICAL EQUIPMENT
3,408,000 Alco Holdings Ltd.............. $ 515,729
1,930,000 Kosonic International Holdings
Ltd............................ 68,648
487,600 Truly International Holdings
Ltd. (Warrants due 8/31/96)*... 5,045
---------------
589,422
---------------
INTERNATIONAL TRADE
330,000 Linkful International Holdings
Ltd. (Warrants due 3/31/96)*... 3,159
---------------
INVESTMENT COMPANIES
380,000 Cathay Investment Fund Ltd.*... 383,367
96,000 Cathay Investment Fund Ltd.
(Warrants due 9/30/95)*........ 15,893
---------------
399,260
---------------
MANUFACTURING
4,500,000 Techtronic Industries Co....... 320,119
---------------
MISCELLANEOUS
1,000,000 Shun Tak Holdings Ltd.......... 591,735
---------------
REAL ESTATE
350,000 Great Eagle Holdings Ltd....... 710,729
650,000 Hong Kong Land Holdings........ 1,420,811
265,000 New World Development Co....... 721,496
---------------
2,853,036
---------------
TELECOMMUNICATIONS
700,000 Hong Kong Telecommunications
Ltd............................ 1,362,608
---------------
TRANSPORTATION
700,000 Cathay Pacific Airways......... 1,081,938
---------------
UTILITIES
300,000 China Light & Power Co......... 1,455,086
---------------
TOTAL HONG KONG................ 12,777,298
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
INDIA (0.9%)
INVESTMENT COMPANIES
50,000 India Magnum Fund (A
Shares)*....................... $ 2,250,000
20,000 Peregrine India Smaller Cos.
Fund........................... 1,820,000
---------------
4,070,000
---------------
METALS & MINING
20,000 Hindalco Industries (GDR)...... 560,000
---------------
MISCELLANEOUS
10,000 Reliance Industries (GDS)...... 160,000
---------------
TOTAL INDIA.................... 4,790,000
---------------
INDONESIA (1.0%)
AUTOMOTIVE
424,000 PT Andayani Megah.............. 407,510
260,000 PT Astra International......... 377,738
---------------
785,248
---------------
BANKING
200,000 PT Bank Bali................... 375,502
240,000 PT Bank International
Indonesia...................... 582,030
---------------
957,532
---------------
COMPUTER SERVICES
300,000 PT Multipolar Corp............. 160,930
---------------
FOREST PRODUCTS, PAPER & PACKAGING
US$ 500,000 PT Tjiwi Kimia 0.00% due
3/26/97 (Conv.)................ 437,500
---------------
INVESTMENT COMPANIES
2,000,000 Peregrine Indonesia Fund
Ltd.***........................ 887,000
20,000 PT Indonesian Satellite Corp.
(ADR).......................... 705,000
---------------
1,592,000
---------------
REAL ESTATE
466,666 PT Duta Anggada Realty......... 297,273
562,000 PT Lippo Land Development...... 383,125
---------------
680,398
---------------
TEXTILES
800,000 PT Great River Industries...... 590,076
---------------
TOTAL INDONESIA................ 5,203,684
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
IRELAND (0.7%)
FINANCIAL SERVICES
250,000 Allied Irish Banks PLC......... $ 1,094,175
1,250,000 Anglo Irish Bank Corp. PLC*.... 992,863
---------------
2,087,038
---------------
MISCELLANEOUS
180,000 CRH PLC........................ 1,070,833
1,500,000 Ryan Hotels PLC................ 632,190
---------------
1,703,023
---------------
TOTAL IRELAND.................. 3,790,061
---------------
ITALY (2.9%)
APPLIANCES & HOUSEHOLD DURABLES
134,000 Merloni Electro Domestici
SpA............................ 472,262
---------------
AUTOMOTIVE
205,999 Fiat SpA*...................... 769,989
290,000 Pirelli SpA.................... 367,730
---------------
1,137,719
---------------
BUILDING & CONSTRUCTION
135,000 UniChem SpA.................... 773,578
ITL70,000K UniChem Mediobanca SpA 4.50%
due 1/01/00 (Conv.)............ 34,076
---------------
807,654
---------------
CHEMICALS
1,069,000 Montedison SpA Di Risp......... 569,297
---------------
COMPUTER SERVICES
500,000 Olivetti & C SpA............... 466,862
---------------
FINANCIAL SERVICES
130,000 IMI SpA........................ 672,188
---------------
GOVERNMENT OBLIGATION
ITL5,800M Italy (Republic of) 8.50% due
8/01/04........................ 2,600,305
---------------
INSURANCE
56,000 R.A.S. Di Risp SpA............. 307,655
8,000 R.A.S. Di Risp SpA (Warrants
due 12/31/97)*................. 17,839
---------------
325,494
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MACHINERY
200,000 Tecnost SpA.................... $ 400,000
---------------
MANUFACTURING
700,000 Dalmine SpA.................... 166,276
219,333 Sasib SpA...................... 883,249
31,333 Sasib SpA (Warrants due
7/31/97)*...................... 14,885
---------------
1,064,410
---------------
MISCELLANEOUS
2,235,000 Istituto Nazionale Delle
Assicurazioni.................. 2,638,742
---------------
TELECOMMUNICATIONS
416,000 Stet SpA....................... 1,065,741
846,000 Telecom Italia SpA............. 1,973,338
---------------
3,039,079
---------------
TEXTILES
80,000 Marzotto (Gaetano) & Figli
SpA............................ 499,707
81,000 Vincenzo Zucchi SpA............ 347,041
---------------
846,748
---------------
TOTAL ITALY.................... 15,040,760
---------------
JAPAN (17.4%)
AUTOMOTIVE
250,000 Mitsubishi Motors Corp......... 2,283,487
---------------
BANKING
Y 500,000K International Bank for
Reconstruction & Development
7.25% due 4/27/95 (Conv.)...... 5,790,993
18,000 Sumitomo Trust & Banking Co.... 243,187
---------------
6,034,180
---------------
BUILDING & CONSTRUCTION
60,500 Japan Foundation Engineering
Co. Ltd........................ 1,390,242
21,000 Kawagishi Bridge Works Co.
Ltd............................ 201,270
300,000 Nishimatsu Construction Co..... 3,384,527
150,000 Tohoku Telecommunications
Construction Co................ 1,056,582
48,400 Yokogawa Construction Co....... 1,212,794
---------------
7,245,415
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES
84,000 Wesco, Inc..................... $ 2,424,942
---------------
CHEMICALS
350,000 Kaneka Corp.................... 2,344,111
---------------
COMPUTER SERVICES
50,000 CSK Corp....................... 1,293,303
90,000 Hitachi Software Engineering
Co............................. 2,182,448
---------------
3,475,751
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
50,000 Ado Electronic Industrial
Co............................. 1,062,356
35,000 Fujitsu Business Systems....... 941,686
150,000 Fujitsu Kiden.................. 2,321,016
200,000 NEC Corp....................... 2,145,497
100,000 Nichicon Corp.................. 1,535,797
150,000 Nitto Denko Corp............... 2,355,658
55,000 Rohm Co., Ltd.................. 2,451,501
100,000 Ryoyo Electronic Corp.......... 2,401,848
---------------
15,215,359
---------------
FINANCIAL SERVICES
44,000 Acom Co., Ltd.................. 1,214,319
100,000 Kokusai Securities Co.......... 1,293,303
100,000 Nomura Securities Co., Ltd..... 1,870,670
75,000 Orix Corp...................... 3,005,196
---------------
7,383,488
---------------
FOREST PRODUCTS, PAPER & PACKAGING
100,000 New Oji Paper Co. Ltd.......... 1,033,487
---------------
HEALTH & PERSONAL CARE
132,000 Santen Pharmaceutical Co....... 3,627,714
---------------
INSURANCE
100,000 Dai-Tokyo Fire & Marine
Insurance Co. Ltd.............. 750,577
150,000 Tokio Marine & Fire Insurance
Co............................. 1,706,120
---------------
2,456,697
---------------
INTERNATIONAL TRADE
300,000 Mitsui & Co.................... 2,355,658
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MACHINERY
50,000 Fuji Machine Manufacturing
Co............................. $ 1,403,002
173,000 Furukawa Co., Ltd.............. 942,910
350,000 Mitsubishi Heavy Industries,
Ltd............................ 2,517,898
80,000 Miura Co....................... 1,431,871
---------------
6,295,681
---------------
MACHINERY - CONSTRUCTION & MATERIALS
70,000 C.K.D. Corp.................... 606,236
---------------
MACHINERY - DIVERSIFIED
180,000 Daiwa Industries............... 1,870,670
---------------
MANUFACTURING
62,000 Descente....................... 368,707
380,000 Hitachi Cable.................. 2,803,926
77,000 Nippon Electric Glass Co....... 1,333,718
75,000 Tenma Corp..................... 1,810,046
130,000 Tokyo Style Co................. 2,086,605
---------------
8,403,002
---------------
METALS & MINING
80,000 Toa Steel Co. Ltd.............. 499,769
50,000 Tokyo Tekko Co. Ltd............ 409,931
---------------
909,700
---------------
MULTI - INDUSTRY
225,000 Kyokuto Boeki Kaisha........... 1,808,314
---------------
OIL RELATED
300,000 Mitsubishi Oil Co.............. 2,771,363
---------------
PHARMACEUTICALS
160,000 Eisai Co. Ltd.................. 2,771,363
---------------
REAL ESTATE
100,000 Sumitomo Realty & Development
Co............................. 646,651
---------------
RETAIL STORES
120,000 Izumiya Co..................... 2,092,379
38,400 Shimamura Co. Ltd.............. 1,321,386
---------------
3,413,765
---------------
TEXTILES
100,000 Kuraray Co..................... 1,166,282
---------------
TRANSPORTATION
253,000 Yamato Transport Co. Ltd....... 2,746,189
---------------
TOTAL JAPAN.................... 89,289,505
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MALAYSIA (2.2%)
BANKING
80,000 DCB Holdings Berhad............ $ 196,164
150,000 Malayan Banking Berhad......... 1,014,435
---------------
1,210,599
---------------
BUILDING & CONSTRUCTION
120,000 United Engineers Berhad........ 702,393
---------------
BUILDING MATERIALS
212,500 Kim Hin Industry Berhad........ 1,033,716
40,500 Kim Hin Industry Berhad
(Warrants due 7/18/98)*........ 46,771
---------------
1,080,487
---------------
CONGLOMERATES
300,000 Renong Berhad.................. 465,098
170,000 Sime Darby Berhad.............. 423,571
---------------
888,669
---------------
CONSTRUCTION PLANT & EQUIPMENT
52,500 YTL Corp. Berhad............... 259,541
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
216,666 Leader Universal Holdings
Berhad......................... 754,068
---------------
FOREST PRODUCTS, PAPER & PACKAGING
500,000 Aokam Perdana Berhad........... 2,807,989
---------------
MANUFACTURING
69,600 Mah Sing Group Berhad.......... 151,394
58,000 Mah Sing Group Berhad
(Rights)*...................... 29,361
149,000 Press Metal Berhad............. 353,569
---------------
534,324
---------------
MULTI - INDUSTRY
66,000 Westmont Berhad................ 331,501
---------------
REAL ESTATE
87,000 Land & General Berhad.......... 266,660
---------------
TELECOMMUNICATIONS
100,000 Telekom Malaysia Berhad........ 692,110
US$ 1,000K Telekom Malaysia Berhad 4.00%
due 10/03/04 (Conv.) -
144A**......................... 850,000
---------------
1,542,110
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
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PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
UTILITIES
100,000 Technology Resource Industries
Berhad......................... $ 286,731
180,000 Tenaga Nasional Berhad......... 740,360
---------------
1,027,091
---------------
TOTAL MALAYSIA................. 11,405,432
---------------
MEXICO (2.9%)
BANKING
180,000 Grupo Financiero Banamex -
Accival S.A. de C.V. (B
shares)........................ 213,018
962,000 Grupo Financiero Bancomer S.A.
de C.V. (B Shares)............. 155,115
400,000 Grupo Financiero Del Norte (B
Shares)........................ 404,734
---------------
772,867
---------------
BUILDING & CONSTRUCTION
270,000 Cementos de Mexico S.A. (B
Shares)........................ 595,118
35,000 Corporacion Geo S.A. (ADR) -
144A**......................... 315,000
1,020,000 Grupo Cementos de Chihuahua
S.A. de C.V. (B Shares)........ 558,284
81,000 Ttolmex S.A. (B Shares)........ 185,485
---------------
1,653,887
---------------
CONGLOMERATES
200,000 Grupo Carso S.A. (A1
Shares)*....................... 877,219
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
900,000 Argos (B Shares)............... 348,817
30,000 Coca Cola FEMSA S.A. de C.V.
(ADR).......................... 551,250
402,000 Emvasa (B Shares).............. 208,136
100,000 Gemex (B Shares)............... 454,882
55,000 Panamerican Beverages, Inc. (A
Shares)........................ 1,436,875
---------------
2,999,960
---------------
FOREST PRODUCTS, PAPER & PACKAGING
90,000 Kimberley-Clark de Mexico S.A.
de C.V. (A Shares)............. 744,231
---------------
INVESTMENT COMPANIES
200,000 Baring Puma Fund............... 4,000,000
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
METALS & MINING
150,000 Hylsamex, S.A. de C.V. (B
Shares)........................ $ 237,426
---------------
PHARMACEUTICALS
60,000 Grupo Casa Autrey S.A. de C.V.
(ADR).......................... 855,000
64,000 Nacional de Drogas S.A. de C.V.
(B Shares)..................... 203,550
202,000 Nacional de Drogas S.A. de C.V.
(L Shares)..................... 490,059
---------------
1,548,609
---------------
RETAIL
700,000 Cifra, S.A. (Series C)......... 855,325
---------------
TELECOMMUNICATIONS
34,000 Telefonos de Mexico S.A. de
C.V. (L Shares) (ADR).......... 969,000
---------------
TOTAL MEXICO................... 14,658,524
---------------
NETHERLANDS (1.5%)
APPLIANCES & HOUSEHOLD DURABLES
14,900 Atag Holdings NV............... 1,141,837
---------------
BUILDING & CONSTRUCTION
21,700 Hunter Douglas NV.............. 945,623
---------------
BUSINESS SERVICES
19,200 Oce-Van Der Grinten NV......... 980,075
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
14,400 Philips Electronics NV......... 490,038
---------------
MISCELLANEOUS
25,000 Ballast Nedam NV (Pref.)....... 1,092,674
---------------
MULTI - INDUSTRY
32,500 Borsumij Wehry NV.............. 599,428
---------------
OIL RELATED
5,000 Royal Dutch Petroleum Co....... 600,078
---------------
PUBLISHING
12,000 Ver Ned Uitgev Ver Bezit NV.... 1,291,337
---------------
TRANSPORTATION
22,200 Nedlloyd Groep NV.............. 624,276
---------------
TOTAL NETHERLANDS.............. 7,765,366
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
NORWAY (1.2%)
CONSUMER SERVICES
16,000 Orkla Borregaard AS (A
Shares)........................ $ 589,371
---------------
FOREST PRODUCTS, PAPER & PACKAGING
36,500 Norsk Skogindustrier AS (B
Shares)........................ 1,030,588
---------------
MACHINERY
35,000 Kvaerner AS (B Shares)......... 1,470,994
---------------
MISCELLANEOUS
107,500 Sensonor AS.................... 880,933
---------------
OIL RELATED
36,666 Norsk Hydro AS................. 1,368,467
---------------
TRANSPORTATION
29,100 Bergesen d.y. AS (A Shares).... 639,846
---------------
TOTAL NORWAY................... 5,980,199
---------------
PANAMA (0.2%)
BANKING
50,000 Banco Latinoamericano de
Exportaciones S.A. (ADR)....... 1,275,000
---------------
PERU (0.4%)
BANKING
185,572 Banco Wiese (ADR).............. 1,299,004
---------------
TELECOMMUNICATIONS
697,310 Telefonica de Peru (B
Shares)........................ 810,538
---------------
TOTAL PERU..................... 2,109,542
---------------
PHILIPPINES (1.5%)
AUTOMOTIVE
312,500 Sime Darby Pilipinas, Inc...... 559,339
---------------
BANKS - COMMERCIAL
50,000 Philippine National Bank....... 426,070
---------------
CONGLOMERATES
74,520 Ayala Corp..................... 894,240
155,000 Ayala Corp. (B Shares)......... 196,012
---------------
1,090,252
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
200,000 San Miguel Corp. (B Shares).... $ 910,506
---------------
MISCELLANEOUS
935,000 JG Summit Holdings, Inc. (B
Shares)........................ 254,669
1,700,000 SM Prime Holdings.............. 515,953
---------------
770,622
---------------
OIL RELATED
1,160,000 Petron Corp.................... 835,019
---------------
REAL ESTATE
290,000 Ayala Land, Inc (B Shares)..... 344,163
---------------
TELECOMMUNICATIONS
25,000 Philippine Long Distance
Telephone...................... 1,498,054
---------------
TRANSPORTATION
600,600 International Container
Terminal....................... 426,496
---------------
UTILITIES
73,000 Manila Electric Co. (B
Shares)........................ 752,724
---------------
TOTAL PHILIPPINES.............. 7,613,245
---------------
PORTUGAL (1.9%)
BANKING
50,000 Banco Totta & Acores S.A....... 1,063,793
---------------
BUILDING & CONSTRUCTION
43,600 Soares da Costa S.A............ 882,524
13,080 Soares da Costa S.A. (New)..... 232,986
---------------
1,115,510
---------------
CHEMICALS
30,000 Corporacao Industrial de
Norte.......................... 893,793
---------------
COMMUNICATIONS EQUIPMENT
226,000 TVI Televisao S.A.............. 1,394,966
---------------
FINANCIAL SERVICES
51,000 Banco Portuguese de
Investimento S.A............... 903,931
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
22,400 Jeronimo Martins & Filho....... $ 1,019,432
20,000 Sumolis Companhia Industrial de
Frutas e Bebidas S.A........... 228,276
---------------
1,247,708
---------------
FOREST PRODUCTS, PAPER & PACKAGING
64,000 Sonae Industria SGPS S.A....... 781,241
38,090 Sonae Industria SGPS S.A.
(New).......................... 42,214
---------------
823,455
---------------
MISCELLANEOUS
40,000 Journalgeste................... 794,483
20,000 Lisnave - Estaleiros Navis de
Lisboa S.A..................... 97,517
20,000 Modelo - Sociedade Gestora de
Participacoes Sociais S.A...... 635,862
30,000 Sonae Investimentos............ 723,103
---------------
2,250,965
---------------
TOTAL PORTUGAL................. 9,694,121
---------------
RUSSIA (0.2%)
INVESTMENT COMPANIES
200,000 First NIS Fund................. 650,000
110,000 Fleming Russia Securities Fund
Ltd. (Pref.)................... 495,000
---------------
TOTAL RUSSIA................... 1,145,000
---------------
SINGAPORE (1.7%)
BANKING
37,500 Development Bank of Singapore,
Ltd............................ 393,199
105,042 Overseas Chinese Banking Corp.,
Ltd............................ 1,056,746
---------------
1,449,945
---------------
COMPUTER SERVICES
200,000 CSA Holdings, Ltd.............. 153,029
---------------
CONGLOMERATES
70,000 Keppel Corp., Ltd.............. 565,356
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
30,000 Asia Pacific Breweries, Ltd.... 174,283
---------------
LEISURE
210,000 Genting Berhad................. 1,904,357
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MISCELLANEOUS
450,000 United Industrial Corp......... $ 398,512
67,500 United Industrial Corp.
(Warrants due 8/29/98)*........ 23,672
---------------
422,184
---------------
MULTI - INDUSTRY
361,000 Acma Ltd....................... 1,109,982
---------------
PUBLISHING
55,000 Singapore Press Holdings....... 931,279
---------------
SHIPBUILDING
135,000 Sembawang Corp. Ltd............ 937,300
100,000 Sembawang Maritime Ltd......... 403,826
---------------
1,341,126
---------------
TRANSPORTATION
40,000 Singapore Airlines Ltd......... 399,575
---------------
TOTAL SINGAPORE................ 8,451,116
---------------
SOUTH KOREA (1.2%)
AUTOMOTIVE
515 Asia Motors Co., Inc........... 6,938
---------------
BANKING
18,000 Kyungnam Bank.................. 172,539
---------------
BUILDING & CONSTRUCTION
20,400 Daelim Industrial Co........... 531,140
8,491 Hanjin Engineering Construction
Co............................. 170,480
---------------
701,620
---------------
CHEMICALS
20,800 Hanwha Chemical Corp........... 522,694
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
9,540 Anam Electronics Co............ 173,005
3,213 Nam Sung Corp., Ltd............ 60,764
297 Samsung Electronics Co.
(GDR).......................... 13,439
7,187 Samsung Electronics Co.
(GDS).......................... 325,212
---------------
572,420
---------------
FINANCIAL SERVICES
1,071 Daewoo Securities Co........... 32,463
1,071 Ssangyong Investment &
Securities Co., Ltd............ 19,284
105 Ssangyong Investment &
Securities Co., Ltd. (New)..... 1,701
---------------
53,448
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANIES
200,000 Clemente Korea Emerging Growth
Fund*.......................... $ 2,400,000
---------------
MACHINERY
224 Samsung Heavy Equipment*....... 8,415
29 Samsung Heavy Equipment
(Rights)*...................... 980
---------------
9,395
---------------
MANUFACTURING
3,696 Daewoo Electronic Components
Co............................. 49,312
---------------
OIL & GAS PRODUCTS
11,400 Yukong Ltd..................... 505,026
---------------
RETAIL STORES
1,272 Midopa Co...................... 18,124
---------------
TELECOMMUNICATIONS
2,216 Daewoo Telecom Co.............. 27,844
---------------
UTILITIES
30,000 Korea Electric Power Corp...... 1,045,337
---------------
TOTAL SOUTH KOREA.............. 6,084,697
---------------
SPAIN (3.1%)
BANKING
40,000 Argentaria Corp. (ADR)......... 575,000
23,300 Argentaria Corp. S.A........... 679,882
25,000 Banco Bilbao Vizcaya S.A....... 635,710
11,000 Banco de Santander S.A......... 386,125
6,000 Banco Popular Espanol.......... 777,067
---------------
3,053,784
---------------
BUILDING & CONSTRUCTION
50,000 Aumar S.A...................... 513,306
12,258 Cubiertas y Mzov S.A........... 628,243
10,300 Fomento de Construcctiones y
Contratas S.A.................. 788,178
---------------
1,929,727
---------------
BUSINESS SERVICES
22,754 Prosegur Compania Seguridad
S.A............................ 395,315
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
30,000 Viscofan Envolturas Celulosas
S.A............................ 361,289
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
GOVERNMENT OBLIGATION
ESP305,000K Spain (Kingdom of) 8.00% due
5/30/04........................ $ 1,857,506
---------------
FOREST PRODUCTS, PAPER & PACKAGING
70,000 Empresa Nacional de Celulosa
S.A............................ 1,547,816
---------------
MACHINERY
15,000 Azkoyen S.A.................... 870,647
---------------
OIL RELATED
29,500 Repsol S.A..................... 836,334
---------------
REAL ESTATE
30,000 Vallehermoso S.A............... 414,594
---------------
RETAIL STORES
30,000 Cortefiel S.A.................. 841,033
---------------
STEEL
8,800 Acerinox S.A................... 847,824
---------------
TELECOMMUNICATIONS
82,400 Telefonica de Espana S.A....... 1,044,397
---------------
TEXTILES
90,000 Algodonera de Saint Antonia
S.A............................ 764,037
---------------
UTILITIES
27,750 ENDESA......................... 1,183,369
---------------
TOTAL SPAIN.................... 15,947,672
---------------
SWEDEN (3.5%)
AUTOMOTIVE
20,000 Autoliv AB..................... 757,082
59,000 Volvo AB (Series "B" Free)..... 1,020,637
---------------
1,777,719
---------------
BIOTECHNOLOGY
100,000 Foreningsbanken AB (A
Shares)........................ 164,170
---------------
BUILDING & CONSTRUCTION
17,700 Celsius Industries Corp. (B
Shares)........................ 276,172
43,000 Euroc AB (Series "B" Free)..... 816,781
40,000 Skanska AB (Series "B" Free)... 762,509
26,175 Svedala Industri (Series "AB"
Free).......................... 621,489
---------------
2,476,951
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES
34,000 Cardo AB....................... $ 357,511
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
11,250 Ericsson (L.M.) AB (Series "B"
Free).......................... 699,843
SEK8,750 Ericsson (L.M.) Telephone Co.
4.25% due 6/30/00 (Conv.)...... 17,763
---------------
717,606
---------------
FOREST PRODUCTS, PAPER & PACKAGING
69,000 Munksjo AB..................... 505,536
10,990 Stora Kopparbergs (Series "B"
Free).......................... 656,084
---------------
1,161,620
---------------
GOVERNMENT OBLIGATION
SEK19,800K Sweden (Kingdom of) 6.00% due
2/09/05........................ 1,838,721
---------------
HAND TOOLS
42,500 Sandvik AB (Series "A" Free)... 674,658
---------------
INTERNATIONAL TRADE
34,800 Kinnevik AB (Series "B"
Free).......................... 1,062,358
---------------
METALS & MINING
90,000 Avesta-Sheffield AB............ 805,926
37,000 S.K.F. AB (Series "B" Free).... 617,470
10,000 SSAB Svenskt Stal AB (Series
"A" Free)...................... 411,104
15,000 SSAB Svenskt Stal AB (Series
"B" Free)...................... 614,621
60,000 Trelleborg AB (Series "B"
Free).......................... 696,027
---------------
3,145,148
---------------
MISCELLANEOUS
83,550 Hoganas AB..................... 1,280,955
50,000 Kalmar Industries AB........... 620,726
---------------
1,901,681
---------------
PHARMACEUTICALS
34,580 Astra AB (Series "A" Free)..... 919,581
---------------
RETAIL STORES
37,000 Lindex AB...................... 522,088
---------------
TRANSPORTATION
55,000 ASG AB (Series "B" Free)....... 940,247
---------------
TOTAL SWEDEN................... 17,660,059
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
SWITZERLAND (0.9%)
FINANCIAL SERVICES
2,080 Swiss Bank Corp................ $ 685,977
---------------
MACHINERY
1,100 Elco Looser Holding AG......... 476,569
---------------
MANUFACTURING
510 Fischer (Georg) AG............. 586,207
---------------
MISCELLANEOUS
1,550 Kardex AG...................... 376,879
---------------
MULTI - INDUSTRY
750 BBC Brown Boveri AG............ 713,528
520 Publicitas Holding S.A......... 448,276
---------------
1,161,804
---------------
PHARMACEUTICALS
200 Roche Holdings AG.............. 1,156,499
---------------
TOTAL SWITZERLAND.............. 4,443,935
---------------
TAIWAN (0.2%)
INVESTMENT COMPANIES
100,000 Paribas Emerging Markets
Fund-Taiwan Series............. 913,000
---------------
THAILAND (2.2%)
AUTOMOTIVE
230,000 Thai Stanley Electric Public
Co............................. 934,390
---------------
BANKING
1,000,000 First Bangkok City Bank Public
Co............................. 721,105
400,000 Krung Thai Bank Public Co.
Ltd............................ 1,129,393
---------------
1,850,498
---------------
FINANCIAL SERVICES
100,000 Dhana Siam Finance and
Securities Co., Ltd............ 487,508
420,000 National Finance & Securities
Co............................. 1,347,959
---------------
1,835,467
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
100,000 Thai President Food Co......... $ 999,391
---------------
HOUSEHOLD PRODUCTS
150,000 Srithai Superware Co., Ltd..... 907,983
---------------
REAL ESTATE
45,200 Kian Gwan Co. Ltd.............. 131,294
50,000 Land & House Co................ 853,138
160,000 Raimon Land Co., Ltd........... 260,004
---------------
1,244,436
---------------
RETAIL STORES
308,000 Robinson Dept Store Co......... 575,584
---------------
TELECOMMUNICATIONS
300,000 Telecomasia Corp.*............. 1,133,455
170,000 Thai Telephone &
Telecommunications............. 1,284,583
---------------
2,418,038
---------------
TRANSPORTATION
246,000 Thai Airway International
Public Co. Ltd................. 589,640
---------------
TOTAL THAILAND................. 11,355,427
---------------
UNITED KINGDOM (4.0%)
BANKING
90,000 Abbey National PLC............. 686,836
---------------
BEVERAGES - ALCOHOLIC
35,000 Guinness PLC................... 264,548
---------------
BREWERS
30,000 Bass PLC....................... 267,143
---------------
BUILDING & CONSTRUCTION
100,000 Bryant Group................... 210,860
70,000 Meyer International PLC........ 346,297
---------------
557,157
---------------
BUSINESS SERVICES
45,000 Inchcape PLC................... 221,890
---------------
CHEMICALS
110,000 Scapa Group.................... 369,329
---------------
ELECTRONIC & ELECTRICAL EQUIPMENT
30,000 Bowthorpe PLC.................. 163,011
---------------
FOOD PROCESSING
27,500 Unilever PLC................... 545,519
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
60,000 B.A.T. Industries PLC.......... $ 427,235
45,000 Boddington Group PLC........... 186,125
---------------
613,360
---------------
GOVERNMENT OBLIGATION
L 1,950K Treasury 8.00% due 9/25/09..... 3,030,454
---------------
HOUSEHOLD FURNISHINGS & APPLIANCES
130,000 MFI Furniture Group PLC........ 246,706
---------------
INSURANCE
55,622 Commercial Union PLC........... 488,986
---------------
INVESTMENT COMPANIES
290,000 NB Smaller Cos. Trust.......... 578,567
1,100,000 The Throgmorton Trust.......... 1,324,769
150,000 TR Smaller Cos. Investment
Trust.......................... 444,023
---------------
2,347,359
---------------
LEISURE
80,000 Rank Organisation PLC.......... 522,933
80,000 Tomkins PLC.................... 304,936
---------------
827,869
---------------
MANUFACTURING
80,000 TI Group PLC................... 489,195
---------------
MISCELLANEOUS
50,000 Ashanti Goldfields Ltd. (GDS) -
144A**......................... 1,242,500
15,000 Zeneca Group PLC............... 211,671
---------------
1,454,171
---------------
MULTI - INDUSTRY
70,000 BTR PLC........................ 372,411
2,679 BTR PLC (Warrants due
11/26/98)*..................... 1,543
3,466 BTR PLC (Warrants due
12/26/97)*..................... 4,441
5,266 BTR PLC (Warrants due
5/15/96)*...................... 6,406
---------------
384,801
---------------
NATURAL GAS
85,000 British Gas PLC................ 394,998
---------------
OIL RELATED
120,000 British Petroleum Co. PLC...... 835,006
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
PHARMACEUTICALS
50,000 Glaxo Holdings PLC............. $ 572,566
40,000 Smithkline Beecham (Class A)... 310,126
---------------
882,692
---------------
PUBLISHING
77,000 Emap PLC....................... 522,057
99,650 Reuters Holding PLC............ 769,370
---------------
1,291,427
---------------
RETAIL
30,000 Marks & Spencer PLC............ 202,912
---------------
RETAIL STORES
250,000 Sears PLC...................... 423,748
---------------
TELECOMMUNICATIONS
98,000 British Telecommunications
PLC............................ 621,518
400,000 Telewest Communications........ 1,109,448
120,000 Vodafone Group PLC............. 386,360
---------------
2,117,326
---------------
TEXTILES
66,830 Coats Viyella PLC.............. 213,545
---------------
TRANSPORTATION
35,000 British Airport Authority...... 267,103
---------------
UTILITIES
46,000 Southern Electric PLC.......... 436,480
30,000 Yorkshire Water PLC............ 255,952
---------------
692,432
---------------
TOTAL UNITED KINGDOM........... 20,279,523
---------------
UNITED STATES (9.3%)
ADVERTISING
8,000 Omnicom Group, Inc............. 438,000
---------------
AEROSPACE
11,000 Boeing Co...................... 592,625
---------------
AUTOMOTIVE
10,000 Genuine Parts Co............... 398,750
---------------
BANKING
25,000 Bank of New York Co., Inc...... 821,875
11,000 First Bank System, Inc......... 444,125
---------------
1,266,000
---------------
BUILDING & CONSTRUCTION
22,000 Oakwood Homes Corp............. 580,250
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
BUSINESS SERVICES
15,000 Green Tree Financial Corp...... $ 615,000
---------------
CABLE/CELLULAR
9,500 Glenayre Technologies, Inc..... 432,250
---------------
CHEMICALS
8,000 International Flavors &
Fragrances Inc................. 413,000
---------------
COMPUTER SOFTWARE
10,000 Autodesk, Inc.................. 420,000
10,000 Cerner Corp.*.................. 477,500
9,000 Computer Associates
International, Inc............. 534,375
10,000 Computer Sciences Corp.*....... 493,750
15,000 FTP Software, Inc.............. 472,500
16,000 Informix Corp.................. 546,000
10,000 Microsoft Corp.*............... 710,000
12,000 Peoplesoft, Inc................ 522,000
---------------
4,176,125
---------------
CONGLOMERATES
3,000 ITT Corp....................... 307,875
---------------
CONSUMER SERVICES
8,000 Automatic Data Processing,
Inc............................ 504,000
13,000 C U C International, Inc.*..... 505,375
8,000 First Data Corp................ 415,000
---------------
1,424,375
---------------
DRUGS
7,000 American Home Products Corp.... 498,750
6,000 Amgen Inc.*.................... 402,750
12,000 Johnson & Johnson.............. 714,000
8,000 Lilly (Eli) & Co............... 585,000
13,000 Merck & Co., Inc............... 554,125
6,500 Pfizer, Inc.................... 557,375
12,000 Scherer (R.P.) Corp.*.......... 603,000
8,000 Schering-Plough Corp........... 595,000
5,500 Warner-Lambert Co.............. 430,375
---------------
4,940,375
---------------
ELECTRONIC COMPONENTS
9,000 ADC Telecommunications, Inc.... 265,500
10,000 Analog Devices, Inc............ 255,000
13,000 Integrated Device Technology,
Inc............................ 481,000
15,000 Oak Technology, Inc............ 446,250
5,000 Xilinx, Inc.................... 337,500
---------------
1,785,250
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
ELECTRONICS - SEMICONDUCTORS
8,000 Altera Corp.................... $ 445,000
6,139 Intel Corp..................... 520,280
16,000 Maxim Integrated Products
Inc.*.......................... 580,000
5,000 Motorola, Inc.................. 273,125
6,000 Texas Instruments Inc.......... 531,000
---------------
2,349,405
---------------
ENTERTAINMENT
14,000 Gaylord Entertainment Co.
(Class A)...................... 367,500
20,000 Sierra On-Line, Inc............ 430,000
---------------
797,500
---------------
FINANCIAL SERVICES
5,500 Federal National Mortgage
Association.................... 447,563
7,200 First Financial Management
Corp........................... 520,200
23,000 MBNA Corp...................... 667,000
6,000 Merrill Lynch & Co., Inc....... 255,750
12,000 MGIC Investment Corp........... 489,000
---------------
2,379,513
---------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
11,000 C P C International Inc........ 595,375
10,000 Coca Cola Co................... 565,000
6,000 PepsiCo Inc.................... 234,000
13,000 Procter & Gamble Co............ 861,250
---------------
2,255,625
---------------
FOREST PRODUCTS, PAPER & PACKAGING
20,000 Fort Howard Corp............... 252,500
7,000 Scott Paper Co................. 625,625
---------------
878,125
---------------
HEALTH & PERSONAL CARE
21,000 Horizon Healthcare Corp.*...... 561,750
17,500 Sun Healthcare Group, Inc...... 446,250
---------------
1,008,000
---------------
HEALTH EQUIPMENT & SERVICES
12,500 Columbia/HCA Healthcare
Corp........................... 537,500
12,000 HBO & Co....................... 519,000
12,000 Shared Medical Systems Corp.... 438,000
15,000 Vivra, Inc. ................... 483,750
---------------
1,978,250
---------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
HOME ENTERTAINMENT
16,000 Electronic Arts, Inc........... $ 360,000
---------------
HOSPITAL SUPPLY
10,000 Boston Scientific Corp......... 246,250
---------------
HOTELS/MOTELS
14,000 Hospitality Franchise Systems,
Inc.*.......................... 448,000
20,000 La Quinta Inns, Inc............ 542,500
15,000 Marriot International Inc...... 521,250
---------------
1,511,750
---------------
HOUSEHOLD PRODUCTS
19,000 Black & Decker Corp............ 548,625
7,000 Gillette Co.................... 571,375
10,000 Tambrands, Inc................. 446,250
---------------
1,566,250
---------------
INSURANCE
14,300 American General Corp.......... 461,175
6,500 American International Group,
Inc............................ 677,625
6,000 CIGNA Corp..................... 448,500
3,000 General Re Corp................ 396,000
10,000 Jefferson-Pilot Corp........... 591,250
9,000 St. Paul, Inc.................. 450,000
11,000 Sunamerica Inc................. 477,125
13,000 Travelers, Inc................. 502,125
---------------
4,003,800
---------------
MANUFACTURING
30,000 Clayton Homes, Inc............. 513,750
6,000 Silicon Graphics, Inc.*........ 213,000
---------------
726,750
---------------
MEDIA
6,000 Capital Cities/ABC, Inc........ 529,500
5,000 Clear Channel Communications,
Inc.*.......................... 297,500
30,000 Heftel Broadcasting Corp....... 371,250
10,000 Infinity Broadcasting Corp.
(Class A)*..................... 412,500
51,000 Scandinavian Broadcasting
System S.A..................... 1,173,000
9,000 Tele-Communications, Inc.
(Class A)...................... 187,875
20,000 Time Warner, Inc............... 755,000
10,000 Viacom, Inc. (Class B)......... 447,500
---------------
4,174,125
---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
PORTFOLIO OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -------------------------------------------------------------------
<C> <S> <C>
MEDICAL PRODUCTS & SUPPLIES
15,000 Allergan, Inc.................. $ 442,500
8,000 Medtronic, Inc................. 555,000
10,000 Omnicare, Inc.................. 525,000
---------------
1,522,500
---------------
OIL RELATED
4,000 Mobil Corp..................... 370,500
---------------
REAL ESTATE
17,000 Crescent Real Estate Equities,
Inc............................ 484,500
---------------
RESTAURANTS
13,000 McDonald's Corp................ 443,625
36,000 Wendy's International, Inc..... 589,500
---------------
1,033,125
---------------
RETAIL
8,000 Home Depot, Inc................ 354,000
5,000 Safeway, Inc................... 173,750
---------------
527,750
---------------
SUPERMARKETS
7,000 Albertson's Inc................ 225,750
---------------
TELECOMMUNICATIONS
8,000 Ascend Communications, Inc..... 518,000
15,000 Summa Four, Inc................ 356,250
---------------
874,250
---------------
UTILITIES
22,000 Kansas City Power & Light
Co............................. 500,500
24,000 TECO Energy, Inc............... 504,000
---------------
1,004,500
---------------
TOTAL UNITED STATES............ 47,648,093
---------------
URUGUAY (0.1%)
BANKING
25,000 Banco Commercial S.A. (ADR) -
144A**......................... 300,000
---------------
TOTAL COMMON AND PREFERRED
STOCKS, WARRANTS, RIGHTS AND
BONDS (Identified Cost
$424,251,060).................. 427,680,053
---------------
PRINCIPAL AMOUNT
IN THOUSANDS VALUE
- -------------------------------------------------------------------
SHORT-TERM INVESTMENTS (a) (5.7%)
U.S. GOVERNMENT AGENCIES
$ 14,500 Federal Home Loan Banks 6.25%
due 4/03/95................... $ 14,494,965
15,000 Federal National Mortgage
Association 5.93% due
4/05/95....................... 14,990,117
---------------
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST
$29,485,082).................. 29,485,082
---------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$453,736,142) (B)........... 89.2% 457,165,135
CASH AND OTHER ASSETS IN
EXCESS OF LIABILITIES....... 10.8 55,093,249
----- ------------
NET ASSETS.................. 100.0% $512,258,384
----- ------------
----- ------------
<FN>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
GDS Global Depository Share.
K In thousands.
M In millions.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
*** Partially paid shares. Resale is restricted to qualified institutional
investors.
(a) U.S. Government agencies were purchased on a discount basis. The interest
rates shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $459,710,268; the
aggregate gross unrealized appreciation is $42,827,792 and the aggregate
gross unrealized depreciation is $45,372,925, resulting in net unrealized
depreciation of $2,545,133.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT MARCH 31, 1995:
<TABLE>
<CAPTION>
CONTRACTS TO IN DELIVERY UNREALIZED
DELIVER EXCHANGE FOR DATE APPRECIATION
- ----------------------------------------------------
<S> <C> <C> <C>
US$ 234,913 AUD 322,240 04/05/95 $1,998
-------
-------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
SUMMARY OF INVESTMENTS MARCH 31, 1995
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Advertising.......................................................................... $ 438,000 0.1%
Aerospace............................................................................ 592,625 0.1
Aluminum............................................................................. 1,331,250 0.3
Appliances & Household Durables...................................................... 1,861,125 0.4
Automotive........................................................................... 13,793,442 2.8
Banking.............................................................................. 28,327,772 5.6
Banks - Commercial................................................................... 426,070 0.1
Beverages - Alcoholic................................................................ 264,548 0.1
Biotechnology........................................................................ 164,170 0.0
Brewers.............................................................................. 267,143 0.1
Building & Construction.............................................................. 22,859,212 4.5
Building Materials................................................................... 1,080,486 0.2
Business Services.................................................................... 5,336,144 1.0
Cable/Cellular....................................................................... 432,250 0.1
Chemicals............................................................................ 8,219,936 1.6
Commercial Services.................................................................. 218,354 0.0
Communications Equipment............................................................. 1,394,966 0.3
Computer Services.................................................................... 4,256,571 0.8
Computer Software.................................................................... 4,176,125 0.8
Conglomerates........................................................................ 5,182,441 1.0
Consumer Services.................................................................... 2,013,746 0.4
Construction Plant & Equipment....................................................... 259,541 0.1
Drugs................................................................................ 4,940,375 1.0
Electronic & Electrical Equipment.................................................... 22,469,098 4.3
Electronic Components................................................................ 1,785,250 0.3
Electronics - Semiconductors......................................................... 2,349,405 0.5
Engineering & Construction........................................................... 555,613 0.1
Entertainment........................................................................ 797,500 0.2
Financial Services................................................................... 18,492,638 3.6
Food Manufacturer.................................................................... 393,304 0.1
Food Processing...................................................................... 545,519 0.1
Food, Beverage, Tobacco & Household Products......................................... 16,166,552 3.2
Foreign Government Obligations....................................................... 18,197,677 3.6
Forest Products, Paper & Packaging................................................... 16,234,172 3.2
Hand Tools........................................................................... 674,658 0.1
Health & Personal Care............................................................... 4,949,667 1.0
Health Equipment & Services.......................................................... 1,978,250 0.4
Home Entertainment................................................................... 360,000 0.1
Hospital Supply...................................................................... 246,250 0.0
Hotels/Motels........................................................................ 1,511,750 0.3
Household Furnishings & Appliances................................................... 246,706 0.0
Household Products................................................................... 2,474,233 0.5
Industrials.......................................................................... 235,264 0.0
Insurance............................................................................ 9,522,391 1.9
International Trade.................................................................. 3,421,174 0.7
Investment Companies................................................................. 26,110,619 5.1
Leisure.............................................................................. 3,470,823 0.7
Machinery............................................................................ 11,387,550 2.2
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
SUMMARY OF INVESTMENTS MARCH 31, 1995, CONTINUED
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Machinery - Construction & Materials................................................. $ 606,236 0.1%
Machinery - Diversified.............................................................. 2,326,803 0.5
Manufacturing........................................................................ 17,375,153 3.4
Media................................................................................ 4,174,125 0.8
Medical Products & Supplies.......................................................... 1,522,500 0.3
Metals & Mining...................................................................... 10,847,552 2.1
Miscellaneous........................................................................ 19,962,928 3.9
Multi - Industry..................................................................... 7,613,563 1.5
Natural Gas.......................................................................... 2,068,219 0.3
Oil & Gas Drilling................................................................... 902,755 0.1
Oil & Gas Exploration................................................................ 1,703,613 0.3
Oil & Gas Products................................................................... 505,026 0.1
Oil Related.......................................................................... 10,336,812 1.9
Pharmaceuticals...................................................................... 9,553,345 1.9
Publishing........................................................................... 3,994,128 0.8
Real Estate.......................................................................... 6,934,439 1.4
Restaurants.......................................................................... 1,033,125 0.2
Retail............................................................................... 1,585,988 0.3
Retail Stores........................................................................ 5,794,342 1.1
Shipbuilding......................................................................... 1,341,126 0.2
Steel................................................................................ 847,824 0.2
Supermarkets......................................................................... 225,750 0.0
Telecommunications................................................................... 21,255,431 4.1
Textiles............................................................................. 3,970,222 0.8
Tire & Rubber Goods.................................................................. 1,127,629 0.2
Transportation....................................................................... 8,206,725 1.6
U.S. Government Agencies............................................................. 29,485,082 5.7
Utilities............................................................................ 9,452,339 1.8
------------------ ---
$ 457,165,135 89.2%
------------------ ---
------------------ ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
Common Stocks........................................................................ $ 395,799,288 77.3%
Convertible Bonds.................................................................... 7,943,334 1.6
Foreign Government Obligations....................................................... 18,197,677 3.6
Preferred Stocks..................................................................... 4,964,836 0.9
Rights............................................................................... 30,341 0.0
Short-Term Investments............................................................... 29,485,082 5.7
Warrants............................................................................. 744,577 0.1
------------------ ---
$ 457,165,135 89.2%
------------------ ---
------------------ ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1995
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $453,736,142)............................ $457,165,135
Cash (including $28,011,396 in foreign currency)............ 51,430,732
Receivable for:
Investments sold........................................ 5,035,993
Interest................................................ 1,124,164
Shares of beneficial interest sold...................... 1,123,169
Dividends............................................... 1,028,377
Foreign withholding taxes reclaimed..................... 421,248
Prepaid expenses and other assets........................... 11,550
------------
TOTAL ASSETS........................................... 517,340,368
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,160,473
Shares of beneficial interest repurchased............... 522,632
Plan of distribution fee................................ 432,882
Investment management fee............................... 432,470
Accrued expenses............................................ 533,527
------------
TOTAL LIABILITIES...................................... 5,081,984
------------
NET ASSETS:
Paid-in-capital............................................. 529,300,531
Net unrealized appreciation................................. 4,182,833
Distributions in excess of net investment income............ (5,220,531)
Distributions in excess of net realized gains............... (16,004,449)
------------
NET ASSETS............................................. $512,258,384
------------
------------
NET ASSET VALUE PER SHARE,
32,602,082 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$15.71
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1995
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $664,187 foreign withholding tax)......... $ 6,483,265
Interest (net of $10,098 foreign withholding tax)........... 5,263,089
------------
TOTAL INCOME........................................... 11,746,354
------------
EXPENSES
Plan of distribution fee.................................... 5,619,558
Investment management fee................................... 5,588,682
Custodian fees.............................................. 1,000,844
Transfer agent fees and expenses............................ 908,753
Professional fees........................................... 144,887
Shareholder reports and notices............................. 116,326
Registration fees........................................... 91,283
Trustees' fees and expenses................................. 32,096
Other....................................................... 19,369
------------
TOTAL EXPENSES......................................... 13,521,798
------------
NET INVESTMENT LOSS.................................... (1,775,444)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss on:
Investments............................................. (1,670,775)
Foreign exchange transactions........................... (6,836,667)
------------
TOTAL LOSS............................................. (8,507,442)
------------
Net change in unrealized appreciation on:
Investments............................................. (55,350,289)
Translation of foreign exchange forward contracts, other
assets and liabilities denominated in foreign
currencies............................................ 718,634
------------
TOTAL DEPRECIATION..................................... (54,631,655)
------------
NET LOSS............................................... (63,139,097)
------------
NET DECREASE................................................ $(64,914,541)
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FOR THE YEAR
MARCH ENDED
31,1995 MARCH 31, 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (1,775,444) $ (1,868,204)
Net realized gain (loss).................................... (8,507,442) 26,624,302
Net change in unrealized appreciation....................... (54,631,655) 32,397,468
------------ --------------
NET INCREASE (DECREASE)................................ (64,914,541) 57,153,566
------------ --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:
In excess of net investment income.......................... (505,002) --
From net realized gain...................................... (12,955,871) (12,859,992)
In excess of net realized gain.............................. (7,793,881) --
------------ --------------
TOTAL.................................................. (21,254,754) (12,859,992)
------------ --------------
Net increase from transactions in shares of beneficial
interest.................................................... 104,859,190 231,516,010
------------ --------------
TOTAL INCREASE......................................... 18,689,895 275,809,584
NET ASSETS:
Beginning of period......................................... 493,568,489 217,758,905
------------ --------------
END OF PERIOD
(INCLUDING DISTRIBUTIONS IN EXCESS OF NET INVESTMENT
INCOME OF $5,220,531 AND $4,872,130, RESPECTIVELY)...... $512,258,384 $ 493,568,489
------------ --------------
------------ --------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
71
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter World Wide Investment 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 was organized as a
Massachusetts business trust on July 7, 1983 and commenced operations on October
31, 1983.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American Stock Exchange or other domestic or foreign stock exchange is
valued at its latest sale price on that exchange prior to the time when assets
are valued; if there were no sales that day, the security is valued at the
latest bid price (in cases where securities are traded on more than one
exchange; the securities are valued on the exchange designated as the primary
market by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by the Investment Manager that sale and 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.
Discounts on securities purchased are amortized over the life of the respective
securities. Dividend income is recorded on the ex-dividend date except with
respect to certain dividends on foreign securities which are recorded as soon as
the Trust is informed after the ex-dividend date. Interest income is accrued
daily and includes amortization of discounts on certain short-term securities.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities
72
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995, CONTINUED
and forward contracts are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales, income and expenses are translated at
the exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized gain/loss on foreign exchange transactions. The Fund
records realized gains or losses on delivery of the currency or at the time the
forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
E. 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.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
73
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995, CONTINUED
2. INVESTMENT MANAGEMENT AND ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager" and "InterCapital") and Investment Advisory
Agreements with Daiwa International Capital Management Corp. ("DICAM"), which
has a subadvisory agreement with its parent Daiwa International Capital
Management Co., Ltd., and NatWest Investment Management Limited ("NWIM"), the
Fund pays InterCapital and each adviser an aggregate management and advisory
fee, accrued daily and payable monthly, by applying the annual rate of 1.0% to
the net assets of the Fund determined as of the close of each business day.
Under their respective agreements, InterCapital, DICAM and NWIM receive fees at
the annual rate of 0.55%, 0.225% and 0.225%, through April 30, 1994
respectively, of the average daily net assets of the Fund determined as of the
close of each business day. Effective May 1, 1994, the Agreement was amended to
reduce the annual fee paid to InterCapital, DICAM and NWIM to an annual rate of
0.5225%, 0.21375% and 0.21375%, respectively, of the Fund's average daily net
assets exceeding $500 million.
Under their respective agreements, InterCapital and each adviser pays the
salaries and expenses of all personnel and all expenses incurred in connection
with the services rendered by InterCapital and each adviser. In addition,
InterCapital 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 as the Fund may reasonably require in the conduct of its
business and 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 dividends 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 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 dealers who
engage in or support
74
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995, CONTINUED
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.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered by the Distributor, 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 March 31, 1995, it
received approximately $755,000 in contingent deferred sales charges from
redemptions of the Fund's shares. The Fund's shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended March 31, 1995 aggregated
$399,804,791 and $321,192,981, respectively.
For the year ended March 31, 1995, the Fund incurred brokerage commissions of
$89,120 and $2,667 with DWR and affiliates of DICAM, respectively, for portfolio
transactions executed on behalf of the Fund. At March 31, 1995, the Fund's
receivable for investments sold and payable for investments purchased included
unsettled trades with DWR of $622,279 and $191,600, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At March 31, 1995, the Fund had
transfer agent fees and expenses payable of approximately $88,000.
The Fund established 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 March 31, 1995
included in Trustees' fees and expenses in the Statement of Operations amounted
to $11,353. At March 31, 1995, the Fund had an accrued pension liability of
$51,087 which is included in accrued expenses in the Statement of Assets and
Liabilities.
75
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1995, CONTINUED
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
MARCH 31, 1995 MARCH 31, 1994
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 12,071,397 $ 218,983,098 16,055,873 $296,295,635
Reinvestment of dividends and distributions...................... 1,205,947 20,079,027 655,157 12,100,745
----------- -------------- ----------- ------------
13,277,344 239,062,125 16,711,030 308,396,380
Repurchased...................................................... (7,792,735) (134,202,935) (4,390,033) (76,880,370)
----------- -------------- ----------- ------------
Net increase..................................................... 5,484,609 $ 104,859,190 12,320,997 $231,516,010
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
Capital and foreign currency losses incurred after October 31 ("post-October
losses") within the taxable year are deemed to arise on the first business day
of the Fund's next taxable year. The Fund incurred and will elect to defer net
capital and foreign currency losses of approximately $9,265,000 and $6,625,000,
respectively during fiscal 1995.
As of March 31, 1995, the Fund had temporary book/tax differences primarily
attributable to post-October loss deferrals, income from the mark-to-market of
passive foreign investment companies and its pro-rata share of income and gains
from qualified electing funds. The Fund had permanent book/ tax differences
primarily attributable to a net operating loss and foreign currency losses. To
reflect reclassifications arising from permanent book/tax differences for the
year ended March 31, 1995, paid-in-capital was charged $2,228,919, distributions
in excess of net realized gains was credited $296,874 and distributions in
excess of net investment income was credited $1,932,045.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
At March 31, 1995, there were no outstanding forward contracts other than those
used to facilitate settlement of foreign currency denominated portfolio
transactions.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At March 31, 1995, the Fund's cash balance consisted principally of interest
bearing deposits with Chase Manhattan Bank N.A., the Fund's custodian.
76
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT 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 MARCH 31
----------------------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE
OPERATING PERFORMANCE:
Net asset value,
beginning of
period.......... $ 18.20 $ 14.72 $ 14.65 $ 14.57 $ 14.84 $ 14.98 $ 14.93 $ 17.36 $ 15.45 $ 10.30
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net investment
income (loss)... (0.02) (0.05) -- -- 0.23 0.11 0.08 0.04 0.11 0.10
Net realized and
unrealized gain
(loss).......... (1.83) 4.24 0.39 1.05 0.18 0.82 1.24 (0.07) 3.88 5.30
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... (1.85) 4.19 0.39 1.05 0.41 0.93 1.32 (0.03) 3.99 5.40
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions:
From net
investment
income........ -- -- -- (0.05) (0.23) (0.11) (0.08) (0.15) (0.10) (0.25)
In excess of
net investment
income........ (0.02) -- -- -- -- -- -- -- -- --
From net
realized
gain.......... (0.39) (0.71) (0.32) (0.92) (0.45) (0.96) (1.19) (2.25) (1.98) --
In excess of
net realized
gain.......... (0.23) -- -- -- -- -- -- -- -- --
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.64) (0.71) (0.32) (0.97) (0.68) (1.07) (1.27) (2.40) (2.08) (0.25)
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 15.71 $ 18.20 $ 14.72 $ 14.65 $ 14.57 $ 14.84 $ 14.98 $ 14.93 $ 17.36 $ 15.45
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... (10.37)% 28.40% 2.69% 7.33% 2.80% 6.09% 9.31% 0.39% 28.22% 53.76%
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.41% 2.40% 2.42% 2.27% 2.29% 2.21% 2.18% 2.13% 2.10% 2.35%*
Net investment
income (loss)... (0.32)% (0.61)% 0.06% 0.03% 1.53% 0.70% 0.50% 0.23% 0.86% 1.21%
SUPPLEMENTAL DATA:
Net assets, end
of period, in
thousands....... $512,258 $493,568 $217,759 $262,852 $278,676 $306,448 $311,803 $368,026 $469,501 $226,621
Portfolio
turnover rate... 67% 68% 139% 89% 68% 75% 67% 70% 65% 69%
<FN>
- ---------------------
+ Does not reflect the deduction of sales charge.
* Net of expense reimbursement.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
77
<PAGE>
DEAN WITTER WORLD WIDE INVESTMENT TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER WORLD WIDE INVESTMENT 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 World Wide Investment
Trust (the "Fund") at March 31, 1995, 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 owned at
March 31, 1995 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
MAY 12, 1995
- --------------------------------------------------------------------------------
1995 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended March 31, 1995, the Fund paid to
shareholders $0.4875 per share from long-term capital gains. For
such period, 3.70% of the ordinary dividend qualified for the
dividends received deduction available to corporations.
78
