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DEAN WITTER
STRATEGIST FUND
PROSPECTUS--SEPTEMBER 24, 1996
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DEAN WITTER STRATEGIST FUND (THE "FUND") IS AN OPEN-END, NON-DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY, THE OBJECTIVE OF WHICH IS TO MAXIMIZE THE TOTAL
RETURN ON ITS INVESTMENTS. THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY
ACTIVELY ALLOCATING ITS ASSETS AMONG THE MAJOR ASSET CATEGORIES OF EQUITY
SECURITIES, FIXED-INCOME SECURITIES AND MONEY MARKET INSTRUMENTS. SEE
"INVESTMENT OBJECTIVE AND POLICIES."
Shares of the Fund are continuously offered at net asset value. However,
redemptions and/or repurchases are subject, in most circumstances, 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 distribution fee pursuant to a Plan of Distribution at the annual
rate of (i) 1% of the lesser of the (a) average daily aggregate net sales since
implementation of the amended Plan of Distribution or (b) average daily net
assets of the Fund attributable to shares issued since implementation of the
amended Plan of Distribution plus (ii) 0.25% of average daily net assets of the
Fund attributable to shares issued prior to inception of the amended Plan of
Distribution. 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 September 24, 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
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Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 3
Financial Highlights.............................. 4
The Fund and its Management....................... 5
Investment Objective and Policies................. 5
Risk Considerations............................. 8
Investment Restrictions........................... 10
Purchase of Fund Shares........................... 11
Shareholder Services.............................. 12
Redemptions and Repurchases....................... 14
Dividends, Distributions and Taxes................ 16
Performance Information........................... 17
Additional Information............................ 17
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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
STRATEGIST FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and
is an open-end, non-diversified management investment company. The Fund invests in
equity securities, fixed-income securities and money market instruments in portions
determined by the Investment Manager to best enable the Fund to maximize the total
return on a shareholder's investment.
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 17).
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OFFERING At net asset value without a front-end sales charge (see page 11). Shares redeemed
PRICE within six years of purchase are subject to a contingent deferred sales charge under
most circumstances (see page 14).
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MINIMUM The minimum initial investment is $1,000 ($100 if the account is opened through
PURCHASE EasyInvest-SM-) and the minimum subsequent investment is $100 (see page 11).
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INVESTMENT The investment objective of the Fund is to maximize the total return on its investments.
OBJECTIVE
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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-nine investment companies
and other portfolios with assets of approximately $84.6 billion at August 31, 1996 (see
page 5).
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MANAGEMENT FEE The Investment Manager receives a monthly fee at the annual rate of 0.60% of daily net
assets on assets not exceeding $500 million, scaled down at various asset levels to
0.475% on daily net assets exceeding $1.5 billion (see page 5).
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DIVIDENDS Dividends from net investment income are paid quarterly; distributions from net capital
gains, if any, are paid at least once each 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 16).
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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: (i) 1% per annum of the lesser of (a) the Fund's
FEE average daily aggregate net sales since the implementation of an amended plan of
distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "Plan"), or (b) the Fund's average daily net assets attributable to shares issued
since the implementation of the Plan plus (ii) 0.25% of the Fund's average daily net
assets attributable to shares issued prior to implementation of the Plan. This fee
compensates the Distributor for the services provided in distributing shares of the Fund
and for sales related expenses. The Distributor also receives the proceeds of any
contingent deferred sales charges (see pages 11 and 14).
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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 EasyInvest-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, but
after the implementation of the Plan on November 8, 1989. However, there is no charge
imposed on redemption of shares purchased through reinvestment of dividends or
distributions (see pages 14 through 16).
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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. The level of income payable to the investor will vary
depending upon the market allocation determined by the Fund's Investment Manager and
with various market determinants such as interest rates. The Fund may make various
investments and may engage in various investment strategies including option and futures
transactions, when-issued and delayed delivery securities and forward commitments, when,
as and if issued securities, foreign securities and repurchase agreements (pages 5-10).
The Fund is a non-diversified investment company and, as such, is not subject to the
diversification requirements of the Investment Company Act of 1940, as amended (see page
10).
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the fiscal
year ended July 31, 1996.
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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%
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A contingent deferred sales charge is imposed at the following declining rates:
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PERCENTAGE OF
AMOUNT
YEAR SINCE PURCHASE PAYMENT MADE REDEEMED
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First............................................. 5.0 %
Second............................................ 4.0 %
Third............................................. 3.0 %
Fourth............................................ 2.0 %
Fifth............................................. 2.0 %
Sixth............................................. 1.0 %
Seventh and thereafter............................ None
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Redemption Fees................................... None
Exchange Fee...................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees................................... 0.56%
12b-1 Fees*....................................... 0.87%
Other Expenses.................................... 0.15%
Total Fund Operating Expenses..................... 1.58%
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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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10
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 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:....... $66 $80 $106 $188
You would pay the following expenses on the same
investment, assuming no redemption:.............. $16 $50 $86 $188
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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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FOR THE PERIOD
FOR THE YEAR ENDED JULY 31 OCTOBER 31, 1988*
-------------------------------------------------------------------- THROUGH
1996 1995 1994 1993 1992 1991 1990 JULY 31, 1989
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PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of period... $15.87 $14.43 $14.59 $14.39 $13.09 $11.65 $11.37 $9.45
-------- ------- ------- ------- ------- ------- ------- ------
Net investment income... 0.30 0.34 0.30 0.26 0.27 0.27 0.23 0.38
Net realized and
unrealized gain....... 1.43 1.86 0.22 0.81 1.27 1.50 0.55 1.84
-------- ------- ------- ------- ------- ------- ------- ------
Total from investment
operations............ 1.73 2.20 0.52 1.07 1.54 1.77 0.78 2.22
-------- ------- ------- ------- ------- ------- ------- ------
Less dividends and
distributions from:
Net investment
income............... (0.32) (0.29) (0.26) (0.31) (0.24) (0.26) (0.29) (0.30)
Net realized gain..... (1.26) (0.47) (0.42) (0.56) -- (0.07) (0.21) --
-------- ------- ------- ------- ------- ------- ------- ------
Total dividends and
distributions......... (1.58) (0.76) (0.68) (0.87) (0.24) (0.33) (0.50) (0.30)
-------- ------- ------- ------- ------- ------- ------- ------
Net asset value, end of
period................ $16.02 $15.87 $14.43 $14.59 $14.39 $13.09 $11.65 $11.37
-------- ------- ------- ------- ------- ------- ------- ------
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TOTAL INVESTMENT
RETURN+............... 11.47% 16.05% 3.53% 7.59% 11.88% 15.67% 7.21% 23.76%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 1.58% 1.63% 1.62% 1.62% 1.63% 1.59% 1.53% 0.97%(2)(3)
Net investment income... 1.88% 2.35% 2.03% 1.90% 2.19% 2.37% 2.39% 6.00%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of
period, in millions... $1,259 $878 $806 $783 $441 $238 $196 $48
Portfolio turnover
rate.................. 174% 179% 90% 98% 79% 140% 101% 70%(1)
Average commission rate
paid.................. $0.0597 -- -- -- -- -- -- --
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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 ITS EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
RATIOS WOULD HAVE BEEN 1.48% AND 5.48%, RESPECTIVELY.
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Strategist Fund (the "Fund") is an open-end, non-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 August 5, 1988.
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-nine investment companies, thirty of which
are listed on the New York Stock Exchange, with combined assets of approximately
$81.8 billion as of August 31, 1996. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $2.8 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs, manage the investment of the Fund's
assets and determine the allocations 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 the annual rate
of 0.60% of the portion of the Fund's net assets not exceeding $500 million,
scaled down at various asset levels to 0.475% on the portion of the Fund's net
assets exceeding $1.5 billion. For the fiscal year ended July 31, 1996, the Fund
accrued total compensation to the Investment Manager amounting to 0.56% of the
Fund's average daily net assets and the Fund's total expenses amounted to 1.58%
of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to maximize the total return on its
investments. This is a fundamental policy and cannot be changed without the
approval of the Fund's shareholders. In seeking to achieve its objective, the
Fund actively allocates assets among the major asset categories of equity
securities, fixed-income securities and money market instruments. Total return
consists of current income (including dividends, interest and, in the case of
discounted instruments, discount accruals) and capital appreciation (including
realized and unrealized capital gains and losses). There can be no assurance
that the investment objective of the Fund will be achieved.
The achievement of the Fund's investment objective depends upon the ability
of the Investment Manager to correctly assess the effects of economic and market
trends on different sectors of the market. The Investment Manager believes that
superior investment returns at lower risk are achievable by actively allocating
resources to the equity, debt and money market sectors of the market as opposed
to relying solely on just one market. At times, the equity market may hold a
higher potential return than the debt market and would warrant a higher asset
allocation. The reverse would be true when the bond market potential return is
higher. Short duration bonds and money market instruments can be used to soften
market declines when both bonds and equities are fully priced. Conserving
capital during declining markets can contribute to maximizing total return over
a longer period of time. In addition, the securities of companies within various
economic sectors may at times offer higher returns than other sectors and can
thus contribute to superior returns. Finally, the Investment Manager believes
that superior stock selection can also contribute to superior total return.
To facilitate reallocation of the Fund's assets in accordance with the
Investment Manager's views as to shifts in the marketplace, the Investment
Manager employs transactions in futures contracts and options thereon. For
example, if the Investment Manager believes that a ten percent increase in that
portion of the Fund's assets invested in fixed-income securities and a
concomitant decrease in that portion of the Fund's assets invested in equity
securities is timely, the Fund might purchase interest rate futures, such as
Treasury bond futures, and sell stock index futures, such as the Standard &
Poor's Corporation ("S&P") 500 Stock Index futures, in equivalent amounts. The
utilization of futures transactions, rather than the purchase and sale of equity
and fixed-income securities, increases the speed and efficacy of the Fund's
asset reallocations. See below for a discussion of futures transactions.
5
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Within the equity sector, the Investment Manager actively allocates funds to
those economic sectors expected to benefit from major trends and to individual
stocks which are deemed to have superior investment potential. The Fund may
purchase equity securities (including convertible debt obligations and
convertible preferred stock) sold on the New York, American and other stock
exchanges and in the over-the-counter market. In addition, the Fund may purchase
and sell warrants and purchase and write listed and over-the-counter options on
individual stocks and stock indexes to hedge against adverse price movements in
its equity portfolio and to increase its total return through the receipt of
premium income. The Fund may also purchase and sell stock index futures and
options thereon to hedge against adverse price movements in its equity portfolio
and to facilitate asset reallocations into and out of the equity area.
Within the fixed-income sector of the market, the Investment Manager seeks
to maximize the return on its investments by adjusting maturities and coupon
rates as well as by exploiting yield differentials among different types of
investment grade bonds. Fixed-income securities in which the Fund may invest are
short-term to intermediate (one to five year maturities) and intermediate to
long-term (greater than five year maturities) debt securities and preferred
stocks, including U.S. Government securities (securities issued or guaranteed as
to principal and interest by the United States or its agencies and
instrumentalities) and corporate securities which are rated at the time of
purchase Baa or better by Moody's Investors Service, Inc. ("Moody's") (while
bonds rated Baa by Moody's are considered investment grade, they have
speculative characteristics as well) or BBB or better by S&P, or which, if
unrated, are deemed to be of comparable quality by the Fund's Trustees (a
description of corporate bond ratings is contained in the Appendix to the
Statement of Additional Information). U.S. Government securities which may be
purchased include zero coupon securities. In addition, the Fund may purchase and
write listed and over-the-counter options on fixed-income securities to hedge
against adverse price movements in its fixed-income portfolio and to increase
its total return through the receipt of premium income. The Fund may also
purchase and sell interest rate futures and options thereon to hedge against
adverse price movements in its fixed-income portfolio and to facilitate asset
reallocations into and out of the fixed-income area.
Within the money market sector of the market, the Investment Manager seeks
to maximize returns by exploiting spreads among short-term instruments. The
money market portion of the Fund's portfolio will contain short-term (maturities
of up to thirteen months) fixed-income securities, issued by private and
governmental institutions. Such securities may include: U.S. Government
securities; bank obligations; Eurodollar certificates of deposit issued by
foreign branches of domestic banks; obligations of savings institutions; fully
insured certificates of deposit; and commercial paper rated within the two
highest grades by S&P or the highest grade by Moody's or, if not rated, issued
by a company having an outstanding debt issue rated at least AA by S&P or Aa by
Moody's. For a discussion of the risks of investing in Eurodollar certificates
of deposit, see "Risk Considerations--Foreign Securities" below.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in
securities issued by foreign governments and other foreign issuers and in
foreign currency issues of domestic issuers, but not more than 10% of its total
assets in such securities, whether issued by a foreign or domestic issuer, which
are denominated in foreign currency. With regard to foreign fixed-income
securities, the Investment Manager believes that in many instances such
securities may provide higher yields than similar securities of domestic
issuers. For a discussion of the risks of investing in foreign securities, see
"Risk Considerations" below.
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 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. For a discussion of the risks of
investing in private placements, see "Risk Considerations" below.
INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in real estate
investment trusts, which pool investors' funds for investments primarily in
commercial real estate properties. Investment in real estate investment trusts
may be the most practical available means for the Fund to invest in the real
estate industry (the Fund is prohibited from investing in real estate directly).
As a shareholder in a real estate investment trust, the Fund would bear its
ratable share of the real estate investment trust's expenses, including its
advisory and administration
6
<PAGE>
fees. At the same time the Fund would continue to pay its own investment
management fees and other expenses, as a result of which the Fund and its
shareholders in effect will be absorbing duplicate levels of fees with respect
to investments in real estate investment trusts.
OPTIONS. The Fund also may purchase and sell (write) call and put options on
debt and equity securities which are listed on Exchanges or are written in
over-the-counter transactions ("OTC options"). Listed options, which are
currently listed on several different Exchanges, are issued by the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the Fund
the right to buy from the OCC the underlying security covered by the option at
the stated exercise price (the price per unit of the underlying security) 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 the
underlying security 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 to the OCC
at the stated exercise price.
OTC OPTIONS. 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. The Fund will engage in OTC
option transactions only with primary U.S. Government securities dealers
recognized by the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options on
portfolio securities, without limit, in order to aid it in achieving its
investment objective. As a writer of a call option, the Fund has the obligation,
upon notice of exercise of the option, to deliver the security underlying the
option (certain listed call options written by the Fund will be exercisable by
the purchaser only on a specific date). See "Options and Futures Transactions--
Covered Call Writing" in the Statement of Additional Information.
COVERED PUT WRITING. As a writer of covered put options, 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. The
Fund will write put options for two purposes: (1) to receive the premiums paid
by purchasers; and (2) when the Investment Manager 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. See "Options and Futures Transactions--Covered Put
Writing" in the Statement of Additional Information.
PURCHASING CALL AND PUT OPTIONS. The Fund may invest up to 5% of its total
assets in the purchase of put and call options on securities and stock indexes.
The Fund may purchase call options only in order to close out a covered call
position. The Fund may purchase put options on securities which it holds (or has
the right to acquire) in its portfolio only to protect itself against a decline
in the value of the security. The Fund may also purchase put options to close
out written put positions in a manner similar to call option closing purchase
transactions. There are no other limits on the Fund's ability to purchase call
and put options.
STOCK INDEX OPTIONS. The Fund may purchase and write options on stock indexes.
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. See "Stock Index Options" and
"Risks of Options on Indexes" in the Statement of Additional Information.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock index
futures contracts ("futures contracts") that are traded on U.S. commodity
exchanges on such underlying securities as U.S. Treasury bonds, notes, and bills
and GNMA Certificates ("interest rate futures") and such indexes as the S&P 500
Index and the New York Stock Exchange Composite Index ("stock index futures")
and the Moody's Investment-Grade Corporate Bond Index ("bond 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 its fixed-income portfolio (or anticipated
portfolio) securities against changes in prevailing interest rates. The Fund
will purchase or sell stock index futures contracts for the purpose of hedging
its equity portfolio (or anticipated portfolio) securities against changes in
their prices. As noted above, the Fund may also engage in futures transactions
to facilitate reallocation of the Fund's assets. The Fund also may purchase and
write call and put options on futures contracts and enter into closing
transactions with respect to such options to terminate an existing position. See
"Options and Futures Transactions--Futures Contracts" and "Options on Futures
Contracts" in the Statement of Additional Information.
For a discussion of the risks of options and futures transactions, see "Risk
Considerations" below and "Options and Futures Transactions" in the Statement of
Additional Information.
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The Fund may purchase securities on a when-issued or delayed delivery basis,
may purchase or sell securities on a forward commitment basis, may purchase
securities on a "when, as and if issued" basis, may lend its portfolio
securities, and may enter into reverse repurchase agreements, as discussed under
"Risk Considerations" below.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The level of income
payable to the investor will vary depending upon the market allocation
determined by the Investment Manager and with various determinants such as
interest rates.
FOREIGN SECURITIES. Foreign securities investments may be affected by changes
in currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and abroad)
or changed circumstances in dealings between nations. Fluctuations in the
relative rates of exchange between the currencies of different nations will
affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The Fund will incur costs in connection
with conversions between various currencies.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. 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. Finally, in the event of a
default of any foreign debt obligations, it may be more difficult for the Fund
to obtain or enforce a judgment against the issuers of such securities.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments. To the extent the Fund purchases Eurodollar
certificates of deposit issued by foreign branches of domestic United States
banks, consideration will be given to their domestic marketability, the lower
reserve requirements normally mandated for overseas banking operations, the
possible impact of interruptions in the flow of international currency
transactions and future international political and economic developments which
might adversely affect the payment of principal or interest.
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, 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. 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
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<PAGE>
illiquidity could increase if qualified institutional buyers become unavailable.
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 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 will generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. Also, exchanges may
limit the amount by which the price of many futures contracts may move on any
day. If the price moves equal the daily limit on successive days, then it may
prove impossible to liquidate a futures position until the daily limit moves
have ceased.
The extent to which the Fund may enter into transactions involving options
and 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."
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 could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale. Another risk
which may arise in employing futures contracts to protect against the price
volatility of portfolio securities 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. See the Statement of Additional Information for further
discussion of such risks.
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.
REVERSE REPURCHASE AGREEMENTS. The Fund may enter into reverse repurchase
agreements, which involve sales by the Fund of portfolio assets concurrently
with an agreement by the Fund to repurchase the same assets at a later date at a
fixed price.
Reverse repurchase agreements involve the risk that the market value of the
securities the Fund is obligated to repurchase under the agreement may decline
below the repurchase price. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, the Fund's use
of the proceeds of the agreement may be restricted pending a determination by
the other party, or its trustee or receiver, whether to enforce the Fund's
obligation to repurchase the securities. Reverse repurchase agreements are
considered borrowings by the Fund and for purposes other than meeting
redemptions may not exceed 5% of the Fund's total assets.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or money market
instruments, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least the market value, determined daily,
of the loaned securities. As with any extensions of credit, there are risks of
delay in recovery and in some cases even loss of rights in the collateral should
the borrower of the securities fail financially. However, loans of portfolio
securities will only be made to firms deemed by the Investment Manager to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks.
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<PAGE>
NON-DIVERSIFIED STATUS. The Fund is a non-diversified investment company and,
as such, is not subject to the diversification requirements of the Investment
Company Act of 1940 (the "Act"). As a non-diversified investment company, the
Fund may invest a greater portion of its assets in the securities of a single
issuer and thus is subject to greater exposure to risks such as a decline in the
credit rating of that issuer. However, the Fund anticipates that it will qualify
as a regulated investment company under the federal income tax laws and, if so
qualified, will be subject to the applicable diversification requirements of the
Internal Revenue Code (the "Code"). As a regulated investment company under the
Code, the Fund may not, as of the end of any of its fiscal quarters, have
invested more than 25% of its total assets in the securities of any one issuer
(including a foreign government), or as to 50% of its total assets, have
invested more than 5% of its total assets in the securities of a single issuer.
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 with a view
to achieving the Fund's investment objective. In determining which securities to
purchase for the Fund or hold in the Fund's portfolio, the Investment Manager
will rely on information from various sources, including research, analysis and
appraisals of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital, the views of Trustees of the Fund and
others regarding economic developments and interest rate trends, and the
Investment Manager's own analysis of factors it deems relevant. The Fund's
portfolio is managed within InterCapital's Growth and Income Group, which
manages twenty-three funds and fund portfolios, with approximately $21 billion
in assets as of August 31, 1996. Mark Bavoso, Senior Vice President of
InterCapital and a member of InterCapital's Growth and Income Group, has been
the primary portfolio manager of the Fund since January, 1994, and has been a
portfolio manager at InterCapital for over five years.
Orders for transactions in other portfolio securities and commodities are
placed for the Fund with a number of brokers and dealers, including DWR.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. In
addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.
It is not anticipated that the portfolio trading engaged in by the Fund will
result in its portfolio turnover rate exceeding 200% in any one year. The Fund
will incur underwriting discount costs (on underwritten securities) and
brokerage costs commensurate with its portfolio turnover rate, and thus a higher
level (over 100%) of portfolio transactions will increase the Fund's overall
brokerage expenses. See "Dividends, Distributions and Taxes" for a discussion of
the tax implications of the Fund's transactions. A more extensive discussion of
the Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
Except as specifically noted, all investment objectives, 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 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 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
2. 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.
3. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or write interest rate and stock and bond index futures
contracts and related options thereon.
4. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial or variation margin for
futures are not deemed to be pledges of assets.)
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<PAGE>
5. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers who have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter Strategist Fund, 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 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. The offering price will be the net
asset value per share next determined following receipt of an order (see
"Determination of Net Asset Value" below).
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Redemptions and Repurchases"). Sales personnel are compensated
for selling shares of the Fund at the time of their sale by the Distributor
and/or Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted an amended Plan of Distribution pursuant to Rule 12b-1 of
the Act (the "Plan"), under which the Fund will pay the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of: (i) 1% of the lesser
of (a) the average daily aggregate gross sales of the Fund's shares since the
implementation of the Plan on November 8, 1989 (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 Plan's implementation upon
which a contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of the Fund attributable to shares issued, net of
related shares redeemed, since implementation of the Plan; plus (ii) 0.25% of
the Fund's average daily net assets attributable to shares issued, net of
related shares redeemed, prior to implementation of the Plan. 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.
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<PAGE>
For the fiscal year ended July 31, 1996, the Fund accrued payments under the
Plan amounting to $9,851,971, which amount is equal to 0.87% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clauses (i)(a) and (ii) 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 $37,253,459 at July 31, 1996, which
was equal to 2.96% of the Fund's net assets on such date. Of this amount,
$13,444,602 represents excess distribution expenses of Dean Witter Managed
Assets Trust, the net assets of which were combined with those of the Fund on
December 22, 1995 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 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.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what the pricing
service believes is the fair valuation of such portfolio securities.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional shares
of the Fund (or, if specified by the shareholder, any other open-end investment
company for which InterCapital serves as investment manager (collectively, with
the Fund, the "Dean Witter Funds")), unless the shareholder requests that they
be paid in cash. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value per share next
determined after receipt by the Transfer Agent, by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. Shares
so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases.")
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<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 Transfer Agent for investment in shares of the Fund (see
"Purchase of Fund Shares" and "Redemptions and Repurchases").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September,
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder will
be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, eligible 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 re-exchanged for
shares of the CDSC fund originally purchased. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period (for
the purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of a CDSC fund, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a CDSC fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in a
CDSC fund (see "Redemptions and Repurchases--Contingent Deferred Sales Charge").
However, in the case of shares exchanged into an Exchange Fund on or after April
23, 1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees, if any, incurred on or after that
date which are attributable to those shares. (Exchange Fund 12b-1 distribution
fees are described in the prospectus 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
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<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 purchased after
implementation of the Plan on November 8, 1989 (see "Purchase of Fund
Shares--Plan of Distribution") 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 purchased
after implementation to the Plan which are 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
14
<PAGE>
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 or prior to implementation of the Plan; 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.
15
<PAGE>
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund at the net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such redemption
or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice, to
redeem, 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 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 on a quarterly basis. The Fund may distribute quarterly net
realized short-term capital gains, if there are any. The Fund intends to
distribute net long-term capital gains, if any, at least once each year. The
Fund may, however, determine either to distribute or to retain all or part of
any 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.
Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term capital gains or losses. 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 gains being available for annual
distribution.
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 the writing of options
on securities held for less than three months, in the writing of options which
expire in less than three months, and in effecting closing transactions with
respect to call or put options which have been written or purchased less than
three months prior to such transactions. The Fund may also 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.
16
<PAGE>
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.
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
(e.g., mutual fund performance rankings of Lipper Analytical Services, Inc.; S&P
500 stock index; Dow Jones and Company, Inc. Industrial Average).
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.
17
<PAGE>
DEAN WITTER STRATEGIST FUND
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
Mark Bavoso
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.
