<PAGE>
DEAN WITTER
WORLD WIDE INCOME TRUST
PROSPECTUS--DECEMBER 24, 1996
- -------------------------------------------------------------------------------
DEAN WITTER WORLD WIDE INCOME TRUST (THE "FUND") IS AN OPEN-END, NON-DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY, WHOSE PRIMARY INVESTMENT OBJECTIVE IS TO PROVIDE
A HIGH LEVEL OF CURRENT INCOME. AS A SECONDARY OBJECTIVE, THE FUND WILL SEEK
APPRECIATION IN THE VALUE OF ITS ASSETS. THE FUND SEEKS TO ACHIEVE ITS
INVESTMENT OBJECTIVES BY INVESTING PRIMARILY IN FIXED-INCOME SECURITIES ISSUED
OR GUARANTEED BY FOREIGN GOVERNMENTS, ISSUED BY FOREIGN OR U.S. COMPANIES, OR
ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES AND INSTRUMENTALITIES.
SEE "INVESTMENT OBJECTIVES AND POLICIES."
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, redemptions and/or repurchases are
subject in most cases to a contingent deferred sales charge, scaled down from 5%
to 1% of the amount redeemed, if made within six years of purchase, which charge
will be paid to the Distributor. See "Redemptions and Repurchases--Contingent
Deferred Sales Charge." In addition, the Fund pays the Distributor a
distribution fee pursuant to a Plan of Distribution at the annual rate of 0.85%
of the lesser of the (i) average daily aggregate net sales or (ii) average daily
net assets of the Fund. See "Purchase of Fund Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated December 24, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 3
Financial Highlights.............................. 4
The Fund and Its Management....................... 5
Investment Objectives and Policies................ 5
Risk Considerations............................. 7
Investment Restrictions........................... 12
Purchase of Fund Shares........................... 13
Shareholder Services.............................. 15
Redemptions and Repurchases....................... 17
Dividends, Distributions and Taxes................ 18
Performance Information........................... 19
Additional Information............................ 20
</TABLE>
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DEAN WITTER
WORLD WIDE INCOME TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 or (800) 869-NEWS (toll-free)
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC., DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and
is an open-end, non-diversified management investment company. The Fund invests
primarily in fixed-income securities issued or guaranteed by foreign governments, issued
by foreign or U.S. companies, or issued or guaranteed by the U.S. Government, its
agencies and instrumentalities.
- -------------------------------------------------------------------------------------------------------
SHARES OFFERED Shares of beneficial interest with $.01 par value (see page 20).
- -------------------------------------------------------------------------------------------------------
OFFERING At net asset value without sales charge (see page 13). Shares redeemed within six years
PRICE of purchase are subject to a contingent deferred sales charge under most circumstances
(see page 17).
- -------------------------------------------------------------------------------------------------------
MINIMUM Minimum initial investment, $1,000 ($100 if the account is opened through EasyInvestSM);
PURCHASE minimum subsequent investments, $100 (see page 13).
- -------------------------------------------------------------------------------------------------------
INVESTMENT The primary investment objective of the Fund is to provide a high level of current
OBJECTIVES income. As a secondary objective, the Fund will seek appreciation in the value of its
assets.
- -------------------------------------------------------------------------------------------------------
INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and
MANAGER its wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to 100
investment companies and other portfolios with assets of approximately $91 billion at
November 30, 1996 (see page 5).
- -------------------------------------------------------------------------------------------------------
MANAGEMENT FEE The Investment Manager receives a monthly fee at the annual rate of 0.75% of the Fund's
daily net assets, scaled down at various asset levels to 0.30% of the Fund's daily net
assets on assets in excess of $1 billion (see page 5).
- -------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income are declared and paid monthly. Capital gains, if
DISTRIBUTIONS any, are paid at least annually. Dividends and capital gains distributions are
automatically reinvested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 18).
- -------------------------------------------------------------------------------------------------------
DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the
Fund a distribution fee accrued daily and payable monthly at the rate of 0.85% per annum
of the lesser of (i) the Fund's average daily aggregate net sales or (ii) the Fund's
average daily net assets. This fee compensates the Distributor for the services provided
in distributing shares of the Fund and for sales-related expenses. The Distributor also
receives the proceeds of any contingent deferred sales charges (see pages 13 and 17).
- -------------------------------------------------------------------------------------------------------
REDEMPTION-- Shares are redeemable by the shareholder at net asset value. An account may be
CONTINGENT involuntarily redeemed if the total value of the account is less than $100 or, if the
DEFERRED account was opened through EasyInvest, if after twelve months the shareholder has
SALES CHARGE invested less than $1,000 in the account. Although no commission or sales load is
imposed upon the purchase of shares, a contingent deferred sales charge (scaled down
from 5% to 1%) is imposed on any redemption of shares if after such redemption the
aggregate current value of an account with the Fund falls below the aggregate amount of
the investor's purchase payments made during the six years preceding the redemption.
However, there is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see pages 17-18).
- -------------------------------------------------------------------------------------------------------
SPECIAL RISK The net asset value of the Fund's shares will fluctuate with changes in the market value
CONSIDERATIONS of its portfolio securities. The 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 7). In addition, it should be recognized that the foreign
securities and markets in which the Fund will invest pose different and possibly greater
risks than those customarily associated with domestic securities and their markets.
Moreover, investors should consider other risks associated with a portfolio of
international securities, including fluctuations in foreign currency exchange rates
(i.e., if a substantial portion of the Fund's assets are denominated in foreign
currencies which decrease in value with respect to the U.S. dollar, the value of the
investor's shares and the distributions made on those shares will, likewise, decrease in
value), foreign securities exchange controls and foreign tax rates, as well as
investments in forward currency contracts, options and futures contracts (see pages
7-12).
- -------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the fiscal
year ended October 31, 1996.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases......... None
Maximum Sales Charge Imposed on Reinvested
Dividends........................................ None
Deferred Sales Charge
(as a percentage of the lesser of original
purchase price or redemption proceeds)........... 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining rates:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- -------------------------------------------------- -----------
<S> <C>
First............................................. 5.0%
Second............................................ 4.0%
Third............................................. 3.0%
Fourth............................................ 2.0%
Fifth............................................. 2.0%
Sixth............................................. 1.0%
Seventh and thereafter............................ None
</TABLE>
<TABLE>
<S> <C>
Redemption Fees................................... None
Exchange Fee...................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Management Fees................................... 0.75%
12b-1 Fees*....................................... 0.85%
Other Expenses.................................... 0.36%
Total Fund Operating Expenses..................... 1.96%
<FN>
- ------------------------
* A portion of the 12b-1 fee equal to 0.20% of the Fund's average daily net
assets is characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines (see "Purchase of
Fund Shares").
</TABLE>
<TABLE>
<CAPTION>
10
EXAMPLE 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) 5% annual return and (2)
redemption at the end of each time period:....... $70 $92 $126 $229
You would pay the following expenses on the same
investment, assuming no redemption:.............. $20 $62 $106 $229
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR LESS THAN
THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the various
costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and Its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The per share data and ratios should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund is
contained in the Fund's Annual Report to Shareholders, which may be obtained
without charge upon request of the Fund.
<TABLE>
<CAPTION>
FOR THE
PERIOD
MARCH
30,
1989*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
------------------------------------------------------------- OCTOBER
1996 1995 1994 1993 1992 1991 1990 31, 1989
------- ------ ------ ------ ------ ------ ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.............. $9.08 $8.55 $9.39 $9.11 $9.11 $10.38 $9.55 $10.00
------- ------ ------ ------ ------ ------ ------ --------
Net investment
income............. 0.60 0.55 0.55 0.59 0.62 0.82 0.95 0.49
Net realized and
unrealized gain
(loss)............. 0.48 0.48 (0.92) 0.27 0.01 (0.99) 0.78 (0.45)
------- ------ ------ ------ ------ ------ ------ --------
Total from
investment
operations......... 1.08 1.03 (0.37) 0.86 0.63 (0.17) 1.73 0.04
------- ------ ------ ------ ------ ------ ------ --------
Less dividends and
distributions from:
Net investment
income........... (0.83) (0.50) (0.22) (0.58) (0.63) (0.86) (0.90) (0.49)
Net realized
gain............. -- -- -- -- -- (0.24) -- --
Paid-in-capital... -- -- (0.25) -- -- -- -- --
------- ------ ------ ------ ------ ------ ------ --------
Total dividends and
distributions...... (0.83) (0.50) (0.47) (0.58) (0.63) (1.10) (0.90) (0.49)
------- ------ ------ ------ ------ ------ ------ --------
Net asset value, end
of period.......... $9.33 $9.08 $8.55 $9.39 $9.11 $9.11 $10.38 $ 9.55
------- ------ ------ ------ ------ ------ ------ --------
------- ------ ------ ------ ------ ------ ------ --------
TOTAL INVESTMENT
RETURN+............. 12.60% 12.45% (3.99)% 9.72% 7.13% (1.75)% 19.22% 0.40%(1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses............ 1.96% 1.93% 1.91% 1.87% 1.87% 1.76% 1.81% 1.90%(2)
Net investment
income............. 6.39% 6.21% 5.87% 6.39% 6.78% 8.45% 9.76% 9.10%(2)
SUPPLEMENTAL DATA:
Net assets, end of
period, in
thousands.......... $114,022 $138,165 $179,563 $275,319 $324,185 $421,051 $462,709 $388,578
Portfolio turnover
rate............... 263% 254% 229% 229% 214% 245% 109% 113%(1)
</TABLE>
- ------------------------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter World Wide Income Trust (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 October 14, 1988.
Dean Witter InterCapital Inc. ("InterCapital" or (the "Investment Manager"),
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Investment Manager. The Investment Manager, which was incorporated in July,
1992, is a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies, 30 of which are listed on
the New York Stock Exchange, with combined total assets of approximately $87.9
billion as of November 30, 1996. The Investment Manager also manages portfolios
of pension plans, other institutions and individuals which aggregated
approximately $3.1 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. InterCapital has retained Dean Witter Services Company Inc. to
perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by or under the
direction of the Investment Manager to ensure that the Fund's general investment
policies and programs are being properly carried out and that administrative
services are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily at an annual rate
of 0.75% of the daily net assets of the Fund up to $250 million, scaled down at
various asset levels to 0.30% of the daily net assets of the Fund exceeding $1
billion. For the fiscal year ended October 31, 1996, the Fund accrued total
compensation to the Investment Manager amounting to 0.75% of the Fund's average
daily net assets and the Fund's total expenses amounted to 1.96% of the Fund's
average daily net assets.
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The primary investment objective of the Fund is to provide a high level of
current income. As a secondary objective, the Fund will seek appreciation in the
value of its assets. The Fund will attempt to achieve its investment objectives
by investing primarily in a portfolio of fixed-income securities issued by
foreign and U.S. corporations or issued or guaranteed by foreign governments,
government agencies or government subdivisions, supranational organizations (or
any subdivision thereof) and the U.S. Government, its agencies and
instrumentalities. There can be no assurance that the Fund will achieve its
objectives. The investment objectives are fundamental policies of the Fund and,
as such, may not be changed without the approval of the shareholders of the
Fund.
The Fund may invest in securities issued by government entities or
corporations of any single nation and which are denominated in any single
currency. The Investment Manager will, however, actively allocate the Fund's
investments among various geographic regions, nations, currencies and
corporations or governmental entities in its attempt to maximize the dividends
paid on the Fund's shares and, if possible, the appreciation of their value. In
addition, it is the Fund's policy that, during normal market conditions, its
assets will be comprised of investments in the securities of issuers located in
at least three separate nations (which may include the United States). The
Investment Manager will consider such factors as the yield of individual
securities, the anticipated appreciation of such securities, the state of the
economies of the countries in which the investments are made, the levels of
inflation existing in such countries, the liquidity and financial soundness of
the markets in which such securities trade, the levels of inflation existing
within the relevant country and the current and anticipated relationships of
such countries' currencies to the U.S. dollar. The currency in which the Fund's
securities will be principally denominated will be a function of these factors
in that, at any given time, the Investment Manager may determine, after review
of these factors, that the fixed-income securities in a given country are
superior to the fixed-income securities in a different country, and,
accordingly, increase the proportion of the Fund's assets denominated in the
currency of the country with the superior investment climate.
It is anticipated that the securities held by the Fund in its portfolio will
be denominated, principally, in the following currencies: the United States
dollar, Australian dollar, New Zealand dollar, German mark, Japanese yen, French
franc, British pound, Canadian dollar, Mexican peso, Swiss franc, Dutch guilder,
Belgian franc, Swedish kronor, Italian lira, Finnish markka and European
Currency Unit (a weighted composite of the currencies of member states of the
European Monetary System). Securities of issuers
5
<PAGE>
within a given country may be denominated in the currency of a different
country.
The U.S. Government securities in which the Fund may invest include U.S.
Treasury bonds, notes and bills, which are direct obligations of the U.S.
Government as well as in securities issued or guaranteed by agencies and
instrumentalities of the U.S. Government. Some of the securities of such
agencies and instrumentalities are backed by the full faith and credit of the
U.S. (e.g., the Government National Mortgage Association), while others are not
backed by the full faith and credit of the U.S. but are backed by the credit of
the issuing agency or instrumentality (e.g., the Federal Home Loan Bank) or are
backed by an existing line of credit with the U.S. Treasury from which its
issuing agency or instrumentality may borrow (e.g., the Federal National
Mortgage Association).
The Fund may invest in fixed-income securities issued or guaranteed by
supranational organizations. Such organizations are entities designated or
supported by a government or government entity to promote economic development,
and include, among others, the Asian Development Bank, the European Coal and
Steel Community, the European Economic Community and the World Bank. These
organizations do not have taxing authority and are dependent upon their members
for payments of interest and principal. Each supranational entity's lending
activities are limited to a percentage of its total capital (including "callable
capital" contributed by members at the entity's call), reserves and net income.
Securities issued by supranational organizations may be denominated in U.S.
dollars or in foreign currencies.
In seeking to achieve its objectives, the Fund will normally invest at least
65% of its assets in fixed-income securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities or fixed-income securities issued
by U.S. corporations, foreign governments, foreign corporations or other
entities which have been rated within the four highest categories as determined
by Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A or Baa) or Standard &
Poor's Corporation ("S&P") (AAA, AA, A or BBB), or which are unrated by such
rating agencies but which are deemed to be of comparable quality by the
Investment Manager. The ratings of fixed-income securities by Moody's and S&P
are a generally accepted barometer of credit risk. Fixed-income securities rated
Baa by Moody's have certain speculative characteristics. A description of S&P
and Moody's ratings is contained in the Statement of Additional Information.
The types of fixed-income securities invested in by the Fund include
straight debt obligations of varying maturities, such as bonds, notes, bills,
debentures, equipment lease and trust certificates, conditional sales contracts,
commercial paper, commercial bank obligations, obligations of savings
institutions, bankers' acceptances, Eurodollar certificates of deposit and fixed
and adjustable rate preferred stocks.
The Fund may invest without limitation in notes and commercial paper, the
principal amount of which is indexed to certain specific foreign currency
exchange rates. Indexed notes and commercial paper typically provide that their
principal amount is adjusted upwards or downwards (but not below zero) at
maturity to reflect fluctuations in the exchange rate between two currencies
during the period the obligation is outstanding, depending on the terms of the
specific security. In selecting the two currencies, the Investment Manager will
consider the correlation and relative yields of various currencies. The Fund
will purchase an indexed obligation using the currency in which it is
denominated and, at maturity, will receive interest and principal payments
thereon in that currency. The amount of principal payable by the issuer at
maturity, however, will vary (i.e., increase or decrease) in response to the
change (if any) in the exchange rates between the two specified currencies
during the period from the date the instrument is issued to its maturity date.
The potential for realizing gains as a result of changes in foreign currency
exchange rates may enable the Fund to hedge the currency in which the obligation
is denominated (or to effect cross-hedges against other currencies) against a
decline in the U.S. dollar value of investments denominated in foreign
currencies, while providing an attractive money market rate of return. The Fund
will purchase such indexed obligations to generate current income or for hedging
purposes and will not speculate in such obligations.
Under normal conditions, a percentage of the short-term investments in the
Fund's portfolio may be money market securities. Money market securities include
short-term obligations issued or guaranteed by the U.S. Government or foreign
governments or issued by such governments' respective agencies and
instrumentalities, bank money market instruments including certificates of
deposit, bankers' acceptances, time deposits and deposit notes and certain other
short-term obligations such as short-term commercial paper. With respect to bank
money instruments, the obligations may be issued by U.S. or foreign depository
institutions, foreign branches or subsidiaries of U.S. depository institutions
("Eurodollar" obligations), U.S. branches or subsidiaries of foreign depository
institutions ("Yankeedollar" obligations) or foreign branches or subsidiaries of
foreign depository institutions. Eurodollar and Yankeedollar obligations and
obligations of branches or subsidiaries of foreign depository institutions may
be general obligations of the parent bank or may be limited to the issuing
branch or subsidiary by the terms of the specific obligations or by government
regulation.
In addition, the Fund may invest in fixed-income securities which are
convertible into common stock, such as convertible debentures and convertible
preferred stock, and fixed-income securities to which are attached equity
features such as shares of common stock, warrants for the purchase of common
stock, participations based on revenues, sales or profits and other conversion
and/or exchange rights.
6
<PAGE>
The Fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets and EDRs, in bearer form, are designed for use in European
securities markets.
There may be periods during which, in the opinion of the Investment Manager,
market conditions warrant reduction of some or all of the Fund's securities
holdings. During such periods, the Fund may adopt a temporary "defensive"
posture in which greater than 35% of its assets are invested in cash or money
market instruments. Under such circumstances, the money market instruments in
which the Fund may invest are securities issued or guaranteed by the U.S.
Government; U.S. bank obligations; Eurodollar certificates of deposit;
obligations of American savings institutions; fully insured certificates of
deposit; and commercial paper of U.S. issuers rated within the two highest
grades by Moody's or S&P or, if not rated, are issued by a company having an
outstanding debt issue rated at least AA by S&P or Aa by Moody's.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of its portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market or political factors which cannot be predicted. The Fund's yield will
also vary based on the yield of the Fund's portfolio securities.
All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate risk. The credit risk relates to the ability of the
issuer to meet interest or principal payments or both as they come due. The
interest rate risk refers to the fluctuations in the net asset value of any
portfolio of fixed-income securities resulting from the inverse relationship
between price and yield of fixed-income securities; that is, when the general
level of interest rates rises, the prices of outstanding fixed-income securities
decline, and when interest rates fall, prices rise.
The Fund may also purchase fixed-income securities which are issued by U.S.
issuers and which are denominated in U.S. dollars but which return principal to
investors in amounts which are tied to the exchange rate between the U.S. dollar
and a foreign currency. The payment of interest on such securities is generally
made at a fixed U.S. dollar rate.
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, as amended (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, as amended (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.
FOREIGN SECURITIES. Investors should carefully consider the risks of investing
in securities of foreign issuers and securities denominated in non-U.S.
currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations may affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's yield on such assets and the net asset value
of a share of the Fund as well as the amount of the Fund's distributions. For
example, if a substantial portion of the Fund's assets are denominated in
Japanese yen and the relative exchange rate of the yen falls with respect to the
U.S. dollar (i.e., a yen is worth a smaller fraction of a dollar than it had
been) then the Fund will be receiving a lesser amount of interest on its
fixed-income securities denominated in yen (when converted into U.S. dollars)
and when the Fund's assets are valued for purposes of determining the net asset
value per share of the Fund, the net assets of the Fund reflected by the
yen-denominated securities will have declined in U.S. dollar value and the net
asset value of the Fund (always stated in U.S. dollars) may have also declined.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward contracts or
futures contracts (see below). The Fund may incur certain costs in connection
with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or
confis-
7
<PAGE>
catory 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 generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to U.S.
companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
------------
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the Fund
may engage in transactions in forward foreign currency contracts, options on
securities and currencies, and futures contracts and options on futures
contracts on securities, currencies and indexes. The Fund may also write options
on securities and currencies to assist it in meeting its objective of providing
a high level of current income. A discussion of these transactions follows and
is supplemented by further disclosure in the Statement of Additional
Information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward foreign currency
exchange contract ("forward contract") involves an obligation to purchase or
sell a currency at a future date, which may be any fixed number of days from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase and the foreign
currency in which the security is denominated during the period between the date
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, the Fund's Investment Manager believes
that the currency of a particular foreign country may suffer a substantial
decline against the U.S. dollar or some other foreign currency, it may enter
into a forward contract to sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or all
of the Fund's portfolio securities (or securities which the Fund has purchased
for its portfolio) denominated in such foreign currency. Under identical
circumstances, the Fund may enter into a forward contract to sell, for a fixed
amount of U.S. dollars or other currency, an amount of foreign currency other
than the currency in which the securities to be hedged are denominated
approximating the value of some or all of the portfolio securities to be hedged.
The Investment Manager will select this method of hedging, called
"cross-hedging," when it determines that the foreign currency in which the
portfolio securities are denominated have insufficient liquidity or are trading
at a discount as compared with some other foreign currency with which it tends
to move in tandem.
In addition, when the Fund's Investment Manager anticipates purchasing
securities at some time in the future, and wishes to lock in the current
exchange rate of the currency in which those securities are denominated against
the U.S. dollar or some other foreign currency, it may enter into a forward
contract to purchase an amount of currency equal to some or all of the value of
the anticipated purchase, for a fixed amount of U.S. dollars or other currency.
The Fund may, however, close out the forward contract without purchasing the
security which was the subject of the "anticipatory" hedge.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is
8
<PAGE>
entered into and the date it matures. The Fund is not required to enter into
such transactions with regard to its foreign currency-denominated securities and
will not do so unless deemed appropriate by the Investment Manager.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. The Fund may be limited in its
ability to enter into hedging transactions involving forward contracts by the
Code requirements relating to qualification as a regulated investment company
(see "Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on U.S. Treasury
notes, bonds and bills, on various foreign currencies and on equity securities
which are listed on several U.S. and foreign securities exchanges and are
written in over-the-counter transactions ("OTC options"). Listed options are
issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Fund the right to buy from the OCC (in the U.S.) or
other clearing corporation or exchange, the underlying security or currency
covered by the option at the stated exercise price (the price per unit of the
underlying security or currency) by filing an exercise notice prior to the
expiration date of the option. Ownership of a listed put option would give the
Fund the right to sell the underlying security or currency to the OCC (in the
U.S.) or other clearing corporation or exchange at the stated exercise price.
OTC options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. With
respect to 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.
COVERED CALL WRITING. The Fund is permitted to write covered call options on
portfolio securities which are denominated in either U.S. dollars or foreign
currencies, without limit, in order to aid it in achieving its investment
objectives and to close out long call option positions. As a writer of a call
option, the Fund has the obligation, upon notice of exercise of the option, to
deliver the security or amount of currency underlying the option (certain listed
and OTC call options written by the Fund will be exercisable by the purchaser
only on a specific date).
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security (or currency) underlying the option from the
purchaser of the put at the option's exercise price at any time during the
option period, at the purchaser's election (certain listed and OTC put options
written by the Fund will be exercisable by the purchaser only on a specific
date). The Fund will write put options for three purposes: (1) to receive the
premiums paid by purchasers; (2) when the Investment Manager wishes to purchase
the security underlying the option (or a security denominated in the currency
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; and (3) to close out a long put option position. The
aggregate value of the obligations underlying the puts determined as of the date
the options are sold will not exceed 50% of the Fund's net assets.
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 to close out a written call position or to protect against
an increase in the price of a security it anticipates purchasing or, in the case
of call options on a foreign currency, to hedge against an adverse exchange rate
change of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is denominated.
The Fund may purchase put options on securities which it holds in its portfolio
only to protect itself against a decline in the value of the security.
Similarly, the Fund may purchase put options on currencies in which securities
which it holds are denominated only to protect itself against a decline in value
of such currency vis-a-vis the currency in which the exercise price is
denominated. There are no other limits on the Fund's ability to purchase call
and put options.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that are
currently traded, or may in the future be traded, on U.S. and foreign commodity
exchanges on such underlying fixed-income securities as U.S. Treasury bonds,
notes, and bills and/or any foreign government fixed-income security ("interest
rate" futures), on various currencies ("currency" futures) and on such indexes
of U.S. or foreign fixed-income securities as may exist or come into being, such
as the Moody's Investment-Grade Corporate Bond 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.
9
<PAGE>
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging the value of its fixed-income portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
The Fund will purchase or sell index futures contracts for the purpose of
hedging its fixed-income portfolio (or anticipated portfolio) against changes in
their prices. The Fund will purchase or sell currency futures on currencies in
which its portfolio securities (or anticipated portfolio securities) are
denominated for the purposes of hedging against anticipated changes in currency
exchange rates. In addition to the above, interest rate, index and currency
futures will be bought or sold in order to close out a short or long position
maintained by the Fund in a corresponding futures contract.
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.
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.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position
as writer of an option, or as a buyer or seller of a futures contract, only if a
liquid secondary market exists for options or futures contracts of that series.
There is no assurance that such a market will exist, particularly in the case of
OTC options, as such options will generally only be closed out by entering into
a closing purchase transaction with the purchasing dealer.
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.
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, currencies and indexes subject to futures contracts (and thereby the
futures contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the Fund's portfolio securities and their denominated
currencies. 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.
The Fund, by entering into transactions in foreign futures and options
markets, will also incur risks similar to those discussed above under the
section entitled "Foreign Securities."
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which may
be viewed as a type of secured lending by the Fund, and which typically involve
the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, 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.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The value
of a convertible security is a function of its "investment value" (its value as
if it did not have a conversion privilege), and its "conversion value" (the
security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege). To the extent that a
10
<PAGE>
convertible security's investment value is greater than its conversion value,
its price will be primarily a reflection of such investment value and its price
will be likely to increase when interest rates fall and decrease when interest
rates rise, as with a fixed-income security (the credit standing of the issuer
and other factors may also have an effect on the convertible security's value).
If the conversion value exceeds the investment value, the price of the
convertible security will rise above its investment value and, in addition, the
convertible security will sell at some premium over its conversion value. (This
premium represents the price investors are willing to pay for the privilege of
purchasing a fixed-income security with a possibility of capital appreciation
due to the conversion privilege.) At such times the price of the convertible
security will tend to fluctuate directly with the price of the underlying equity
security.
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. 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
speculative techniques involving leverage, and are considered borrowings by the
Fund.
ZERO COUPON SECURITIES. A portion of the fixed-income 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 on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. 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 payments in cash on the security
during the year.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase securities on
a when-issued or delayed delivery basis or may purchase or sell securities on a
forward commitment basis. When such transactions are negotiated, the price is
fixed at the time of the commitment, but delivery and payment can take place a
month or more after the date of the commitment. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a when-issued, delayed delivery or forward commitment basis. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued, delayed delivery or forward commitment basis may
increase the volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a "when,
as and if issued" basis under which the issuance of the security depends upon
the occurrence of a subsequent event, such as approval of a merger, corporate
reorganization, leveraged buyout or debt restructuring. If the anticipated event
does not occur and the securities are not issued, the Fund will have lost an
investment opportunity. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a "when,
as and if issued" basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
PRIVATE PLACEMENTS. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not
11
<PAGE>
be included within the category "illiquid securities," which is limited by the
Fund's investment restrictions to 10% of the Fund's total assets. Investing in
Rule 144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular time, may be unable to find
qualified institutional buyers interested in purchasing such securities.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities. 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.
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.
For additional risk disclosure, please refer to the discussion of specific
investments under the "Investment Objectives and Policies" section of the
Prospectus and the "Investment Practices and Policies" section of the Statement
of Additional Information.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a view
to achieving the Fund's investment objectives.
The Fund is managed within InterCapital's Taxable Fixed-Income Group, which
manages twenty-five funds and fund portfolios, with approximately $13.2 billion
in assets at November 30, 1996. Vinh Q. Tran, Vice President of InterCapital,
and Peter J. Seeley, a Senior Fixed-Income Portfolio Manager with InterCapital,
each a member of InterCapital's Taxable Fixed-Income Group, are the primary
portfolio managers of the Fund. Messrs. Tran and Seeley have been the Fund's
primary portfolio managers since its inception and December, 1994, respectively.
Mr. Tran has been a portfolio manager with InterCapital for over five years. Mr.
Seeley has been a portfolio manager with InterCapital since July, 1994, prior to
which time he was a portfolio manager with Nikko Capital Management (October,
1992-June, 1994) and prior thereto with Schroders Incorporated. In determining
which securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the views of
Trustees of the Fund and others regarding economic developments and interest
rate trends, and the Investment Manager's own analysis of factors it deems
relevant.
Personnel of the Investment Manager have substantial experience in the use
of the investment techniques described above under the heading "Options and
Futures Transactions," which techniques require skills different from those
needed to select the portfolio securities underlying various options and futures
contracts.
Securities purchased by the Fund are generally sold by dealers acting as
principal for their own accounts. Orders for transactions in other portfolio
securities and commodities are placed for the Fund with a number of brokers and
dealers, including DWR. Pursuant to an order of the Securities and Exchange
Commission, the Fund may effect principal transactions in certain money market
instruments with DWR. In addition, the Fund may incur brokerage commissions on
transactions conducted through DWR.
The Fund may sell portfolio securities without regard to the length of time
that they have been held, in order to take advantage of new investment
opportunities or yield differentials, or because the Fund desires to preserve
gains or limit losses due to changing economic conditions, interest rate trends,
or the financial condition of the issuer. It is not anticipated that the Fund's
portfolio turnover rate will exceed 300% in any one year. The Fund will incur
underwriting discount costs (on underwritten securities) and brokerage costs
commensurate with its portfolio turnover rate. Short term gains and losses may
result from such portfolio transactions. See "Dividends, Distributions and
Taxes" for a discussion of the tax implications of the Fund's transactions.
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.
12
<PAGE>
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry.
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, currency 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.
6. 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.
Generally, OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, the Fund is permitted to treat the
securities it uses as cover for written OTC options as liquid provided it
follows a procedure whereby it will sell OTC options only to qualified
dealers who agree that the Fund may repurchase such options at a maximum
price to be calculated pursuant to a predetermined formula set forth in the
option agreement. The formula may vary from agreement to agreement, but is
generally based on a multiple of the premium received by the Fund for
writing the option plus the amount, if any, of the options intrinsic value.
An OTC option is considered an illiquid asset only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of
the option.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers which have entered into selected dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter World Wide Income Trust,
directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040,
Jersey City, NJ 07303 or by contacting an account executive of DWR or other
Selected Broker-Dealer. The minimum initial purchase, in the case of investments
through EasyInvest, an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling at least $1,000 within the first twelve months. In the
case of investments pursuant to Systematic Payroll Deduction Plans (including
Individual Retirement Plans), the Fund, in its discretion, may accept
investments without regard to any minimum amounts which would otherwise be
required if the Fund has reason to believe that additional investments will
increase the investment in all accounts under such Plans to at least $1,000.
Certificates for shares purchased will not be issued unless a request is made by
the shareholder in writing to the Transfer Agent. The offering price will be the
net asset value per share next determined following receipt of an offer (see
"Determination of Net Asset Value" below).
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge, which is paid to the Distributor,
may be imposed at the time of redemption (see "Redemptions and Repurchases").
Sales personnel are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or Selected Broker-Dealer. In addition, some
sales personnel of the Selected Broker-Dealer will receive various types of
non-cash compensation as special sales incentives,
includ-
13
<PAGE>
ing trips, educational and/or business seminars and merchandise. The Fund and
the Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan"), under which the Fund pays the Distributor a fee, which is accrued
daily and payable monthly, at an annual rate of 0.85% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the inception of
the Fund (not including reinvestments of dividends or distributions), less the
average daily aggregate net asset value of the Fund's shares redeemed since the
Fund's inception upon which a contingent deferred sales charge has been imposed
or waived, or (b) the Fund's average daily net assets. This fee is treated by
the Fund as an expense in the year it is accrued. A portion of the fee payable
pursuant to the Plan, equal to 0.20% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of NASD guidelines. The
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Amounts paid under the Plan are paid to the Distributor to compensate it for
the services provided and the expenses borne by the Distributor and others in
the distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses.
For the fiscal year ended October 31, 1996, the Fund accrued payments under
the Plan amounting to $1,058,190, which amount is equal to 0.85% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (b) of the compensation formula under
the Plan.
At any given time, the expenses in distributing shares of the Fund may be in
excess of the total of (i) the payments made by the Fund pursuant to the Plan,
and (ii) the proceeds of contingent deferred sales charges paid by investors
upon the redemption of shares (see "Redemptions and Repurchases--Contingent
Deferred Sales Charge"). For example, if $1 million in expenses in distributing
shares of the Fund had been incurred and $750,000 had been received as described
in (i) and (ii) above, the excess expense would amount to $250,000. The
Distributor has advised the Fund that such excess amount, including the carrying
charge described above, totalled $8,308,200 at October 31, 1996, which was equal
to 7.29% of the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, this excess amount does not constitute a liability
of the Fund. Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon redemption
of shares, if for any reason the Plan is terminated the Trustees will consider
at that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or contingent deferred
sales charges, may or may not be recovered through future distribution fees or
contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00 p.m.,
New York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the value of all assets of the Fund, subtracting all its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign 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); and (2) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available bid
price prior to the time of valuation. When market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale and bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Fund's Trustees. For valuation purposes, quotations of foreign portfolio
securities, other assets and liabilities and forward contracts stated in foreign
currency are translated into U.S. dollar equivalents at the
14
<PAGE>
prevailing market rates prior to the close of the New York Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to the close of the New York Stock
Exchange. The values of such securities used in computing the net asset value of
the Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange and will therefore not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional shares
of the Fund (or, if specified by the shareholder, any other open-end investment
company for which InterCapital serves as investment manager (collectively, with
the Fund, the "Dean Witter Funds")), unless the shareholder requests that they
be paid in cash. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
EASYINVESTSM. Shareholders may subscribe to EasyInvest, an automatic purchase
plan which provides for any amount from $100 to $5,000 to be transferred
automatically from a checking or savings account, on a semi-monthly, monthly or
quarterly basis, to the Transfer Agent for investment in shares of the Fund (see
"Purchase of Fund Shares" and "Redemptions and Repurchases--Involuntary
Redemption").
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value per share next
determined after receipt by the Transfer Agent, by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. Shares
so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases.")
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable
contingent deferred sales charge will be imposed on shares redeemed under the
Withdrawal Plan (See "Redemptions and Repurchases--Contingent Deferred Sales
Charge"). Therefore, any shareholder participating in the Withdrawal Plan will
have sufficient shares redeemed from his or her account so that the proceeds
(net of any applicable contingent deferred sales charge) to the shareholder will
be the designated monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege" allowing
the exchange of shares of the Fund for shares of other Dean Witter Funds sold
with a contingent deferred sales charge ("CDSC funds"), and for shares of Dean
Witter Short-Term Bond Fund, Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Limited Term Municipal Trust, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Intermediate
15
<PAGE>
Term U.S. Treasury Trust, and five Dean Witter Funds which are money market
funds (the foregoing eleven non-CDSC funds are hereinafter referred to as the
"Exchange Funds"). Exchanges may be made after the shares of the Fund acquired
by purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange or
dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following business day. Subsequent exchanges between any of the
money market funds and any of the CDSC funds can be effected on the same basis.
No contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange, although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund acquired in exchange for shares of another CDSC fund having a
different CDSC schedule than that of this Fund will be subject to the CDSC
schedule of this Fund, even if such shares are subsequently re-exchanged for
shares of the CDSC fund originally purchased. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period (for
the purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of a CDSC fund, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a CDSC fund are reacquired. Thus, the CDSC is based
upon the time (calculated as described above) the shareholder was invested in a
CDSC fund (see "Redemptions and Repurchases--Contingent Deferred Sales Charge").
However, in the case of shares exchanged into an Exchange Fund on or after April
23, 1990, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution fees
are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a
front-end sales charge ("front-end sales charge funds"), but shares of the Fund,
however acquired, may not be exchanged for shares of front-end sales charge
funds. Shares of a CDSC fund acquired in exchange for shares of a front-end
sales charge fund (or in exchange for shares of other Dean Witter Funds for
which shares of a front-end sales charge fund have been exchanged) are not
subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such Dean Witter
Funds for which shares of the Fund have been exchanged, upon such notice as may
be required by applicable regulatory agencies. Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on exchange of shares of the Fund
pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders
should obtain a copy and examine it carefully before investing. Exchanges are
subject to the minimum investment requirement and any other conditions imposed
by each fund. An exchange will be treated for federal income tax purposes the
same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss. However, the ability to deduct capital losses on
an exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Transfer Agent, to initiate an
exchange. If the Authorization Form is used, exchanges may be made in writing or
by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
16
<PAGE>
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 fradulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Dean Witter
Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds may be
reduced by the amount of any applicable contingent deferred sales charges (see
below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by the
shareholder, the shares may be redeemed by surrendering the certificates with a
written request for redemption along with any additional information required by
the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held six years
or more after purchase (calculated from the last day of the month in which the
shares were purchased) will not be subject to any charge upon redemption. Shares
redeemed sooner than six years after purchase may, however, be subject to a
charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ----------------------------------------- -----------------------
<S> <C>
First.................................... 5.0%
Second................................... 4.0%
Third.................................... 3.0%
Fourth................................... 2.0%
Fifth.................................... 2.0%
Sixth.................................... 1.0%
Seventh and thereafter................... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of the
Internal Revenue Code which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which Dean Witter Trust Company or
Dean Witter Trust FSB, each of which is an affiliate of the
Invest-
17
<PAGE>
ment Manager, serves as Trustee ("Eligible 401(k) Plan"), provided that
either: (A) the plan continues to be an Eligible 401(k) Plan after the
redemption; or (B) the redemption is in connection with the complete
termination of the plan involving the distribution of all plan assets to
participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the telephonic
request of the shareholder. The repurchase price is the net asset value next
computed (see "Purchase of Fund Shares") after such repurchase order is received
by DWR or other Selected Broker-Dealer, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund, the Distributor
or DWR or other Selected Broker-Dealer. 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. If the shares to be redeemed have recently been purchased by
check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund at net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro-rata credit for any CDSC paid in connection with such redemption
or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on sixty days' notice, to
redeem at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvest, 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 his or her account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay monthly income dividends
and to distribute net short-term and net long-term capital gains, if any, at
least once each year. The Fund may, however, determine either to distribute or
to retain all or part of any long-term capital gains in any year for
reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment income
and net short-term and long-term capital gains to shareholders and remain
qualified as a regulated investment company under Subchapter M of the Code, it
is not expected that the Fund will be required to pay any federal income tax on
such income and capital gains.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures generally are treated as 60%
long-term gain/loss and 40% short-term gain/loss. When the Fund engages in
options and futures transactions, various tax regulations applicable to the Fund
may have the effect of causing the Fund to recognize a gain or loss for tax
purposes before that
18
<PAGE>
gain or loss is realized, or to defer recognition of a realized loss for tax
purposes. Recognition, for tax purposes, of an unrealized loss may result in a
lesser amount of the Fund's realized net gains being available for distribution.
As a regulated investment company, the Fund is subject to the requirement
that less than 30% of its gross income be derived from the sale of certain
investments held for less than three months (the "Short-Short Test"). The
treatment of foreign currency gains and gains from options, futures and forward
contracts on foreign currencies is uncertain under the Short Short Test since it
is dependent on whether such gains are "directly related" to the "business of
investing in stock or securities (or options and futures with respect to stock
or securities)". Although the Fund believes that its activities in foreign
currencies and options, futures and forward contracts on foreign currencies will
satisfy the "directly related" standard, the Treasury and the Internal Revenue
Service have not yet addressed the scope of the term "directly related." As a
result, there can be no assurance that future Treasury regulations or rulings
issued by the Internal Revenue Service will not adopt a restrictive meaning for
the term "directly related". In such a case, the Fund's activities in foreign
currencies and options, futures and forward contracts on foreign currencies
would be restricted. Further, if such regulations or rulings are adopted on a
retroactive basis, and if, as a result, the Fund fails to satisfy the "Short
Short Test", the Fund might be retroactively disqualified as a regulated
investment company and the Fund might have to pay a federal corporate income tax
on its net investment income and net capital gains.
Shareholders will normally have to pay federal income taxes, and any
applicable state and/or local 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 and net short-term capital gains,
are taxable to the shareholder as ordinary dividend income regardless of whether
the shareholder receives such distributions in additional shares or in cash. Any
dividends declared in the last quarter of any calendar year which are paid in
the following year prior to February 1 will be deemed received by the
shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will 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,
including information as to the portion taxable as ordinary income and the
portion taxable as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election, the
Fund would deduct foreign tax in computing the amount of its distributable
income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return" in
advertisements and sales literature. Both the yield and the total return of the
Fund are based on historical earnings and are not intended to indicate future
performance. The yield of the Fund will be computed by dividing the Fund's net
investment income over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable new regulatory
requirements. Such amount will be compounded for six months and then annualized
for a twelve-month period to derive the Fund's yield.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over periods of one and five years, as
well as over the life of the Fund. Average annual total return reflects all
income earned by the Fund, any appreciation or depreciation of the Fund's
assets, all expenses incurred by the Fund and all sales charges which would be
incurred by redeeming shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
19
<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.
and Salomon Brothers Treasury Index, Salomon Brothers World Government Index,
Salomon Brothers Corporate Index, Shearson Lehman Corporate/Government Bond
Index and Donahue's Money Market Index).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for 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, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean Witter
Services Company Inc. and the Distributor are subject to a strict Code of Ethics
adopted by those companies. The Code of Ethics is intended to ensure that the
interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
20
<PAGE>
DEAN WITTER
WORLD WIDE INCOME TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Vinh Q. Tran
Vice President
Peter J. Seeley
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank, N.A.
One Chase Plaza
New York, New York 10005
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.
