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DEAN WITTER
VALUE-ADDED MARKET SERIES
PROSPECTUS--AUGUST 26, 1996
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DEAN WITTER VALUE-ADDED MARKET SERIES (THE "FUND") IS AN OPEN-END DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY PRESENTLY CONSISTING OF A SINGLE INVESTMENT
PORTFOLIO, THE EQUITY PORTFOLIO, WHOSE INVESTMENT OBJECTIVE IS TO ACHIEVE A HIGH
LEVEL OF TOTAL RETURN ON ITS ASSETS THROUGH A COMBINATION OF CAPITAL
APPRECIATION AND CURRENT INCOME. THE FUND SEEKS TO ATTAIN THE EQUITY PORTFOLIO'S
INVESTMENT OBJECTIVE BY INVESTING ON AN EQUALLY-WEIGHTED BASIS IN A DIVERSIFIED
PORTFOLIO OF COMMON STOCKS OF THE COMPANIES WHICH ARE REPRESENTED IN THE
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX. SEE "INVESTMENT OBJECTIVE AND
POLICIES." THE FUND IS NEITHER SPONSORED BY, NOR AFFILIATED WITH, STANDARD &
POOR'S CORPORATION.
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. See "Redemptions and
Repurchases--Contingent Deferred Sales Charge." In addition, the Fund pays the
Distributor a 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 August 26, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
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TABLE OF CONTENTS
<S> <C>
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........................... 7
Purchase of Fund Shares........................... 8
Shareholder Services.............................. 9
Redemptions and Repurchases....................... 11
Dividends, Distributions and Taxes................ 13
Performance Information........................... 13
Additional Information............................ 14
</TABLE>
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DEAN WITTER
VALUE-ADDED MARKET SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or (800) 869-NEWS (toll-free)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and
is an open-end diversified management investment company. The Fund currently consists of
a single portfolio, the Equity Portfolio, which invests on an equally-weighted basis in
the common stocks of the companies represented in the Standard & Poor's 500 Composite
Stock Price Index.
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SHARES OFFERED Shares of beneficial interest with $.01 par value (see page 14).
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OFFERING At net asset value without a front-end sales charge (see page 8). Shares redeemed within
PRICE six years of purchase are subject to a contingent deferred sales charge under most
circumstances (see page 11).
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MINIMUM The minimum initial investment is $1,000 ($100 if the account is opened through Easy
PURCHASE Invest-SM-) and the minimum subsequent investment is $100 (see page 8).
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INVESTMENT The investment objective of the Equity Portfolio, currently the Fund's single investment
OBJECTIVE portfolio, is to achieve a high level of total return on its assets through a
combination of capital appreciation and current income.
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INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
MANAGER subsidiary, Dean Witter Services Company Inc., serve in various investment management,
advisory, management and administrative capacities to ninety-eight investment companies
and other portfolios with assets of approximately $83.4 billion at July 31, 1996 (see
page 5).
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MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of 0.50% of average
FEE daily net assets, scaled down on assets over $500 million (see page 5).
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DIVIDENDS Dividends from net investment income and distributions from net capital gains, if any,
are paid at least once per year. Dividends and capital gains distributions are
automatically reinvested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 13).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor") is the distributor of the Fund's
AND shares. The Distributor receives from the Fund a distribution fee, accrued daily and
DISTRIBUTION payable monthly, at the rate of 1% per annum of the lesser of: (i) the Fund's average
FEE daily aggregate net sales or (ii) the Fund's average daily net assets. This fee
compensates the Distributor for the services provided in distributing shares of the Fund
and for sales related expenses. The Distributor also receives the proceeds of any
contingent deferred sales charges (see pages 8 and 11).
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REDEMPTION-- Shares are redeemable by the shareholder at net asset value. An account may be
CONTINGENT involuntarily redeemed if the total value of the account is less than $100 or, if the
DEFERRED account was opened through Easy Invest-SM-, if after twelve months the shareholder has
SALES CHARGE invested less than $1,000 in the account. Although no commission or sales load is
imposed upon the purchase of shares, a contingent deferred sales charge (scaled down
from 5% to 1%) is imposed on any redemption of shares if after such redemption the
aggregate current value of an account with the Fund is less than the aggregate amount of
the investor's purchase payments made during the six years preceding the redemption.
However, there is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see pages 11-13).
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SPECIAL RISK The net asset value of the Fund's shares will fluctuate with changes in the market value
CONSIDERATIONS of its portfolio securities. Dividends payable by the Fund will vary in relation to the
amount of income earned on portfolio securities. The Fund may engage in transactions
involving stock index futures contracts (see pages 6-7).
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SHAREHOLDER Automatic Investment of Dividends and Distributions; Investment of Distributions
SERVICES Received in Cash; Systematic Withdrawal Plan; Exchange Privilege; Easy Invest-SM-;
Tax-Sheltered Retirement Plans (see pages 9-11).
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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 June 30, 1996.
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SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
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%
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A contingent deferred sales charge is imposed at the following declining rates:
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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
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Redemption Fees.................................................. None
Exchange Fee..................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fees.................................................. 0.48%
12b-1 Fees*...................................................... 0.87%
Other Expenses................................................... 0.16%
Total Fund Operating Expenses.................................... 1.51%
<FN>
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* 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").
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period............................................... $ 65 $ 78 $ 102 $ 180
You would pay the following expenses on the same investment,
assuming no redemption......................................... $ 15 $ 48 $ 82 $ 180
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN
THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
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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.
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<CAPTION>
FOR THE
PERIOD
DECEMBER 1,
1987*
FOR THE YEAR ENDED JUNE 30 THROUGH
----------------------------------------------------------------------- JUNE 30,
1996 1995 1994 1993 1992 1991 1990 1989 1988
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.............. $23.06 $19.23 $19.17 $16.29 $14.73 $14.21 $13.86 $12.47 $10.00
-------- ------ ------ ------ ------ ------ ------ ------ ------------
Net investment
income............. 0.18 0.19 0.14 0.14 0.17 0.20 0.23 0.24 0.12
Net realized and
unrealized gain.... 4.23 3.88 0.30 2.86 1.57 0.59 0.62 1.56 2.43
-------- ------ ------ ------ ------ ------ ------ ------ ------------
Total from
investment
operations......... 4.41 4.07 0.44 3.00 1.74 0.79 0.85 1.80 2.55
-------- ------ ------ ------ ------ ------ ------ ------ ------------
Less dividends and
distributions from:
Net investment
income........... (0.26) (0.09) (0.09) (0.12) (0.18) (0.21) (0.24) (0.24) (0.08)
Net realized
gain............. (0.12) (0.15) (0.29) -- -- (0.06) (0.26) (0.17) --
-------- ------ ------ ------ ------ ------ ------ ------ ------------
Total dividends and
distributions...... (0.38) (0.24) (0.38) (0.12) (0.18) (0.27) (0.50) (0.41) (0.08)
-------- ------ ------ ------ ------ ------ ------ ------ ------------
Net asset value, end
of period.......... $27.09 $23.06 $19.23 $19.17 $16.29 $14.73 $14.21 $13.86 $12.47
-------- ------ ------ ------ ------ ------ ------ ------ ------------
-------- ------ ------ ------ ------ ------ ------ ------ ------------
TOTAL INVESTMENT
RETURN+............. 19.27% 21.41% 2.26% 18.50% 11.83% 5.82% 6.17% 16.87% 25.56%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses............ 1.51% 1.64% 1.68% 1.71% 1.80% 1.80% 1.80% 1.90% 1.60%(2)(3)
Net investment
income............. 0.81% 1.01% 0.86% 0.86% 1.10% 1.40% 1.90% 2.30% 1.90%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of
period, in
millions........... $962 $642 $456 $311 $193 $139 $148 $78 $37
Portfolio turnover
rate............... 10% 11% 19% 6% 9% 20% 10% 10% 12%(1)
Average commission
rate paid.......... $0.0302 -- -- -- -- -- -- -- --
</TABLE>
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* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE REIMBURSED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
RATIOS WOULD HAVE BEEN 2.30% AND 1.20%, RESPECTIVELY.
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Value-Added Market Series (the "Fund") is an open-end diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of
Massachusetts on May 27, 1987. The Fund currently consists of a single
portfolio, the Equity Portfolio. References herein to the Fund also refer to the
Equity Portfolio if the context so indicates.
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-eight investment companies, thirty of which
are listed on the New York Stock Exchange, with combined assets of approximately
$80.7 billion as of July 31, 1996. The Investment Manager also manages
portfolios of pension plans, other institutions and individuals which aggregated
approximately $2.7 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily at an annual rate
of 0.50% of the daily net assets of the Fund up to $500 million, scaled down at
various asset levels to 0.425% on assets over $1 billion. For the fiscal year
ended June 30, 1996, the Fund accrued total compensation to the Investment
Manager amounting to 0.48% of the Fund's average daily net assets and the Fund's
total expenses amounted to 1.51% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Equity Portfolio, currently the Fund's single
investment portfolio, is to achieve a high level of total return on its assets
through a combination of capital appreciation and current income. This is a
fundamental policy and cannot be changed without the approval of the
shareholders of the Equity Portfolio. There can be no assurance that the Equity
Portfolio's investment objective will be achieved.
The Fund will seek to attain the Equity Portfolio's investment objective by
investing on an equally-weighted basis in a diversified portfolio of common
stocks of the companies which are included in the Standard & Poor's 500
Composite Stock Price Index (the "S&P Index"). The S&P Index consists of 500
common stocks selected by Standard & Poor's Corporation, most of which are
listed on the New York Stock Exchange. Inclusion of a stock in the S&P Index
implies no opinion by Standard & Poor's Corporation ("S&P") as to the quality of
the stock as an investment. The S&P Index is determined, composed and calculated
by S&P without regard to the Fund. S&P is neither a sponsor of, nor in any way
affiliated with, the Fund, and S&P makes no representation or warranty, express
or implied, on the advisability of investing in the Fund or as to the ability of
the S&P Index to track general stock market performance, and S&P disclaims all
warranties of merchantability or fitness for a particular purpose or use with
respect to the S&P Index or any data included therein. S&P has no connection
with the Fund other than the licensing to the Investment Manager of the use of
the S&P Index in connection with the Fund.
The Fund invests in the stocks included in the S&P Index on an
equally-weighted basis; that is, to the extent practicable and subject to the
specific investment policies and restrictions described below, an equal portion
of the Fund's assets is invested in each of the 500 securities in the S&P Index.
This differs from the S&P Index and nearly all other major indexes, which
generally are weighted on a market-capitalization basis. For example, the 50
largest capitalization issuers in the S&P Index represent approximately 45% of
the S&P Index. However, in accordance with its investment policies, the Fund
will strive to maintain each stock holding equally, so that, subject to the
specific investment policies and investment restrictions described below,
approximately 0.20 of 1% of the Fund's total invested assets will be invested in
each of the 500 companies included in the S&P Index. The equal-weighting
technique is based on the Investment Manager's statistical analysis that most
portfolio performance is usually generated by
5
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only one-quarter to one-third of the portfolio. Since there is no certainty that
any specific company or industry selection, even within a broad-based index such
as the S&P Index, will achieve superior performance, the Investment Manager
believes equal-weighting may benefit the Fund in seeking to attain its
investment objective.
The holdings of the Fund will be adjusted by the Investment Manager not less
than quarterly to reflect changes in the Fund's asset levels and in the relative
values of the common stocks in the Fund's portfolio so that following each
adjustment the value of the Fund's investment in each security will be equal to
the extent practicable. In addition, whenever a company is eliminated from or
added to the S&P Index, the Fund will sell or purchase the stock of such
company, as the case may be, as soon as practicable. Accordingly, securities may
be purchased and sold by the Fund when such purchases and sales would not be
made under traditional investment criteria.
In addition, the Investment Manager may eliminate one or more securities (or
elect not to increase the Fund's position in such securities), notwithstanding
the continued listing of such securities in the S&P Index, in the following
circumstances: (a) the stock is no longer publicly traded, such as in the case
of a leveraged buyout or merger; (b) an unexpected adverse development with
respect to a company, such as bankruptcy or insolvency; (c) in the view of the
Investment Manager, there is a high degree of risk with respect to a company
that bankruptcy or insolvency will occur; or (d) in the view of the Investment
Manager, based on its consideration of the price of a company's securities, the
depth of the market in those securities and the amount of those securities held
or to be held by the Fund, retaining shares of a company or making any
additional purchases would be inadvisable because of liquidity risks. The
Investment Manager will monitor on an ongoing basis all companies falling within
any of the circumstances described in this paragraph, and will return such
company's shares to the Fund's portfolio, or recommence purchases, when and if
those conditions cease to exist.
The investment policies of the Fund are not fundamental and may be changed
by the Trustees without shareholder approval.
STOCK INDEX FUTURES TRANSACTIONS. The Fund may purchase futures contracts on
stock indexes such as the S&P Index and the New York Stock Exchange Composite
Index. Purchase of a futures contract by the Fund serves as a temporary
substitute for the purchase of individual stocks which may then be purchased in
orderly fashion. The Fund will not enter into futures contracts on stock indexes
for speculative purposes. The Fund may not enter into futures contracts if
immediately thereafter the amount committed to margin exceeds 5% of the value of
the Fund's total assets. There is no overall limitation on the percentage of the
Fund's portfolio securities with respect to which the Fund may purchase or sell
futures contracts. For a discussion of the risks of stock index futures
transactions, see "Risk Considerations" below.
FOREIGN SECURITIES. The Fund may purchase common stock, including American
Depository Receipts, of foreign corporations represented in the S&P Index (such
securities are listed on the New York Stock Exchange, the American Stock
Exchange or the NASDAQ Market System). For a discussion of the risks of
investing in foreign securities, see "Risk Considerations" below.
TEMPORARY INVESTMENTS A portion of the Fund's assets, not exceeding 25% of its
total assets, may be invested temporarily in money market instruments under any
one or more of the following circumstances: (a) pending investment of proceeds
of sale of shares of the Fund; (b) pending settlement of purchases of portfolio
securities; or (c) to maintain liquidity for the purposes of meeting anticipated
redemptions. The money market instruments in which the Fund may invest are
certificates of deposit of U.S. domestic banks with assets of $1 billion or
more; bankers' acceptances; time deposits; U.S. Government and U.S. Government
agency securities; or commercial paper rated within the two highest grades by
S&P or Moody's Investors Service, Inc., or, if not rated, are of comparable
quality as determined by the Trustees, and which mature within one year from the
date of purchase.
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. For a discussion of the risks of investing in repurchase agreements,
see "Risk Considerations" below.
PRIVATE PLACEMENTS. The Fund may purchase securities which are sold without
registration under the federal securities laws. Such securities may be held by
the Fund as liquid investments pursuant to procedures adopted by the Fund's
Trustees.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. Dividends payable by the Fund will
vary in relation to the amount of income earned on portfolio securities.
STOCK INDEX FUTURES TRANSACTIONS. A risk in employing futures contracts to
protect against the price volatility of portfolio securities is that the prices
of securities subject to futures contracts may correlate imperfectly with the
behavior of the cash prices of the Fund's portfolio securities. This
6
<PAGE>
risk is enhanced for the Fund because no existing index correlates perfectly
with both the composition and equal-weighting policy of the Equity Portfolio.
Also, the correlation may be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between a
contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
The extent to which the Fund may enter into transactions involving futures
contracts may be limited by the Internal Revenue Code's requirements for
qualification as a regulated investment company and the Fund's intention to
qualify as such. See "Dividends, Distributions and Taxes."
REPURCHASE AGREEMENTS. 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, as described above, 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.
FOREIGN SECURITIES. Foreign securities investments may be affected by changes
in governmental administration or economic policy (in the United States and
abroad) or changed circumstances in dealings between nations. Foreign companies
may be subject to less governmental regulation than U.S. companies. Securities
of foreign companies may be more volatile than securities of U.S. companies. As
noted above, the Fund's investment in common stock of foreign corporations
represented in the S&P Index may also be in the form of American Depository
Receipts (ADRs). ADRs are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying securities and are designed
for use in the U.S. securities markets.
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 managed by its Investment Manager with a view to
achieving the Fund's investment objective. The Fund's portfolio is managed
within InterCapital's Growth Group, which manages twenty-six funds and fund
portfolios, with approximately $10.3 billion in assets as of July 31, 1996.
Kenton J. Hinchliffe, Senior Vice President of InterCapital and a member of
InterCapital's Growth Group, has been the primary portfolio manager of the Fund
since July, 1993 and has been a portfolio manager at InterCapital for over five
years. Since the Fund does not intend generally to engage in short-term trading,
it is anticipated that the Fund's portfolio turnover rate will not exceed 100%.
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 InterCapital. In
addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
as defined in the Act. For purposes of the following limitations: (i) all
percentage limitations apply immediately after a purchase or initial investment,
and (ii) any subsequent change in any applicable percentage resulting from
market fluctuations or other changes in total or net assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or
guar-
7
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anteed by the United States Government or its agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Minimum subsequent purchases of $100
or more may be made by sending a check, payable to Dean Witter Value-Added
Market Series, Equity Portfolio, directly to Dean Witter Trust Company (the
"Transfer Agent") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an
account executive of DWR or other Selected Broker-Dealer. The minimum initial
purchase in the case of investments through EasyInvest-SM-, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value" below).
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive dividends and
capital gains distributions if their order is received by the close of business
on the day prior to the record date for such dividends and distributions. While
no sales charge is imposed at the time shares are purchased, a contingent
deferred sales charge may be imposed at the time of redemption (see "Redemptions
and Repurchases"). Sales personnel are compensated for selling shares of the
Fund at the time of their sale by the Distributor and/or Selected Broker-Dealer.
In addition, some sales personnel of the Selected Broker-Dealer will receive
various types of non-cash compensation as special sales incentives, including
trips, educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 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% 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
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.
8
<PAGE>
For the fiscal year ended June 30, 1996, the Fund accrued payments under the
Plan amounting to $7,035,667, which amount is equal to 0.87% of the Fund's
average daily net assets for the fiscal year. These payments accrued under the
Plan were calculated pursuant to clause (a) 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 amounts, including the
carrying charge described above, totalled $53,226,045 at June 30, 1996, which
was equal to 5.5% of the Fund's net assets on such date. Of this amount,
$28,379,160 represents excess distribution expenses of Dean Witter Equity Income
Trust, the net assets of which were combined with those of the Fund on April 18,
1994 pursuant to an Agreement and Plan of Reorganization. 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 each day that the New York Stock Exchange is
open by taking the value of all assets of the Fund, subtracting all its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or quoted
by NASDAQ is valued at its latest sale price on that exchange or quotation
service prior to the time assets are valued; if there were no sales that day,
the security is valued at the latest bid price (in cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market pursuant to procedures adopted by the
Trustees); and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price. When
market quotations are not readily available, including circumstances under which
it is determined by the Investment Manager that sale and bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Fund's Trustees.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain debt securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional shares
of the Fund (or, if specified by the shareholder, any other open-end investment
company for which InterCapital serves as investment manager (collectively, with
the Fund, the "Dean Witter Funds")), unless the shareholder requests that they
be paid in cash. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value per share next
determined after receipt by the Transfer Agent, by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. Shares
so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases").
9
<PAGE>
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 Fund's Transfer Agent for investment in shares of the
Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases -- Involuntary Redemption").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any 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 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, if any, incurred on
or after that date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may
10
<PAGE>
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. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares, on
which the shareholder may realize a capital gain or loss. However, the ability
to deduct capital losses on an exchange may be limited in situations where there
is an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing or
by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean Witter
Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds will be
reduced by the amount of any applicable contingent deferred sales charges (see
below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption along with any additional documentation required
by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
11
<PAGE>
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------------- ------------------------
<S> <C>
First.................................... 5.0%
Second................................... 4.0%
Third.................................... 3.0%
Fourth................................... 2.0%
Fifth.................................... 2.0%
Sixth.................................... 1.0%
Seventh and thereafter................... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first. In addition, no CDSC
will be imposed on redemptions of shares which 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:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of the
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company,
an affiliate of the Investment Manager, serves as recordkeeper or Trustee
("Eligible 401(k) Plan"), provided that either: (A) the plan continues to be an
Eligible 401(k) Plan after the redemption; or (B) the redemption is in
connection with the complete termination of the plan involving the distribution
of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the telephonic
request of the shareholder. The repurchase price is the net asset value next
computed (see "Purchase of Fund Shares") after such 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 the Fund, the Distributor,
DWR or other Selected Broker-Dealers. The offer by DWR and other Selected
Broker-Dealers to repurchase shares may be suspended without notice by them at
any time. In that event, shareholders may redeem their shares through the Fund's
Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under unusual
circumstances, e.g., when normal trading is not taking place on the New York
Stock Exchange. If the shares to be redeemed have recently been purchased by
check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of investment of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within
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<PAGE>
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 net asset value next determined after a reinstatement request, together
with the proceeds, is received by the Transfer Agent and receive a pro-rata
credit for any CDSC paid in connection with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice, to
redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder it will notify the shareholder that the value of
the shares is less than the applicable amount and allow the shareholder sixty
days to make an additional investment in an amount which will increase the value
of the account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to distribute all of its net
investment income and net realized short-term and long-term 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 and/or distributions be paid in cash. (See "Shareholder
Services -- Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment income
and net 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. Shareholders who are required to pay taxes on their income
will normally have to pay federal income taxes, and any state income taxes, on
the dividends and distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
net 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.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be derived
from gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Fund may be restricted in its ability to engage
in transactions involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the corporate dividends received deduction.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements and
sales literature. The total return of the Fund is based on historical earnings
and is not intended to indicate future performance. The "average annual total
return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over periods of one, five and ten years, or over the life of the
Fund, if less than any of the foregoing. 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.
13
<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
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 from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
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. There are no
conversion, pre-emptive or other subscription rights. In the event of a
liquidation, each share of beneficial interest of the Fund is entitled to its
portion of all the Fund's assets after all debts and expenses have been paid.
The shares do not have cumulative voting rights.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
Shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for 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 options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
14
<PAGE>
DEAN WITTER
VALUE-ADDED MARKET SERIES
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Kenton J. Hinchliffe
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
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.
