<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NOS.: 33-23669
811-5654
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 10 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 11 /X/
------------------
DEAN WITTER STRATEGIST FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
------------------------
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on July 28, 1997 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (a)(1) OF RULE 24f-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED THE RULE 24f-2 NOTICE FOR
ITS FISCAL YEAR ENDING JULY 31, 1996 WITH THE SECURITIES AND EXCHANGE COMMISSION
ON AUGUST 29, 1996.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DEAN WITTER STRATEGIST FUND
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ----------------------------------------------- -----------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. .......................................... Cover Page
2. .......................................... Prospectus Summary; Summary of Fund Expenses
3. .......................................... Financial Highlights; Performance Information
4. .......................................... Prospectus Summary; Financial Highlights; Investment Objective and
Policies; The Fund and Its Management; Cover Page; Investment
Restrictions
5. .......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. .......................................... Dividends, Distributions and Taxes; Additional Information
7. .......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. .......................................... Purchase of Fund Shares; Redemptions and Repurchases; Shareholder
Services;
9. .......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. .......................................... Cover Page
11. .......................................... Table of Contents
12. .......................................... The Fund and Its Management
13. .......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. .......................................... The Fund and Its Management; Trustees and Officers
15. .......................................... The Fund and Its Management; Trustees and Officers
16. .......................................... The Fund and Its Management; The Distributor; Custodian and Transfer
Agent; Independent Accountants; Shareholder Services
17. .......................................... Portfolio Transactions and Brokerage
18. .......................................... Description of Shares
19. .......................................... The Distributor; Purchase of Fund Shares; Redemptions and Repurchases;
Financial Statements; Determination of Net Asset Value; Shareholder
Services
20. .......................................... Dividends, Distributions and Taxes; Financial Statements
21. .......................................... The Distributor
22. .......................................... Performance Information
23. .......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
JULY 28, 1997
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."
The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. Except as discussed herein, shares of
the Fund held prior to July 28, 1997 have been designated Class B shares. See
"Purchase of Fund Shares-- Alternative Purchase Arrangements."
This Prospectus sets forth concisely the information you should
know before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated July 28, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/5
Financial Highlights/7
The Fund and its Management/8
Investment Objective and Policies/8
Risk Considerations/12
Investment Restrictions/16
Purchase of Fund Shares/16
Shareholder Services/28
Redemptions and Repurchases/31
Dividends, Distributions and Taxes/32
Performance Information/33
Additional Information/33
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter
Strategist Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is
Fund 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.
- ----------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 33). The Fund offers four
Offered Classes of shares, each with a different combination of sales charges, ongoing fees and
other features (see pages 16-27).
- ----------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened
Purchase through EasyInvest-SM-). Class D shares are only available to persons investing $5 million
or more and to certain other limited categories of investors. For the purpose of meeting
the minimum $5 million investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Fund, an investor's existing holdings of Class A
shares and shares of funds for which Dean Witter InterCapital Inc. serves as investment
manager ("Dean Witter Funds") that are sold with a front-end sales charge, and concurrent
investments in Class D shares of the Fund and other Dean Witter Funds that are multiple
class funds, will be aggregated. The minimum subsequent investment is $100 (see page 16).
- ----------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to maximize the total return on its investments.
Objective
- ----------------------------------------------------------------------------------------------------------
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 100 investment companies and other
portfolios with assets of approximately $96.6 billion at June 30, 1997 (see page 8).
- ----------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.60% of daily net
Fee 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 8).
- ----------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution
and plan pursuant to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with
Distribution respect to the distribution fees paid by the Class A, Class B, and Class C shares of the
Fee Fund to the Distributor. The entire 12b-1 fee payable by Class A and a portion of the
12b-1 fee payable by each of Class B and Class C equal to 0.25% of the average daily net
assets of the Class are currently each characterized as a service fee within the meaning
of the National Association of Securities Dealers, Inc. guidelines. The remaining portion
of the 12b-1 fee, if any, is characterized as an asset-based sales charge (see pages 16
and 26).
- ----------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements - Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced
for larger purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charge at the time of
purchase but a contingent deferred sales charge ("CDSC") of 1.0% may be imposed on
redemptions within one year of purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's
Class A shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of
0.25% of average daily net assets of the Class (see pages 16, 20 and 27).
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be
subject to a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after
purchase. The CDSC will be imposed on any redemption of shares if after such redemption
the aggregate current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to investments by certain qualified plans.
Class B shares are also subject to a 12b-1 fee assessed at the annual rate of (i) 1.0% of
the lesser of: (a) the average daily net sales of the Fund's Class B shares since
implementation of the 12b-1 Plan on November 8, 1989 or (b) the average daily net assets
of Class B attributable to shares issued since implementation of the 12b-1 Plan, plus (ii)
0.25% of the average daily net assets of Class B attributable to shares issued prior to
implementation of the 12b-1 Plan. All shares of the Fund held prior to July 28, 1997
(other than shares which were purchased prior to November 8, 1989 (and, with respect to
such shares, certain shares acquired through reinvestment of dividends and capital gains
distributions) and the shares held by certain employee benefit plans established by Dean
Witter Reynolds Inc. and its affiliate, SPS Transaction Services, Inc.) have been
designated Class B shares. Shares which were purchased prior to November 8, 1989 (and,
with respect to such shares, certain shares acquired through reinvestment of dividends and
capital gains distributions) and shares held by those employee benefit plans prior to July
28, 1997 have been designated Class D shares. Shares held before May 1, 1997 that have
been designated Class B shares will convert to Class A shares in May, 2007. In all other
instances, Class B shares convert to Class A shares approximately ten years after the date
of the original purchase (see pages 16, 22 and 26).
- Class C shares are offered without a front-end sales charge, but will in most cases be
subject to a CDSC of 1.0% if redeemed within one year after purchase. The Fund is
authorized to reimburse the Distributor for specific expenses incurred in promoting the
distribution of the Fund's Class C shares and servicing shareholder accounts pursuant to
the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 1.0% of average daily net assets of the Class (see pages 16, 25 and 26).
- Class D shares are offered only to investors meeting an initial investment minimum of $5
million and to certain other limited categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages
16, 25 and 26).
- ----------------------------------------------------------------------------------------------------------
Dividends Dividends from net investment income are paid quarterly and distributions from net capital
and gains, if any, are paid at least once per year. The Fund may, however, determine to retain
Capital Gains all or part of any net long-term capital gains in any year for reinvestment. Dividends and
Distributions capital gains distributions paid on shares of a Class are automatically reinvested in
additional shares of the same Class at net asset value unless the shareholder elects to
receive cash. Shares acquired by dividend and distribution reinvestment will not be
subject to any sales charge or CDSC (see pages 28 and 32).
- ----------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on
Class A, Class B or Class C shares. An account may be involuntarily redeemed if the total
value of the account is less than $100 or, if the account was opened through
EasyInvest-SM-, if after twelve months the shareholder has invested less than $1,000 in
the account (see page 31).
- ----------------------------------------------------------------------------------------------------------
Special The net asset value of the Fund's shares will fluctuate with changes in the market value
Risk of its portfolio securities. The level of income payable to the investor will vary
Considerations 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 8-16). 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 15).
- ----------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
4
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are based on
the expenses and fees for the fiscal year ended July 31, 1996.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price)........................ 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments......... None None None None
Maximum Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds)............................................ None(2) 5.00%(3) 1.00%(4) None
Redemption Fees........................................ None None None None
Exchange Fee........................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
- -------------------------------------------------------
Management Fees........................................ 0.56% 0.56% 0.56% 0.56%
12b-1 Fees (5) (6)..................................... 0.25% 0.88%(7) 1.00% None
Other Expenses......................................... 0.15% 0.15% 0.15% 0.15%
Total Fund Operating Expenses (8)...................... 0.96% 1.59% 1.71% 0.71%
</TABLE>
- ------------
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").
(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE
WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").
(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO
THEREAFTER.
(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").
(5) THE 12b-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12b-1 FEE
PAYABLE BY CLASS A AND A PORTION OF THE 12b-1 FEE PAYABLE BY EACH OF CLASS B
AND CLASS C EQUAL TO 0.25% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS ARE
CURRENTLY EACH CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES AND ARE PAYMENTS
MADE FOR PERSONAL SERVICE AND/OR MAINTENANCE OF SHAREHOLDER ACCOUNTS. THE
REMAINDER OF THE 12b-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A
DISTRIBUTION FEE PAID TO THE DISTRIBUTOR TO COMPENSATE IT FOR THE SERVICES
PROVIDED AND THE EXPENSES BORNE BY THE DISTRIBUTOR AND OTHERS IN THE
DISTRIBUTION OF THE FUND'S SHARES (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").
(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE
SUBJECT TO THE LOWER 12b-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 1.00% DISTRIBUTION FEE (SEE "PURCHASE OF FUND
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").
(7) THE 12b-1 FEE HAS BEEN RESTATED TO REFLECT WHAT THE FEE WOULD HAVE BEEN IF
THE SHARES THAT HAVE BEEN DESIGNATED CLASS D SHARES WERE NOT INCLUDED IN THE
FUND AS OF JULY 31, 1996. THE ACTUAL 12b-1 FEE WAS 0.87%.
(8) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS C OR CLASS D PRIOR TO THE
DATE OF THIS PROSPECTUS. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS
SHOWN ABOVE WITH RESPECT TO THOSE CLASSES, ARE BASED UPON THE SUM OF 12b-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."
5
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10
EXAMPLES 1 YEAR 3 YEARS 5 YEARS YEARS
- ---------------------------------------------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) a 5%
annual return and (2) redemption at the end of each time period:
Class A....................................................................... $ 62 $ 81 $ 103 $ 164
Class B....................................................................... $ 66 $ 80 $ 107 $ 189
Class C....................................................................... $ 27 $ 54 $ 93 $ 202
Class D....................................................................... $ 7 $ 23 $ 40 $ 88
You would pay the following expenses on the same $1,000 investment assuming no
redemption at the end of the period:
Class A....................................................................... $ 62 $ 81 $ 103 $ 164
Class B....................................................................... $ 16 $ 50 $ 87 $ 189
Class C....................................................................... $ 17 $ 54 $ 93 $ 202
Class D....................................................................... $ 7 $ 23 $ 40 $ 88
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS 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," "Purchase of Fund Shares--Plan of Distribution"
and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each of the periods through July 31, 1996 have been
audited by Price Waterhouse LLP, independent accountants. The information for
the six-month period ended January 31, 1997 is unaudited. The financial
highlights should be read in conjunction with the financial statements, the
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. All
shares of the Fund held prior to July 28, 1997, other than shares which were
purchased prior to November 8, 1989 (and, with respect to such shares, certain
shares acquired through reinvestment of dividends and capital gains
distributions (collectively, the "Old Shares")) and shares held by certain
employee benefit plans established by Dean Witter Reynolds Inc. and its
affiliate, SPS Transaction Services, Inc., have been designated Class B shares.
The Old Shares and shares held by those employees benefit plans prior to July
28, 1997 have been designated Class D shares.
<TABLE>
<CAPTION>
FOR THE
PERIOD
FOR THE SIX OCTOBER 31,
MONTHS 1988*
ENDED FOR THE YEAR ENDED JULY 31 THROUGH
JANUARY 31, --------------------------------------------------------------- JULY 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning
of period.............. $ 16.02 $ 15.87 $14.43 $14.59 $ 14.39 $13.09 $11.65 $11.37 $ 9.45
----------- -------- ------- ------- -------- ------- ------- ------- ------------
Net investment income... 0.21 0.30 0.34 0.30 0.26 0.27 0.27 0.23 0.38
Net realized and
unrealized gain........ 2.08 1.43 1.86 0.22 0.81 1.27 1.50 0.55 1.84
----------- -------- ------- ------- -------- ------- ------- ------- ------------
Total from investment
operations............. 2.29 1.73 2.20 0.52 1.07 1.54 1.77 0.78 2.22
----------- -------- ------- ------- -------- ------- ------- ------- ------------
Less dividends and
distributions from:
Net investment
income............... (0.22) (0.32) (0.29) (0.26) (0.31) (0.24) (0.26) (0.29) (0.30)
Net realized gain..... (1.40) (1.26) (0.47) (0.42) (0.56) -- (0.07) (0.21) --
----------- -------- ------- ------- -------- ------- ------- ------- ------------
Total dividends and
distributions.......... (1.62) (1.58) (0.76) (0.68) (0.87) (0.24) (0.33) (0.50) (0.30)
----------- -------- ------- ------- -------- ------- ------- ------- ------------
Net asset value, end of
period................. $ 16.69 $ 16.02 $15.87 $14.43 $ 14.59 $14.39 $13.09 $11.65 $11.37
----------- -------- ------- ------- -------- ------- ------- ------- ------------
----------- -------- ------- ------- -------- ------- ------- ------- ------------
TOTAL INVESTMENT
RETURN+................ 14.57%(1) 11.47% 16.05% 3.53% 7.59% 11.88% 15.67% 7.21% 23.76%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses................ 1.55%(2) 1.58% 1.63% 1.62% 1.62% 1.63% 1.59% 1.53% 0.97%(2)(3)
Net investment income... 2.53%(2) 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.... $1,422 $1,259 $878 $806 $783 $441 $238 $196 $48
Portfolio turnover
rate................... 72%(1) 174% 179% 90% 98% 79% 140% 101% 70%(1)
Average commission rate
paid................... $0.0585 $0.0597 -- -- -- -- -- -- --
</TABLE>
<TABLE>
<C> <S>
- ------------------------
* 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.
</TABLE>
7
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
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 Morgan Stanley, Dean Witter, Discover &
Co, a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$93.1 billion as of June 30, 1997. The Investment Manager also manages and
advises portfolios of pension plans, other institutions and individuals which
aggregated approximately $3.5 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
- --------------------------------------------------------------------------------
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
8
<PAGE>
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.
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 facili-
9
<PAGE>
tate 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 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 securi-
10
<PAGE>
ties 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
11
<PAGE>
("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.
------------------------
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
12
<PAGE>
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 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.
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<PAGE>
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
14
<PAGE>
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.
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") and other broker-dealer affiliates of InterCapital, the
views of 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-two funds and fund portfolios, with approximately $27.3 billion
in assets as of June 30, 1997. 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 and
other broker-dealer affiliates of InterCapital. 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 and other brokers
and dealers that are affiliates of InterCapital.
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.
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<PAGE>
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.)
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its 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 Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if
16
<PAGE>
redeemed within one year of purchase, except for certain specific circumstances.
Class B shares are sold without an initial sales charge but are subject to a
CDSC (scaled down from 5.0% to 1.0%) payable upon most redemptions within six
years after purchase. (Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a CDSC scaled down from 2.0% to
1.0% if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold without
an initial sales charge or CDSC and are available only to investors meeting an
initial investment minimum of $5 million, and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the Fund,
Class A shares may be sold to categories of investors in addition to those set
forth in this prospectus at net asset value without a front-end sales charge,
and Class D shares may be sold to certain other categories of investors, in each
case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements-- Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million or more and to
certain other limited categories of investors. For the purpose of meeting the
minimum $5 million initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares of the Fund and other Dean Witter Funds that
are multiple class funds ("Dean Witter Multi-Class Funds") and shares of Dean
Witter Funds sold with a front-end sales charge ("FSC Funds") and concurrent
investments in Class D shares of the Fund and other Dean Witter Multi-Class
Funds will be aggregated. Subsequent purchases of $100 or more may be made by
sending a check, payable to Dean Witter 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. When
purchasing shares of the Fund, investors must specify whether the purchase is
for Class A, Class B, Class C or Class D shares. If no Class is specified, the
Transfer Agent will not process the transaction until the proper Class is
identified. The minimum initial purchase in the case of investments through
EasyInvest-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.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund at the time of their sale by the Distributor or any
of its affiliates and/or the Selected Broker-Dealer. In addition, some sales
personnel of the Selected Broker-Dealer will receive various types of non-cash
compensation as special
17
<PAGE>
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified employer-sponsored benefit plans are subject to a CDSC scaled down
from 2.0% to 1.0% if redeemed within three years after purchase.) This CDSC may
be waived for certain redemptions. Class B shares are also subject to an annual
12b-1 fee of (i) 1.0% of the lesser of: (a) the average daily aggregate gross
sales of the Fund's Class B shares since the implementation of the 12b-1 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
Class B shares redeemed since the implementation of the 12b-1 Plan upon which a
CDSC has been imposed or waived, or (b) the average daily net assets of Class B
attributable to shares issued, net of related shares redeemed, since
implementation of the 12b-1 Plan, plus (ii) 0.25% of the average daily net
assets of Class B attributable to shares issued, net of related shares redeemed,
prior to implementation of the 12b-1 Plan. The Class B shares' distribution fee
will cause that Class to have higher expenses and pay lower dividends than Class
A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment
18
<PAGE>
of dividends and distributions will be converted at that time. See "Contingent
Deferred Sales Charge Alternative--Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause that Class to
have higher expenses and pay lower dividends than Class A or Class D shares. See
"Level Load Alternative--Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
For the purpose of meeting the $5 million minimum investment amount for
Class D shares, holdings of Class A shares in all Dean Witter Multi-Class Funds,
shares of FSC Funds and shares of Dean Witter Funds for which such shares have
been exchanged will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.
19
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
-----------------------------------------------------
CLASS SALES CHARGE 12b-1 FEE CONVERSION FEATURE
- ----------------------------------------------------------------------------------------
<C> <S> <C> <C>
A Maximum 5.25% initial sales 0.25% No
charge reduced for purchases
of $25,000 and over; shares
sold without an initial sales
charge generally subject to a
1.0% CDSC during first year.
- ----------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the 1.0% B shares convert to A shares
first year decreasing to 0 automatically after
after six years approximately ten years
- ----------------------------------------------------------------------------------------
C 1.0% CDSC during first year 1.0% No
- ----------------------------------------------------------------------------------------
D None None No
- ----------------------------------------------------------------------------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF AMOUNT
TRANSACTION PRICE INVESTED
- ------------------------- ------------------- ---------------------
<S> <C> <C>
Less than $25,000........ 5.25% 5.54%
$25,000 but less
than $50,000........ 4.75% 4.99%
$50,000 but less
than $100,000....... 4.00% 4.17%
$100,000 but less
than $250,000....... 3.00% 3.09%
$250,000 but less
than $1 million..... 2.00% 2.04%
$1 million and over...... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of
20
<PAGE>
21 purchasing shares for his, her or their own accounts; (c) a trustee or other
fiduciary purchasing shares for a single trust estate or a single fiduciary
account; (d) a pension, profit-sharing or other employee benefit plan qualified
or non-qualified under Section 401 of the Internal Revenue Code; (e) tax-exempt
organizations enumerated in Section 501(c)(3) or (13) of the Internal Revenue
Code; (f) employee benefit plans qualified under Section 401 of the Internal
Revenue Code of a single employer or of employers who are "affiliated persons"
of each other within the meaning of Section 2(a)(3)(c) of the Act; and for
investments in Individual Retirement Accounts of employees of a single employer
through Systematic Payroll Deduction plans; or (g) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Fund and other Dean Witter Funds acquired in exchange for those shares, and
including in each case shares acquired through reinvestment of dividends and
distributions), which are held at the time of such transaction, amounts to
$25,000 or more. If such investor has a cumulative net asset value of shares of
FSC Funds and Class A and Class D shares equal to at least $5 million, such
investor is eligible to purchase Class D shares subject to the $1,000 minimum
initial investment requirement of that Class of the Fund. See "No Load
Alternative-- Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an order is
placed by mail. The reduced sales charge will not be granted if: (a) such
notification is not furnished at the time of the order; or (b) a review of the
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or shares of other Dean Witter Funds which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, or of Class A shares
of the Fund or shares of other Dean Witter Funds acquired in exchange for shares
of such funds purchased during such period at a price including a front-end
sales charge, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more,
21
<PAGE>
Class A shares also may be purchased at net asset value by the following:
(1) trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust
FSB ("DWTFSB") (each of which is an affiliate of the Investment Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the Distributor,
pursuant to which such persons pay an asset based fee for services in the nature
of investment advisory or administrative services (such investments are subject
to all of the terms and conditions of such programs, which may include
termination fees and restrictions on transferability of Fund shares);
(3) retirement plans qualified under Section 401(k) of the Internal Revenue
Code ("401(k) plans") and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code with at least 200 eligible employees and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper;
(4) 401(k) plans and other employer-sponsored plans qualified under Section
401(a) of the Internal Revenue Code for which DWTC or DWTFSB serves as Trustee
or the 401(k) Support Services Group of DWR serves as recordkeeper whose Class B
shares have converted to Class A shares, regardless of the plan's asset size or
number of eligible employees;
(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the proceeds of the redemption had been maintained in
the interim in cash or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE-- CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain employer-sponsored benefit
plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of (i) 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's Class B shares since the
implementation of the 12b-1 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 Class B shares redeemed since the
implementation of the 12b-1 Plan upon which a CDSC has been imposed or waived,
or (b) the average daily net assets of Class B attributable to shares issued,
net of related shares redeemed, since implementation of the 12b-1 Plan, plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to implementation of the 12b-1
Plan.
Except as noted below, Class B shares of the Fund which are held for six
years or more after
pur-
22
<PAGE>
chase (calculated from the last day of the month in which the shares were
purchased) will not be subject to any CDSC upon redemption. Shares redeemed
earlier than six years after purchase may, however, be subject to a CDSC which
will be a percentage of the dollar amount of shares redeemed and will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The size of this percentage will depend upon
how long the shares have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE CDSC AS A
PURCHASE PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 5.0%
Second........................... 4.0%
Third............................ 3.0%
Fourth........................... 2.0%
Fifth............................ 2.0%
Sixth............................ 1.0%
Seventh and thereafter........... None
</TABLE>
In the case of Class B shares of the Fund held by 401 (k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services
Group of DWR serves as recordkeeper and whose accounts are opened on or after
July 28, 1997, shares held for three years or more after purchase (calculated as
described in the paragraph above) will not be subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase may
be subject to a CDSC (calculated as described in the paragraph above), the
percentage of which will depend on how long the shares have been held, as set
forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- --------------------------------- -----------------------
<S> <C>
First............................ 2.0%
Second........................... 2.0%
Third............................ 1.0%
Fourth and thereafter............ None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain employer-sponsored benefit plans, three
years) preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption; and
(iii) the current net asset value of shares purchased through reinvestment of
dividends or distributions and/or shares acquired in exchange for shares of FSC
Funds or of other Dean Witter Funds acquired in exchange for such shares.
Moreover, in determining whether a CDSC is applicable it will be assumed that
amounts described in (i), (ii) and (iii) above (in that order) are redeemed
first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
401(k) plan or other employer-sponsored plan qualified under Section 401(a) of
the Internal Revenue Code which offers investment
23
<PAGE>
companies managed by the Investment Manager or its subsidiary, Dean Witter
Services Company Inc., as self-directed investment alternatives and for which
DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR
serves as recordkeeper ("Eligible Plan"), provided that either: (A) the plan
continues to be an Eligible Plan after the redemption; or (B) the redemption is
in connection with the complete termination of the plan involving the
distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
CONVERSION TO CLASS A SHARES. All shares of the Fund held prior to July 28,
1997 (other than shares which were purchased prior to November 8, 1989 (and,
with respect to such shares, including such proportion of shares acquired
through reinvestment of dividends and capital gains distributions as the total
number of shares acquired prior to such date bears to the total number of Fund
shares purchased and owned by a shareholder (collectively, the "Old Shares") and
shares held by certain employee benefit plans established by DWR and its
affiliate, SPS Transaction Services, Inc.) have been designated Class B shares.
Shares held before May 1, 1997 that have been designated Class B shares will
convert to Class A shares in May, 2007. In all other instances Class B shares
will convert automatically to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase. The ten
year period is calculated from the last day of the month in which the shares
were purchased or, in the case of Class B shares acquired through an exchange or
a series of exchanges, from the last day of the month in which the original
Class B shares were purchased, provided that shares originally purchased before
May 1, 1997 will convert to Class A shares in May, 2007. The conversion of
shares purchased on or after May 1, 1997 will take place in the month following
the tenth anniversary of the purchase. There will also be converted at that time
such proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code and for which DWTC
or DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves
as recordkeeper, the plan is treated as a single investor and all Class B shares
will convert to Class A shares on the conversion date of the first shares of a
Dean Witter Multi-Class Fund purchased by that plan. In the case of Class B
shares previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a Dean
Witter Multi-Class Fund, the holding period resumes on the last day of the month
in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
24
<PAGE>
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
Class B shares purchased before July 28, 1997 by trusts for which DWTC or
DWTFSB provides discretionary trustee services will convert to Class A shares on
or about August 29, 1997. The CDSC will not be applicable to such shares.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million and the following
categories of investors: (i) investors participating in the InterCapital mutual
fund asset allocation program pursuant to which such persons pay an asset based
fee; (ii) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory or administrative services (subject to all
of the terms and conditions of such programs, which may include termination fees
and restrictions on transferability of Fund shares); (iii) 401(k) plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR) for
their employees; (iv) certain Unit Investment Trusts sponsored by DWR; (v)
certain other open-end investment companies whose shares are distributed by the
Distributor; and (vi) other categories of investors, at the discretion of the
Board, as disclosed in the then current prospectus of the Fund. The Old Shares
and shares held by the employee benefit plans referred to in clause (iii) above
prior to July 28, 1997 have been designated Class D shares. Investors who
require a $5 million minimum initial investment to qualify to purchase Class D
shares may satisfy that requirement by investing that amount in a single
transaction in Class D shares of the Fund and other Dean Witter Multi-Class
Funds, subject to the $1,000 minimum initial investment required for that Class
of the Fund. In addition, for the purpose of meeting the $5 million minimum
investment amount, holdings of Class A shares in all Dean Witter Multi-Class
Funds, shares of FSC Funds and shares of Dean Witter Funds for which such shares
have been exchanged will be included together with the current investment
amount. If a shareholder redeems Class A shares and purchases Class D shares,
such redemption may be a taxable event.
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PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and Class C shares, the Plan provides that the
Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those shares.
Reimbursements for these expenses will be made in monthly payments by the Fund
to the Distributor, which will in no event exceed amounts equal to payments at
the annual rates of 0.25% and 1.0% of the average daily net assets of Class A
and Class C, respectively. In the case of Class B shares, the Plan provides that
the Fund will pay the Distributor a fee, which is accrued daily and paid
monthly, at the annual rate of (i) 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B 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 Class B shares redeemed since the implementation of the 12b-1 Plan
upon which a CDSC has been imposed or waived, or (b) the average daily net
assets of Class B attributable to shares issued, net of related shares redeemed,
since implementation of the 12b-1 Plan, plus (ii) 0.25% of the average daily net
assets of Class B attributable to shares issued, net of related shares redeemed,
prior to implementation of the 12b-1 Plan. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of the
NASD guidelines. In the case of Class B and Class C shares, a portion of the fee
payable pursuant to the Plan, equal to 0.25% of the average daily net assets of
each of these Classes, is currently characterized as a service fee. A service
fee is a payment made for personal service and/or the maintenance of shareholder
accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
For the fiscal 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. All shares held prior to July 28, 1997 (other than the
Old Shares and shares held by certain employee benefit plans established by DWR
and its affiliate, SPS Transaction Services, Inc.) have been designated Class B
shares.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described
26
<PAGE>
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 distribution expenses or any
requirement that the Plan be continued from year to year, such 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 CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
CDSCs, may or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. No interest or other financing
charges will be incurred on any Class A or Class C distribution expenses
incurred by the Distributor under the Plan or on any unreimbursed expenses due
to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (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 net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single
portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange is valued
at its latest sale price on that exchange prior to the time assets are valued;
if there were no sales that day, the security is valued at the latest bid price
(in cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees), and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price. When market quotations are not readily available, including
circumstances under which it is determined by the Investment Manager that sale
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,
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<PAGE>
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
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a
CDSC (see "Redemptions and Repurchases").
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 or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemtption").
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 in shares of the
applicable Class 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 acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Redemptions and Repurchases.")
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 CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal plan payments should not be considered
as dividends, yields or income. If periodic withdrawal plan payments
continuously exceed net investment income and net capital gains, the
shareholder's original investment will be correspondingly reduced and ultimately
exhausted. Each withdrawal constitutes a redemption of shares and any gain or
loss realized must be recognized for federal income tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, 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
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any
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exchange fee. Shares may also be exchanged for shares of the following funds:
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S.
Treasury Trust and five Dean Witter funds which are money market funds (the
"Exchange Funds"). Class A shares may also be exchanged for shares of Dean
Witter Multi-State Municipal Series Trust and Dean Witter Hawaii Municipal
Trust, which are Dean Witter Funds sold with a front-end sales charge ("FSC
Funds"). Class B shares may also be exchanged for shares of Dean Witter Global
Short-Term Income Fund Inc., Dean Witter High Income Securities and Dean Witter
National Municipal Trust, which are Dean Witter Funds offered with a CDSC ("CDSC
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 Dean Witter Multi-Class Fund, any FSC Fund, any 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 Dean
Witter Multi-Class Funds, FSC Funds or CDSC Funds or any Exchange Fund that is
not a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a Dean Witter Multi-Class
Fund or shares of 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 Dean Witter Multi-Class Fund or shares of a CDSC Fund are reacquired. Thus,
the CDSC is based upon the time (calculated as described above) the shareholder
was invested in shares of a Dean Witter Multi-Class Fund or in shares of a CDSC
Fund (see "Purchase of Fund Shares"). In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in shares of a FSC
Fund. 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.) Class B
shares of the Fund acquired in exchange for Class B shares of another Dean
Witter Multi-Class Fund or shares of a CDSC Fund having a different CDSC
schedule than that of this Fund will be subject to the higher CDSC schedule,
even if such shares are subsequently re-exchanged for shares of the fund with
the lower CDSC schedule.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional purchases
and/ or exchanges from the investor. Although the Fund does not have any
specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a
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<PAGE>
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 of
each Class of shares and any other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges may
be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder 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.
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<PAGE>
REDEMPTIONS AND REPURCHASES
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REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at P.
O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption, along with any additional documentation required
by the Transfer Agent.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic 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 or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of investment of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at their net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such redemption
or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares have a value of
less than $100, or such lesser amount as may be fixed by the Board of Trustees
or, in the case of an account opened through EasyInvest-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.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for
each Class of shares and 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
shares of the same Class and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. Shares acquired
by dividend and distribution reinvestments will not be subject to any front-end
sales charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. Distributions paid on Class A and Class D shares will be higher than
for Class B and Class C shares because distribution fees paid by Class B and
Class C shares are higher. (See "Shareholder Services--Automatic Investment of
Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise 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. Any dividends declared in the last quarter of any calendar
year which are paid in the following year prior to February 1 will be deemed,
for tax purposes, to have been received by the shareholder in the prior year.
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.
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The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments would not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The total return of the Fund is based on
historical earnings and is not intended to indicate future performance. The
"average annual total return" of the Fund refers to a figure reflecting the
average annualized percentage increase (or decrease) in the value of an initial
investment in a Class of the Fund of $1,000 over periods of one, five and ten
years, or over the life of the Fund, if less than any of the foregoing. 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 applicable Class
and all sales charges which would be incurred by shareholders, for the stated
periods. It also assumes reinvestment of all dividends and distributions paid by
the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (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 except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be
33
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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.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
non-diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
34
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS FIXED-INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter New York Municipal Money Market Trust Dean Witter U.S. Government Securities Trust
Dean Witter California Tax-Free Daily Income Trust Dean Witter California Tax-Free Income Fund
Dean Witter U.S. Government Money Market Trust Dean Witter New York Tax-Free Income Fund
EQUITY FUNDS Dean Witter Convertible Securities Trust
Dean Witter American Value Fund Dean Witter Federal Securities Trust
Dean Witter Natural Resource Development Dean Witter World Wide Income Trust
Securities Inc. Dean Witter Intermediate Income Securities
Dean Witter Dividend Growth Securities Inc. Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Developing Growth Securities Trust Dean Witter Multi-State Municipal Series Trust
Dean Witter World Wide Investment Trust Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Value-Added Market Series Dean Witter Diversified Income Trust
Dean Witter Utilities Fund Dean Witter Limited Term Municipal Trust
Dean Witter Precious Metals and Minerals Trust Dean Witter Short-Term Bond Fund
Dean Witter Capital Growth Securities Dean Witter High Income Securities
Dean Witter European Growth Fund Inc. Dean Witter National Municipal Trust
Dean Witter Pacific Growth Fund Inc. Dean Witter Balanced Income Fund
Dean Witter Health Sciences Trust Dean Witter Hawaii Municipal Trust
Dean Witter Global Dividend Growth Securities Dean Witter Intermediate Term U.S. Treasury
Dean Witter Global Utilities Fund Trust
Dean Witter International SmallCap Fund DEAN WITTER RETIREMENT SERIES
Dean Witter Mid-Cap Growth Fund Liquid Asset Series
Dean Witter Balanced Growth Fund U.S. Government Money Market Series
Dean Witter Capital Appreciation Fund U.S. Government Securities Series
Dean Witter Information Fund Intermediate Income Securities Series
Dean Witter Special Value Fund American Value Series
Dean Witter Financial Services Trust Capital Growth Series
Dean Witter Market Leader Trust Dividend Growth Series
ASSET ALLOCATION FUNDS Strategist Series
Dean Witter Strategist Fund Utilities Series
Dean Witter Global Asset Allocation Fund Value-Added Market Series
ACTIVE ASSETS ACCOUNT PROGRAM Global Equity Series
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets Government Securities Trust
Active Assets California Tax-Free Trust
</TABLE>
<PAGE>
DEAN WITTER
Dean Witter STRATEGIST
Strategist Fund 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
Barry Fink
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.
PROSPECTUS -- JULY 28, 1997
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
JULY 28, 1997 STRATEGIST FUND
- --------------------------------------------------------------------------------
Dean Witter Strategist Fund (the "Fund") is an open-end, non-diversified
management investment company, the investment objective of which is to maximize
the total return on its investments. The Fund seeks to achieve its objective by
actively allocating its assets among the major asset categories of equity
securities, fixed-income securities and money market instruments. See
"Investment Practices and Policies."
A Prospectus for the Fund dated July 28, 1997, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
Strategist Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
The Fund and its Management ............................................... 3
Trustees and Officers ..................................................... 6
Investment Practices and Policies ......................................... 11
Investment Restrictions ................................................... 25
Portfolio Transactions and Brokerage ...................................... 26
The Distributor ........................................................... 28
Determination of Net Asset Value .......................................... 32
Purchase of Fund Shares ................................................... 33
Shareholder Services ...................................................... 35
Redemptions and Repurchases ............................................... 40
Dividends, Distributions and Taxes ........................................ 41
Performance Information ................................................... 43
Description of Shares of the Fund ......................................... 44
Custodian and Transfer Agent .............................................. 44
Independent Accountants ................................................... 45
Reports to Shareholders ................................................... 45
Legal Counsel ............................................................. 45
Experts ................................................................... 45
Registration Statement .................................................... 45
Financial Statements - July 31, 1996 ...................................... 46
Report of Independent Accountants ......................................... 60
Financial Statements - January 31, 1997 (unaudited) ....................... 61
Appendix .................................................................. 74
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
August 5, 1988.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the investment advisory, administrative and management
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. (As
hereinafter used in this Statement of Additional Information, the terms
"InterCapital" and "Investment Manager" refer to DWR's InterCapital Division
prior to the internal reorganization and to Dean Witter InterCapital Inc.
thereafter.) The daily management of the Fund and research relating to the
Fund's portfolio are conducted by or under the direction of officers of the Fund
and of the Investment Manager, subject to review by the Fund's Board of
Trustees. Information as to these Trustees and officers is contained under the
caption "Trustees and Officers."
InterCapital is also the investment manager or investment adviser of the
following management investment companies: Active Assets Money Trust, Active
Assets Tax-Free Trust, Active Assets California Tax-Free Trust, Active Assets
Government Securities Trust, Dean Witter Liquid Asset Fund Inc., InterCapital
Income Securities Inc., InterCapital Insured Municipal Bond Trust, InterCapital
Insured Municipal Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, InterCapital Insured
Municipal Securities, InterCapital Insured California Municipal Securities,
InterCapital Quality Municipal Investment Trust, InterCapital Quality Municipal
Income Trust, InterCapital Quality Municipal Securities, InterCapital California
Quality Municipal Securities, InterCapital New York Quality Municipal
Securities, High Income Advantage Trust, High Income Advantage Trust II, High
Income Advantage Trust III, Dean Witter Government Income Trust, Dean Witter
High Yield Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter
Developing Growth Securities Trust, Dean Witter Tax-Exempt Securities Trust,
Dean Witter Natural Resource Development Securities Inc., Dean Witter Dividend
Growth Securities Inc., Dean Witter American Value Fund, Dean Witter U.S.
Government Money Market Trust, Dean Witter Variable Investment Series, Dean
Witter World Wide Investment Trust, Dean Witter Select Municipal Reinvestment
Fund, Dean Witter U.S. Government Securities Trust, Dean Witter California
Tax-Free Income Fund, Dean Witter New York Tax-Free Income Fund, Dean Witter
Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean Witter
Value-Added Market Series, Dean Witter Utilities Fund, Dean Witter California
Tax-Free Daily Income Trust, Dean Witter World Wide Income Trust, Dean Witter
Intermediate Income Securities, Dean Witter Capital Growth Securities, Dean
Witter European Growth Fund Inc., Dean Witter Precious Metals and Minerals
Trust, Dean Witter New York Municipal Money Market Trust, Dean Witter Global
Short-Term Income Fund, Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter
Multi-State Municipal Series Trust, Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Diversified Income Trust, Dean Witter Health Sciences Trust, Dean
Witter Retirement Series, Dean Witter Global Dividend Growth Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter Global Utilities Fund, Dean Witter National Municipal Trust, Dean Witter
High Income Securities, Dean Witter International SmallCap Fund, Dean Witter
Mid-Cap Growth Fund, Dean Witter Select Dimensions Investment Series, Dean
Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Hawaii Municipal Trust, Dean Witter Intermediate Term U.S. Treasury Trust, Dean
Witter Capital Appreciation Fund, Dean Witter Information Fund, Dean Witter
Japan Fund, Dean Witter Income Builder Fund, Dean Witter Special Value Fund,
Dean Witter Financial Services Trust, Dean Witter Market Leader Trust, Municipal
Income Trust, Municipal Income Trust II, Municipal Income Trust III, Municipal
Income Opportunities Trust, Municipal Income
3
<PAGE>
Opportunities Trust II, Municipal Income Opportunities Trust III, Prime Income
Trust and Municipal Premium Income Trust. The foregoing investment companies,
together with the Fund, are collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity
Trust, TCW/DW Global Telecom Trust, TCW/DW Strategic Income Trust, TCW/DW
Emerging Markets Opportunities Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust
2002 and TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves
as: (i) administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (ii) sub-administrator of MassMutual Participation
Investors and Templeton Global Governments Income Trust, closed-end investment
companies.
Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage the
investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective. Under the terms of the Agreement, in addition to managing
the Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, such office space,
facilities, equipment, clerical help and bookkeeping and legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the salaries
of all personnel, including officers of the Fund, who are employees of the
Investment Manager. The Investment Manager also bears the cost of telephone
service, heat, light, power and other utilities provided to the Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital and DWSC on such date. The
foregoing internal reorganizations did not result in any change in the nature or
scope of the administrative services being provided to the Fund or any of the
fees being paid by the Fund for the overall services being performed under the
terms of the existing Agreement.
Expenses not expressly assumed by the Investment Manager under the Agreement
or by the Distributor of the Fund's shares, Dean Witter Distributors Inc.
("Distributors" or the "Distributor") (see "The Distributor"), will be paid by
the Fund. These expenses will be allocated among the four classes of shares of
the Fund (each, a "Class") pro rata based on the net assets of the Fund
attributable to each Class, except as described below. The expenses borne by the
Fund include, but are not limited to: expenses of the Plan of Distribution
pursuant to Rule 12b-1 (the "12b-1 fee") (see "The Distributor"); charges and
expenses of any registrar; custodian, stock transfer and dividend disbursing
agent; brokerage commissions; taxes; engraving and printing of share
certificates; registration costs of the Fund and its shares under federal and
state securities laws; the cost and expense of printing, including typesetting,
and distributing Prospectuses and Statements of Additional Information of the
Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for
4
<PAGE>
pricing of the Fund's shares; fees and expenses of legal counsel, including
counsel to the Trustees who are not interested persons of the Fund or of the
Investment Manager (not including compensation or expenses of attorneys who are
employees of the Investment Manager) and independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
following annual rates to the Fund's daily net assets: 0.60% of the portion of
the daily net assets not exceeding $500 million; 0.55% of the next $500 million;
0.50% of the next $500 million; and 0.475% of the portion of the daily net
assets exceeding $1.5 billion. For the fiscal years ended July 31, 1994, 1995
and 1996, the Fund accrued to the Investment Manager total compensation of
$4,711,608, $4,679,443 and $6,414,184, respectively.
The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder, the
Investment Manager is not liable to the Fund or any of its investors for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors. The Agreement in no way restricts the Investment Manager from
acting as investment manager or adviser to others.
The Agreement was initially approved by the Board of Trustees on February
21, 1997 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on May 21, 1997. The Agreement is substantially identical to a
prior investment management agreement which was initially approved by the Board
of Trustees on October 30, 1992 and by the shareholders of the Fund at a Special
Meeting of Shareholders held on January 12, 1993, as such agreement had been
amended by the Trustees at their meetings held on April 28, 1993 and April 17,
1996, to lower the management fees charged on the Fund's daily net assets in
excess of $1 billion and $1.5 billion. The Agreement took effect on May 31, 1997
upon the consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. The Agreement may be terminated at any time, without penalty,
on thirty days' notice by the Trustees of the Fund, by the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Investment Manager. The Agreement will automatically terminate in the event
of its assignment (as defined in the Act).
Under its terms, the Agreement had an initial term ending April 30, 1999 and
will remain in effect from year to year thereafter, provided continuance of the
Agreement is approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Trustees of the Fund; provided that in either event such continuance is
approved annually by the vote of a majority of the Trustees of the Fund who are
not parties to the Agreement or "interested persons" (as defined in the Act) of
any such party (the "Independent Trustees"), which vote must be cast in person
at a meeting called for the purpose of voting on such approval.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use, or at any time
permit others to use, the name "Dean Witter." The Fund has also agreed that in
the event the Agreement is terminated, or if the affiliation between
InterCapital and its parent company is terminated, the Fund will eliminate the
name "Dean Witter" from its name if DWR or its parent company shall so request.
5
<PAGE>
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the 83 Dean Witter Funds and the 14 TCW/DW Funds are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Michael Bozic (56) Chairman and Chief Executive Officer of Levitz Furniture Corporation
Trustee (since November, 1995); Director or Trustee of the Dean Witter Funds;
c/o Levitz Furniture Corporation formerly President and Chief Executive Officer of Hills Department
6111 Broken Sound Parkway, N.W. Stores (May, 1991-July, 1995); formerly variously Chairman, Chief
Boca Raton, Florida Executive Officer, President and Chief Operating Officer (1987-1991) of
the Sears Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College Fund and
Weirton Steel Corporation.
Charles A. Fiumefreddo* (64) Chairman and Chief Executive Officer and Director of InterCapital, DWSC
Chairman of the Board, and Distributors; Executive Vice President and Director of DWR;
President and Chief Executive Chairman, Director or Trustee, President and Chief Executive Officer of
Officer and Trustee the Dean Witter Funds; Chairman, Chief Executive Officer and Trustee of
Two World Trade Center the TCW/DW Funds; Chairman and Director of Dean Witter Trust Company
New York, New York ("DWTC"); Director and/or officer of various MSDWD subsidiaries;
formerly Executive Vice President and Director of Dean Witter, Discover
and Co. (until February, 1993).
Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly United States
Trustee Senator (R-Utah) (1974-1992) and Chairman, Senate Banking Committee
c/o Huntsman Corporation (1980-1986); formerly Mayor of Salt Lake City, Utah (1972-1974);
500 Huntsman Way formerly Astronaut, Space Shuttle Discovery (April 12-19, 1985); Vice
Salt Lake City, Utah Chairman, Huntsman Corporation (since January, 1993); Director of
Franklin Quest (time management systems) and John Alden Financial Corp.
(health insurance); member of the board of various civic and charitable
organizations.
John R. Haire (72) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Directors or Trustees and Director or Trustee of the Dean
Two World Trade Center Witter Funds; Chairman of the Audit Committee and Chairman of the
New York, New York Committee of the Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education (1978-1989) and
Chairman and Chief Executive Officer of Anchor Corporation, an
Investment Adviser (1964-1978); Director of Washington National
Corporation (insurance).
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Wayne E. Hedien** (63) Retired, Director or Trustee of the Dean Witter Funds (commencing on
Trustee September 1, 1997); Director of The PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field Museum of Natural
Weitzen Shalov & Wein History; formerly associated with the Allstate Companies (1966-1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer of its
New York, New York wholly-owned subsidiary, Allstate Insurance Company (July,
1989-December, 1994); director of various other business and charitable
organizations.
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a consulting firm;
Trustee Co-Chairman and a founder of the Group of Seven Council (G7C), an
c/o Johnson Smick International, Inc. international economic commission; Director or Trustee of the Dean
1133 Connecticut Avenue, N.W. Witter Funds; Trustee of the TCW/DW Funds; Director of NASDAQ (since
Washington, DC June, 1995); Director of Greenwich Capital Markets, Inc.
(broker-dealer); Trustee of the Financial Accounting Foundation
(oversight organization for the Financial Accounting Standards Board);
formerly Vice Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S. Treasury
(1982-1986).
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds; Trustee of
c/o Triumph Capital, L.P. the TCW/DW Funds; formerly Vice President, Bankers Trust Company and BT
237 Park Avenue Capital Corporation (1984-1988); Director of various business
New York, New York organizations.
Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive Officer of
Trustee MSDWD, DWR and Novus Credit Services Inc.; Director of InterCapital,
1585 Broadway DWSC and Distributors; Director or Trustee of the Dean Witter Funds;
New York, New York Director and/or officer of various MSDWD subsidiaries.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds; Trustee of the
Trustee TCW/DW Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Executive Vice President and Chief Investment Officer of the Home
Weitzen Shalov & Wein Insurance Company (August, 1991-September, 1995).
Counsel to the Independent Trustees
114 West 47th Street
New York, New York
Barry Fink (42) Senior Vice President (since March, 1997) and Secretary and General
Vice President, Secretary Counsel (since February, 1997) of InterCapital and DWSC; Senior Vice
and General Counsel President (since March, 1997) and Assistant Secretary and Assistant
Two World Trade Center General Counsel (since February, 1997) of Distributors; Assistant
New York, New York Secretary of DWR (since August, 1996); Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/DW Funds (since
February, 1997); previously First Vice President (June, 1993-February,
1997), Vice President (until June, 1993) and Assistant Secretary and
Assistant General Counsel of InterCapital and DWSC and Assistant
Secretary of the Dean Witter Funds and the TCW/DW Funds.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND
AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ----------------------------------------- -----------------------------------------------------------------------
<S> <C>
Mark Bavoso (36) Senior Vice President of InterCapital (since June, 1993); formerly Vice
Vice President President of InterCapital.
Two World Trade Center
New York, New York
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of InterCapital and DWSC;
Treasurer Treasurer of the Dean Witter Funds and the TCW/DW Funds.
Two World Trade Center
New York, New York
<FN>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
** Mr. Hedien's term as Trustee will commence on September 1, 1997.
</TABLE>
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Executive Vice President and Director of DWR, and Director of
SPS Transaction Services, Inc. and various other MSDWD subsidiaries, Robert S.
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and DWTC
and Director of DWTC, and Joseph J. McAlinden, Executive Vice President and
Chief Investment Officer of InterCapital and Director of DWTC, are Vice
Presidents of the Fund, and Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, Lou Anne McInnis, Carsten
Otto and Ruth Rossi, Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Frank Bruttomesso, a staff attorney with
InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees currently consists of eight (8) trustees; as noted
above, Mr. Hedien's term will commence on September 1, 1997. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of this
Statement of Additional Information, there are a total of 83 Dean Witter Funds,
comprised of 126 portfolios. As of June 30, 1997, the Dean Witter Funds had
total net assets of approximately $87.9 billion and more than six million
shareholders.
Six Trustees and Mr. Hedien (77% of the total number) have no affiliation or
business connection with InterCapital or any of its affiliated persons and do
not own any stock or other securities issued by InterCapital's parent company,
MSDWD. These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four of
the six independent Trustees are also Independent Trustees of the TCW/DW Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The Dean Witter Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the current Independent Trustees serve as members of the Audit
Committee and the Committee of the Independent Trustees. Three of them also
serve as members of the Derivatives Committee. During the calendar year ended
December 31, 1996, the three Committees held a combined total of sixteen
meetings. The Committees hold some meetings at InterCapital's offices and some
outside InterCapital. Management Trustees or officers do not attend these
meetings unless they are invited for purposes of furnishing information or
making a report.
8
<PAGE>
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to time.
The Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Most of the Dean Witter Funds have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and the
Funds' operations and management. He screens and/or prepares written materials
and identifies critical issues for the Independent Trustees to consider,
develops agendas for Committee meetings, determines the type and amount of
information that the Committees will need to form a judgment on various issues,
and arranges to have that information furnished to Committee members. He also
arranges for the services of independent experts and consults with them in
advance of meetings to help refine reports and to focus on critical issues.
Members of the Committees believe that the person who serves as Chairman of both
Committees and guides their efforts is pivotal to the effective functioning of
the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Manager and other service providers. In effect,
the Chairman of the Committees serves as a combination of chief executive and
support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the Audit
Committee of the TCW/DW Funds. The current Committee Chairman has had more than
35 years experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees
9
<PAGE>
arriving at conflicting decisions regarding operations and management of the
Funds and avoids the cost and confusion that would likely ensue. Finally, having
the same Independent Trustees serve on all Fund Boards enhances the ability of
each Fund to obtain, at modest cost to each separate Fund, the services of
Independent Trustees, and a Chairman of their Committees, of the caliber,
experience and business acumen of the individuals who serve as Independent
Trustees of the Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). The Fund also
reimburses such Trustees for travel and other out-of-pocket expenses incurred by
them in connection with attending such meetings. Trustees and officers of the
Fund who are or have been employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended July 31, 1996.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,750
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,963
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,700
John L. Schroeder............................................. 1,800
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1996 for services
to the 82 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1996.
With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the TCW/DW Funds
are included solely because of a limited exchange privilege between those Funds
and five Dean Witter Money Market Funds.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND TRUSTEES AND 82 DEAN
COMMITTEE MEMBER TRUSTEE AND AUDIT AUDIT WITTER
OF 82 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 82 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Michael Bozic.............. $138,850 -- -- -- $138,850
Edwin J. Garn.............. 140,900 -- -- -- 140,900
John R. Haire.............. 106,400 $64,283 $195,450 $ 12,187 378,320
Dr. Manuel H. Johnson...... 137,100 66,483 -- -- 203,583
Michael E. Nugent.......... 138,850 64,283 -- -- 203,133
John L. Schroeder.......... 137,150 69,083 -- -- 206,233
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund
10
<PAGE>
referred to as an "Adopting Fund" and each such Trustee referred to as an
"Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Trustee for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Trustee's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the Fund for the fiscal year ended July 31, 1996
and by the 57 Dean Witter Funds (including the Fund) as of December 31, 1996,
and the estimated retirement benefits for the Fund's Independent Trustees, to
commence upon their retirement, from the Fund as of July 31, 1996 and from the
57 Dean Witter Funds as of December 31, 1996.
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS ESTIMATED ANNUAL
-------------------------------------- RETIREMENT BENEFITS BENEFITS
ESTIMATED ACCRUED AS EXPENSES UPON RETIREMENT(2)
CREDITED YEARS ESTIMATED ---------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUND(3) FUNDS FUND(5) FUNDS
- --------------------------------- ------------------- ----------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic.................... 10 50.0% $ 147 $ 20,147 $ 950 $ 51,325
Edwin J. Garn.................... 10 50.0 (599) 27,772 950 51,325
John R. Haire.................... 10 50.0 1,188 46,952 4,687 129,550
Dr. Manuel H. Johnson............ 10 50.0 (415) 10,926 950 51,325
Michael E. Nugent................ 10 50.0 (753) 19,217 950 51,325
John L. Schroeder................ 8 41.7 281 38,700 792 42,771
</TABLE>
- ---------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. The
amount estimated to be payable under this method, through the remainder of
the later of the lives of such Eligible Trustee and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Trustee may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1) above.
(3) These numbers reflect the effect of the combination of the net assets of
Dean Witter Managed Assets Trust with those of the Fund on December 22, 1995
pursuant to an Agreement and Plan of Reorganization.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES. As stated in the Prospectus, the Fund may
invest in short-term to intermediate (one to five year maturities) and
intermediate to long term (greater than five year maturities) fixed-income
securities which are issued or guaranteed, as to principal and interest, by the
United States or its agencies and instrumentalities.
11
<PAGE>
Such U.S. Government securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to thirty years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal Farm
Credit System and the Federal Home Loan Banks.
ZERO COUPON SECURITIES. A portion of the U.S. Government securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the right
to receive their full value at maturity. The interest earned on such securities
is, implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner of
a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received if prevailing interest rates rise. For this
reason, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest currently.
MONEY MARKET INSTRUMENTS. As stated in the Prospectus, the money market
instruments which the Fund may purchase include U.S. Government securities, bank
obligations, Eurodollar certificates of deposit, obligations of savings
institutions, fully insured certificates of deposit and commercial paper. Such
securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government
and having total assets of $1 billion or more, and instruments secured by
such obligations, not including obligations of foreign branches of domestic
banks except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion
or more;
12
<PAGE>
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if
the principal amount of the obligation is insured by the Federal Deposit
Insurance Corporation, limited to $100,000 principal amount per certificate
and to 10% or less of the Fund's total assets in all such obligations and in
all illiquid assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades
by Standard & Poor's Corporation ("S&P") or the highest grade by Moody's
Investors Service, Inc. ("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.
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 notice provisions described below), and are at all times
secured by cash or cash equivalents, which are maintained in a segregated
account pursuant to applicable regulations and that are equal to at least the
market value, determined daily, of the loaned securities. The advantage of such
loans is that the Fund continues to receive the income on the loaned securities
while at the same time earning interest on the cash amounts deposited as
collateral, which will be invested in short-term obligations. The Fund will not
lend its portfolio securities if such loans are not permitted by the laws or
regulations of any state in which its shares are qualified for sale and will not
lend more than 25% of the value of its total assets. A loan may be terminated by
the borrower on one business days' notice, or by the Fund on two business days'
notice. If the borrower fails to deliver the loaned securities within two days
after receipt of notice, the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund. The creditworthiness of firms to which
the Fund lends its portfolio securities will be monitored on an ongoing basis by
the Investment Manager pursuant to procedures adopted and reviewed, on an
ongoing basis, by the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. The Fund did not
lend any of its portfolio securities during the fiscal year ended July 31, 1996.
REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. A
repurchase agreement may be viewed as a type of secured lending by the Fund
which typically involves the acquisition by the Fund of government securities
from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution, and that the institution will repurchase. the
underlying security ("collateral") at a specified price and at a fixed time in
the future, usually not more than seven days from the date of purchase. The
collateral will be maintained in a segregated account and will be marked to
market daily to determine that the full value of the collateral, as specified in
the agreement, does not decrease below the repurchase price plus accrued
interest. If such decrease occurs, additional collateral will be added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits and may exceed one year.
13
<PAGE>
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. Repurchase agreements will be transacted only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continuously monitored by the Investment Manager subject to
procedures established by the Trustees. In addition, as described above, the
value of the collateral underlying the repurchase agreement will be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral. However,
the exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from the sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss. The Fund has not to date and does not presently intend
to enter into repurchase agreements so that more than 5% of the Fund's net
assets are subject to such agreements.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements as part of its investment strategy. Reverse repurchase agreements
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.
Generally, the effect of such a transaction is that the Fund can recover all or
most of the cash invested in the portfolio securities involved during the term
of the reverse repurchase agreement, while it will be able to keep the interest
income associated with those portfolio securities. Such transactions are only
advantageous if the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of otherwise obtaining the cash. Opportunities
to achieve this advantage may not always be available. The Fund will establish a
segregated account with its custodian bank in which it will maintain cash, U.S.
Government securities or other liquid portfolio securities equal in value to its
obligations in respect of reverse repurchase agreements. 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.
WARRANTS. The Fund may acquire warrants attached to other securities and,
in addition may invest up to 5% of the value of its total assets in warrants,
including up to 2% of such assets in warrants not listed on either the New York
or American Stock Exchange. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period of
time, and have no voting rights, pay no dividends and have no rights with
respect to the corporation issuing them.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. As discussed in the
Prospectus, from time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis, i.e., delivery
and payment can take place a month or more after the date of the transactions.
The securities so purchased are subject to market fluctuation and no interest
accrues to the purchaser during this period. While the Fund will only purchase
securities on a when-issued, delayed delivery or forward commitment basis with
the intention of acquiring the securities, the Fund may sell the securities
before the settlement date, if it is deemed advisable. At the time the Fund
makes the commitment to purchase securities on a when-issued or delayed delivery
basis, the Fund will record the transaction and thereafter reflect the value,
each day, of such security in determining the net asset value of the Fund. At
the time of delivery of the securities, the value may be more or less than the
purchase price. The Fund will also establish a segregated account with the
Fund's custodian bank in which it will continuously maintain cash or U.S.
Government Securities or other liquid portfolio securities equal in value to
commitments for such when-issued or delayed delivery securities; subject to this
requirement, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. The Investment Manager and the Board
of Trustees do not believe that the Fund's net asset value or income will be
adversely affected by its purchase of securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES. As discussed in the Prospectus, the Fund
may purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon
14
<PAGE>
the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization, leveraged buyout or debt restructuring. The commitment for the
purchase of any such security will not be recognized in the portfolio of the
Fund until the Investment Manager determines that issuance of the security is
probable. At such time, the Fund will record the transaction and, in determining
its net asset value, will reflect the value of the security daily. At such time,
the Fund will also establish a segregated account with its custodian bank in
which it will continuously maintain cash or U.S. Government securities or other
liquid portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. The value of the Fund's commitments to
purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Fund, may not exceed 5% of the value of
the Fund's total assets at the time the initial commitment to purchase such
securities is made (see "Investment Restrictions"). Subject to the foregoing
restrictions, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The Investment Manager and the Trustees do not believe that
the net asset value of the Fund will be adversely affected by its purchase of
securities on such basis.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same series to effect closing transactions,
and may hedge against potential changes in the market value of investments (or
anticipated investments) and facilitate the reallocation of the Fund's assets
into and out of equities and fixed-income securities by purchasing put and call
options on portfolio (or eligible portfolio) securities and engaging in
transactions involving futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges (currently the Chicago Board Options
Exchange, American Stock Exchange, New York Stock Exchange, Pacific Stock
Exchange and Philadelphia Stock Exchange) and are written in over-the-counter
transactions ("OTC Options"). Listed options 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. Upon notice of exercise of the put option, the writer of
the put would have the obligation to purchase the underlying security from the
OCC at the exercise price.
OPTIONS ON TREASURY BONDS AND NOTES. Because trading interest in options
written on Treasury bonds and notes tends to center on the most recently
auctioned issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new expirations
as the original ones expire. Options trading on each issue of bonds or notes
will thus be phased out as new options are listed on more recent issues, and
options representing a full range of expirations will not ordinarily be
available for every issue on which options are traded.
OPTIONS ON TREASURY BILLS. Because a deliverable Treasury bill changes from
week to week, writers of Treasury bill calls cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of the
option, the position may be hedged from a risk standpoint by the writing of a
call option. For so long as the call option is outstanding, the Fund will hold
the Treasury bills in a segregated account with its Custodian, so that they will
be treated as being covered.
15
<PAGE>
OPTIONS ON GNMA CERTIFICATES. Currently, options on GNMA Certificates are
only traded over-the-counter. Since the remaining principal balance of GNMA
Certificates declines each month as a result of mortgage payments, the Fund, as
a writer of a GNMA call holding GNMA Certificates as "cover" to satisfy its
delivery obligation in the event of exercise, may find that the GNMA
Certificates it holds no longer have a sufficient remaining principal balance
for this purpose. Should this occur, the Fund will purchase additional GNMA
Certificates from the same pool (if obtainable) or replacement GNMA Certificates
in the cash market in order to maintain its cover. A GNMA Certificate held by
the Fund to cover an option position in any but the nearest expiration month may
cease to represent cover for the option in the event of a decline in the GNMA
coupon rate at which new pools are originated under the FHA/VA loan ceiling in
effect at any given time, as such decline may increase the prepayments made on
other mortgage pools. If this should occur, the Fund will no longer be covered,
and the Fund will either enter into a closing purchase transaction or replace
such Certificate with a Certificate which represents cover. When the Fund closes
out its position or replaces such Certificate, it may realize a loss and incur
transaction costs.
OTC OPTIONS. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which have
entered into direct agreements with the Fund. With OTC options, such variables
as expiration date, exercise price and premium will be agreed upon between the
Fund and the transacting dealer, without the intermediation of a third party
such as the OCC. If the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, the Fund would lose the premium paid for the option as well as any
anticipated benefit of the transaction. The Fund will engage in OTC option
transactions only with 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 and on stock index options, without limit, in order to
aid in achieving its investment objective. Generally, a call option is "covered"
if the Fund owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Fund by its
Custodian in a segregated account) the underlying security subject to the option
except that in the case of call options on U.S. Treasury Bills, the Fund might
own U.S. Treasury Bills of a different series from those underlying the call
option, but with a principal amount and value corresponding to the exercise
price and a maturity date no later than that of the securities deliverable under
the call option. A call option is also covered if the Fund holds a call on the
same security as the underlying security of the written option, where the
exercise price of the call used for coverage is equal to or less than the
exercise price of the call written or greater than the exercise price of the
call written if the mark-to-market difference is maintained by the Fund in cash,
U.S. Government securities or other liquid portfolio securities which the Fund
holds in a segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to achieve a greater total return than would be
realized from holding the underlying securities alone. Moreover, the premium
received will offset a portion of the potential loss incurred by the Fund if the
securities underlying the option are ultimately sold by the Fund at a loss. The
value of the premium received will fluctuate with varying economic market
conditions.
As regards listed options and certain OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
against payment of the exercise price on any calls it has written (exercise of
certain listed and OTC options may be limited to specific expiration dates).
This obligation is terminated upon the expiration of the option period or at
such earlier time when the writer effects a closing purchase transaction. A
closing purchase transaction is accomplished by purchasing an option of the same
series as the option previously written.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option to prevent an underlying security from being called,
to permit the sale of an underlying security or to
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enable the Fund to write another call option on the underlying security with
either a different exercise price or expiration date or both. Also, effecting a
closing purchase transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
investments by the Fund. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part or exceeded by a decline in the
market value of the underlying security.
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security during
the option period. If a call option is exercised, the Fund realizes a gain or
loss from the sale of the underlying security equal to the difference between
the purchase price of the underlying security and the proceeds of the sale of
the security plus the premium received for on the option less the commission
paid.
Options written by a Fund normally have expiration dates of from up to nine
months (equity securities) to eighteen months (fixed-income securities) from the
date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written. See "Risks of Options and Futures Transactions," below.
The Fund may also purchase put options to close out written put positions in
a manner similar to call options closing purchase transactions. In addition, the
Fund may sell a put option which it has previously purchased prior to the sale
of the securities underlying such option. Such a sale would result in a net gain
or loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid on the put option which is
sold. Any such gain or loss could be offset in whole or in part by a change in
the market value of the underlying security. If a put option purchased by the
Fund expired without being sold or exercised, the premium would be lost.
COVERED PUT WRITING. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period, at
the purchaser's election (certain listed and OTC put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if the Fund maintains, in a segregated account maintained on its
behalf at the Fund's Custodian, cash, U.S. Government securities or other liquid
portfolio securities in an amount equal to at least the exercise price of the
option, at all times during the option period. Similarly, a written put position
could be covered by the Fund by its purchase of a put option on the same
security as the underlying security of the written option, where the exercise
price of the purchased option is equal to or more than the exercise price of the
put written or less than the exercise price of the put written if the
mark-to-market difference is maintained by the Fund in cash, U.S. Government
securities or other liquid portfolio securities which the Fund holds in a
segregated account maintained at its Custodian. In the case of listed options,
during the option period, the Fund may be required, at any time, to make payment
of the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.
The Fund will write put options for two purposes: (1) to receive the income
derived from the premiums paid by purchasers; and (2) when the Investment
Manager wishes to purchase the security underlying the option at a price lower
than its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction) while the potential loss equals the
difference between the exercise price of the option and the current market price
of the underlying securities when the put is exercised, offset by the premium
received (less the commissions paid on the transaction).
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PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options in order to close out a covered call position (see
"Covered Call Writing" above) and, as to 2% of its total assets, purchase call
options on securities it intends to purchase. If, in the latter case, the price
of the security underlying the option fails to rise above the exercise price by
an amount exceeding the price of the option premium, the Fund will sustain a
loss equal to some or all of the premium price. A call purchased to close out a
position is likely to be on the same securities and have the same terms as the
written option. The option would generally be acquired from the dealer or
financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities 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. If the value of the underlying security were to fall
below the exercise price of the put purchased in an amount greater than the
premium paid for the option, the Fund would incur no additional loss. The Fund
may also purchase put options to close out written put positions in a manner
similar to call options closing purchase transactions. In addition, the Fund may
sell a put option which it has previously purchased prior to the sale of the
securities underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option when it was
purchased. Any such gain or loss could be offset in whole or in part by a change
in the market value of the underlying security. If a put option purchased by the
Fund expired without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates and
market movements. If the market value of the portfolio securities upon which
call options have been written increases, the Fund may receive a lower total
return from the portion of its portfolio upon which calls have been written than
it would have had such calls not been written. In writing puts, the Fund assumes
the risk of loss should the market value of the underlying securities decline
below the exercise price of the option (any loss being decreased by the receipt
of the premium on the option written). During the option period, the covered
call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security increase, but has retained the risk of loss
should the price of the underlying security decline. The secured put writer also
retains the risk of loss should the market value of the underlying security
decline below the exercise price of the option less the premium received on the
sale of the option. In both cases, the writer has no control over the time when
it may be required to fulfill its obligation as a writer of the option. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call option
writer may not be able to sell an underlying security at a time when it might
otherwise be advantageous to do so. A covered put option writer who is unable to
effect a closing purchase transaction or to purchase an offsetting over-the-
counter option would continue to bear the risk of decline in the market price of
the underlying security until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash or U.S.
Government or other liquid portfolio securities as cover for the put option for
other investment purposes until the exercise or expiration of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer. However, the Fund may
be able to purchase an offsetting option which does not close out its position
as a writer but constitutes an asset of equal value to the obligation under the
option written. If the Fund is not able to either enter into a closing
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purchase transaction or purchase an offsetting position, it will be required to
maintain the securities subject to the call, or the collateral underlying the
put, even though it might not be advantageous to do so, until a closing
transaction can be entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an exchange; (v) inadequacy of the facilities of an exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that exchange (or in that class or series of options) would cease to
exist, although outstanding options on that exchange that had been issued by the
OCC as a result of trades on that exchange would generally continue to be
exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Investment Manager.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written on
one or more accounts or through one or more brokers). An exchange may order the
liquidation of positions found to be in violation of these limits and it may
impose other sanctions or restrictions. These position limits may restrict the
number of listed options which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes" in the Prospectus).
STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The multiplier for an index option
performs a function similar to the unit of trading for a stock option. It
determines the total dollar value per contract of each point in the difference
between the exercise price of an option and the current level of the underlying
index. A multiplier of 100 means that a one-point difference will yield $100.
Options on different indexes may have different multipliers. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount. Unlike stock options, all settlements are in cash and a gain or
loss depends on price movements in the stock market generally (or in a
particular segment of the market) rather than the price movements in individual
stocks. Currently, options are traded on, among other indexes, the Standard &
Poor's 100 Index and the Standard & Poor's 500 Index on the Chicago Board
Options Exchange, the Major Market Index and the Computer Technology Index, Oil
Index and Institutional Index on the American Stock Exchange and the NYSE Index
and NYSE Beta Index on the New York Stock Exchange, The Financial
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News Composite Index on the Pacific Stock Exchange and the Value Line Index,
National O-T-C Index and Utilities Index on the Philadelphia Stock Exchange,
each of which and any similar index on which options are traded in the future
which include stocks that are not limited to any particular industry or segment
of the market is referred to as a "broadly based stock market index." The Fund
will invest only in broadly based indexes. Options on broad-based stock indexes
provide the Fund with a means of protecting the Fund against the risk of
market-wide price movements. If the Investment Manager anticipates a market
decline, the Fund could purchase a stock index put option. If the expected
market decline materialized, the resulting decrease in the value of the Fund's
portfolio would be offset to the extent of the increase in the value of the put
option. If the Investment Manager anticipates a market rise, the Fund may
purchase a stock index call option to enable the Fund to participate in such
rise until completion of anticipated common stock purchases by the Fund.
Purchases and sales of stock index options also enable the Investment Manager to
more speedily achieve changes in the Fund's equity positions.
The Fund will be able to write put options on stock indexes only if such
positions are covered by cash, U.S. Government securities or other liquid
portfolio securities equal to the aggregate exercise price of the puts, or by a
put option on the same stock index with a strike price no lower than the strike
price of the put option sold by the Fund, which cover is held for the Fund in a
segregated account maintained for it by the Fund's Custodian. All call options
on stock indexes written by the Fund will be covered either by a portfolio of
stocks substantially replicating the movement of the index underlying the call
option or by holding a separate call option on the same stock index with a
strike price no higher than the strike price of the call option sold by the
Fund.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, the Fund, as a call writer, would not be able to provide in
advance for their potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options. When
an index option is exercised, the amount of cash that the holder is entitled to
receive is determined by the difference between the exercise price and the
closing index level on the date when the option is exercised. As with other
kinds of options, the writer will not learn that it has been assigned until the
next business day, at the earliest. The time lag between exercise and notice of
assignment poses no risk for the writer of a covered call on a specific
underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined with a
corresponding decrease in the value of its stock portfolio. This "timing risk"
is an inherent limitation on the ability of index call writers to cover their
risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
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If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
FUTURES CONTRACTS. As stated in the Prospectus, 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, bills and GNMA Certificates ("interest rate futures") and
such indexes as the S&P 500 Index, the Moody's Investment-Grade Corporate Bond
Index and the New York Stock Exchange Composite Index ("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) against changes in prevailing interest rates and to
alter the Fund's asset allocation in fixed-income securities. If the Investment
Manager anticipates that interest rates may rise and, concomitantly, the price
of fixed-income securities fall, or wishes to decrease the Fund's asset
allocation in fixed-income securities, the Fund may sell an interest rate
futures contract or a bond index futures contract. If declining interest rates
are anticipated or if the Investment Manager wishes to increase the Fund's asset
allocation of fixed-income securities, the Fund may purchase an interest rate
futures contract to protect against a potential increase in the price of U.S.
Government securities the Fund intends to purchase. Subsequently, appropriate
fixed-income securities may be purchased by the Fund in an orderly fashion; as
securities are purchased, corresponding futures positions would be terminated by
offsetting sales of contracts.
The Fund will purchase or sell stock index futures contracts for the purpose
of hedging its equity portfolio (or anticipated portfolio) against changes in
their prices. If the Investment Manager anticipates that the prices of stock
held by the Fund may fall or wishes to decrease the Fund's asset allocation in
equity securities, the Fund may sell a stock index futures contract. Conversely,
if the Investment Manager wishes to increase the Fund's assets which are
invested in stocks or as a hedge against anticipated price rises in those stocks
which the Fund intends to purchase, the Fund may purchase stock index futures
contracts. This allows the Fund to purchase equities, in accordance with the
Investment Manager's asset allocations, in an orderly and efficacious manner. In
addition, interest rate and stock index futures contracts will be bought or sold
in order to close out a short or long position in a corresponding futures
contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Stock index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open or
close of the last trading day of the contract and the futures contract price. A
futures contract sale is closed out by effecting a futures contract purchase for
the same aggregate amount of the specific type of equity security and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of equity security and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.
INTEREST RATE FUTURES. When the Fund enters into an interest rate futures
contract, it is initially required to deposit with the Fund's Custodian, in a
segregated account in the name of the broker performing the transaction, "an
initial margin" of cash or U.S. Government securities or other liquid
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portfolio securities equal to approximately 2% of the contract amount. Initial
margin requirements are established by the Exchanges on which futures contracts
trade and may, from time to time, change. In addition, brokers may establish
margin deposit requirements in excess of those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked-to-market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin," with the Fund's futures contract clearing
broker, which are reflective of price fluctuations in the futures contract.
Currently, interest rate futures contracts can be purchased on debt securities
such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with maturities
between 6 1/2 and 10 years, GNMA Certificates and Bank Certificates of Deposit.
INDEX FUTURES. As discussed in the Prospectus, the Fund may invest in index
futures contracts. An index futures contract sale creates an obligation by the
Fund, as seller, to deliver cash at a specified future time. An index futures
contract purchase would create an obligation by the Fund, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indexes do not
require the physical delivery of securities, but provide for a final cash
settlement on the expiration date which reflects accumulated profits and losses
credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in the
form of variation margin payments. The Fund may be required to make additional
margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or a gain.
Currently, index futures contracts can be purchased or sold with respect to,
among others, the Standard & Poor's 500 Stock Price Index and the Standard &
Poor's 100 Stock Price Index on the Chicago Mercantile Exchange, the New York
Stock Exchange Composite Index on the New York Futures Exchange, the Major
Market Index on the American Stock Exchange, the Value Line Stock Index on the
Kansas City Board of Trade and the Moody's Investment-Grade Corporate Bond Index
on the Chicago Board of Trade.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an Exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid), to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Investment
Manager wished to protect against an
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increase in interest rates and the resulting negative impact on the value of a
portion of its fixed-income portfolio, it might write a call option on an
interest rate futures contract, the underlying security of which correlates with
the portion of the portfolio the Investment Manager seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course, augment
the total return of the Fund and thereby provide a further hedge against losses
resulting from price declines in portions of the Fund's portfolio.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to initial margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however, that
in the case of an option that is in-the-money (the exercise price of the call
(put) option is less (more) than the market price of the underlying security) at
the time of purchase, the in-the-money amount may be excluded in calculating the
5%. However, there is no overall limitation on the percentage of the Fund's
assets which may be subject to a hedge position. In addition, in accordance with
the regulations of the Commodity Futures Trading Commission ("CFTC") under which
the Fund is exempted from registration as a commodity pool operator, the Fund
may only enter into futures contracts and options on futures contracts
transactions for purposes of hedging a part or all of its portfolio. If the CFTC
changes its regulations so that the Fund would be permitted to write options on
futures contracts for purposes other than hedging the Fund's investments without
CFTC registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements. As
stated in the prospectus, the Fund may sell a futures contract to protect
against the decline in the value of securities held by the Fund. However, it is
possible that the futures market may advance and the value of securities held in
the portfolio of the Fund may decline. If this occurred, the Fund would lose
money on the futures contract and also experience a decline in value of its
portfolio securities. However, while this could occur for a very brief period or
to a very small degree, over time the value of a diversified portfolio will tend
to move in the same direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Investment Manager may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.
If the Fund maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in a
segregated account maintained at its Custodian, cash, U.S. Government securities
or other high grade debt obligations equal in value (when added to any initial
or variation margin on deposit) to the market value of the securities underlying
the futures contract or the exercise price of the option. Such a position may
also be covered by owning the securities underlying the futures contract (in the
case of a stock index futures contract a portfolio of securities substantially
replicating the relevant index), or by holding a call option permitting the Fund
to purchase the same contract at a price no higher than the price at which the
short position was established.
In addition, if the Fund holds a long position in a futures contract or has
sold a put option on a futures contract, it will hold cash, U.S. Government
securities or other liquid portfolio securities equal to the purchase price of
the contract or the exercise price of the put option (less the amount of initial
or
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variation margin on deposit) in a segregated account maintained for the Fund by
its Custodian. Alternatively, the Fund could cover its long position by
purchasing a put option on the same futures contract with an exercise price as
high or higher than the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities 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. Another such risk is that prices of interest rate
futures contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be distorted
by the fact that the futures market is dominated by short-term traders seeking
to profit from the difference between a contract or security price objective and
their cost of borrowed funds. Such distortions are generally minor and would
diminish as the contract approached maturity.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of the
securities which are the subject of the hedge. If participants in the futures
market elect to close out their contracts through offsetting transactions rather
than meet margin deposit requirements, distortions in the normal relationship
between the debt securities and futures markets could result. Price distortions
could also result if investors in futures contracts opt to make or take delivery
of underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends by the Investment Manager may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position, and in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities at a time when it may be disadvantageous to do so.
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<PAGE>
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes" in the
Prospectus).
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities.
The Investment Manager has substantial experience in the use of the
investment techniques described above under the heading "Options and Futures
Transactions," which techniques require skills different from those needed to
select the portfolio securities underlying various options and futures
contracts.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Invest in securities of any issuer if, to the knowledge of the
Fund, any officer or trustee/ director of the Fund or of the Investment
Manager owns more than 1/2 of 1% of the outstanding securities of such
issuer, and such officers and trustees/directors who own more than 1/2 of 1%
own in the aggregate more than 5% of the outstanding securities of such
issuers.
2. Purchase or sell real estate or interests therein, although the
Fund may purchase securities of issuers which engage in real estate
operations and securities secured by real estate or interests therein.
3. Invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days. The
staff of the Securities and Exchange Commission ("SEC") has taken the
position that purchased OTC options and the assets used as "cover" for
written OTC options are illiquid securities and the Fund will treat these
assets as such.
4. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
5. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
6. Borrow money (except insofar as to the Fund may be deemed to have
borrowed by entrance into a reverse repurchase agreement), except that the
Fund may, but not to leverage the Fund's assets, borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
25
<PAGE>
7. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6). 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.
8. Issue senior securities as defined in the Act except insofar as
the Fund may be deemed to have issued a senior security by reason of
borrowing money in accordance with restrictions described above.
9. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objective and policies; (b) by investment in
repurchase agreements; or (c) by lending its portfolio securities.
10. Make short sales of securities.
11. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. 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.
12. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
13. Invest for the purpose of exercising control or management of any
other issuer.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the Investment
Manager is responsible for decisions to buy and sell securities for the Fund,
the selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts without
a stated commission, although the price of the security usually includes a
profit to the dealer. The Fund expects that securities will be purchased at
times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
Options and futures transactions will usually be effected through a broker and a
commission will be charged. On occasion, the Fund may also purchase certain
money market instruments directly from an issuer, in which case no commissions
or discounts are paid. During the fiscal years ended July 31, 1994, 1995 and
1996, the Fund paid a total of $627,783, $845,540 and $1,417,865, respectively,
in brokerage commissions.
The Investment Manager currently serves as investment manager to a number of
clients, including other investment companies, and may in the future act as
investment manager or adviser to others. It is the practice of the Investment
Manager to cause purchase and sale transactions to be allocated among the Fund
and others whose assets it manages in such manner as it deems equitable. In
making such allocations among the Fund and other client accounts, various
factors may be considered, including the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client
26
<PAGE>
accounts. In the case of certain initial and secondary public offerings, the
Investment Manager may utilize a pro rata allocation process based on the size
of the Dean Witter Funds involved and the number of shares available from the
public offering.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager from obtaining a high quality of
brokerage and research services. In seeking to determine the reasonableness of
brokerage commissions paid in any transaction, the Investment Manager relies
upon its experience and knowledge regarding commissions generally charged by
various brokers and on its judgment in evaluating the brokerage and research
services received from the broker effecting the transaction. Such determinations
are necessarily subjective and imprecise, as in most cases an exact dollar value
for those services is not ascertainable.
In seeking to implement the Fund's policies, the Investment Manager effects
transactions with those brokers and dealers who the Investment Manager believes
provide the most favorable prices and are capable of providing efficient
executions. If the Investment Manager believes such prices and executions are
obtainable from more than one broker or dealer, it may give consideration to
placing portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager. Such services
may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities. During the
fiscal year ended July 31, 1996, the Fund directed the payment of $1,266,052 in
brokerage commissions in connection with transactions in the aggregate amount of
$1,018,524,409 to brokers because of research services provided.
The information and services received by the Investment Manager from brokers
and dealers may be of benefit to the Investment Manager in the management of
accounts of some of its other clients and may not in all cases benefit the Fund
directly. While the receipt of such information and services is useful in
varying degrees and would generally reduce the amount of research or services
otherwise performed by the Investment Manager and thereby reduce its expenses,
it is of indeterminable value and the management fee paid to the Investment
Manager is not reduced by any amount that may be attributable to the value of
such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit such transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR and other affiliated brokers and dealers. In order for an
affiliated broker or dealer to effect any portfolio transactions for the Fund,
the commissions, fees or other remuneration received by the affiliated broker or
dealer must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow the affiliated broker or
dealer to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested" persons of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or
27
<PAGE>
other remuneration paid to an affiliated broker or dealer are consistent with
the foregoing standard. The Fund does not reduce the management fee it pays to
the Investment Manager by any amount of the brokerage commissions it may pay to
an affiliated broker or dealer. During the fiscal years ended July 31, 1994,
1995 and 1996, the Fund paid a total of $22,810, $84,770 and $105,265,
respectively, in brokerage commissions to DWR. The brokerage commissions paid to
DWR represented approximately 7.42% of the total brokerage commissions paid by
the Fund for the fiscal year ended July 31, 1996 and were paid on account of
transactions having an aggregate dollar value equal to approximately 8.28% of
the aggregate dollar value of all portfolio transactions of the Fund during the
period for which commissions were paid.
During the fiscal year ended July 31, 1996, the Fund purchased bonds issued
by PaineWebber Inc. and Donaldson, Lufkin & Jenrette Securities and common stock
issued by Morgan Stanley Group Inc. and Merrill Lynch & Co. At July 31, 1996,
the Fund held a bond issued by PaineWebber Inc. and common stock issued by
Morgan Stanley Group Inc. and Merrill Lynch & Co. with market values of
$5,116,369, $4,387,500 and $3,924,375, respectively. These issuers were among
the ten brokers or the ten dealers which executed transactions for or with the
Fund in the largest dollar amounts during the fiscal year ended July 31, 1996.
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDWD. The Trustees of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Trustees"), approved, at their meeting held on June 30, 1997, the
current Distribution Agreement appointing the Distributor exclusive distributor
of the Fund's shares and providing for the Distributor to bear distribution
expenses not borne by the Fund. By its terms, the Distribution Agreement has an
initial term ending April 30, 1998, and will remain in effect from year to year
thereafter if approved by the Trustees.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and the Distributor have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. Under the Distribution Agreement, the
Distributor uses its best efforts in rendering services to the Fund, but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations, the Distributor is not liable to the Fund or any
of its shareholders for any error of judgement or mistake of law or for any act
or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), pursuant to which each Class, other than Class D, pays the
Distributor compensation accrued daily and payable monthly at the following
annual rates: 0.25% and 1.0% of the average daily net assets of Class A and
Class C, respectively, and, with respect to Class B, (i) 1.0% of the lesser of:
(a) the average daily
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<PAGE>
aggregate gross sales of the Fund's Class B 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 Class B shares redeemed since the implementation of the Plan upon
which a contingent deferred sales charge has been imposed or upon which such
charge has been waived, or (b) the average daily net assets of Class B
attributable to shares issued, net of related shares redeemed, since the
implementation of the Plan; plus (ii) 0.25% of the average daily net assets of
Class B attributable to shares issued, net of related shares redeemed, prior to
implementation of the Plan. The Distributor also receives the proceeds of
front-end sales charges and of contingent deferred sales charges imposed on
certain redemptions of shares, which are separate and apart from payments made
pursuant to the Plan (see "Purchase of Fund Shares" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received approximately
$1,294,000, $1,775,000 and $1,662,000 in contingent deferred sales charges for
the fiscal years ended July 31, 1994, 1995 and 1996, respectively, none of which
was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class's average daily net assets are
currently each characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). The "service fee" is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by a Class, if any, is characterized as an "asset-based
sales charge" as such is defined by the aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Trustees, including all of
the Trustees who are not "interested persons" of the Fund (as defined in the
Act) and who had or have no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on the Plan, on July 27, 1989, and by
the shareholders holding a majority, as defined in the Act, of the outstanding
shares of the Fund, at the Fund's Special Meeting of Shareholders held on
November 8, 1989. The Plan amended and restated the Fund's initial Plan of
Distribution which had been in effect from August 26, 1988 through November 7,
1989.
At their meeting held on October 30, 1992, the Trustees of the Fund,
including all of the Independent 12b-1 Trustees, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
fact that upon an internal reorganization the share distribution activities
theretofore performed for the Fund by DWR were assumed by the Distributor and
DWR's sales activities are now being performed pursuant to the terms of a
selected dealer agreement between the Distributor and DWR. The amendments
provide that payments under the Plan will be made to the Distributor rather than
to DWR as before the amendment, and that the Distributor in turn is authorized
to make payments to DWR, its affiliates or other selected broker-dealers (or
direct that the Fund pay such entities directly). The Distributor is also
authorized to retain part of such fee as compensation for its own
distribution-related expenses. At their meeting held on April 28, 1993, the
Trustees, including a majority of the Independent 12b-1 Trustees, also approved
certain technical amendments to the Plan in connection with amendments adopted
by the National Association of Securities Dealers, Inc. to its Rules of the
Association. At their meeting held on December 19, 1995, the shareholders of the
Fund approved an amendment to the Plan to permit payments to be made under the
Plan with respect to distribution expenses incurred in connection with the
distribution of shares of an investment company whose assets are acquired by the
Fund in a tax-free reorganization. At their meeting held on June 30, 1997, the
Trustees, including a majority of the Independent 12b-1 Trustees, approved
amendments to the Plan to reflect the multiple-class structure for the Fund,
which took effect on July 28, 1997.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report provided
by the Distributor of the amounts expended by the Distributor under the Plan and
the purpose for which such expenditures were made. The Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended July 31,
1996, of $9,851,971. This amount is equal to 0.87% of the Fund's average daily
net assets for the fiscal year and
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<PAGE>
was calculated pursuant to clauses (i)(a) and (ii) of the compensation formula
under the Plan. This amount is treated by the Fund as an expense in the year it
is accrued. This amount represents amounts paid by Class B only; there were no
Class A or Class C shares outstanding on such date.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set forth
in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the account executives or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by 401(k) plans or other
employer-sponsored plans qualified under Section 401(a) of the Internal Revenue
Code for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") serves as Trustee or the 401(k) Support Services Group of DWR serves
as recordkeeper, the Investment Manager compensates DWR's account executives by
paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.25% of the current value (not including reinvested
dividends or distributions) of the amount sold in all cases. In the case of
retirement plans qualified under Section 401(k) of the Internal Revenue Code and
other employer-sponsored plans qualified under Section 401(a) of the Internal
Revenue Code for which DWTC or DWTFSB serves as Trustee or the 401(k) Support
Services Group of DWR serves as recordkeeper, and which plans are opened on or
after July 28, 1997, DWR compensates its account executives by paying them, from
its own funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value of
the respective accounts for which they are the account executives of record.
With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of up
to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid if
the Class D shares are redeemed in the first year and a chargeback of 50% of the
amount paid if the Class D shares are redeemed in the second year after
purchase. The Investment Manager also compensates DWR's account executives by
paying them, from its own funds, an annual residual commission, currently a
residual of up to 0.10% of the current value of the respective accounts for
which they are the account executives of record (not including accounts of
participants in the InterCapital mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including: (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund share sales. The distribution fee
that the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred on behalf of the Fund and, in the case of Class B
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<PAGE>
shares, opportunity costs, such as the gross sales credit and an assumed
interest charge thereon ("carrying charge"). In the Distributor's reporting of
the distribution expenses to the Fund, in the case of Class B shares, such
assumed interest (computed at the "broker's call rate") has been calculated on
the gross sales credit as it is reduced by amounts received by the Distributor
under the Plan and any contingent deferred sales charges received by the
Distributor upon redemption of shares of the Fund. No other interest charge is
included as a distribution expense in the Distributor's calculation of
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $9,851,971 accrued under the Plan for the fiscal
year ended July 31, 1996 to the Distributor. The Distributor and DWR estimate
that they have spent, pursuant to the Plan, $77,907,578 on behalf of the Fund
since the inception of the Fund. It is estimated that this amount was spent in
approximately the following ways: (i) 3.01% ($2,345,917)--advertising and
promotional expenses; (ii) 0.31% ($240,658) printing of prospectuses for
distribution to other than current shareholders; and (iii) 96.68%
($75,321,003)--other expenses, including the gross sales credit and the carrying
charge, of which 6.62% ($4,983,371) represents carrying charges, 30.10%
($22,671,872) represents commission credits to DWR branch offices for payments
of commissions to account executives, 45.43% ($34,221,158) represents overhead
and other branch office distribution-related expenses, and 17.85% ($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. These amounts represent
amounts paid by Class B only; there were no Class A or Class C shares
outstanding on such date.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Trustees, including
a majority of the Independent 12b-1 Trustees. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(for Class C) may be reimbursed without prior determination. In the event that
the Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Trustees will
review a quarterly budget of projected distribution expenses to be incurred on
behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund that
in the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by DWR
which arise from it having advanced monies without having received the amount of
any sales charges imposed at the time of sale of the Fund's Class B shares,
totalled $37,253,459 as of July 31, 1996. Because there is no requirement under
the Plan that the Distributor be reimbursed for all expenses with respect to
Class B shares 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 distribution expenses in excess of
payments made to the Distributor under the Plan and the proceeds of contingent
deferred sales charges paid by
31
<PAGE>
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales charges.
No interested person of the Fund or any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, had any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR, DWSC or certain of their employees may be deemed
to have such interest as a result of benefits derived from the successful
operation of the Plan or as a result of receiving a portion of the amounts
expended thereunder by the Fund.
Under its terms, the Plan had an initial term ending April 30, 1990 and will
continue from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees in the manner described above. Prior to the
Board's approval of amendments to the Plan to reflect the multiple-class
structure for the Fund, the most recent continuance of the Plan for one year,
until April 30, 1998, was approved by the Trustees of the Fund, including a
majority of the Independent 12b-1 Trustees, at a meeting of the Trustees held on
April 24, 1997. Prior to approving the continuation of the Plan, the Trustees
requested and received from the Distributor and reviewed all information which
they deemed necessary to arrive at an informed determination. In making their
determination to continue the Plan, the Trustees considered: (1) the Fund's
experience under the Plan and whether such experience indicates that the Plan is
operating as anticipated; (2) the benefits the Fund had obtained, was obtaining
and would be likely to obtain under the Plan; and (3) what services had been
provided and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees of the Fund, including each
of the Independent 12b-1 Trustees, determined that continuation of the Plan
would be in the best interest of the Fund and would have a reasonable likelihood
of continuing to benefit the Fund and its shareholders. In the Trustees'
quarterly review of the Plan, they will consider its continued appropriateness
and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
affected Class or Classes Fund, and all material amendments of the Plan must
also be approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without payment of any penalty, by vote of a majority of
the Trustees who are not interested persons of the Fund and who have no direct
or indirect financial interest in the operation of the Plan, or by a vote of a
majority of the outstanding voting securities of the Fund (as defined in the
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent 12b-1 Trustees shall be committed to the discretion of the
Independent 12b-1 Trustees.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As stated in the Prospectus, short-term securities with remaining maturities
of sixty days or less at the time of purchase are valued at amortized cost,
unless the Trustees determine such does not reflect the securities' market
value, in which case these securities will be valued at their fair value as
determined by the Trustees. Other short-term debt securities will be valued on a
mark-to-market basis until such time as they reach a remaining maturity of sixty
days, whereupon they will be valued at amortized cost using their value on the
61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. Listed options on debt securities are valued at
the latest sale price on the exchange on which they are listed unless no sales
of such options have taken place that day, in which case they will be valued at
the mean between their latest bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale price
on the commodities exchange on which they trade unless the Trustees determine
32
<PAGE>
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Trustees. All other securities
and other assets are valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Trustees.
The net asset value per share for each Class of shares 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. The New York Stock Exchange currently
observes the following holidays: New Year's Day, Reverend Dr. Martin Luther King
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other Dean Witter Funds sold with
a front-end sales charge purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of
the Fund, the sales charge applicable to the $20,000 purchase would be 4.75% of
the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Dean Witter Trust Company (the "Transfer
Agent") fails to confirm the investor's represented holdings.
LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
33
<PAGE>
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other Dean Witter Funds
held by the shareholder which were previously purchased at a price including a
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") and the purchase of shares of other Dean Witter Funds will not be
included in determining whether the stated goal of a Letter of Intent has been
reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain employer-sponsored benefit plans, three years). However,
no CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption, plus (b)
the current net asset value of shares purchased through reinvestment of
dividends or distributions of the Fund or another Dean Witter Fund (see
"Shareholder Services-- Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Dean Witter front-end
sales charge funds, or (ii) shares of other Dean Witter Funds for which shares
of front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of the
investor's shares above the total amount of payments for the purchase of Fund
shares made during the preceding six (three) years. The CDSC will be paid to the
Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain employer-sponsored
benefit plans, three years) will be redeemed first. In the event the redemption
amount exceeds such increase in value, the next portion of the amount redeemed
will be the amount which represents the net asset value of the investor's shares
purchased more than six (three) years prior to the redemption and/or shares
purchased through reinvestment of dividends or distributions and/or shares
acquired in exchange for shares of Dean Witter front-end sales charge funds, or
for shares of other Dean Witter funds for which shares of front-end sales charge
funds have been exchanged. A portion of the amount redeemed which exceeds an
amount which represents both such increase in value and the value of shares
purchased more than six years (or, in the case of shares held by certain
employer-sponsored benefit plans, three years) prior to the redemption and/or
shares purchased through reinvestment of dividends or distributions and/or
shares acquired in the above-described exchanges will be subject to a CDSC.
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<PAGE>
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC 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>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund held by 401(k) plans or other employer-sponsored plans
qualified under Section 401(a) of the Internal Revenue Code for which DWTC or
DWTFSB serves as Trustee or the 401(k) Support Services Group of DWR serves as
recordkeeper and whose accounts are opened on or after July 28, 1997:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ---------------------------------------- --------------------------
<S> <C>
First................................... 2.0%
Second.................................. 2.0%
Third................................... 1.0%
Fourth and thereafter................... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain employer-sponsored benefit plans, three
years) of purchase which are in excess of these amounts and which redemptions do
not qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Transfer
Agent. This is an open account in which shares owned by the investor are
credited by the Transfer Agent in lieu of issuance of a share certificate. If a
share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder-instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a confirmation of
the transaction from the Fund or from DWR or other selected broker-dealer.
35
<PAGE>
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or the other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions.
TARGETED DIVIDENDS.-SM- In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end Dean Witter Fund
other than Dean Witter Strategist Fund or in another Class of Dean Witter
Strategist Fund. Such investment will be made as described above for automatic
investment in shares of the applicable Class of the Fund, at the net asset value
per share of the selected Dean Witter Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected Dean Witter Fund the next business day. To participate
in the Targeted Dividends program, shareholders should contact their DWR or
other selected broker-dealer account executive or the Transfer Agent.
Shareholders of the Fund must be shareholders of the selected Class of the Dean
Witter Fund targeted to receive investments from dividends at the time they
enter the Targeted Dividends program. Investors should review the prospectus of
the targeted Dean Witter Fund before entering the program.
EASYINVEST.-SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or capital gains distribution may invest such dividend or distribution
in shares of the applicable Class at net asset value, without the imposition of
a CDSC upon redemption, by returning the check or the proceeds to the Transfer
Agent within thirty days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset value
per share next determined after receipt of the check or the proceeds by the
Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly or quarterly amount.
36
<PAGE>
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent, or amounts credited to a shareholder's DWR or other
selected broker-dealer brokerage account, within five business days after the
date of redemption. The Withdrawal Plan may be terminated at any time by the
Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her account executive or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature guarantees
required in the manner described above. The shareholder may also terminate the
Withdrawal Plan at any time by written notice to the Transfer Agent. In the
event of such termination, the account will be continued as a regular
shareholder investment account. The shareholder may also redeem all or part of
the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
DIRECT INVESTMENT THROUGH TRANSFER AGENT. As discussed in the Prospectus, a
shareholder may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to Dean Witter Strategist Fund, and indicating the selected
Class, directly to the Fund's Transfer Agent. In the case of Class A shares,
after deduction of any applicable sales charge, the balance will be applied to
the purchase of Fund shares, and, in the case of shares of the other Classes,
the entire amount will be applied to the purchase of Fund shares, at the net
asset value per share next computed after receipt of the check or purchase
payment by the Transfer Agent. The shares so purchased will be credited to the
investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund
may exchange their shares for shares of the same Class of shares of any other
Dean Witter Multi-Class Fund without the imposition of any exchange fee. Shares
may also be exchanged for shares of any of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter Funds which are money market funds (the foregoing nine
funds are hereinafter referred to as the "Exchange Funds"). Class A shares may
also be exchanged for shares of Dean Witter Multi-State Municipal Series Trust
and Dean Witter Hawaii Municipal Trust, which are Dean Witter Funds sold with a
front-end sales charge ("FSC Funds"). Class B shares may also be exchanged for
shares of Dean Witter Global Short-Term Income Fund Inc., Dean Witter High
Income Securities and Dean Witter National Municipal Trust, which are Dean
Witter Funds offered with a CDSC ("CDSC 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.
37
<PAGE>
There is no waiting period for exchanges of shares acquired by exchange or
dividend reinvestment. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a Dean Witter
Multi-Class Fund or any CDSC Fund are exchanged for shares of an Exchange Fund,
the exchange is executed at no charge to the shareholder, without the imposition
of the CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period or
"year since purchase payment made" is frozen. When shares are redeemed out of
the Exchange Fund, they will be subject to a CDSC which would be based upon the
period of time the shareholder held shares in a Dean Witter Multi-Class Fund or
in a CDSC Fund. However, in the case of shares exchanged into an Exchange Fund
on or after April 23, 1990, upon a redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given in
an amount equal to the Exchange Fund 12b-1 distribution fees, if any, incurred
on or after that date which are attributable to those shares. Shareholders
acquiring shares of an Exchange Fund pursuant to this exchange privilege may
exchange those shares back into a Dean Witter Multi-Class Fund or a CDSC Fund
from the Exchange Fund, with no CDSC being imposed on such exchange. The holding
period previously frozen when shares were first exchanged for shares of the
Exchange Fund resumes on the last day of the month in which shares of a Dean
Witter Multi-Class Fund or of a CDSC Fund are reacquired. A CDSC is imposed only
upon an ultimate redemption, based upon the time (calculated as described above)
the shareholder was invested in a Dean Witter Multi-Class Fund or in a CDSC
Fund. In the case of exchanges of Class A shares which are subject to a CDSC,
the holding period also includes the time (calculated as described above) the
shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in a
CDSC Fund are exchanged for shares of a Dean Witter Multi-Class Fund, shares of
a CDSC Fund, shares of a FSC Fund, or shares of an Exchange Fund, the date of
purchase of the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments between
funds for purposes of the CDSC, the amount which represents the current net
asset value of shares at the time of the exchange which were (i) purchased more
than one, three or six years (depending on the CDSC schedule applicable to the
shares) prior to the exchange, (ii) originally acquired through reinvestment of
dividends or distributions and (iii) acquired in exchange for shares of FSC
Funds, or for shares of other Dean Witter Funds for which shares of FSC Funds
have been exchanged (all such shares called "Free Shares"), will be exchanged
first. After an exchange, all dividends earned on shares in an Exchange Fund
will be considered Free Shares. If the exchanged amount exceeds the value of
such Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time (except that, with respect to Class B
shares, if shares held for identical periods of time but subject to different
CDSC schedules are held in the same Exchange Privilege account, the shares of
that block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares of
the fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset
38
<PAGE>
value of, the exchanged non-Free Shares. If an exchange between funds would
result in exchange of only part of a particular block of non-Free Shares, then
shares equal to any appreciation in the value of the block (up to the amount of
the exchange) will be treated as Free Shares and exchanged first, and the
purchase payment for that block will be allocated on a pro rata basis between
the non-Free Shares of that block to be retained and the non-Free Shares to be
exchanged. The prorated amount of such purchase payment attributable to the
retained non-Free Shares will remain as the purchase payment for such shares,
and the amount of purchase payment for the exchanged non-Free Shares will be
equal to the lesser of (a) the prorated amount of the purchase payment for, or
(b) the current net asset value of, those exchanged non-Free Shares. Based upon
the procedures described in the Prospectus under the caption "Purchase of Fund
Shares," any applicable CDSC will be imposed upon the ultimate redemption of
shares of any fund, regardless of the number of exchanges since those shares
were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Dean Witter Liquid Asset
Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter New York
Municipal Money Market Trust and Dean Witter California Tax-Free Daily Income
Trust, although those funds may, at their discretion, accept initial investments
of as low as $1,000. The minimum initial investment for the Exchange Privilege
account of each Class is $10,000 for Dean Witter Short-Term U.S. Treasury Trust
although that fund may, in its discretion, accept initial investments as low as
$5,000. The minimum initial investment for the Exchange Privilege account of
each Class is $5,000 for Dean Witter Special Value Fund. The minimum initial
investment for the Exchange Privilege account of each Class of all other Dean
Witter Funds for which the Exchange Privilege is available is $1,000.) Upon
exchange into an Exchange Fund, the shares of that fund will be held in a
special Exchange Privilege Account separately from accounts of those
shareholders who have acquired their shares directly from that fund. As a
result, certain services normally available to shareholders of those funds,
including the check writing feature, will not be available for funds held in
that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days' prior written notice for
termination or material revision), provided that six months' prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds pursuant to the Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice at
times (a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c) when
an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, (d) during any
other period when the Securities and Exchange Commission by order so
39
<PAGE>
permits (provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in (b)
or (c) exist) or (e) if the Fund would be unable to invest amounts effectively
in accordance with its investment objective(s), policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of each Class 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 CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an accompanying
stock power, and the request for redemption, must be signed by the shareholder
or shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent to
the Fund's Transfer Agent, which will redeem the shares at their net asset value
next computed (see "Purchase of Fund Shares") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
computation will be redeemed at the next determined net asset value.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a new
prospectus.
REPURCHASE. As stated in the Prospectus, 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 after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means that
the share certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an emergency
exists as a result of which disposal by the Fund of securities owned by it is
not reasonably practicable or it is not reasonably practicable for the Fund
fairly to determine the value of its net assets, or (d) during any other period
when the Securities and Exchange Commission by order so permits; provided that
applicable rules and regulations of the Securities and Exchange Commission shall
govern as to whether the conditions prescribed in (b) or (c) exist. If the
shares to be redeemed have recently been purchased by check, payment of the
redemption proceeds may be delayed for the minimum time needed to verify that
the check used for investment has been honored (not more than fifteen days from
the time of receipt of
40
<PAGE>
the check by the Transfer Agent). Shareholders maintaining margin accounts with
DWR or another selected broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the margin
account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 35 days after the date of the
redemption or repurchase, reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with the
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and will notify shareholders that, following an election by the
Fund, the shareholders will be required to include such undistributed gains in
determining their taxable income and may claim their share of the tax paid by
the Fund as a credit against their individual federal income tax.
Because the Fund intends to distribute all of its net investment income and
net capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from net
investment income or 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. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior calendar
year.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than
twelve months. Gains or losses on the sale of securities held for twelve months
or less will be short-term capital gains or losses.
Gains or losses on the Fund's transactions, if any, in futures and
non-equity options generally are treated as 60% long-term and 40% short-term
capital gains or losses. When the Fund engages in futures transactions, various
tax regulations applicable to the Fund may have the effect of causing the Fund
to recognize a gain or loss for tax purposes before that gain or loss is
realized, or to defer recognition of a realized loss for tax purposes.
Recognition, for tax purposes, of an unrealized loss may result in a lesser
amount of the Fund's realized net gains being available for distribution.
41
<PAGE>
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of its 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 dividends received deduction.
Under current federal law, the Fund will receive net investment income in
the form of interest by virtue of holding Treasury bills, notes and bonds, and
will recognize income attributable to it from holding zero coupon Treasury
securities. Current federal tax law requires that a holder (such as the Fund) of
a zero coupon security accrue a portion of the discount at which the security
was purchased as income each year even though the Fund receives no interest
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year.
Accordingly, the Fund, to the extent it invests in zero coupon Treasury
securities, may be required to pay out as an income distribution each year an
amount which is greater than the total amount of cash receipts of interest the
Fund actually received. Such distributions will be made from the available cash
of the Fund or by liquidation of portfolio securities if necessary. If a
distribution or cash necessitates the liquidation of portfolio securities, the
Investment Manager will select which securities to sell. The Fund may realize a
gain or loss from such sales. In the event the Fund realizes net capital gains
from such transactions, its shareholders may receive a larger capital gain
distribution, if any, than they would in the absence of such transactions.
In computing net investment income, the Fund will not amortize premiums or
accrue discounts on fixed-income securities in the portfolio, except those
original issue discounts for which amortization is required for federal income
tax purposes. Additionally, with respect to market discounts on bonds, a portion
of any capital gain realized upon disposition may be characterized as taxable
ordinary income in accordance with the provisions of the Internal Revenue Code.
Realized gains and losses on security transactions are determined on the
identified cost method.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a distribution
record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent the
aggregate dividends received by the Fund would be eligible for the deduction if
the Fund were the shareholder claiming the dividends received deduction. The
amount of dividends paid by the Fund which may qualify for the dividends
received deduction is limited to the aggregate amount of qualifying dividends
which the Fund derives from its portfolio investments which the Fund has held
for a minimum period, usually 46 days. Any distributions made by the Fund will
not be eligible for the dividends received deduction with respect to shares
which are held by the shareholder for 45 days or less. Any long-term capital
gain distributions will also not be eligible for
42
<PAGE>
the dividends received deduction. The ability to take the dividends received
deduction will also be limited in the case of a Fund shareholder which incurs or
continues indebtedness which is directly attributable to its investment in the
Fund.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the portion eligible for the dividends received
deduction. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. These figures are
computed separately for Class A, Class B, Class C and Class D shares. The Fund's
"average annual total return" represents an annualization of the Fund's total
return over a particular period and is computed by finding the annual percentage
rate which will result in the ending redeemable value of a hypothetical $1,000
investment made at the beginning of a one, five or ten year period, or for the
period from the date of commencement of the Fund's operations, if shorter than
any of the foregoing. The ending redeemable value is reduced by any CDSC at the
end of the one, five or ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment, taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result. The average
annual total returns of the Fund for the fiscal year ended July 31, 1996, for
the five year period ended July 31, 1996 and for the period from October 31,
1988 (commencement of operations) through July 31, 1996 were 6.47%, 9.75% and
12.40%, respectively. These returns are for Class B only; there were no other
Classes of shares outstanding on such date.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge for Class A
or the deduction of the CDSC for each of Class B and Class C which, if
reflected, would reduce the performance quoted. For example, the average annual
total return of the Fund may be calculated in the manner described above, but
without deduction for any applicable sales charge. Based on this calculation,
the average annual total returns of the Fund for the fiscal year ended July 31,
1996, for the five year period ended July 31, 1996 and for the period October
31, 1988 through July 31, 1996 were 11.47%, 10.02% and 12.40%, respectively.
These returns are for Class B only; there were no other Classes of shares
outstanding on such date.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without the reduction for any sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total returns for the fiscal year ending July 31, 1996,
for the five year period ended July 31, 1996 and for the period October 31, 1988
through July 31, 1996 were 11.47%, 61.22% and 147.41%, respectively. These
returns are for Class B only; there were no other Classes of shares outstanding
on such date.
43
<PAGE>
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1 to
the Fund's aggregate total return to date (expressed as a decimal and without
taking into account the effect of any applicable CDSC) and multiplying by
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as the
case may be. Investments of $10,000, $50,000 and $100,000 in the Fund at
inception would have grown to $24,741, $123,705 and $ 247,410, respectively, at
July 31, 1996. This information is for Class B only; there were no other Classes
of shares outstanding on such date.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES OF THE FUND
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. All of the Trustees have been elected by the shareholders of the Fund,
most recently at a Special Meeting of Shareholders held on May 21, 1997. On that
date, Wayne E. Hedien was also elected as a Trustee of the Fund, with his term
to commence on September 1, 1997. The Trustees themselves have the power to
alter the number and the terms of office of the Trustees, and they may at any
time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that holders
of more than 50 percent of the shares voting can, if they choose, elect all
Trustees being selected, while the holders of the remaining shares would be
unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). The Trustees have not authorized any such
additional series or classes of shares other than as set forth in the
Prospectus.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his/her or its own
bad faith, willful misfeasance, gross negligence, or reckless disregard of his
his/her or its duties. It also provides that all third persons shall look solely
to the Fund's property for satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated, the Declaration of Trust
provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liabilities in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York, 10286 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by Federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and
44
<PAGE>
distributions on Fund shares and Agent for shareholders under various investment
plans described herein. Dean Witter Trust Company is an affiliate of Dean Witter
InterCapital Inc., the Fund's Investment Manager, and of Dean Witter
Distributors Inc., the Fund's Distributor. As Transfer Agent and Dividend
Disbursing Agent, Dean Witter Trust Company's responsibilities include
maintaining shareholder accounts, disbursing cash dividends and reinvesting
dividends, processing account registration changes, handling purchase and
redemption transactions, mailing propectuses and reports, mailing and tabulating
proxies, processing share certificate transactions, and maintaining shareholder
records and lists. For these services Dean Witter Trust Company receives a per
shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, a report showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by the independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on July 31. The financial statements of the Fund
must be audited at least once a year by independent accountants whose selection
is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The annual financial statements of the Fund for the year ended July 31, 1996
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
45
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (49.9%)
AEROSPACE & DEFENSE (1.3%)
100,000 General Motors Corp. (Class H).... $ 5,700,000
166,000 Honeywell, Inc.................... 8,798,000
25,700 Rockwell International Corp....... 1,349,250
-----------------
15,847,250
-----------------
ALUMINUM (0.7%)
150,000 Aluminum Co. of America........... 8,700,000
-----------------
AUTO PARTS (0.1%)
9,000 TRW, Inc.......................... 813,375
-----------------
AUTOMOTIVE (1.0%)
288,000 Chrysler Corp..................... 8,172,000
130,000 Ford Motor Co..................... 4,225,000
-----------------
12,397,000
-----------------
BANKS - MONEY CENTER (0.8%)
80,000 Citicorp.......................... 6,550,000
48,000 Morgan (J.P.) & Co., Inc.......... 4,128,000
-----------------
10,678,000
-----------------
BANKS - REGIONAL (0.4%)
20,000 Wells Fargo & Co.................. 4,657,500
-----------------
BEVERAGES - SOFT DRINKS (0.6%)
227,800 PepsiCo Inc....................... 7,204,175
-----------------
BROADCAST MEDIA (0.8%)
550,000 U.S. West Media Group*............ 9,487,500
-----------------
BROKERAGE (0.7%)
65,000 Merrill Lynch & Co., Inc.......... 3,924,375
90,000 Morgan Stanley Group, Inc......... 4,387,500
-----------------
8,311,875
-----------------
BUSINESS SYSTEMS (0.7%)
170,000 Electronic Data Systems Corp...... 8,988,750
-----------------
CHEMICALS (1.1%)
60,000 Dow Chemical Co................... 4,462,500
10,000 Du Pont (E.I.) de Nemours & Co.,
Inc............................. 807,500
290,000 Monsanto Co....................... 9,062,500
-----------------
14,332,500
-----------------
CHEMICALS - SPECIALTY (1.2%)
207,600 Georgia Gulf Corp................. 6,383,700
16,000 PPG Industries, Inc............... 788,000
200,000 Praxair, Inc...................... 7,675,000
12,000 Rohm & Haas Co.................... 714,000
-----------------
15,560,700
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS - EQUIPMENT &
SOFTWARE (1.1%)
261,400 Cisco Systems, Inc.*.............. $ 13,527,450
-----------------
COMPUTER EQUIPMENT (1.0%)
56,200 Komag Inc.*....................... 1,152,100
76,800 Seagate Technology, Inc.*......... 3,715,200
530,000 Teradyne, Inc.*................... 7,155,000
-----------------
12,022,300
-----------------
COMPUTER SERVICES (1.1%)
257,500 Diebold, Inc...................... 14,098,125
-----------------
COMPUTER SOFTWARE (1.3%)
73,400 Microsoft Corp.*.................. 8,642,850
200,000 Oracle Corp.*..................... 7,800,000
-----------------
16,442,850
-----------------
COMPUTERS (2.0%)
280,000 Dell Computer Corp.*.............. 15,505,000
250,000 Gateway 2000, Inc.*............... 10,000,000
-----------------
25,505,000
-----------------
COMPUTERS - SYSTEMS (1.7%)
195,800 Hewlett-Packard Co................ 8,615,200
44,000 International Business Machines
Corp............................ 4,746,500
150,000 Sun Microsystems, Inc.*........... 8,175,000
-----------------
21,536,700
-----------------
DRUGS & HEALTHCARE (1.3%)
160,000 Abbott Laboratories............... 7,040,000
194,744 Johnson & Johnson................. 9,299,026
-----------------
16,339,026
-----------------
ELECTRICAL EQUIPMENT (1.1%)
71,000 Emerson Electric Co............... 5,990,625
89,300 General Electric Co............... 7,356,087
-----------------
13,346,712
-----------------
ELECTRICAL HOUSEHOLD APPLIANCES (0.2%)
121,500 Maytag Corp....................... 2,430,000
-----------------
ENTERTAINMENT (1.2%)
200,000 Carnival Corp. (Class A).......... 5,375,000
330,000 Circus Circus Enterprises,
Inc.*........................... 10,147,500
-----------------
15,522,500
-----------------
FINANCIAL SERVICES (1.9%)
150,000 American Express Co............... 6,562,500
80,000 Beneficial Corp................... 4,320,000
240,000 Federal National Mortgage
Assoc........................... 7,620,000
140,000 Travelers Group, Inc.............. 5,915,000
-----------------
24,417,500
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FOODS (1.5%)
88,000 Campbell Soup Co.................. $ 5,973,000
150,000 General Mills, Inc................ 8,137,500
140,000 Quaker Oats Company (The)......... 4,480,000
-----------------
18,590,500
-----------------
FOREST PRODUCTS, PAPER & PACKAGING (1.5%)
254,000 Champion International Corp....... 10,731,500
210,000 International Paper Co............ 7,953,750
-----------------
18,685,250
-----------------
HARDWARE & TOOLS (0.8%)
250,000 Black & Decker Corp............... 9,187,500
36,000 Stanley Works..................... 1,026,000
-----------------
10,213,500
-----------------
HEALTHCARE - MISCELLANEOUS (1.5%)
554,000 Humana, Inc.*..................... 9,279,500
140,000 PacifiCare Health Systems (Class
B)*............................. 9,450,000
-----------------
18,729,500
-----------------
HOSPITAL MANAGEMENT (0.6%)
143,000 Columbia/HCA Healthcare Corp...... 7,328,750
-----------------
HOUSEHOLD PRODUCTS (0.8%)
126,700 Colgate-Palmolive Co.............. 9,945,950
9,700 Tambrands, Inc.................... 395,275
-----------------
10,341,225
-----------------
INDUSTRIALS (0.0%)
5,500 AlliedSignal, Inc................. 323,125
-----------------
INSURANCE (0.4%)
50,000 American International Group,
Inc............................. 4,706,250
-----------------
LABELS (0.1%)
17,000 Avery Dennison Corp............... 879,750
-----------------
MACHINERY - CONSTRUCTION &
MATERIALS (0.3%)
12,000 Johnson Controls, Inc............. 864,000
70,000 Parker-Hannifin Corp.............. 2,441,250
-----------------
3,305,250
-----------------
MEDICAL PRODUCTS & SUPPLIES (0.3%)
99,000 Baxter International, Inc......... 4,120,875
-----------------
METALS - MISCELLANEOUS (0.4%)
80,700 Phelps Dodge Corp................. 4,741,125
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OFFICE EQUIPMENT & SUPPLIES (0.7%)
200,000 Alco Standard Corp................ $ 8,750,000
-----------------
OIL DRILLING & SERVICES (1.2%)
360,000 Dresser Industries, Inc........... 9,720,000
70,000 Schlumberger, Ltd................. 5,600,000
-----------------
15,320,000
-----------------
OIL INTEGRATED - DOMESTIC (0.6%)
70,000 Atlantic Richfield Co............. 8,120,000
-----------------
OIL INTEGRATED - INTERNATIONAL (2.8%)
150,000 Chevron Corp...................... 8,681,250
130,000 Exxon Corp........................ 10,692,500
70,000 Mobil Corp........................ 7,726,250
90,000 Texaco, Inc....................... 7,650,000
-----------------
34,750,000
-----------------
PHARMACEUTICALS (1.9%)
128,400 American Home Products Corp....... 7,286,700
104,800 Lilly (Eli) & Co.................. 5,868,800
102,200 Merck & Co., Inc.................. 6,566,350
63,000 Pfizer, Inc....................... 4,402,125
-----------------
24,123,975
-----------------
PUBLISHING - NEWSPAPER (0.1%)
13,000 Gannett Co., Inc.................. 853,125
-----------------
RAILROADS (0.7%)
143,100 Conrail, Inc...................... 9,373,050
-----------------
RETAIL - DEPARTMENT STORES (0.6%)
100,000 Dayton-Hudson Corp................ 3,025,000
114,000 May Department Stores Co.......... 5,115,750
-----------------
8,140,750
-----------------
RETAIL - SPECIALTY (3.6%)
500,000 Bed Bath & Beyond, Inc.*.......... 10,937,500
144,000 Home Depot, Inc................... 7,272,000
189,360 Payless ShoeSource, Inc.*......... 6,130,530
700,000 Pier 1 Imports, Inc............... 11,812,500
450,000 Price/Costco, Inc.*............... 9,168,750
-----------------
45,321,280
-----------------
RETAIL - SPECIALTY APPAREL (0.2%)
100,000 Gap, Inc.......................... 2,975,000
-----------------
SAVINGS & LOAN ASSOCIATIONS (1.7%)
400,000 California Federal Bank*.......... 9,050,000
110,000 Golden West Financial Corp........ 6,105,000
395,000 Roosevelt Financial Group, Inc.... 6,320,000
-----------------
21,475,000
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHIPPING (0.7%)
365,800 APL Ltd........................... $ 8,550,575
-----------------
SHOES (0.7%)
80,000 Nike, Inc. (Class B).............. 8,230,000
-----------------
STEEL & IRON (0.5%)
637,000 Bethlehem Steel Corp.*............ 6,370,000
-----------------
TELECOMMUNICATIONS (0.9%)
130,000 ITT Corp.*........................ 7,377,500
80,000 Newbridge Networks Corp.*
(Canada)........................ 3,480,000
-----------------
10,857,500
-----------------
TEXTILES - APPAREL MANUFACTURERS (0.1%)
50,900 Liz Claiborne, Inc................ 1,660,613
-----------------
TOBACCO (0.9%)
106,000 Philip Morris Companies, Inc...... 11,090,250
-----------------
UTILITIES - GAS (0.5%)
150,000 Williams Companies, Inc........... 6,881,250
-----------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $533,479,736).... 626,974,256
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (16.3%)
BANKS (3.0%)
$ 5,000 Banque Paribas of New York
8.35% due 06/15/07.............. 5,168,550
4,950 CoreStates Financial Corp.
9.625% due 02/15/01............. 5,442,129
7,000 First Nationwide Bank
10.00% due 10/01/06............. 7,778,960
5,000 Fleet Financial Group, Inc.
8.125% due 07/01/04............. 5,204,400
5,000 Landeskreditbank NV 7.875% due
04/15/04 (Germany).............. 5,210,850
4,000 Midland Bank PLC
7.625% due 06/15/06
(United Kingdom)................ 4,022,960
5,000 National Bank of Canada 8.125% due
08/15/04 (Canada)............... 5,182,900
-----------------
38,010,749
-----------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BROADCAST MEDIA (0.9%)
$ 10,000 Time Warner, Inc.
9.625% due 05/01/02............. $ 10,943,100
-----------------
BROKERAGE (1.2%)
5,000 Lehman Brothers Holdings,
Inc. 7.625% due 07/15/99........ 5,082,750
5,000 Lehman Brothers Holdings,
Inc. 8.75% due 03/15/05......... 5,296,350
4,950 Paine Webber Group, Inc.
8.25% due 05/01/02.............. 5,116,369
-----------------
15,495,469
-----------------
CABLE TELEVISION EQUIPMENT (0.4%)
5,000 Continental Cablevision, Inc.
8.30% due 05/15/06.............. 5,123,200
-----------------
FINANCIAL (2.9%)
3,000 Arkwright CSN Trust -
144A** 9.625% due 08/15/26...... 3,075,000
5,000 Commercial Credit Co.
10.00% due 05/15/09............. 5,978,150
5,000 Price Reit Inc.
7.25% due 11/01/00.............. 4,932,150
4,950 RHG Finance Corp.
8.875% due 10/01/05............. 5,097,114
5,000 Rodamco NV 7.30% due 05/15/05
(Netherlands)................... 4,971,500
7,000 Sun Canada Financial Co. -
144A** 6.625% due 12/15/07...... 6,510,000
5,800 Terra Nova Holdings
10.75% due 07/01/05
(United Kingdom)................ 6,467,000
-----------------
37,030,914
-----------------
FINANCIAL SERVICES (2.2%)
4,835 American Annuity Group
9.50% due 08/15/01.............. 5,076,750
9,900 Conseco, Inc.
10.50% due 12/15/04............. 11,288,673
6,000 Household Finance Corp.
7.65% due 05/15/07.............. 6,082,320
5,000 Lumbermens Mutual Casualty -
144A**
9.15% due 07/01/26.............. 5,150,000
-----------------
27,597,743
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FOREIGN GOVERNMENT AGENCY (0.8%)
$ 5,000 Quebec Province 7.125% due
02/09/24 (Canada)............... $ 4,576,450
5,000 Quebec Province 8.625% due
12/01/26 (Canada)............... 5,369,700
-----------------
9,946,150
-----------------
HOSPITAL MANAGEMENT (0.4%)
4,900 Columbia/HCA Healthcare
Corp. 7.50% due 11/15/95........ 4,618,250
-----------------
INDUSTRIALS (2.8%)
1,000 Jet Equipment Trust - 144A**
10.91% due 08/15/14............. 1,120,000
3,000 Joy Technologies Inc.
10.25% due 09/01/03............. 3,300,750
4,950 Lockheed Martin Corp.
7.70% due 06/15/08.............. 5,045,634
5,000 Mitchell Energy & Development
Corp.
8.00% due 07/15/99.............. 5,059,250
5,153 Pennzoil Co.
10.125% due 11/15/09............ 6,060,752
5,000 Reliance Industries PLC - 144A**
9.375% due 06/24/26 (India)..... 5,150,000
5,000 Reliance Industries Ltd. - 144A**
10.50% due 08/06/46 (India)..... 5,043,750
4,950 WMX Technologies Inc.
7.10% due 08/01/26.............. 4,980,938
-----------------
35,761,074
-----------------
RETAIL - DEPARTMENT STORES (0.4%)
5,000 Dayton-Hudson Co.
7.50% due 07/15/06.............. 4,968,600
-----------------
TELECOMMUNICATIONS (0.7%)
3,000 TCI Communications, Inc.
8.75% due 08/01/15.............. 2,915,580
5,000 Tele-Communications, Inc.
9.80% due 02/01/12.............. 5,359,800
-----------------
8,275,380
-----------------
TOBACCO (0.2%)
3,000 RJR Nabisco, Inc.
8.75% due 08/15/05.............. 2,945,100
-----------------
UTILITIES - ELECTRIC (0.4%)
4,950 Niagara Mohawk Power
Corp. 9.25% due 10/01/01........ 4,870,157
-----------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $207,129,655).... 205,585,886
-----------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCIES OBLIGATIONS (22.5%)
$ 5,000 Federal Home Loan Mortgage Corp.
6.75% due 02/01/00.............. $ 4,993,750
480 Federal Home Loan Mortgage Corp.
8.50% due 07/01/02.............. 489,510
206 Federal Home Loan Mortgage Corp.
9.00% due 08/01/02.............. 212,264
2,500 Private Export Funding Corp. 7.95%
due 11/01/06.................... 2,606,000
3,000 U.S. Treasury Bond
6.25% due 08/15/23.............. 2,700,937
15,850 U.S. Treasury Bond
7.625% due 02/15/25............. 16,954,547
17,850 U.S. Treasury Bond
6.875% due 08/15/25............. 17,523,680
23,000 U.S. Treasury Note
6.00% due 08/31/97.............. 22,996,406
32,050 U.S. Treasury Note
6.50% due 04/30/99.............. 32,160,172
5,000 U.S. Treasury Note
6.375% due 05/15/99............. 5,000,000
25,000 U.S. Treasury Note
6.875% due 08/31/99............. 25,300,781
8,500 U.S. Treasury Note
7.875% due 11/15/99............. 8,850,625
35,000 U.S. Treasury Note
7.75% due 12/31/99.............. 36,367,188
5,000 U.S. Treasury Note
6.875% due 03/31/00............. 5,060,937
15,000 U.S. Treasury Note
6.75% due 04/30/00.............. 15,119,531
25,000 U.S. Treasury Note
5.625% due 11/30/00............. 24,148,437
7,000 U.S. Treasury Note
7.50% due 11/15/01.............. 7,278,906
18,950 U.S. Treasury Note
5.75% due 08/15/03.............. 17,966,969
15,000 U.S. Treasury Note
7.25% due 08/15/04.............. 15,464,063
7,000 U.S. Treasury Note
7.50% due 02/15/05.............. 7,330,313
5,000 U.S. Treasury Note
6.50% due 05/15/05.............. 4,912,500
10,000 U.S. Treasury Note
7.00% due 07/15/06.............. 10,143,750
-----------------
TOTAL U.S. GOVERNMENT & AGENCIES
OBLIGATIONS
(IDENTIFIED COST $289,198,174).... 283,581,266
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (16.5%)
U.S. GOVERNMENT AGENCIES
$ 49,300 Federal Home Loan Banks 5.62% due
08/01/96........................ $ 49,300,000
98,961 Federal Home Loan Mortgage Corp.
5.18% - 5.21% due
08/09/96 - 08/15/96............. 98,804,244
60,000 Tennessee Valley Authority 5.20%
due 08/02/96 - 08/06/96......... 59,974,000
-----------------
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $208,078,244)..... 208,078,244
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST $1,237,885,809) (b).... 105.2% 1,324,219,652
LIABILITIES IN EXCESS OF CASH AND OTHER
ASSETS.................................. (5.2) (64,914,879)
------- --------------
NET ASSETS.............................. 100.0% $1,259,304,773
------- --------------
------- --------------
<FN>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $1,239,843,014; the
aggregate gross unrealized appreciation is $107,346,687 and the aggregate
gross unrealized depreciation is $22,970,049, resulting in net unrealized
appreciation of $84,376,638.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,237,885,809).......................... $1,324,219,652
Cash........................................................ 39,461
Receivable for:
Investments sold........................................ 12,725,365
Interest................................................ 9,611,323
Shares of beneficial interest sold...................... 1,413,846
Dividends............................................... 550,164
Principal paydowns...................................... 13,558
Receivable from affiliate................................... 61,659
Prepaid expenses and other assets........................... 13,389
--------------
TOTAL ASSETS........................................... 1,348,648,417
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 86,454,606
Plan of distribution fee................................ 1,036,320
Shares of beneficial interest repurchased............... 812,502
Investment management fee............................... 638,563
Accrued expenses and other payables......................... 401,653
--------------
TOTAL LIABILITIES...................................... 89,343,644
--------------
NET ASSETS:
Paid-in-capital............................................. 1,087,622,356
Net unrealized appreciation................................. 86,333,843
Accumulated undistributed net investment income............. 4,346,240
Accumulated undistributed net realized gain................. 81,002,334
--------------
NET ASSETS............................................. $1,259,304,773
--------------
--------------
NET ASSET VALUE PER SHARE,
78,583,914 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$16.02
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 1996
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 26,559,194
Dividends................................................... 12,772,090
------------
TOTAL INCOME........................................... 39,331,284
------------
EXPENSES
Plan of distribution fee.................................... 9,851,971
Investment management fee................................... 6,414,184
Transfer agent fees and expenses............................ 1,123,176
Registration fees........................................... 211,708
Shareholder reports and notices............................. 123,956
Custodian fees.............................................. 79,221
Professional fees........................................... 67,457
Trustees' fees and expenses................................. 19,406
Other....................................................... 15,923
------------
TOTAL EXPENSES......................................... 17,907,002
------------
NET INVESTMENT INCOME.................................. 21,424,282
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 97,968,604
Net change in unrealized appreciation....................... (3,107,509)
------------
NET GAIN............................................... 94,861,095
------------
NET INCREASE................................................ $116,285,377
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE YEAR ENDED
ENDED JULY 31,
JULY 31, 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 21,424,282 $ 18,982,173
Net realized gain........................................... 97,968,604 56,953,694
Net change in unrealized appreciation....................... (3,107,509) 45,494,865
------------- ------------
NET INCREASE........................................... 116,285,377 121,430,732
------------- ------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (21,021,721) (15,997,877)
Net realized gain........................................... (70,591,947) (25,273,043)
------------- ------------
TOTAL.................................................. (91,613,668) (41,270,920)
------------- ------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... 357,037,738 (8,813,901)
------------- ------------
TOTAL INCREASE......................................... 381,709,447 71,345,911
NET ASSETS:
Beginning of period......................................... 877,595,326 806,249,415
------------- ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$4,346,240 AND $3,987,969, RESPECTIVELY)................ $1,259,304,773 $877,595,326
------------- ------------
------------- ------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Strategist Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end
management investment company. The Fund's investment objective is to maximize
the total return of its investments. The Fund seeks to achieve its objective by
actively allocating its assets among major asset categories of equity and
fixed-income securities and money market instruments. The Fund was organized as
a Massachusetts business trust on August 5, 1988 and commenced operations on
October 31, 1988.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York or American Stock Exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price; (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees; (4) certain of
the Fund's portfolio securities may be valued by an outside pricing service
approved by the Trustees. The pricing service utilizes a matrix system
incorporating security quality, maturity and coupon as the evaluation model
parameters, and/or research and evaluations by its staff, including review of
broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at the time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized cost based
on their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.
54
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, CONTINUED
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with Dean Witter InterCapital
Inc. (the "Investment Manager"), the Fund pays the Investment Manager a
management fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined at the close of each
business day: 0.60% to the portion of daily net assets not exceeding $500
million; 0.55% to the portion of daily net assets exceeding $500 million but not
exceeding $1 billion; 0.50% to the portion exceeding $1 billion but not
exceeding $1.5 billion. Effective May 1, 1996, the annual rate was reduced to
0.475% to the portion of daily net assets in excess of $1.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
55
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, CONTINUED
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the implementation of the Plan
on November 8, 1989 (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's implementation of the Plan upon which a
contingent deferred sales charge has been imposed or upon which such charge has
been waived; or (b) the Fund's average daily net assets attributable to shares
issued, net of related shares redeemed, since implementation of the Plan.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution of
the Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to, and expenses of, the account executives of
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses; printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered, may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
Although there is no legal obligation for the Fund to pay expenses incurred in
excess of payments made to the Distributor under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares;
if for any reason the Plan is terminated, the Trustees will consider at that
time the manner in which to treat such expenses. The Distributor has advised the
Fund that such excess amounts, including carrying charges, totaled $37,253,459
at July 31, 1996. 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.
56
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, CONTINUED
The Distributor has informed the Fund that for the year ended July 31, 1996, it
received approximately $1,662,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended July 31, 1996 aggregated
$1,911,012,938 and $1,823,861,647, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $439,350,625 and
$365,547,234, respectively. For the same period, the Fund incurred brokerage
commissions with DWR of approximately $105,000 for transactions executed on
behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At July 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $106,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the year ended July 31, 1996 included in
Trustees' fees and expenses in the Statement of Operations amounted to $1,205.
At July 31, 1996, the Fund had an accrued pension liability of $91,788 which is
included in accrued expenses in the Statement of Assets and Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1996 JULY 31, 1995
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 15,621,003 $ 252,119,338 9,276,510 $137,319,676
Reinvestment of dividends and distributions...................... 5,419,616 83,797,500 2,728,962 38,146,103
Shares issued in connection with the acquisition of Dean Witter
Managed Assets Trust (Note 6)................................... 20,952,000 322,593,266 -- --
----------- -------------- ----------- ------------
41,992,619 658,510,104 12,005,472 175,465,779
Repurchased...................................................... (18,698,191) (301,472,366) (12,582,171) (184,279,680)
----------- -------------- ----------- ------------
Net increase (decrease).......................................... 23,294,428 $ 357,037,738 (576,699) $ (8,813,901)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
57
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996, CONTINUED
6. ACQUISITION OF DEAN WITTER MANAGED ASSETS TRUST
As of the close of business on December 22, 1995, the Fund acquired all the net
assets of Dean Witter Managed Assets Trust ("Managed Assets") pursuant to a plan
of reorganization approved by the shareholders of Managed Assets on December 19,
1995. The acquisition was accomplished by a tax-free exchange of 20,952,000
shares of the Fund at a net asset value of $15.39 for 30,683,052 shares of
Managed Assets. The net assets of the Fund and Managed Assets immediately before
the acquisition were $935,510,174 and $322,593,266, respectively, including for
Managed Assets, unrealized appreciation of $6,077,572, distributions in excess
of net investment income of $158,230 and distributions in excess of net realized
gain of $16,410. Immediately after the acquisition, the combined net assets of
the Fund amounted to $1,258,103,440.
7. FEDERAL INCOME TAX STATUS
As of July 31, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences attributable to nondeductible merger expenses. To reflect
reclassifications arising from permanent book/tax differences for the year ended
July 31, 1996, paid-in-capital was charged and accumulated undistributed net
investment income was credited $113,940.
58
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 31,
FOR THE YEAR ENDED JULY 31 1988*
------------------------------------------------------------------------------ THROUGH
1996 1995 1994 1993 1992 1991 1990 JULY 31, 1989
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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
---------- --------- --------- ---------- --------- --------- ---------- ------
---------- --------- --------- ---------- --------- --------- ---------- ------
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 -- -- -- -- -- -- --
</TABLE>
<TABLE>
<C> <S>
- ---------------------
* 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER STRATEGIST FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER STRATEGIST FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter Strategist Fund (the
"Fund") at July 31, 1996, the results of its operations for the year then ended,
the changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the seven years in the period then
ended and for the period October 31, 1988 (commencement of operations) through
July 31, 1989, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at July
31, 1996 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
SEPTEMBER 13, 1996
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended July 31, 1996, the Fund paid to its
shareholders $0.96 per share from long-term capital gains. For
such period 35.48% of the income dividend qualified for the
dividends received deduction available to corporations.
60
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (53.5%)
AEROSPACE & DEFENSE (5.7%)
270,000 General Motors Corp. (Class H).... $ 16,470,000
194,000 Honeywell, Inc.................... 13,992,250
60,000 Litton Industries, Inc.*.......... 11,700,000
140,000 Lockheed Martin Corp.............. 12,880,000
160,000 McDonnell Douglas Corp............ 10,760,000
280,000 Thiokol Corp...................... 15,680,000
-----------------
81,482,250
-----------------
AIRLINES (0.5%)
50,000 Continental Airlines, Inc. (Class
B)*............................. 6,968,750
-----------------
ALUMINUM (0.7%)
150,000 Aluminum Co. of America........... 10,350,000
-----------------
APPAREL (0.1%)
31,000 Liz Claiborne, Inc................ 1,305,875
-----------------
AUTO PARTS (0.1%)
18,000 TRW, Inc.......................... 913,500
-----------------
AUTOMOTIVE (0.7%)
288,000 Chrysler Corp..................... 10,044,000
11,700 Ford Motor Co..................... 375,862
-----------------
10,419,862
-----------------
BANKS (0.8%)
37,000 Wells Fargo & Co.................. 11,275,750
-----------------
BANKS - MONEY CENTER (0.8%)
102,000 Citicorp.......................... 11,870,250
-----------------
BEVERAGES - SOFT DRINKS (0.6%)
227,800 PepsiCo Inc....................... 7,944,525
-----------------
BROKERAGE (1.0%)
14,000 Morgan Stanley Group, Inc......... 799,750
266,666 Travelers Group, Inc.............. 13,966,632
-----------------
14,766,382
-----------------
CABLE/CELLULAR (0.7%)
550,000 U.S. West Media Group*............ 10,243,750
-----------------
CHEMICALS (2.0%)
110,000 Du Pont (E.I.) de Nemours & Co.... 12,058,750
220,000 Monsanto Co....................... 8,332,500
16,000 PPG Industries, Inc............... 856,000
150,000 Praxair, Inc...................... 6,956,250
-----------------
28,203,500
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
COMMUNICATIONS - EQUIPMENT & SOFTWARE (1.7%)
180,000 Cisco Systems, Inc.*.............. $ 12,532,500
252,400 Comsat Corp....................... 6,814,800
160,000 Newbridge Networks Corp.*
(Canada)........................ 5,520,000
-----------------
24,867,300
-----------------
COMPUTER SOFTWARE (1.6%)
146,800 Microsoft Corp.*.................. 14,955,250
200,000 Oracle Corp.*..................... 7,750,000
-----------------
22,705,250
-----------------
COMPUTERS (2.0%)
383,500 Apple Computer, Inc.*............. 6,327,750
200,000 Dell Computer Corp.*.............. 13,225,000
150,000 Gateway 2000, Inc.*............... 9,150,000
-----------------
28,702,750
-----------------
COMPUTERS - PERIPHERAL EQUIPMENT (0.6%)
153,600 Seagate Technology, Inc.*......... 7,910,400
-----------------
COMPUTERS - SYSTEMS (2.5%)
219,500 Diebold, Inc...................... 12,950,500
170,000 Electronic Data Systems Corp...... 7,820,000
112,000 Hewlett-Packard Co................ 5,894,000
300,000 Sun Microsystems, Inc.*........... 9,487,500
-----------------
36,152,000
-----------------
CONSUMER PRODUCTS (1.6%)
126,700 Colgate-Palmolive Co.............. 12,258,225
220,000 Tupperware Corp................... 10,312,500
-----------------
22,570,725
-----------------
ELECTRICAL EQUIPMENT (1.8%)
129,000 Emerson Electric Co............... 12,738,750
129,000 General Electric Co............... 13,287,000
-----------------
26,025,750
-----------------
ELECTRONIC COMPONENTS (0.1%)
12,000 Johnson Controls, Inc............. 1,032,000
-----------------
ENTERTAINMENT/GAMING (1.0%)
420,000 Circus Circus Enterprises,
Inc.*........................... 14,805,000
-----------------
FINANCIAL SERVICES (1.7%)
200,000 American Express Co............... 12,475,000
290,000 Federal National Mortgage
Assoc........................... 11,455,000
-----------------
23,930,000
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FOODS (1.5%)
88,000 Campbell Soup Co.................. $ 7,304,000
150,000 General Mills, Inc................ 10,162,500
90,000 Quaker Oats Company (The)......... 3,453,750
-----------------
20,920,250
-----------------
FOREST PRODUCTS, PAPER & PACKAGING (0.6%)
200,000 Champion International Corp....... 8,375,000
-----------------
HARDWARE & TOOLS (0.7%)
250,000 Black & Decker Corp............... 8,375,000
36,000 Stanley Works..................... 1,368,000
-----------------
9,743,000
-----------------
HEALTHCARE - MISCELLANEOUS (1.7%)
554,000 Humana, Inc.*..................... 10,526,000
170,000 PacifiCare Health Systems, Inc.
(Class B)*...................... 13,642,500
-----------------
24,168,500
-----------------
HOSPITAL MANAGEMENT (0.6%)
214,500 Columbia/HCA Healthcare Corp...... 8,472,750
-----------------
HOUSEHOLD APPLIANCES (0.2%)
121,500 Maytag Corp....................... 2,490,750
-----------------
INDUSTRIALS (0.0%)
5,500 AlliedSignal, Inc................. 386,375
-----------------
INSURANCE (0.8%)
95,000 American International Group,
Inc............................. 11,506,875
-----------------
LABELS (0.1%)
34,000 Avery Dennison Corp............... 1,245,250
-----------------
LEISURE (0.5%)
100,000 Carnival Corp. (Class A).......... 3,675,000
50,000 Walt Disney Co.................... 3,662,500
-----------------
7,337,500
-----------------
MEDICAL PRODUCTS & SUPPLIES (0.3%)
99,000 Baxter International, Inc......... 4,566,375
-----------------
NATURAL GAS - DISTRIBUTION (0.6%)
202,500 Williams Companies, Inc........... 8,125,312
-----------------
OFFICE EQUIPMENT & SUPPLIES (0.6%)
200,000 Ikon Office Solutions, Inc........ 8,825,000
-----------------
OIL DRILLING & SERVICES (0.4%)
150,000 Dresser Industries, Inc........... 5,081,250
6,300 Schlumberger, Ltd................. 700,088
-----------------
5,781,338
-----------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
OIL INTEGRATED - DOMESTIC (0.5%)
56,000 Atlantic Richfield Co............. $ 7,406,000
-----------------
OIL INTEGRATED - INTERNATIONAL (2.4%)
133,000 Chevron Corp...................... 8,827,875
80,000 Exxon Corp........................ 8,290,000
62,000 Mobil Corp........................ 8,137,500
79,000 Texaco, Inc....................... 8,364,125
-----------------
33,619,500
-----------------
PAPER (0.2%)
100,000 Unisource Worldwide, Inc.......... 2,175,000
-----------------
PAPER & FOREST PRODUCTS (0.4%)
150,000 International Paper Co............ 6,131,250
-----------------
PHARMACEUTICALS (4.6%)
160,000 Abbott Laboratories............... 8,700,000
128,400 American Home Products Corp....... 8,137,350
194,744 Johnson & Johnson................. 11,222,123
151,000 Lilly (Eli) & Co.................. 13,155,875
102,200 Merck & Co., Inc.................. 9,274,650
400,000 Pharmacia & Upjohn, Inc........... 14,900,000
-----------------
65,389,998
-----------------
PUBLISHING - NEWSPAPER (0.1%)
13,000 Gannett Co., Inc.................. 996,125
-----------------
RETAIL - DEPARTMENT STORES (0.1%)
4,000 Dayton-Hudson Corp................ 150,500
16,000 May Department Stores Co.......... 712,000
-----------------
862,500
-----------------
RETAIL - SPECIALTY (3.7%)
470,000 Bed Bath & Beyond, Inc.*.......... 12,925,000
350,000 Costco Companies, Inc.*........... 9,275,000
144,000 Home Depot, Inc................... 7,128,000
189,360 Payless ShoeSource, Inc.*......... 7,101,000
900,000 Pier 1 Imports, Inc............... 16,650,000
-----------------
53,079,000
-----------------
RETAIL - SPECIALTY APPAREL (0.0%)
10,000 Gap, Inc.......................... 287,500
-----------------
SAVINGS & LOAN ASSOCIATIONS (1.0%)
170,000 Golden West Financial Corp........ 11,411,250
100,000 Great Western Financial Corp...... 3,162,500
-----------------
14,573,750
-----------------
SEMICONDUCTORS (1.8%)
300,000 Micron Technology, Inc............ 10,425,000
470,000 Teradyne Inc.*.................... 14,511,250
-----------------
24,936,250
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHIPPING (0.6%)
345,800 APL Ltd........................... $ 8,299,200
-----------------
SHOES (0.6%)
130,000 Nike, Inc. (Class B).............. 8,823,750
-----------------
STEEL (0.6%)
17,000 Bethlehem Steel Corp.*............ 144,500
150,000 Nucor Corp........................ 7,800,000
-----------------
7,944,500
-----------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $558,897,504).... 760,914,167
-----------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
CORPORATE BONDS (25.9%)
AIRLINES (1.3%)
$ 6,900 America West Airlines, Inc. 6.86%
due 07/02/04.................... 6,839,625
5,000 United Air Lines, Inc. 10.125% due
03/22/15........................ 5,931,150
5,000 United Air Lines, Inc. 9.35% due
04/07/16........................ 5,518,750
-----------------
18,289,525
-----------------
AUTOMOTIVE (0.4%)
5,000 General Motors Corp. 9.125% due
07/15/01........................ 5,468,950
-----------------
AUTOMOTIVE - FINANCE (0.5%)
6,900 GMAC Pass Thru Asset Trust 97 -
144A** 6.50% due 01/17/00....... 6,917,250
-----------------
BANK HOLDING COMPANIES (1.9%)
5,000 North Fork Bancorp - 144A** 8.70%
due 12/15/26.................... 5,087,500
7,500 Provident Bank - 144A** 8.60% due
12/01/26........................ 7,565,625
4,800 Standard Federal Bancorp 7.75% due
07/17/06........................ 4,980,336
5,000 U.S. Bancorp Capital - 144A**
8.27% due 12/15/26.............. 5,137,500
4,000 Union Planters Co. 6.25% due
11/01/03........................ 3,840,480
-----------------
26,611,441
-----------------
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
BANKS (2.0%)
$ 5,780 Central Fidelity Banks, Inc. 8.15%
due 11/15/02.................... $ 6,108,997
5,000 First Empire Capital Trust 1
8.234% due 02/01/27............. 5,043,750
5,000 First National Bank Corp. 6.50%
due 01/14/00.................... 5,018,750
5,000 First Nationwide Bank 10.00% due
10/01/06........................ 5,748,700
6,900 People's Bank-Bridgeport 7.20% due
12/01/06........................ 6,764,070
-----------------
28,684,267
-----------------
BANKS - INTERNATIONAL (1.5%)
4,800 Banque Paribas of New York 6.875%
due 03/01/09.................... 4,573,440
5,000 Dao Heng Bank Ltd. - 144A** (Hong
Kong) 7.75% due 01/24/07........ 5,050,000
5,000 Merita Bank Ltd. - 144A**
(Finland) 7.50% due 12/29/49.... 5,037,500
7,000 Skandinaviska Enskilda Banken -
144A** (Sweden) 8.125% due
09/06/49........................ 7,350,000
-----------------
22,010,940
-----------------
BROKERAGE (1.5%)
4,920 Lehman Brothers Holdings, Inc.
6.625% due 11/15/00............. 4,891,858
5,000 Lehman Brothers Holdings, Inc.
8.75% due 03/15/05.............. 5,441,750
5,740 Paine Webber Group, Inc. 8.25% due
05/01/02........................ 6,055,126
5,000 Paine Webber Group, Inc. 8.875%
due 03/15/05.................... 5,476,250
-----------------
21,864,984
-----------------
CABLE TELEVISION EQUIPMENT (1.2%)
5,000 Continental Cablevision, Inc.
9.50% due 08/01/13.............. 5,725,250
10,000 Tele-Communications, Inc. 9.80%
due 02/01/12.................... 11,063,100
-----------------
16,788,350
-----------------
CABLE/CELLULAR (0.3%)
5,000 360 degrees Communication Co.
7.125% due 03/01/03............. 4,949,100
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
FINANCIAL (0.3%)
$ 4,900 Vesta Capital Trust 1 - 144A**
8.525% due 01/15/27............. $ 4,955,125
-----------------
FINANCIAL SERVICES (4.1%)
5,000 Advanta Corp. 6.384% due
08/07/98........................ 5,001,650
3,500 Advanta Corp. 7.28% due
07/30/01........................ 3,554,005
10,000 Arkwright CSN Trust - 144A**
9.625% due 08/15/26............. 11,062,500
6,900 Capital One Bank 8.125% due
03/01/00........................ 7,151,298
5,400 Commercial Credit Group 7.875 due
02/01/25........................ 5,802,138
5,000 Firstar Capital Trust I - 144A**
8.32% due 12/15/26.............. 5,125,000
4,900 Markel Capital Trust I - 144A**
8.71% due 01/01/46.............. 5,004,125
6,900 MBNA Capital Inc. 8.278% due
12/01/26........................ 6,977,625
4,000 Pxre Capital Trust I - 144A**
8.85% due 02/01/27.............. 4,055,000
4,950 RHG Finance Corp. 8.875% due
10/01/05........................ 5,133,348
-----------------
58,866,689
-----------------
FOREIGN GOVERNMENT BONDS (0.4%)
5,000 National Bank Hungary (Hungary)
8.875% due 11/01/13............. 5,408,450
-----------------
INSURANCE (2.8%)
5,000 Associates Corp. N.A. 6.25% due
03/15/99........................ 4,996,800
5,550 Associates Corp. N.A. 6.375% due
08/15/99........................ 5,550,999
4,900 Conseco, Inc. 10.50% due
12/15/04........................ 5,787,341
4,900 Farmers Insurance Exchange -
144A** 8.50% due 08/01/04....... 5,181,750
6,800 Jefferson-Pilot Capital Trust A -
144A** 8.14% due 01/15/46....... 6,791,500
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
$ 5,000 Lumbermens Mutual Casualty -
144A** 9.15% due 07/01/26....... $ 5,406,250
5,800 Terra Nova Holdings (United
Kingdom) 10.75% due 07/01/05.... 6,515,140
-----------------
40,229,780
-----------------
INTERNATIONAL TRADE (0.5%)
6,900 Guangdong International Trust &
Investment - 144A** (China)
8.75% due 10/24/16.............. 7,150,125
-----------------
MACHINERY & MACHINE TOOLS (1.0%)
1,000 Jet Equipment Trust - 144A**
10.91% due 08/15/14............. 1,160,000
3,000 Joy Technologies Inc. 10.25% due
09/01/03........................ 3,302,250
10,000 Reliance Industries Ltd. - 144A**
(India) 10.25% due 01/15/97..... 10,537,500
-----------------
14,999,750
-----------------
METALS & MINING (0.5%)
6,900 Freeport-McMoran C & G Co. 7.50%
due 11/15/06.................... 6,807,885
-----------------
MISCELLANEOUS (0.5%)
6,900 Placer Dome, Inc. (Canada) 8.50%
due 12/31/45.................... 6,770,625
-----------------
OIL & GAS PRODUCTS (0.7%)
5,000 Mitchell Energy & Development
Corp. 8.00% due 07/15/99........ 5,121,150
5,000 Mitchell Energy & Development
Corp. 6.75% due 02/15/04........ 4,797,950
-----------------
9,919,100
-----------------
PUBLISHING & TELEVISION (0.4%)
5,000 Time Warner I Inc. 9.125% due
01/15/13........................ 5,444,550
-----------------
RAILROAD EQUIPMENT (0.3%)
4,900 Anixter International Inc. 8.00%
due 09/15/03.................... 4,981,732
-----------------
RAILROADS (0.4%)
5,000 Penn Central Corp. 10.625% due
04/15/00........................ 5,509,500
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST (0.4%)
$ 5,000 Price Reit, Inc. 7.25% due
11/01/00........................ $ 5,038,000
-----------------
SAVINGS & LOAN ASSOCIATIONS (0.5%)
6,800 Great Western Financial Trust II
8.206% due 02/01/27............. 6,825,500
-----------------
STEEL (0.4%)
5,000 Pohang Iron & Steel Co. (South
Korea) 7.375% due 05/15/05...... 5,042,750
-----------------
TELECOMMUNICATIONS (1.1%)
5,000 British Telecom Finance (United
Kingdom) 9.625% due 02/15/19.... 5,476,550
3,000 TCI Communications, Inc. 8.75% due
08/01/15........................ 3,038,490
6,900 Total Access Communication -
144A** (Thailand) 8.375% due
11/04/06........................ 6,943,125
-----------------
15,458,165
-----------------
TOBACCO (0.6%)
4,900 Philip Morris Companies, Inc.
7.65% due 07/01/08.............. 5,013,827
3,000 RJR Nabisco, Inc. 8.75% due
08/15/05........................ 3,042,120
-----------------
8,055,947
-----------------
UTILITIES - ELECTRIC (0.4%)
4,950 Niagara Mohawk Power Corp. 9.25%
due 10/01/01.................... 5,082,462
-----------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $364,622,983).... 368,130,942
-----------------
U.S. GOVERNMENT & AGENCY OBLIGATIONS (13.8%)
394 Federal Home Loan Mortgage Corp.
8.50% due 07/01/02.............. 402,206
173 Federal Home Loan Mortgage Corp.
9.00% due 08/01/02.............. 176,522
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
$ 2,500 Private Export Funding Corp.
7.95% due 11/01/06.............. $ 2,653,950
2,000 U.S. Treasury Bond
6.25% due 08/15/23.............. 1,845,740
2,850 U.S. Treasury Bond
7.625% due 02/15/25............. 3,114,566
17,200 U.S. Treasury Note
5.625% due 11/30/00............. 16,875,264
9,950 U.S. Treasury Note
5.75% due 08/15/03.............. 9,622,247
23,000 U.S. Treasury Note
6.00% due 08/31/97.............. 23,058,880
5,000 U.S. Treasury Note
6.00% due 08/15/99.............. 4,997,200
5,000 U.S. Treasury Note
6.375% due 05/15/99............. 5,040,550
22,050 U.S. Treasury Note
6.50% due 04/30/99.............. 22,298,283
4,900 U.S. Treasury Note
6.50% due 08/31/01.............. 4,945,668
3,000 U.S. Treasury Note
6.50% due 05/15/05.............. 3,005,310
15,000 U.S. Treasury Note
6.75% due 04/30/00.............. 15,264,450
3,200 U.S. Treasury Note
6.75% due 08/15/26.............. 3,167,648
25,000 U.S. Treasury Note
6.875% due 08/31/99............. 25,495,500
5,000 U.S. Treasury Note
7.25% due 05/15/04.............. 5,238,100
5,000 U.S. Treasury Note
7.25% due 08/15/04.............. 5,239,500
7,000 U.S. Treasury Note
7.50% due 11/15/01.............. 7,349,650
7,000 U.S. Treasury Note
7.50% due 02/15/05.............. 7,448,980
20,150 U.S. Treasury Note
7.75% due 12/31/99.............. 21,033,376
8,500 U.S. Treasury Note
7.875% due 11/15/99............. 8,887,940
-----------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS
(IDENTIFIED COST $197,939,478).... 197,161,530
-----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
DEAN WITTER STRATEGIST FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.7%)
U.S. GOVERNMENT AGENCY (a) (5.3%)
$ 75,000 Federal Home Loan Mortgage Corp.
5.26-5.48% due 02/03/97 -
02/19/97 (Amortized Cost
$74,901,678).................... $ 74,901,678
REPURCHASE AGREEMENT (0.4%)
5,724 The Bank of New York 5.25% due
02/03/97 (dated 01/31/97;
proceeds $5,726,256;
collateralized by $5,770,860
Federal Home Loan Mortgage
Association 6.25% due 11/10/99
valued at $5,838,227)
(Identified Cost $5,723,752).... 5,723,752
-----------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $80,625,430)..... 80,625,430
-----------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$1,202,085,395) (b)........ 98.9% 1,406,832,069
OTHER ASSETS IN EXCESS OF
LIABILITIES................ 1.1 15,114,254
----- -------------
NET ASSETS................. 100.0% $1,421,946,323
----- -------------
----- -------------
<FN>
- ---------------------
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $211,793,190 and the
aggregate gross unrealized depreciation is $7,046,516, resulting in net
unrealized appreciation of $204,746,674.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $1,202,085,395).......................... $ 1,406,832,069
Receivable for:
Investments sold........................................ 22,179,630
Interest................................................ 10,776,264
Shares of beneficial interest sold...................... 2,987,838
Dividends............................................... 552,093
Principal paydowns...................................... 12,698
Prepaid expenses and other assets........................... 73,819
---------------
TOTAL ASSETS........................................... 1,443,414,411
---------------
LIABILITIES:
Payable for:
Investments purchased................................... 18,651,999
Plan of distribution fee................................ 1,047,236
Shares of beneficial interest repurchased............... 808,516
Investment management fee............................... 656,092
Accrued expenses and other payables......................... 304,245
---------------
TOTAL LIABILITIES...................................... 21,468,088
---------------
NET ASSETS:
Paid-in-capital............................................. 1,194,579,660
Net unrealized appreciation................................. 204,746,674
Accumulated undistributed net investment income............. 4,068,904
Accumulated undistributed net realized gain................. 18,551,085
---------------
NET ASSETS............................................. $ 1,421,946,323
---------------
---------------
NET ASSET VALUE PER SHARE,
85,191,684 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$16.69
---------------
---------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 22,817,556
Dividends................................................... 4,911,979
------------
TOTAL INCOME........................................... 27,729,535
------------
EXPENSES
Plan of distribution fee.................................... 6,016,881
Investment management fee................................... 3,772,257
Transfer agent fees and expenses............................ 590,197
Registration fees........................................... 54,015
Custodian fees.............................................. 39,951
Shareholder reports and notices............................. 39,182
Professional fees........................................... 29,584
Trustees' fees and expenses................................. 6,140
Other....................................................... 5,980
------------
TOTAL EXPENSES......................................... 10,554,187
------------
NET INVESTMENT INCOME.................................. 17,175,348
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 46,887,807
Net change in unrealized appreciation....................... 118,412,831
------------
NET GAIN............................................... 165,300,638
------------
NET INCREASE................................................ $182,475,986
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
67
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1997 JULY 31, 1996
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 17,175,348 $ 21,424,282
Net realized gain........................................... 46,887,807 97,968,604
Net change in unrealized appreciation....................... 118,412,831 (3,107,509)
---------------- ---------------
NET INCREASE........................................... 182,475,986 116,285,377
---------------- ---------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (17,452,684) (21,021,721)
Net realized gain........................................... (109,339,056) (70,591,947)
---------------- ---------------
TOTAL.................................................. (126,791,740) (91,613,668)
---------------- ---------------
Net increase from transactions in shares of beneficial
interest.................................................. 106,957,304 357,037,738
---------------- ---------------
NET INCREASE........................................... 162,641,550 381,709,447
NET ASSETS:
Beginning of period......................................... 1,259,304,773 877,595,326
---------------- ---------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$4,068,904 AND $4,346,240, RESPECTIVELY),............... $ 1,421,946,323 $ 1,259,304,773
---------------- ---------------
---------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997 (UNAUDITED)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Strategist Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end
management investment company. The Fund's investment objective is to maximize
the total return of its investments. The Fund seeks to achieve its objective by
actively allocating its assets among major asset categories of equity and
fixed-income securities and money market instruments. The Fund was organized as
a Massachusetts business trust on August 5, 1988 and commenced operations on
October 31, 1988.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by Dean Witter InterCapital Inc. (the "Investment Manager") that sale
or bid prices are not reflective of a security's market value, portfolio
securities are valued at their fair value as determined in good faith under
procedures established by and under the general supervision of the Trustees; (4)
certain of the Fund's portfolio securities may be valued by an outside pricing
service approved by the Trustees. The pricing service may utilize a matrix
system incorporating security quality, maturity and coupon as the evaluation
model parameters, and/or research and evaluations by its staff, including review
of broker-dealer market price quotations, if available, in determining what it
believes is the fair valuation of the portfolio securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined
69
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
by the identified cost method. Discounts are accreted over the life of the
respective securities. Dividend income and other distributions are recorded on
the ex-dividend date. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined at the close of
each business day: 0.60% to the portion of daily net assets not exceeding $500
million; 0.55% to the portion of daily net assets exceeding $500 million but not
exceeding $1 billion; 0.50% to the portion of daily net assets exceeding $1
billion but not exceeding $1.5 billion; and 0.475% to the portion of daily net
assets exceeding $1.5 billion.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
70
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under the Act pursuant
to which the Fund pays the Distributor compensation, accrued daily and payable
monthly, at an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the implementation of the Plan
on November 8, 1989 (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's implementation of the Plan upon which a
contingent deferred sales charge has been imposed or upon which such charge has
been waived; or (b) the Fund's average daily net assets attributable to shares
issued, net of related shares redeemed, since implementation of the Plan.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by it and others in the distribution of
the Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to, and expenses of, the account executives of
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other employees or selected broker-dealers who engage in or
support distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses incurred but
not yet recovered, may be recovered through future distribution fees from the
Fund and contingent deferred sales charges from the Fund's shareholders.
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 the investors upon redemption of
shares, if for any reason the Plan is terminated, the Trustees will consider at
the time the manner in which to treat such expenses. The Distributor has advised
the Fund that such excess amounts, including carrying charges, totaled
$37,206,400 at January 31, 1997.
The Distributor has informed the Fund that for the six months ended January 31,
1997, it received approximately $825,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
71
<PAGE>
DEAN WITTER STRATEGIST FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997 (UNAUDITED) CONTINUED
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended January 31, 1997 aggregated
$937,420,719 and $892,680,557, respectively. Included in the aforementioned are
purchases and sales/prepayments of U.S. Government securities of $78,691,375 and
$167,972,128, respectively.
For the same period, the Fund incurred brokerage commissions with DWR of
approximately $29,300 for transactions executed on behalf of the Fund.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At January 31, 1997, the Fund had
transfer agent fees and expenses payable of approximately $115,600.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. At January 31, 1997, the Fund had an accrued pension liability of
$88,462 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
JANUARY 31, 1997 FOR THE YEAR
---------------------------- ENDED
JULY 31, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 10,937,149 $ 184,536,765 15,621,003 $252,119,338
Reinvestment of dividends and distributions...................... 7,090,040 114,806,533 5,419,616 83,797,500
Shares issued in connection with the acquisition of Dean Witter
Managed Assets Trust............................................ -- -- 20,952,000 322,593,266
----------- -------------- ----------- ------------
18,027,189 299,343,298 41,992,619 658,510,104
Repurchased...................................................... (11,419,419) (192,385,994) (18,698,191) (301,472,366)
----------- -------------- ----------- ------------
Net increase..................................................... 6,607,770 $ 106,957,304 23,294,428 $357,037,738
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
6. FEDERAL INCOME TAX STATUS
At July 31, 1996, the Fund had temporary book/tax differences which were
primarily attributable to capital loss deferrals on wash sales.
72
<PAGE>
DEAN WITTER STRATEGIST FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR ENDED JULY 31
JANUARY 31, --------------------------------------------------------
1997 1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period......................... $ 16.02 $ 15.87 $ 14.43 $ 14.59 $ 14.39 $ 13.09
------ ---------- ---------- --------- --------- ----------
Net investment income........... 0.21 0.30 0.34 0.30 0.26 0.27
Net realized and unrealized
gain........................... 2.08 1.43 1.86 0.22 0.81 1.27
------ ---------- ---------- --------- --------- ----------
Total from investment
operations..................... 2.29 1.73 2.20 0.52 1.07 1.54
------ ---------- ---------- --------- --------- ----------
Less dividends and distributions
from:
Net investment income........ (0.22) (0.32) (0.29) (0.26) (0.31) (0.24)
Net realized gain............ (1.40) (1.26) (0.47) (0.42) (0.56) --
------ ---------- ---------- --------- --------- ----------
Total dividends and
distributions.................. (1.62) (1.58) (0.76) (0.68) (0.87) (0.24)
------ ---------- ---------- --------- --------- ----------
Net asset value, end of
period......................... $ 16.69 $ 16.02 $ 15.87 $ 14.43 $ 14.59 $ 14.39
------ ---------- ---------- --------- --------- ----------
------ ---------- ---------- --------- --------- ----------
TOTAL INVESTMENT RETURN+........ 14.57%(1) 11.47% 16.05% 3.53% 7.59 11.88%
RATIOS TO AVERAGE NET ASSETS:
Expenses........................ 1.55%(2) 1.58% 1.63% 1.62% 1.62% 1.63
Net investment income........... 2.53%(2) 1.88% 2.35% 2.03% 1.90% 2.19
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions....................... $1,422 $1,259 $878 $806 $783 $441
Portfolio turnover rate......... 72%(1) 174% 179% 90% 98% 79%
Average commission rate paid.... $0.0585 $0.0597 -- -- -- --
</TABLE>
<TABLE>
<C> <S>
- ---------------------
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
73
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there
may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its corporate and
municipal bond rating system. The modifier 1 indicates that the security ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and a modifier 3 indicates that the issue ranks in the lower
end of its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the
74
<PAGE>
following considerations: (1) likelihood of default-capacity and willingness of
the obligor as to the timely payment of interest and repayment of principal in
accordance with the terms of the obligation; (2) nature of and provisions of the
obligation; and (3) protection afforded by, and relative position of, the
obligation in the event of bankruptcy, reorganization or other arrangement under
the laws of bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
AAA Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay
principal for debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
NR Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that Standard & Poor's does not
rate a particular type of obligation as a matter of policy.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2 and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying
this designation are, however, somewhat more vulnerable to the adverse effects
of changes in circumstances than obligations carrying the higher designations.
75
<PAGE>
DEAN WITTER STRATEGIST FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A):
Page in
Prospectus
----------
Financial Highlights for the period October 31, 1988
through July 31, 1989 and for the years ended
July 31, 1990, 1991, 1992, 1993, 1994, 1995 and
1996 and for the six months ended January 31, 1997 . . . . . 7
(2) Financial statements included in the Statement of
Additional Information (Part B):
Page in
SAI
-------
Portfolio of Investments at July 31, 1996. . . . . . . . . . 46
Statement of Assets and Liabilities at
July 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . 51
Statement of Operations for the year ended
July 31, 1996. . . . . . . . . . . . . . . . . . . . . . . . 52
Statement of Changes in Net Assets for the years
ended July 31, 1995 and July 31, 1996. . . . . . . . . . . . 53
Notes to Financial Statements at July 31, 1996 . . . . . . . 54
Financial Highlights for the period October 31,
1988 through July 31, 1989 and for the years ended July 31,
1990, 1991, 1992, 1993, 1994, 1995 and 1996. . . . . . . . . 59
Portfolio of Investments at January 31, 1997
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . 61
Statement of Assets and Liabilities at January 31,
1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . 67
Statement of Operations for the six months ended
January 31, 1997 (unaudited) . . . . . . . . . . . . . . . . 67
Statement of Changes in Net Assets for the six months
ended January 31, 1997 (unaudited) and for the year
ended July 31, 1996. . . . . . . . . . . . . . . . . . . . . 68
<PAGE>
Notes to Financial Statements at January 31, 1997
(unaudited). . . . . . . . . . . . . . . . . . . . . . . . . 69
Financial Highlights for the years ended July 31,
1992, 1993, 1994, 1995 and 1996 and for the
six months ended January 31, 1997 (unaudited). . . . . . . . 73
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
1. -- Form of Instrument Establishing and Designating
Additional Classes.
5. -- Form of Investment Management Agreement between the
Registrant and Dean Witter InterCapital Inc.
6.(a) -- Form of Distribution Agreement between the Registrant
and Dean Witter InterCapital Inc.
6.(b) -- Form of Multiple-Class Distribution Agreement between
the Registrant and Dean Witter Distributors Inc.
11. -- Consent of Independent Accountants.
15. -- Amended and Restated Plan of Distribution Pursuant to
Rule 12b-1.
27. -- Financial Data Schedule.
Other -- Form of Multiple-Class Plan Pursuant to Rule 18f-3.
- -------------------------------
All other exhibits previously filed and incorporated
by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at June 30, 1997
-------------- ------------------------
Shares of Beneficial Interest 93,102
2
<PAGE>
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of
Trust and under Section 4.8 of the Registrant's By-Laws, the indemnification of
the Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties or
by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the Registrant
shall be liable for any action or failure to act, except in the case of bad
faith, willful misfeasance, gross negligence or reckless disregard of duties to
the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
3
<PAGE>
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was serving at
the request of Registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The principal address
of the Dean Witter Funds is Two World Trade Center, New York, New York 10048.
The term "Dean Witter Funds" used below refers to the following registered
investment companies:
CLOSED-END INVESTMENT COMPANIES
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
OPEN-END INVESTMENT COMPANIES:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
4
<PAGE>
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Mid-Cap Growth Fund
(48) Dean Witter Select Dimensions Investment Series
(49) Dean Witter Balanced Growth Fund
(50) Dean Witter Balanced Income Fund
(51) Dean Witter Hawaii Municipal Trust
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
5
<PAGE>
(57) Dean Witter Special Value Fund
(58) Dean Witter Financial Services Trust
(59) Dean Witter Market Leader Trust
The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10)TCW/DW Strategic Income Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean Witter
Services Company Inc. ("DWSC"); Chairman and
Director of Dean Witter Trust Company ("DWTC");
Chairman, Director or Trustee, President and
Chief Executive Officer of the Dean Witter Funds
and Chairman, Chief Executive Officer and Trustee
of the TCW/DW Funds; Director and/or officer of
various Morgan Stanley, Dean Witter, Discover &
Co. ("MSDWD") subsidiaries; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and Director of
Director of MSDWD and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer
Director of Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors
and DWTC; Trustee of the TCW/DW Funds.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWTC.
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDWD; Executive
President, Chief Vice President and Chief Financial Officer of
Financial Officer and DWSC and Distributors; Director of DWR,
Director DWSC and Distributors.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDWD; Executive Vice
President, Secretary and Chief Legal Officer
of Distributors; Director of DWR, DWSC and
Distributors.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of DWTC;
Executive Vice President and Director of DWR;
Director of SPS Transaction Services, Inc. and
various other MSDWD subsidiaries.
John B. Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President
Joseph J. McAlinden
Executive Vice President
and Chief Investment Vice President of the Dean Witter Funds and
Officer Director of DWTC.
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Richard Felegy
Senior Vice President
Edward F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWTC and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.
Anita H. Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingston Vice President of various Dean Witter Funds.
Senior Vice President
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Kirk Balzer
Vice President Vice President of Various Dean Witter Funds.
Nancy Belza
Vice President
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
Salvatore DeSteno
Vice President Vice President of DWSC.
Frank J. DeVito
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovese
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series
Peter Hermann
Vice President Vice President of various Dean Witter Funds
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
Vice President Vice President of various Dean Witter Funds
Michael Knox
Vice President Vice President of various Dean Witter Funds
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
Gerard J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metal and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Robert Vanden Assem
Vice President
12
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Katherine Wickham
Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Federal Securities Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
13
<PAGE>
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter High Income Securities
(45) Dean Witter National Municipal Trust
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Variable Investment Series
(51) Dean Witter Capital Appreciation Fund
(52) Dean Witter Intermediate Term U.S. Treasury Trust
(53) Dean Witter Information Fund
(54) Dean Witter Japan Fund
(55) Dean Witter Income Builder Fund
(56) Dean Witter Special Value Fund
(57) Dean Witter Financial Services Trust
(58) Dean Witter Market Leader Trust
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048.
None of the following persons has any position or office with the
Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
14
<PAGE>
are maintained by the Investment Manager at its offices, except records relating
to holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 17th day of July, 1997.
DEAN WITTER STRATEGIST FUND
By /s/ Barry Fink
---------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No.10 has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/Charles A. Fiumefreddo 7/17/97
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia 7/17/97
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/Barry Fink 7/17/97
--------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
By /s/David M. Butowsky 7/17/97
--------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBITS:
1. -- Form of Instrument Establishing and Designating Additional Classes.
5. -- Form of Investment Management Agreement between the Registrant and
Dean Witter InterCapital Inc.
6.(a) -- Form of Distribution Agreement between the Registrant and Dean
Witter InterCapital Inc.
6.(b) -- Form of Multiple-Class Distribution Agreement between the Registrant
and Dean Witter Distributors Inc.
11. -- Consent of Independent Accountants.
15. -- Amended and Restated Plan of Distribution Pursuant to Rule 12b-1.
27. -- Financial Data Schedule.
Other -- Form of Multiple-Class Plan Pursuant to Rule 18f-3.
<PAGE>
CERTIFICATE
The undersigned hereby certifies that he is the Secretary of Dean
Witter Strategist Fund (the "Trust"), an unincorporated business trust organized
under the laws of the Commonwealth of Massachusetts, that annexed hereto is an
Instrument Establishing and Designating Additional Classes of Shares of the
Trust unanimously adopted by the Trustees of the Trust on June 30, 1997, as
provided in Section 6.9(h) of the said Declaration, said Instrument to take
effect on July 28, 1997, and I do hereby further certify that such Instrument
has not been amended and is on the date hereof in full force and effect.
Dated this 28th day of July, 1997.
--------------------------------------
Barry Fink
Secretary
(SEAL)
<PAGE>
DEAN WITTER STRATEGIST FUND
INSTRUMENT ESTABLISHING AND DESIGNATING
ADDITIONAL CLASSES OF SHARES
WHEREAS, Dean Witter Strategist Fund (the "Trust") was established by the
Declaration of Trust dated August 4, 1988, as amended from time to time (the
"Declaration"), under the laws of the Commonwealth of Massachusetts;
WHEREAS, Section 6.9(h) of the Declaration provides that the establishment and
designation of any additional class of shares shall be effective upon the
execution by a majority of the then Trustees of an instrument setting forth such
establishment and designation and the relative rights, preferences, voting
powers, restrictions, limitations as to dividends, qualifications, and terms and
conditions of such class, or as otherwise provided in such instrument, which
instrument shall have the status of an amendment to the Declaration; and
WHEREAS, the Trustees of the Trust have deemed it advisable to establish and
designate three additional classes of shares and to designate classes for the
existing shares held prior to July 28, 1997 ("Existing Class") as provided
herein.
NOW, THEREFORE, BE IT RESOLVED, pursuant to Section 6.9(h) of the Declaration,
there are hereby established and designated three additional classes of shares,
to be known as: Class A, Class C and Class D (the "Additional Classes"), each
of which shall be subject to the relative rights, preferences, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption set forth in the Declaration with respect to the
Existing Class, except to the extent the DEAN WITTER FUNDS MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3 attached hereto as EXHIBIT A sets forth differences (i)
between each of the Additional Classes, or (ii) among each of the Existing Class
and the Additional Classes; and be it further
RESOLVED, pursuant to Section 6.9(h) of the Declaration, all shares of the Trust
held prior to July 28, 1997 are hereby designated as Class B shares of the
Trust, except that (i) shares purchased prior to November 8, 1989 (including
such proportion of shares acquired through reinvestment of dividends and capital
gains distributions as the total number of shares acquired prior to November 8,
1989 bears to the total number of shares of the Trust purchased and owned by the
shareholder) and (ii) shares held by certain employee benefit plans established
by Dean Witter Reynolds Inc. and its affiliate, SPS Transaction Services, Inc.,
are hereby designated as Class D Shares.
This instrument may be executed in more than one counterpart, each of which
shall be deemed an original, but all of which together shall constitute one and
the same document.
<PAGE>
IN WITNESS THEREOF, the undersigned, the Trustees of the Trust, have executed
this instrument this 30th day of June, 1997.
/s/ Michael Bozic /s/ Manuel H. Johnson
- ----------------------------------- --------------------------------------
Michael Bozic, as Trustee Manuel H. Johnson, as Trustee
and not individually and not individually
c/o Levitz Furniture Corp. c/o Johnson Smick International Inc.
6111 Broken Sound Parkway, N.W. 1133 Connecticut Avenue, N.W.
Boca Raton, FL 33487 Washington, D.C. 20036
/s/ Charles A. Fiumefreddo /s/ Michael E. Nugent
- ----------------------------------- --------------------------------------
Charles A. Fiumefreddo, as Trustee Michael E. Nugent, as Trustee
and not individually and not individually
Two World Trade Center c/o Triumph Capital, L.P.
New York, NY 10048 237 Park Avenue
New York, NY 10017
/s/ Edwin J. Garn /s/ Philip J. Purcell
- ----------------------------------- --------------------------------------
Edwin J. Garn, as Trustee Philip J. Purcell, as Trustee
and not individually and not individually
c/o Huntsman Chemical Corporation Two World Trade Center
500 Huntsman Way New York, NY 10048
Salt Lake City, UT 84111
/s/ John R. Haire /s/ John L. Schroeder
- ----------------------------------- --------------------------------------
John R. Haire, as Trustee John L. Schroeder, as Trustee
and not individually and not individually
Two World Trade Center c/o Gordon Altman Butowsky Weitzen
New York, NY 10048 Shalov & Wein
Counsel to the Independent Trustees
114 West 47th Street
New York, NY 10036
<PAGE>
STATE OF NEW YORK )
)ss:
COUNTY OF NEW YORK )
On this 30th day of June, 1997, MICHAEL BOZIC, CHARLES A. FIUMEFREDDO,
EDWIN J. GARN, JOHN R. HAIRE, MANUEL H. JOHNSON, MICHAEL E. NUGENT, PHILIP J.
PURCELL and JOHN L. SCHROEDER, known to me to be the individuals described in
and who executed the foregoing instrument, personally appeared before me and
they severally acknowledged the foregoing instrument to be their free act and
deed.
/s/ Marilyn K. Cranney
-------------------------------------------
Notary Public
My Commission expires:
MARILYN K. CRANNEY
NOTARY PUBLIC, STATE OF NEW YORK
NO. 24-4795538
QUALIFIED IN KINGS COUNTY
COMMISSION EXPIRES MAY 31, 1999
<PAGE>
EXHIBIT A
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and will be
effective as of July 28, 1997. The Plan relates to shares of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"). The Funds are distributed
pursuant to a system (the "Multiple Class System") in which each class of shares
(each, a "Class" and collectively, the "Classes") of a Fund represents a pro
rata interest in the same portfolio of investments of the Fund and differs only
to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Dean Witter
Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its affiliates and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class, assessed at an annual rate of up to 0.25% of average daily net
assets. The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Dean Witter American Value Fund, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Strategist Fund and Dean
Witter Dividend Growth Securities Inc.)(1), Class B
- ------------
(1)The payments under the 12b-1 Plan for each of Dean Witter American Value
Fund, Dean Witter Natural Resource Development Securities Inc. and Dean Witter
Dividend Growth Securities Inc. are assessed at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund's Plan (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Plan's inception
upon which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the Plan
on November 8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
1
<PAGE>
shares are also subject to a fee under each Fund's respective 12b-1 Plan,
assessed at the annual rate of up to 1.0% of either: (a) the lesser of (i) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (ii) the average daily net assets of Class B; or (b) the
average daily net assets of Class B. A portion of the 12b-1 fee equal to up to
0.25% of the Fund's average daily net assets is characterized as a service fee
within the meaning of the NASD guidelines and the remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge. Also, Class B
shares have a conversion feature ("Conversion Feature") under which such shares
convert to Class A shares after a certain holding period. Details of the
Conversion Feature are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Dean Witter Distributors Inc., DWR, its affiliates
and other broker-dealers for distribution expenses incurred by them specifically
on behalf of the Class, assessed at the annual rate of up to 1.0% of the average
daily net assets of the Class. A portion of the 12b-1 fee equal to up to 0.25%
of the Fund's average daily net assets is characterized as a service fee within
the meaning of NASD guidelines. Unlike Class B shares, Class C shares do not
have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund) have been
designated Class B shares. Shares held prior to July 28, 1997 by such employee
benefit plans have been designated Class D shares. Shares held prior to July 28,
1997 of Funds offered with a FESL have been designated Class D shares. In
addition, shares of Dean Witter American Value Fund purchased prior to April 30,
1984, shares of Dean Witter Strategist Fund purchased prior to November 8, 1989
and shares of Dean Witter Natural Resource Development Securities Inc. and Dean
Witter Dividend Growth Securities Inc. purchased prior to July 2, 1984 (with
respect to such shares of each Fund, including such proportion of shares
acquired through reinvestment of dividends and capital gains distributions as
the total number of shares acquired prior to each of the preceding dates in this
sentence bears to the total number of shares purchased and owned by the
shareholder of that Fund) have been designated Class D shares. Shares of Dean
Witter Balanced Growth Fund and Dean Witter Balanced Income Fund held prior to
July 28, 1997 have
2
<PAGE>
been designated Class C shares except that shares of Dean Witter Balanced Growth
Fund and Dean Witter Balanced Income Fund held prior to July 28, 1997 that were
acquired in exchange for shares of an investment company offered with a CDSC
have been designated Class B shares and those that were acquired in exchange for
shares of an investment company offered with a FESL have been designated Class A
shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which are purchased before July 28, 1997
by trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") provides discretionary trustee services will convert to Class A
shares on or about August 29, 1997 (the CDSC will not be applicable to such
shares upon the conversion). In all other instances, Class B shares of each Fund
will automatically convert to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase.
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper, all Class B shares will convert to Class A shares on
the conversion date of the first shares of a Fund purchased by that plan. In the
case of Class B shares previously exchanged for shares of an "Exchange Fund" (as
such term is defined in the prospectus of each Fund), the period of time the
shares were held in the Exchange Fund (calculated from the last day of the month
in which the Exchange Fund shares were acquired) is excluded from the holding
period for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
3
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
4
<PAGE>
EXHIBIT 5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 31st day of May, 1997 by and between Dean Witter
Strategist Fund, an unincorporated business trust organized under the laws of
the Commonwealth of Massachusetts (hereinafter called the "Fund"), and Dean
Witter InterCapital Inc., a Delaware corporation (hereinafter called the
"Investment Manager"):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, The Investment Manager is registered as an investment adviser under
the Investment Advisers Act of 1940, and engages in the business of acting as
investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform services
on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Trustees, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously manage
the assets of the Fund in a manner consistent with the investment objectives and
policies of the Fund; shall determine the securities and commodities to be
purchased, sold or otherwise disposed of by the Fund and the timing of such
purchases, sales and dispositions; and shall take such further action, including
the placing of purchase and sale orders on behalf of the Fund, as the Investment
Manager shall deem necessary or appropriate. The Investment Manager shall also
furnish to or place at the disposal of the Fund such of the information,
evaluations, analyses and opinions formulated or obtained by the Investment
Manager in the discharge of its duties as the Fund may, from time to time,
reasonably request.
2. The Investment Manager shall, at its own expense, maintain such staff
and employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of the
foregoing, the staff and personnel of the Investment Manager shall be deemed to
include persons employed or otherwise retained by the Investment Manager to
furnish statistical and other factual data, advice regarding economic factors
and trends, information with respect to technical and scientific developments,
and such other information, advice and assistance as the Investment Manager may
desire. The Investment Manager shall, as agent for the Fund, maintain the Fund's
records and books of account (other than those maintained by the Fund's transfer
agent, registrar, custodian and other agencies). All such books and records so
maintained shall be the property of the Fund and, upon request therefor, the
Investment Manager shall surrender to the Fund such of the books and records so
requested.
3. The Fund will, from time to time, furnish or otherwise make available to
the Investment Manager such financial reports, proxy statements and other
information relating to the business and affairs of the Fund as the Investment
Manager may reasonably require in order to discharge its duties and obligations
hereunder.
4. The Investment Manager shall bear the cost of rendering the investment
management and supervisory services to be performed by it under this Agreement,
and shall, at its own expense, pay the compensation of the officers and
employees, if any, of the Fund, and provide such office space, facilities and
equipment
<PAGE>
and such clerical help and bookkeeping services as the Fund shall reasonably
require in the conduct of its business. The Investment Manager shall also bear
the cost of telephone service, heat, light, power and other utilities provided
to the Fund.
5. The Fund assumes and shall pay or cause to be paid all other expenses of
the Fund, including without limitation: fees pursuant to any plan of
distribution that the Fund may adopt; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities or commodities and other property, and any stock
transfer or dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio transactions to which the
Fund is a party; all taxes, including securities or commodities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund and
its shares with the Securities and Exchange Commission and various states and
other jurisdictions (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing, including typesetting, and
distributing prospectuses and statements of additional information of the Fund
and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Investment Manager or any corporate affiliate of the Investment Manager; all
expenses incident to the payment of any dividend, distribution, withdrawal or
redemption, whether in shares or in cash; charges and expenses of any outside
service used for pricing of the Fund's shares; charges and expenses of legal
counsel, including counsel to the Trustees of the Fund who are not interested
persons (as defined in the Act) of the Fund or the Investment Manager, and of
independent accountants, in connection with any matter relating to the Fund;
membership dues of industry associations; interest payable on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including but not limited to legal claims and liabilities and litigation costs
and any indemnification related thereto); and all other charges and costs of the
Fund's operation unless otherwise explicitly provided herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Investment Manager, the Fund shall pay to the Investment
Manager monthly compensation determined by applying the following annual rates
to the Fund's daily net assets: 0.60% of daily net assets up to $500 million;
0.55% of the next $500 million; 0.50% of the next $500 million; and 0.475% of
daily net assets over $1.5 billion. Except as hereinafter set forth,
compensation under this Agreement shall be calculated and accrued daily and the
amounts of the daily accruals shall be paid monthly. Such calculations shall be
made by applying 1/365ths of the annual rates to the Fund's net assets each day
determined as of the close of business on that day or the last previous business
day. If this Agreement becomes effective subsequent to the first day of a month
or shall terminate before the last day of a month, compensation for that part of
the month this Agreement is in effect shall be prorated in a manner consistent
with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 7 hereof, payment of the Investment
Manager's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated by paragraph 7
hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to paragraph 6 hereof, for any fiscal
year ending on a date on which this Agreement is in effect, exceed the expense
limitations applicable to the Fund imposed by state securities laws or
regulations thereunder, as such limitations may be raised or lowered from time
to time, the Investment Manager shall reduce its management fee to the extent of
such excess and, if required, pursuant to any such laws or regulations, will
reimburse the Fund for annual operating expenses in excess of any expense
limitation that may be applicable; provided, however, there shall be excluded
from such expenses the amount of any interest, taxes, brokerage commissions,
distribution fees and extraordinary expenses (including but not limited to legal
claims and liabilities and litigation costs and any indemnification related
thereto) paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis, and shall be based upon
the expense limitation applicable to the Fund as at the end of the last
2
<PAGE>
business day of the month. Should two or more such expense limitations be
applicable as at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the Investment Manager's
fee shall be applicable.
For purposes of this provision, should any applicable expense limitation be
based upon the gross income of the Fund, such gross income shall include, but
not be limited to, interest on debt securities in the Fund's portfolio accrued
to and including the last day of the Fund's fiscal year, and dividends declared
on equity securities in the Fund's portfolio, the record dates for which fall on
or prior to the last day of such fiscal year, but shall not include gains from
the sale of securities.
8. The Investment Manager will use its best efforts in the supervision and
management of the investment activities of the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Investment Manager shall not be liable to the Fund or
any of its investors for any error of judgment or mistake of law or for any act
or omission by the Investment Manager or for any losses sustained by the Fund or
its investors.
9. Nothing contained in this Agreement shall prevent the Investment Manager
or any affiliated person of the Investment Manager from acting as investment
adviser or manager for any other person, firm or corporation and shall not in
any way bind or restrict the Investment Manager or any such affiliated person
from buying, selling or trading any securities or commodities for their own
accounts or for the account of others for whom they may be acting. Nothing in
this Agreement shall limit or restrict the right of any Trustee, officer or
employee of the Investment Manager to engage in any other business or to devote
his or her time and attention in part to the management or other aspects of any
other business whether of a similar or dissimilar nature.
10. This Agreement shall remain in effect until April 30, 1999 and from year
to year thereafter provided such continuance is approved at least annually by
the vote of holders of a majority, as defined in the Investment Company Act of
1940, as amended (the "Act"), of the outstanding voting securities of the Fund
or by the Trustees of the Fund; provided that in either event such continuance
is also approved annually by the vote of a majority of the Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in the
Act) of any such party, which vote must be cast in person at a meeting called
for the purpose of voting on such approval; provided, however, that (a) the Fund
may, at any time and without the payment of any penalty, terminate this
Agreement upon thirty days' written notice to the Investment Manager, either by
majority vote of the Trustees of the Fund or by the vote of a majority of the
outstanding voting securities of the Fund; (b) this Agreement shall immediately
terminate in the event of its assignment (to the extent required by the Act and
the rules thereunder) unless such automatic terminations shall be prevented by
an exemptive order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment of penalty on
thirty days' written notice to the Fund. Any notice under this Agreement shall
be given in writing, addressed and delivered, or mailed post-paid, to the other
party at the principal office of such party.
11. This Agreement may be amended by the parties without the vote or consent
of the shareholders of the Fund to supply any omission, to cure, correct or
supplement any ambiguous, defective or inconsistent provision hereof, or if they
deem it necessary to conform this Agreement to the requirements of applicable
federal laws or regulations, but neither the Fund nor the Investment Manager
shall be liable for failing to do so.
12. This Agreement shall be construed in accordance with the laws of the
State of New York and the applicable provisions of the Act. To the extent the
applicable law of the State of New York, or any of the provisions herein,
conflicts with the applicable provisions of the Act, the latter shall control.
13. The Investment Manager and the Fund each agree that the name "Dean
Witter," which comprises a component of the Fund's name, is a property right of
Dean Witter Reynolds Inc. The Fund agrees and consents that (i) it will only use
the name "Dean Witter" as a component of its name and for no other purpose, (ii)
it will not purport to grant to any third party the right to use the name "Dean
Witter" for any purpose, (iii) the Investment Manager or its parent, Morgan
Stanley, Dean Witter, Discover & Co., or any corporate affiliate of the
Investment Manager's parent, may use or grant to others the right to use the
name "Dean Witter," or any combination or abbreviation thereof, as all or a
portion of a corporate or business
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name or for any commercial purpose, including a grant of such right to any other
investment company, (iv) at the request of the Investment Manager or its parent,
the Fund will take such action as may be required to provide its consent to the
use of the name "Dean Witter," or any combination or abbreviation thereof, by
the Investment Manager or its parent or any corporate affiliate of the
Investment Manager's parent, or by any person to whom the Investment Manager or
its parent or any corporate affiliate of the Investment Manager's parent shall
have granted the right to such use, and (v) upon the termination of any
investment advisory agreement into which the Investment Manager and the Fund may
enter, or upon termination of affiliation of the Investment Manager with its
parent, the Fund shall, upon request by the Investment Manager or its parent,
cease to use the name "Dean Witter" as a component of its name, and shall not
use the name, or any combination or abbreviation thereof, as a part of its name
or for any other commercial purpose, and shall cause its officers, Trustees and
shareholders to take any and all actions which the Investment Manager or its
parent may request to effect the foregoing and to reconvey to the Investment
Manager or its parent any and all rights to such name.
14. The Declaration of Trust establishing Dean Witter Strategist Fund, dated
August 4, 1988, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Dean Witter Strategist Fund refers to the
Trustees under the Declaration collectively as Trustees, but not as individuals
or personally; and no Trustee, shareholder, officer, employee or agent of Dean
Witter Strategist Fund shall be held to any personal liability, nor shall resort
be had to their private property for the satisfaction of any obligation or claim
or otherwise, in connection with the affairs of said Dean Witter Strategist
Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written in New York, New York.
DEAN WITTER STRATEGIST FUND
By:
......................................
Attest:
.....................................
DEAN WITTER INTERCAPITAL INC.
By:
......................................
Attest:
.....................................
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 31st day of May, 1997 between each of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"), and Dean Witter Distributors
Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND.
(a) The Distributor shall have the right to buy from each Fund the Shares
needed, but not more than the Shares needed (except for clerical errors in
transmission), to fill unconditional orders for Shares placed with the
Distributor by investors or securities dealers. The price which the Distributor
shall pay for the Shares so purchased from the Fund shall be the net asset
value, determined as set forth in the Prospectus, used in determining the public
offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares as set forth in the Prospectus, to investors or to securities
dealers, including DWR, who have entered into selected dealer agreements with
the Distributor upon the terms and conditions set forth in Section 7 hereof
("Selected Dealers").
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(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section (f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less, in the case of a Fund whose Shares are offered
with a contingent deferred sales charge ("CDSC"), any applicable CDSC. Upon any
redemption of Shares the Fund shall pay the total amount of the redemption price
in New York Clearing House funds in accordance with applicable provisions of the
Prospectus.
(b) In the case of a Fund whose Shares are offered with a front-end sales
charge, the redemption by a Fund of any of its Shares purchased by or through
the Distributor will not affect the applicable front-end sales charge secured by
the Distributor or any Selected Dealer in the course of the original sale,
except that if any Shares are tendered for redemption within seven business days
after the date of the confirmation of the original purchase, the right to the
applicable front-end sales charge shall be forfeited by the Distributor and the
Selected Dealer which sold such Shares.
(c) In the case of a Fund whose Shares are offered with a CDSC, the proceeds
of any redemption of Shares shall be paid by each Fund as follows: (i) any
applicable CDSC shall be paid to the Distributor or to the Selected Dealer, or,
when applicable, pursuant to the Rules of the Association of the National
Association of Securities Dealers, Inc. ("NASD"), retained by the Fund and (ii)
the balance shall be paid to the redeeming shareholders, in each case in
accordance with applicable provisions of its Prospectus in New York Clearing
House funds. The Distributor is authorized to direct a Fund to pay directly to
the Selected Dealer any CDSC payable by a Fund to the Distributor in respect of
Shares sold by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the
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shareholders, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of Shares. Payment for Shares repurchased may be made by a
Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Account Executives, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
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(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Funds whose Shares are offered with a front-end sales charge, in such
agreement the Distributor shall have the right to fix the portion of the
applicable front-end sales charge which may be allocated to the Selected
Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended and
supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in
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conformity with, information furnished to the Fund in connection therewith by or
on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of a Fund in favor of the Distributor and any such controlling persons
to be deemed to protect the Distributor or any such controlling persons thereof
against any liability to a Fund or its security holders to which the Distributor
or any such controlling persons would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of its duties or
by reason of reckless disregard of its obligations and duties under this
Agreement; or (ii) is a Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or uch controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. Each Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any such suit brought to
enforce any such liability, but if a Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional counsel retained by them, but, in case the Fund does not elect to
assume the defense of any such suit, it will reimburse the Distributor or such
controlling person or persons, defendant or defendants in the suit, for the
reasonable fees and expenses of any counsel retained by them. Each Fund shall
promptly notify the Distributor of the commencement of any litigation or
proceedings against it or any of its officers or Directors/Trustees in
connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and
each of its Directors/Trustees and officers and each person, if any, who
controls the Fund against any loss, liability, claim, damage, or expense
described in the indemnity contained in subsection (a) of this Section, but only
with respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to a Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus and Statement of Additional Information, as from time to time
amended, or the annual or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person so
indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in
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such proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable if contribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective with respect to a Fund as of the date first above written
and shall remain in force until April 30, 1998, and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
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SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflicts with the applicable provisions of the 1940 Act, the
latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT MAY 31, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1997 between each of the
open-end investment companies to which Dean Witter InterCapital Inc. acts as
investment manager, that are listed on Schedule A, as may be amended from time
to time (each, a "Fund" and collectively, the "Funds"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor").
W I T N E S S E T H:
WHEREAS, each Fund is registered as an open-end investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and it is in the
interest of each Fund to offer its shares for sale continuously, and
WHEREAS, each Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of each Fund's transferable
shares, of $0.01 par value (the "Shares"), to commence on the date listed above,
in order to promote the growth of each Fund and facilitate the distribution of
its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR.
(a) Each Fund hereby appoints the Distributor as the principal underwriter
and distributor of the Fund to sell Shares to the public on the terms set forth
in this Agreement and that Fund's prospectus and the Distributor hereby accepts
such appointment and agrees to act hereunder. Each Fund, during the term of this
Agreement, shall sell Shares to the Distributor upon the terms and conditions
set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from each Fund and to sell Shares as principal to investors, and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in that Fund's prospectus
(the "Prospectus") and statement of additional information included in the
Fund's registration statement (the "Registration Statement") most recently filed
from time to time with the Securities and Exchange Commission (the "SEC") and
effective under the Securities Act of 1933, as amended (the "1933 Act"), and the
1940 Act or as the Prospectus may be otherwise amended or supplemented and filed
with the SEC pursuant to Rule 497 under the 1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of each Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by each Fund: (i) in connection with the merger or
consolidation of any other investment company or personal holding company with
the Fund or the acquisition by purchase or otherwise of all (or substantially
all) the assets or the outstanding shares of any such company by the Fund; (ii)
pursuant to reinvestment of dividends or capital gains distributions; or (iii)
pursuant to the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM EACH FUND. The Shares are offered in
four classes (each, a "Class"), as described in the Prospectus, as amended or
supplemented from time to time.
(a) The Distributor shall have the right to buy from each Fund the Shares of
the particular class needed, but not more than the Shares needed (except for
clerical errors in transmission), to fill unconditional orders for Shares of the
applicable class placed with the Distributor by investors or securities dealers.
The price which the Distributor shall pay for the Shares so purchased from the
Fund shall be the net asset value, determined as set forth in the Prospectus,
used in determining the public offering price on which such orders were based.
(b) The Shares are to be resold by the Distributor at the public offering
price of Shares of the applicable class as set forth in the Prospectus, to
investors or to securities dealers, including DWR, who
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have entered into selected dealer agreements with the Distributor upon the terms
and conditions set forth in Section 7 hereof ("Selected Dealers").
(c) Each Fund shall have the right to suspend the sale of the Shares at
times when redemption is suspended pursuant to the conditions set forth in
Section 4(f) hereof. Each Fund shall also have the right to suspend the sale of
the Shares if trading on the New York Stock Exchange shall have been suspended,
if a banking moratorium shall have been declared by federal or New York
authorities, or if there shall have been some other extraordinary event which,
in the judgment of a Fund, makes it impracticable to sell its Shares.
(d) Each Fund, or any agent of a Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by a Fund; provided, however, that a Fund
will not arbitrarily or without reasonable cause refuse to accept orders for the
purchase of Shares. The Distributor will confirm orders upon their receipt, and
each Fund (or its agent) upon receipt of payment therefor and instructions will
deliver share certificates for such Shares or a statement confirming the
issuance of Shares. Payment shall be made to the Fund in New York Clearing House
funds. The Distributor agrees to cause such payment and such instructions to be
delivered promptly to the Fund (or its agent).
(e) With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct each Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to each Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES.
(a) Any of the outstanding Shares of a Fund may be tendered for redemption
at any time, and each Fund agrees to redeem its Shares so tendered in accordance
with the applicable provisions set forth in its Prospectus. The price to be paid
to redeem the Shares shall be equal to the net asset value determined as set
forth in the Prospectus less any applicable contingent deferred sales charge
("CDSC"). Upon any redemption of Shares the Fund shall pay the total amount of
the redemption price in New York Clearing House funds in accordance with
applicable provisions of the Prospectus.
(b) The redemption by a Fund of any of its Class A Shares purchased by or
through the Distributor will not affect the applicable front-end sales charge
secured by the Distributor or any Selected Dealer in the course of the original
sale, except that if any Class A Shares are tendered for redemption within seven
business days after the date of the confirmation of the original purchase, the
right to the applicable front-end sales charge shall be forfeited by the
Distributor and the Selected Dealer which sold such Shares.
(c) The proceeds of any redemption of Class A, Class B or Class C Shares
shall be paid by each Fund as follows: (i) any applicable CDSC shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of the Association of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
its Prospectus in New York Clearing House funds. The Distributor is authorized
to direct a Fund to pay directly to the Selected Dealer any CDSC payable by a
Fund to the Distributor in respect of Class A, Class B, or Class C Shares sold
by the Selected Dealer to the redeeming shareholders.
(d) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in each
Fund's Prospectus. The Distributor shall promptly transmit to the transfer agent
of the Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
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(e) The Distributor is authorized, as agent for each Fund, to repurchase
Shares held in a shareholder's account with a Fund for which no share
certificate has been issued, upon the telephonic request of the shareholders, or
at the discretion of the Distributor. The Distributor shall promptly transmit to
the transfer agent of the Fund, for redemption, all such orders for repurchase
of Shares. Payment for Shares repurchased may be made by a Fund to the
Distributor for the account of the shareholder. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(f) Redemption of its Shares or payment by a Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by a Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for a Fund fairly to determine the value of its net assets, or
during any other period when the SEC, by order, so permits.
(g) With respect to its Shares tendered for redemption or repurchase by any
Selected Dealer on behalf of its customers, the Distributor is authorized to
instruct the transfer agent of a Fund to accept orders for redemption or
repurchase directly from the Selected Dealer on behalf of the Distributor and to
instruct the Fund to transmit payments for such redemptions and repurchases
directly to the Selected Dealer on behalf of the Distributor for the account of
the shareholder. The Distributor shall obtain from the Selected Dealer, and
shall maintain, a record of such orders. The Distributor is further authorized
to obtain from the Fund, and shall maintain, a record of payment made directly
to the Selected Dealer on behalf of the Distributor.
SECTION 5. DUTIES OF THE FUND.
(a) Each Fund shall furnish to the Distributor copies of all information,
financial statements and other papers which the Distributor may reasonably
request for use in connection with the distribution of its Shares, including one
certified copy, upon request by the Distributor, of all financial statements
prepared by the Fund and examined by independent accountants. Each Fund shall,
at the expense of the Distributor, make available to the Distributor such number
of copies of its Prospectus as the Distributor shall reasonably request.
(b) Each Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) Each Fund shall use its best efforts to pay the filing fees for an
appropriate number of its Shares to be sold under the securities laws of such
states as the Distributor and the Fund may approve. Any qualification to sell
its Shares in a state may be withheld, terminated or withdrawn by a Fund at any
time in its discretion. As provided in Section 8(c) hereof, such filing fees
shall be paid by the Fund. The Distributor shall furnish any information and
other material relating to its affairs and activities as may be required by a
Fund in connection with the sale of its Shares in any state.
(d) Each Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of its annual and
interim reports.
SECTION 6. DUTIES OF THE DISTRIBUTOR.
(a) The Distributor shall sell shares of each Fund through DWR and may sell
shares through other securities dealers and its own Account Executives, and
shall devote reasonable time and effort to promote sales of the Shares, but
shall not be obligated to sell any specific number of Shares. The services of
the Distributor hereunder are not exclusive and it is understood that the
Distributor may act as principal underwriter for other registered investment
companies, so long as the performance of its obligations hereunder is not
impaired thereby. It is also understood that Selected Dealers, including DWR,
may also sell shares for other registered investment companies.
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<PAGE>
(b) Neither the Distributor nor any Selected Dealer shall give any
information or make any representations, other than those contained in the
Registration Statement or related Prospectus and any sales literature
specifically approved by the appropriate Fund.
(c) The Distributor agrees that it will at all times comply with the
applicable terms and limitations of the Rules of the Association of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS.
(a) The Distributor shall have the right to enter into selected dealer
agreements with Selected Dealers for the sale of Shares. In making agreements
with Selected Dealers, the Distributor shall act only as principal and not as
agent for a Fund. Shares sold to Selected Dealers shall be for resale by such
dealers only at the public offering price set forth in the Prospectus. With
respect to Class A Shares, in such agreement the Distributor shall have the
right to fix the portion of the applicable front-end sales charge which may be
allocated to the Selected Dealers.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
(c) The Distributor shall adopt and follow procedures, as approved by each
Fund, for the confirmation of sales of its Shares to investors and Selected
Dealers, the collection of amounts payable by investors and Selected Dealers on
such sales, and the cancellation of unsettled transactions, as may be necessary
to comply with the requirements of the NASD, as such requirements may from time
to time exist.
SECTION 8. PAYMENT OF EXPENSES.
(a) Each Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors/Trustees
of each Fund who are not interested persons (as defined in the 1940 Act) of the
Fund or the Distributor, and independent accountants, in connection with the
preparation and filing of any required Registration Statements and Prospectuses
and all amendments and supplements thereto, and the expense of preparing,
printing, mailing and otherwise distributing prospectuses and statements of
additional information, annual or interim reports or proxy materials to
shareholders.
(b) The Distributor shall bear all expenses incurred by it in connection
with its duties and activities under this Agreement including the payment to
Selected Dealers of any sales commissions, service fees and other expenses for
sales of a Fund's Shares (except such expenses as are specifically undertaken
herein by a Fund) incurred or paid by Selected Dealers, including DWR. The
Distributor shall bear the costs and expenses of preparing, printing and
distributing any supplementary sales literature used by the Distributor or
furnished by it for use by Selected Dealers in connection with the offering of
the Shares for sale. Any expenses of advertising incurred in connection with
such offering will also be the obligation of the Distributor. It is understood
and agreed that, so long as a Fund's Plan of Distribution pursuant to Rule 12b-1
under the 1940 Act ("Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid in accordance with the terms
of such Rule 12b-1 Plan.
(c) Each Fund shall pay the filing fees, and, if necessary or advisable in
connection therewith, bear the cost and expense of qualifying each Fund as a
broker or dealer, in such states of the United States or other jurisdictions as
shall be selected by the Fund and the Distributor pursuant to Section 5(c)
hereof and the cost and expenses payable to each such state for continuing to
offer Shares therein until the Fund decides to discontinue selling Shares
pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION.
(a) Each Fund shall indemnify and hold harmless the Distributor and each
person, if any, who controls the Distributor against any loss, liability, claim,
damage or expense (including the reasonable cost of investigating or defending
any alleged loss, liability, claim, damage or expense and reasonable counsel
fees incurred in connection therewith) arising by reason of any person acquiring
any Shares, which may be based upon the 1933 Act, or on any other statute or at
common law, on the ground that the Registration Statement or related Prospectus
and Statement of Additional Information, as from time to time amended
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<PAGE>
and supplemented, or the annual or interim reports to shareholders of a Fund,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary in order to make the statements
therein not misleading, unless such statement or omission was made in reliance
upon, and in conformity with, information furnished to the Fund in connection
therewith by or on behalf of the Distributor; provided, however, that in no case
(i) is the indemnity of a Fund in favor of the Distributor and any such
controlling persons to be deemed to protect the Distributor or any such
controlling persons thereof against any liability to a Fund or its security
holders to which the Distributor or any such controlling persons would otherwise
be subject by reason of willful misfeasance, bad faith or gross negligence in
the performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement; or (ii) is a Fund to be liable
under its indemnity agreement contained in this paragraph with respect to any
claim made against the Distributor or any such controlling persons, unless the
Distributor or any such controlling persons, as the case may be, shall have
notified the Fund in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall have
been served upon the Distributor or uch controlling persons (or after the
Distributor or such controlling persons shall have received notice of such
service on any designated agent), but failure to notify the Fund of any such
claim shall not relieve it from any liability which it may have to the person
against whom such action is brought otherwise than on account of its indemnity
agreement contained in this paragraph. Each Fund will be entitled to participate
at its own expense in the defense, or, if it so elects, to assume the defense,
of any such suit brought to enforce any such liability, but if a Fund elects to
assume the defense, such defense shall be conducted by counsel chosen by it and
satisfactory to the Distributor or such controlling person or persons, defendant
or defendants in the suit. In the event the Fund elects to assume the defense of
any such suit and retain such counsel, the Distributor or such controlling
person or persons, defendant or defendants in the suit, shall bear the fees and
expenses of any additional counsel retained by them, but, in case the Fund does
not elect to assume the defense of any such suit, it will reimburse the
Distributor or such controlling person or persons, defendant or defendants in
the suit, for the reasonable fees and expenses of any counsel retained by them.
Each Fund shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or
Directors/Trustees in connection with the issuance or sale of the Shares.
(b) (i) The Distributor shall indemnify and hold harmless each Fund and each
of its Directors/Trustees and officers and each person, if any, who controls
the Fund against any loss, liability, claim, damage, or expense described in the
indemnity contained in subsection (a) of this Section, but only with respect to
statements or omissions made in reliance upon, and in conformity with,
information furnished to a Fund in writing by or on behalf of the Distributor
for use in connection with the Registration Statement or related Prospectus and
Statement of Additional Information, as from time to time amended, or the annual
or interim reports to shareholders.
(ii) The Distributor shall indemnify and hold harmless each Fund and
each Fund's transfer agent, individually and in its capacity as the Fund's
transfer agent, from and against any claims, damages and liabilities which arise
as a result of actions taken pursuant to instructions from, or on behalf of, the
Distributor to: (1) redeem all or a part of shareholder accounts in the Fund
pursuant to Section 4(g) hereof and pay the proceeds to, or as directed by, the
Distributor for the account of each shareholder whose Shares are so redeemed;
and (2) register Shares in the names of investors, confirm the issuance thereof
and receive payment therefor pursuant to Section 3(e) hereof.
(iii) In case any action shall be brought against a Fund or any person
so indemnified by this Section 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to a Fund, and the Fund and each person so indemnified shall have the rights and
duties given to the Distributor, by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifiying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by a Fund on the one hand and the Distributor on the other
from the
5
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offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of a Fund on the one hand and the Distributor on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by a Fund on the one hand and the Distributor on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Fund bear to the total
compensation received by the Distributor, in each case as set forth in the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by a Fund or the Distributor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Each Fund and the Distributor agree that it would not be
just and equitable ifcontribution were determined by pro rata allocation or by
any other method of allocation which does not take into account the equitable
considerations referred to above. The amount paid or payable by an indemnified
party as a result of the losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to above shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such claim. Notwithstanding the
provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages which it has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective with respect to a Fund as of the date first above written
and shall remain in force until April 30, 1998, and thereafter, but only so long
as such continuance is specifically approved at least annually by (i) the Board
of Directors/Trustees of each Fund, or by the vote of a majority of the
outstanding voting securities of the Fund, cast in person or by proxy, and (ii)
a majority of those Directors/Trustees who are not parties to this Agreement or
interested persons of any such party and who have no direct or indirect
financial interest in this Agreement or in the operation of the Fund's Rule
12b-1 Plan or in any agreement related thereto, cast in person at a meeting
called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors/Trustees of a Fund, by a majority of the
Directors/Trustees of a Fund who are not interested persons of the Fund and who
have no direct or indirect financial interest in this Agreement, or by vote of a
majority of the outstanding voting securities of a Fund, or by the Distributor,
on sixty days' written notice to the other party. This Agreement shall
automatically terminate in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the
Directors/Trustees of a Fund, or by the vote of a majority of outstanding voting
securities of a Fund, and (ii) a majority of those Directors/Trustees of a Fund
who are not parties to this Agreement or interested persons of any such party
and who have no direct or indirect financial interest in this Agreement or in
any Agreement related to the Fund's Rule 12b-1 Plan, cast in person at a meeting
called for the purpose of voting on such approval.
SECTION 12. ADDITIONAL FUNDS. If at any time another Fund desires to
appoint the Distributor as its principal underwriter and distributor under this
Agreement, it shall notify the Distributor in writing. If the Distributor is
willing to serve as the Fund's principal underwriter and distributor under this
Agreement, it shall notify the Fund in writing, whereupon such other Fund shall
become a Fund hereunder.
SECTION 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the
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State of New York, or any of the provisions herein, conflicts with the
applicable provisions of the 1940 Act, the latter shall control.
SECTION 14. PERSONAL LIABILITY. With respect to any Fund that is organized
as an unincorporated business trust under the laws of the Commonwealth of
Massachusetts, its Declaration of the Trust (each, a "Declaration") is on file
in the office of the Secretary of the Commonwealth of Massachusetts. Each
Declaration provides that the name of the Fund refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, shareholder, officer, employee or agent of any Fund shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with the
affairs of any Fund, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first written in New York, New York.
ON BEHALF OF THE FUNDS SET FORTH ON
SCHEDULE A, ATTACHED HERETO
By: ..................................
DEAN WITTER DISTRIBUTORS INC.
By: ..................................
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DEAN WITTER FUNDS
DISTRIBUTION AGREEMENT
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 10 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
September 13, 1996, relating to the financial statements and financial
highlights of Dean Witter Strategist Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the references to us under the headings "Independent
Accountants" and "Experts" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in
such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
July 16, 1997
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER STRATEGIST FUND
WHEREAS, Dean Witter Strategist Fund (the "Fund") is engaged in business
as an open-end management investment company and is registered as such under
the Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, on December 19, 1995, the Fund most recently amended and restated
a Plan of Distribution pursuant to Rule 12b-1 under the Act which had
initially been adopted on August 26, 1988, and the Trustees then determined
that there was a reasonable likelihood that adoption of the Plan of
Distribution, as then amended and restated, would benefit the Fund and its
shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to
continue to benefit the Fund and its shareholders; and
WHEREAS, on July 27, 1989, the Fund and Dean Witter Reynolds Inc. ("DWR")
amended and restated a Distribution Agreement which had initially been
adopted on August 26, 1988, pursuant to which the Fund employed DWR as
distributor of the Fund's shares; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of
the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will continue
to promote the sale of Fund shares and provide personal services to Fund
shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor entered into a separate Distribution
Agreement dated as of July 28, 1997 (which superseded a Distribution
Agreement dated May 31, 1997, which Agreement in turn superseded an Agreement
dated June 30, 1993), pursuant to which the Fund has employed the Distributor
in such capacity during the continuous offering of shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted and amended and restated, and the Distributor hereby agrees to the
terms of said Plan of Distribution (the "Plan"), as amended herein, in
accordance with Rule 12b-1 under the Act on the following terms and
conditions with respect to the Class A, Class B and Class C shares of the
Fund:
1(a)(i). With respect to Class A and Class C shares of the Fund, the
Distributor hereby undertakes to directly bear all costs of rendering the
services to be performed by it under this Plan and under the Distribution
Agreement, except for those specific expenses that the Trustees determine to
reimburse as hereinafter set forth.
1(a)(ii). The Fund is hereby authorized to reimburse the Distributor, DWR,
its affiliates and other broker-dealers for distribution expenses incurred by
them specifically on behalf of Class A and Class C shares of the Fund.
Reimbursement will be made through payments at the end of each month. The
amount of each monthly payment may in no event exceed an amount equal to a
payment at the annual rate of 0.25%, in the case of Class A, and 1.0%, in the
case of Class C, of the average net assets of the respective Class during the
month. With respect to Class A, in the case of all expenses other than
expenses representing the service fee and, with respect to Class C, in the
case of all expenses other than expenses representing a gross sales credit or
a residual to account executives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including a majority of
the Trustees who are not "interested persons" of the Fund, as defined in the
Act. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to account executives (for Class C) may be reimbursed
without prior determination. In the event that the Distributor proposes that
monies shall be reimbursed for other than such expenses, then in making the
quarterly determinations of the amounts that may be expended by the Fund, the
Distributor shall provide, and the Trustees shall review, a quarterly budget
of projected distribution expenses to be incurred by the Distributor, DWR,
its affiliates or other broker-dealers on behalf of the Fund together with a
report explaining the purposes and anticipated benefits of incurring
<PAGE>
such expenses. The Trustees shall determine the particular expenses, and the
portion thereof that may be borne by the Fund, and in making such
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares directly
or through DWR, its affiliates or other broker-dealers.
1(a)(iii). If, as of the end of any calendar year, the actual expenses
incurred by the Distributor, DWR, its affiliates and other broker-dealers on
behalf of Class A or Class C shares of the Fund (including accrued expenses
and amounts reserved for incentive compensation and bonuses) are less than
the amount of payments made by such Class pursuant to this Plan, the
Distributor shall promptly make appropriate reimbursement to the appropriate
Class. If, however, as of the end of any calendar year, the actual expenses
(other than expenses representing a gross sales credit) of the Distributor,
DWR, its affiliates and other broker-dealers are greater than the amount of
payments made by Class A or Class C shares of the Fund pursuant to this Plan,
such Class will not reimburse the Distributor, DWR, its affiliates or other
broker-dealers for such expenses through payments accrued pursuant to this
Plan in the subsequent fiscal year. Expenses representing a gross sales
credit may be reimbursed in the subsequent calendar year.
1(b). With respect to Class B shares of the Fund, the Fund shall pay to
the Distributor, as the distributor of securities of which the Fund is the
issuer, compensation for distribution of its Class B shares at the rate of
(i) the lesser of (a) 1.0% per annum of the average daily aggregate sales of
the Fund's Class B shares since the effectiveness of the Fund's first
amendment of the Plan on November 8, 1989 (not including reinvestment of
dividends and capital gains distributions from the Fund) less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since
the effectiveness of the first amendment of the Plan upon which a contingent
deferred sales charge has been imposed or upon which such charge has been
waived, or (b) 1.0% per annum of the average daily net assets of Class B
attributable to shares issued since the effectiveness of the first amendment
of the Plan, and (ii) 0.25% of the Fund's average daily net assets
attributable to shares issued prior to the effectiveness of the first
amendment of the Plan. Such compensation shall be calculated and accrued
daily and paid monthly or at such other intervals as the Trustees shall
determine.
The Distributor may direct that all or any part of the amounts receivable
by it under this Plan be paid directly to DWR, its affiliates or other
broker-dealers who provide distribution and shareholder services. All
payments made hereunder pursuant to the Plan shall be in accordance with the
terms and limitations of the Rules of the Association of the National
Association of Securities Dealers, Inc.
2. With respect to expenses incurred by each Class, the amount set forth
in paragraph 1 of this Plan shall be paid for services of the Distributor,
DWR its affiliates and other broker-dealers it may select in connection with
the distribution of the Fund's shares, including personal services to
shareholders with respect to their holdings of Fund shares, and may be spend
by the Distributor, DWR, its affiliates and such broker-dealers on any
activities or expenses related to the distribution of the Fund's shares or
services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR,
its affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in
or support distribution of shares or who provide personal services to
shareholders; printing of prospectuses and reports for other than existing
shareholders; preparation, printing and distribution of sales literature and
advertising materials and, with respect to Class B, opportunity costs in
incurring the foregoing expenses (which may be calculated as a carrying
charge on the excess of the distribution expenses incurred by the
Distributor, DWR, its affiliates or other broker-dealers over distribution
revenues received by them, such excess being hereinafter referred to as
"carryover expenses"). The overhead and other branch office
distribution-related expenses referred to in this paragraph 2 may include:
(a) the expenses operating the branch offices of the Distributor or other
broker-dealers, including DWR, in connection with the sale of the Fund
shares, including lease costs, the salaries and employee benefits of
operations and sales support personnel, utility costs, communications costs
and the costs of stationery and supplies; (b) the costs of client sales
seminars; (c) travel expenses of mutual fund sales coordinators to promote
the sale of Fund shares; and (d) other expenses relating to branch promotion
of Fund sales. Payments may also be made with respect to distribution
expenses incurred in connection with the distribution of shares, including
2
<PAGE>
personal services to shareholders with respect to holdings of such shares, of
an investment company whose assets are acquired by the Fund in a tax-free
reorganization. It is contemplated that, with respect to Class A shares, the
entire fee set forth in paragraph 1(a) will be characterized as a service fee
within the meaning of the National Association of Securities Dealers, Inc.
guidelines and that, with respect to Class B and Class C shares, payments at
the annual rate of 0.25% will be so characterized.
3. This Plan, as amended and restated, shall not take effect with respect
to any particular Class until it has been approved, together with any related
agreements, by votes of a majority of the Board of Trustees of the Fund and
of the Trustees who are not "interested persons" of the Fund (as defined in
the Act) and have no direct financial interest in the operation of this Plan
or any agreements related to it (the "Rule 12b-1 Trustees"), cast in person
at a meeting (or meetings) called for the purpose of voting on this Plan and
such related agreements.
4. This Plan shall continue in effect with respect to each Class until
April 30, 1998, and from year to year thereafter, provided such continuance
is specifically approved at least annually in the manner provided for
approval of this Plan in paragraph 3 hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this
regard, the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by
paragraph 4 hereof.
6. This Plan may be terminated at any time with respect to a Class by vote
of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the
outstanding voting securities of the Fund. The Plan may remain in effect with
the respect to a particular Class even if the Plan has been terminated in
accordance with this paragraph 6 with respect to any other Class. In the
event of any such termination or in the event of nonrenewal, the Fund shall
have no obligation to pay expenses which have been incurred by the
Distributor, DWR, its affiliates or other broker-dealers in excess of
payments made by the Fund pursuant to this Plan. However, with respect to
Class B, this shall not preclude consideration by the Trustees of the manner
in which such excess expenses shall be treated.
7. This Plan may not be amended with respect to any Class to increase
materially the amount each Class may spend for distribution provided in
paragraph 1 hereof unless such amendment is approved by a vote of at least a
majority (as defined in the Act) of the outstanding voting securities of that
Class, and no material amendment to the Plan shall be made unless approved in
the manner provided for approval in paragraph 3 hereof. Class B shares will
have the right to vote on any material increase in the fee set forth in
paragraph 1(a) above affecting Class A shares.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible
place.
10. The Declaration of Trust establishing Dean Witter Strategist Fund,
dated August 4, 1988, a copy of which, together with all amendments thereto
(the "Declaration"), is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name Dean Witter Strategist
Fund refers to the Trustees under the Declaration collectively as Trustees
but not as individuals or personally; and no Trustee, shareholder, officer,
employee or agent of Dean Witter Strategist Fund shall be held to any
personal liability, nor shall resort be had to their private property for
this satisfaction of any obligation or claim or otherwise, in connection with
the affairs of said Dean Witter Strategist Fund, but the Trust Estate only
shall be liable.
3
<PAGE>
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed this
amended and restated Plan of Distribution as of the day and year set forth
below in New York, New York.
Date: August 26, 1988
As Amended on July 27, 1989,
January 4, 1993, April 28, 1993,
December 19, 1995 and July 28, 1997
Attest: DEAN WITTER STRATEGIST FUND
................................... By: .................................
Attest: DEAN WITTER DISTRIBUTORS INC.
................................... By: .................................
Attest: DEAN WITTER REYNOLDS INC.
................................... By: .................................
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> JAN-31-1997
<INVESTMENTS-AT-COST> 1,202,085,395
<INVESTMENTS-AT-VALUE> 1,406,832,069
<RECEIVABLES> 36,508,523
<ASSETS-OTHER> 73,819
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,443,414,411
<PAYABLE-FOR-SECURITIES> 18,651,999
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,816,089
<TOTAL-LIABILITIES> 21,468,088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,194,579,660
<SHARES-COMMON-STOCK> 85,191,684
<SHARES-COMMON-PRIOR> 78,583,914
<ACCUMULATED-NII-CURRENT> 4,068,904
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18,551,085
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 204,746,674
<NET-ASSETS> 1,421,946,323
<DIVIDEND-INCOME> 4,911,979
<INTEREST-INCOME> 22,817,556
<OTHER-INCOME> 0
<EXPENSES-NET> 10,554,187
<NET-INVESTMENT-INCOME> 17,175,348
<REALIZED-GAINS-CURRENT> 46,887,807
<APPREC-INCREASE-CURRENT> 118,412,831
<NET-CHANGE-FROM-OPS> 182,475,986
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,452,684)
<DISTRIBUTIONS-OF-GAINS> (109,339,056)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,937,149
<NUMBER-OF-SHARES-REDEEMED> 11,419,419
<SHARES-REINVESTED> 7,090,040
<NET-CHANGE-IN-ASSETS> 162,641,550
<ACCUMULATED-NII-PRIOR> 4,346,240
<ACCUMULATED-GAINS-PRIOR> 81,002,334
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,772,257
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 10,554,187
<AVERAGE-NET-ASSETS> 1,346,601,643
<PER-SHARE-NAV-BEGIN> 16.02
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 2.08
<PER-SHARE-DIVIDEND> (0.22)
<PER-SHARE-DISTRIBUTIONS> (1.40)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.69
<EXPENSE-RATIO> 1.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN
PURSUANT TO RULE 18f-3
INTRODUCTION
This plan (the "Plan") is adopted pursuant to Rule 18f-3(d) of the
Investment Company Act of 1940, as amended (the "1940 Act"), and will be
effective as of July 28, 1997. The Plan relates to shares of the open-end
investment companies to which Dean Witter InterCapital Inc. acts as investment
manager, that are listed on Schedule A, as may be amended from time to time
(each, a "Fund" and collectively, the "Funds"). The Funds are distributed
pursuant to a system (the "Multiple Class System") in which each class of shares
(each, a "Class" and collectively, the "Classes") of a Fund represents a pro
rata interest in the same portfolio of investments of the Fund and differs only
to the extent outlined below.
I. DISTRIBUTION ARRANGEMENTS
One or more Classes of shares of the Funds are offered for purchase by
investors with the sales load structures described below. In addition, pursuant
to Rule 12b-1 under the 1940 Act, the Funds have each adopted a Plan of
Distribution (the "12b-1 Plan") under which shares of certain Classes are
subject to the service and/or distribution fees ("12b-1 fees") described below.
1. CLASS A SHARES
Class A shares are offered with a front-end sales load ("FESL"). The
schedule of sales charges applicable to a Fund and the circumstances under which
the sales charges are subject to reduction are set forth in each Fund's current
prospectus. As stated in each Fund's current prospectus, Class A shares may be
purchased at net asset value (without a FESL): (i) in the case of certain large
purchases of such shares; and (ii) by certain limited categories of investors,
in each case, under the circumstances and conditions set forth in each Fund's
current prospectus. Class A shares purchased at net asset value may be subject
to a contingent deferred sales charge ("CDSC") on redemptions made within one
year of purchase. Further information relating to the CDSC, including the manner
in which it is calculated, is set forth in paragraph 6 below. Class A shares are
also subject to payments under each Fund's 12b-1 Plan to reimburse Dean Witter
Distributors Inc., Dean Witter Reynolds Inc. ("DWR"), its affiliates and other
broker-dealers for distribution expenses incurred by them specifically on behalf
of the Class, assessed at an annual rate of up to 0.25% of average daily net
assets. The entire amount of the 12b-1 fee represents a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD") guidelines.
2. CLASS B SHARES
Class B shares are offered without a FESL, but will in most cases be subject
to a six-year declining CDSC which is calculated in the manner set forth in
paragraph 6 below. Class B shares purchased by certain qualified
employer-sponsored benefit plans are subject to a three-year declining CDSC
which is calculated in the manner set forth in paragraph 6 below. The schedule
of CDSC charges applicable to each Fund is set forth in each Fund's current
prospectus. With the exception of certain of the Funds which have a different
formula described below (Dean Witter American Value Fund, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Strategist Fund and Dean
Witter Dividend Growth Securities Inc.)(1), Class B
- ------------
(1)The payments under the 12b-1 Plan for each of Dean Witter American Value
Fund, Dean Witter Natural Resource Development Securities Inc. and Dean Witter
Dividend Growth Securities Inc. are assessed at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund's Plan (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Plan's inception
upon which a contingent deferred sales charge has been imposed or waived, or (b)
the average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since inception of the Plan. The payments under the
12b-1 Plan for the Dean Witter Strategist Fund are assessed at the annual rate
of: (i) 1% of the lesser of (a) the average daily aggregate gross sales of the
Fund's Class B shares since the effectiveness of the first amendment of the Plan
on November 8, 1989 (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the effectiveness of the first amended Plan, upon
which a contingent deferred sales charge has been imposed or waived, or (b) the
average daily net assets of Class B attributable to shares issued, net of
related shares redeemed, since the effectiveness of the first amended Plan; plus
(ii) 0.25% of the average daily net assets of Class B attributable to shares
issued, net of related shares redeemed, prior to effectiveness of the first
amended Plan.
1
<PAGE>
shares are also subject to a fee under each Fund's respective 12b-1 Plan,
assessed at the annual rate of up to 1.0% of either: (a) the lesser of (i) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestment of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (ii) the average daily net assets of Class B; or (b) the
average daily net assets of Class B. A portion of the 12b-1 fee equal to up to
0.25% of the Fund's average daily net assets is characterized as a service fee
within the meaning of the NASD guidelines and the remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge. Also, Class B
shares have a conversion feature ("Conversion Feature") under which such shares
convert to Class A shares after a certain holding period. Details of the
Conversion Feature are set forth in Section IV below.
3. CLASS C SHARES
Class C shares are offered without imposition of a FESL, but will in most
cases be subject to a CDSC of 1.0% on redemptions made within one year after
purchase. Further information relating to the CDSC is set forth in paragraph 6
below. In addition, Class C shares, under each Fund's 12b-1 Plan, are subject to
12b-1 payments to reimburse Dean Witter Distributors Inc., DWR, its affiliates
and other broker-dealers for distribution expenses incurred by them specifically
on behalf of the Class, assessed at the annual rate of up to 1.0% of the average
daily net assets of the Class. A portion of the 12b-1 fee equal to up to 0.25%
of the Fund's average daily net assets is characterized as a service fee within
the meaning of NASD guidelines. Unlike Class B shares, Class C shares do not
have the Conversion Feature.
4. CLASS D SHARES
Class D shares are offered without imposition of a FESL, CDSC or a 12b-1 fee
for purchases of Fund shares by (i) investors meeting an initial minimum
investment requirement and (ii) certain other limited categories of investors,
in each case, as may be approved by the Boards of Directors/Trustees of the
Funds and as disclosed in each Fund's current prospectus.
5. ADDITIONAL CLASSES OF SHARES
The Boards of Directors/Trustees of the Funds have the authority to create
additional Classes, or change existing Classes, from time to time, in accordance
with Rule 18f-3 under the 1940 Act.
6. CALCULATION OF THE CDSC
Any applicable CDSC is calculated based upon the lesser of net asset value
of the shares at the time of purchase or at the time of redemption. The CDSC
does not apply to amounts representing an increase in share value due to capital
appreciation and shares acquired through the reinvestment of dividends or
capital gains distributions. The CDSC schedule applicable to a Fund and the
circumstances in which the CDSC is subject to waiver are set forth in each
Fund's prospectus.
II. EXPENSE ALLOCATIONS
Expenses incurred by a Fund are allocated among the various Classes of
shares pro rata based on the net assets of the Fund attributable to each Class,
except that 12b-1 fees relating to a particular Class are allocated directly to
that Class. In addition, other expenses associated with a particular Class
(except advisory or custodial fees), may be allocated directly to that Class,
provided that such expenses are reasonably identified as specifically
attributable to that Class and the direct allocation to that Class is approved
by the Fund's Board of Directors/Trustees.
III. CLASS DESIGNATION
All shares of the Funds held prior to July 28, 1997 (other than the shares
held by certain employee benefit plans established by DWR and its affiliate, SPS
Transaction Services, Inc., shares of Funds offered with a FESL, and shares of
Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund) have been
designated Class B shares. Shares held prior to July 28, 1997 by such employee
benefit plans have been designated Class D shares. Shares held prior to July 28,
1997 of Funds offered with a FESL have been designated Class D shares. In
addition, shares of Dean Witter American Value Fund purchased prior to April 30,
1984, shares of Dean Witter Strategist Fund purchased prior to November 8, 1989
and shares of Dean Witter Natural Resource Development Securities Inc. and Dean
Witter Dividend Growth Securities Inc. purchased prior to July 2, 1984 (with
respect to such shares of each Fund, including such proportion of shares
acquired through reinvestment of dividends and capital gains distributions as
the total number of shares acquired prior to each of the preceding dates in this
sentence bears to the total number of shares purchased and owned by the
shareholder of that Fund) have been designated Class D shares. Shares of Dean
Witter Balanced Growth Fund and Dean Witter Balanced Income Fund held prior to
July 28, 1997 have
2
<PAGE>
been designated Class C shares except that shares of Dean Witter Balanced Growth
Fund and Dean Witter Balanced Income Fund held prior to July 28, 1997 that were
acquired in exchange for shares of an investment company offered with a CDSC
have been designated Class B shares and those that were acquired in exchange for
shares of an investment company offered with a FESL have been designated Class A
shares.
IV. THE CONVERSION FEATURE
Class B shares held before May 1, 1997 will convert to Class A shares in
May, 2007, except that Class B shares which are purchased before July 28, 1997
by trusts for which Dean Witter Trust Company ("DWTC") or Dean Witter Trust FSB
("DWTFSB") provides discretionary trustee services will convert to Class A
shares on or about August 29, 1997 (the CDSC will not be applicable to such
shares upon the conversion). In all other instances, Class B shares of each Fund
will automatically convert to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase.
Conversions will be effected once a month. The 10 year period will be calculated
from the last day of the month in which the shares were purchased or, in the
case of Class B shares acquired through an exchange or a series of exchanges,
from the last day of the month in which the original Class B shares were
purchased, provided that shares originally purchased before May 1, 1997 will
convert to Class A shares in May, 2007. Except as set forth below, the
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends owned by the shareholder as the total number
of his or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a 401(k) plan or other employer-sponsored plan
qualified under Section 401(a) of the Internal Revenue Code (the "Code") and for
which DWTC or DWTFSB serves as Trustee or the 401(k) Support Services Group of
DWR serves as recordkeeper, all Class B shares will convert to Class A shares on
the conversion date of the first shares of a Fund purchased by that plan. In the
case of Class B shares previously exchanged for shares of an "Exchange Fund" (as
such term is defined in the prospectus of each Fund), the period of time the
shares were held in the Exchange Fund (calculated from the last day of the month
in which the Exchange Fund shares were acquired) is excluded from the holding
period for conversion. If those shares are subsequently re-exchanged for Class B
shares of a Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
Effectiveness of the Conversion Feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel to the effect that (i) the conversion of shares does not constitute a
taxable event under the Code; (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion; and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The Conversion Feature may be suspended if the Ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B fees under the applicable Fund's 12b-1 Plan.
V. EXCHANGE PRIVILEGES
Shares of each Class may be exchanged for shares of the same Class of the
other Funds and for shares of certain other investment companies without the
imposition of an exchange fee as described in the prospectuses and statements of
additional information of the Funds. The exchange privilege of each Fund may be
terminated or revised at any time by the Fund upon such notice as may be
required by applicable regulatory agencies as described in each Fund's
prospectus.
VI. VOTING
Each Class shall have exclusive voting rights on any matter that relates
solely to its 12b-1 Plan, except that Class B shareholders will have the right
to vote on any proposed material increase in Class A's expenses, including
payments under the Class A 12b-1 Plan, if such proposal is submitted separately
to Class A shareholders. If the amount of expenses, including payments under the
Class A 12b-1 Plan, is increased materially without the approval of Class B
shareholders, the Fund will establish a new Class A for Class B shareholders
whose shares automatically convert on the same terms as applied to Class A
before the increase. In addition, each Class shall have separate voting rights
on any matter submitted to shareholders in which the interests of one Class
differ from the interests of any other Class.
3
<PAGE>
DEAN WITTER FUNDS
MULTIPLE CLASS PLAN PURSUANT TO RULE 18f-3
SCHEDULE A
AT JULY 28, 1997
1) Dean Witter American Value Fund
2) Dean Witter Balanced Growth Fund
3) Dean Witter Balanced Income Fund
4) Dean Witter California Tax-Free Income Fund
5) Dean Witter Capital Appreciation Fund
6) Dean Witter Capital Growth Securities
7) Dean Witter Convertible Securities Trust
8) Dean Witter Developing Growth Securities Trust
9) Dean Witter Diversified Income Trust
10) Dean Witter Dividend Growth Securities Inc.
11) Dean Witter European Growth Fund Inc.
12) Dean Witter Federal Securities Trust
13) Dean Witter Financial Services Trust
14) Dean Witter Global Asset Allocation Fund
15) Dean Witter Global Dividend Growth Securities
16) Dean Witter Global Utilities Fund
17) Dean Witter Health Sciences Trust
18) Dean Witter High Yield Securities Inc.
19) Dean Witter Income Builder Fund
20) Dean Witter Information Fund
21) Dean Witter Intermediate Income Securities
22) Dean Witter International SmallCap Fund
23) Dean Witter Japan Fund
24) Dean Witter Managers' Select Fund
25) Dean Witter Market Leader Trust
26) Dean Witter Mid-Cap Growth Fund
27) Dean Witter Natural Resource Development Securities Inc.
28) Dean Witter New York Tax-Free Income Fund
29) Dean Witter Pacific Growth Fund Inc.
30) Dean Witter Precious Metals and Minerals Trust
31) Dean Witter Special Value Fund
32) Dean Witter Strategist Fund
33) Dean Witter Tax-Exempt Securities Trust
34) Dean Witter U.S. Government Securities Trust
35) Dean Witter Utilities Fund
36) Dean Witter Value-Added Market Series/Equity Portfolio
37) Dean Witter World Wide Income Trust
38) Dean Witter World Wide Investment Trust
4
