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Filed Pursuant to Rule 497(e)
Registration File No.: 33-41187
DEAN WITTER
SHORT-TERM U.S. TREASURY TRUST
PROSPECTUS -- AUGUST 1, 1997
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DEAN WITTER SHORT-TERM U.S. TREASURY TRUST (THE "FUND") IS AN OPEN-END,
DIVERSIFIED MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS
CURRENT INCOME, PRESERVATION OF PRINCIPAL AND LIQUIDITY. THE FUND SEEKS TO
ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS ASSETS IN U.S. TREASURY
SECURITIES BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT. (SEE
"INVESTMENT OBJECTIVE AND POLICIES.") SHARES OF THE FUND ARE NOT ISSUED,
INSURED OR GUARANTEED, AS TO VALUE OR YIELD, BY THE U.S. GOVERNMENT OR ITS
AGENCIES OR INSTRUMENTALITIES.
Shares of the Fund are sold and redeemed at net asset value without the
imposition of a sales charge. The Fund is authorized to reimburse specific
expenses incurred in promoting the distribution of the Fund's shares,
including personal services to shareholders and maintenance of shareholder
accounts, in accordance with a Plan of Distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940. Reimbursement may in no event
exceed an amount equal to payments at the annual rate of 0.35% of the average
daily net assets of the Fund.
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated August 1, 1997, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Purchase of Fund Shares ............................................... 7
Shareholder Services .................................................. 8
Redemptions and Repurchases ........................................... 11
Dividends, Distributions and Taxes .................................... 12
Performance Information ............................................... 13
Additional Information ................................................ 14
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
SHORT-TERM U.S. TREASURY 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
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts
business trust, and is an open-end, diversified management investment
company investing in U.S. Treasury securities backed by the full faith
and credit of the U.S. Government.
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SHARES OFFERED Shares of beneficial interest with $0.01 par value (see page 14).
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OFFERING The price of the shares offered by this Prospectus is determined once
PRICE daily as of 4:00 p.m., New York time, on each day that the New York
Stock Exchange is open, and is equal to the net asset value per share
without a sales charge (see page 7).
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MINIMUM Minimum initial purchase through Distributor, $10,000 ($1,000 if the
PURCHASE account is opened through EasyInvest (Service Mark) ) although the
Fund and Distributor may, from time to time, accept initial purchases
of $5,000; minimum subsequent investment, $100 (see page 7).
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INVESTMENT The investment objective of the Fund is to provide investors with
OBJECTIVE current income, preservation of principal and liquidity.
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INVESTMENT In order to maximize the amount of the Fund's dividends which are
POLICIES exempt from state and local income taxation, the Fund will invest
all of its assets in U.S. Treasury securities which are direct obligations
of the U.S. Government (see page 5).
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INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager
MANAGER of the Fund, and 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 $96.6 billion at
June 30, 1997 (see page 5).
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MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of
FEE 0.35% of daily net assets (see page 5).
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DIVIDENDS AND Dividends are declared daily and paid monthly. Capital gains
CAPITAL GAINS distributions, if any, are paid at least once a year or are retained
DISTRIBUTIONS for reinvestment by the Fund. Dividends and capital gains distributions
are automatically invested in additional shares at net asset value
unless the shareholder elects to receive cash (see page 12).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor")(see page 7). The
AND PLAN OF Fund is authorized to reimburse specific expenses incurred in promoting
DISTRIBUTION the distribution of the Fund's shares, including personal services
to shareholders and maintenance of shareholders accounts, in accordance
with a Plan of Distribution with the Distributor pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement may
in no event exceed an amount equal to payments at an annual rate of
0.35% of average daily net assets of the Fund (see page 7).
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REDEMPTION At net asset value; account may be involuntarily redeemed if total
value of the account is less than $1,000 or, if the account was opened
through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $10,000 in the account (see pages
11-12).
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RISKS The Fund invests only in U.S. Treasury securities which are subject
to minimal risk of loss of income and principal. It may engage in
the purchase of such securities on a when-issued basis. The value
of the Fund's portfolio securities, and therefore the Fund's net asset
value per share, may increase or decrease due to various factors,
principally changes in prevailing interest rates. Generally, a rise
in interest rates will result in a decrease in the Fund's net asset
value per share, while a drop in interest rates will result in an
increase in the Fund's net asset value per share. A portion of the
U.S. Treasury securities in which the Fund invests may be zero coupon
Treasury securities. Such securities are subject to greater market
price fluctuations during periods of changing prevailing interest
rates (see pages 5-6).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended May 31, 1997
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases................................. None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales Charge .................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees........................................................... 0.35%
12b-1 Fees* .............................................................. 0.35%
Other Expenses ........................................................... 0.13%
Total Fund Operating Expenses ............................................ 0.83%
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* A portion of the 12b-1 fee, which may not exceed 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the
meaning of National Association of Securities Dealers Inc. ("NASD")
guidelines.
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period: $8 $26 $46 $103
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE 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" and "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.
Long-term shareholders of the Fund may pay more in distribution fees than the
economic equivalent of the maximum front-end sales charges permitted by the
NASD.
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further unaudited information about the performance
of the Fund is contained in the Fund's Annual Report to Shareholders, which
may be obtained without charge upon request to the Fund.
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FOR THE PERIOD
FOR THE YEAR ENDED MAY 31 AUGUST 13, 1991*
------------------------------------------------------- THROUGH
1997 1996 1995 1994 1993 MAY 31, 1992
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.............................. $ 9.84 $ 9.98 $ 9.88 $10.34 $10.21 $10.00
------ ------ ------ ------ ------ ------
Net investment income ............... 0.54 0.54 0.49 0.49 0.54 0.44
Net realized and unrealized gain
(loss) ............................. -- (0.14) 0.10 (0.45) 0.13 0.20
------ ------ ------ ------ ------ ------
Total from investment operations ... 0.54 0.40 0.59 0.04 0.67 0.64
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income .............. (0.53) (0.54) (0.49) (0.50) (0.53) (0.43)
Net realized gain .................. -- -- -- -- (0.01) --
------ ------ ------ ------ ------ ------
Total dividends and distributions .. (0.53) (0.54) (0.49) (0.50) (0.54) (0.43)
------ ------ ------ ------ ------ ------
Net asset value, end of period ..... $ 9.85 $ 9.84 $ 9.98 $ 9.88 $10.34 $10.21
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+............. 5.63% 4.09% 6.22% 0.25% 6.75% 6.55%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................ 0.83% 0.84% 0.84% 0.79% 0.80% 0.79%(2)(3)
Net investment income ............... 5.42% 5.33% 4.93% 4.74% 5.18% 5.49%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $230,267 $258,637 $273,184 $516,017 $584,206 $523,555
Portfolio turnover rate ............. 149% 63% 30% 49% 21% 12%(1)
</TABLE>
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* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment
income ratios would have been 0.81% and 5.47%, respectively.
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THE FUND AND ITS MANAGEMENT
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Dean Witter Short-Term U.S. Treasury Trust (the "Fund") is an open-end
diversified management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of The Commonwealth of Massachusetts on June 4, 1991.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Morgan Stanley,
Dean Witter, Discover & Co., a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services
Company, serve in various investment management, advisory, management and
administrative capacities to a total of 100 investment companies, thirty of
which are listed on the New York Stock Exchange, with combined total assets
of approximately $93.1 billion as of June 30, 1997. The Investment Manager
also manages portfolios of pension plans, other institutions and individuals
which aggregated approximately $3.5 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs 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 Board of Trustees reviews 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 by applying an
annual rate of 0.35% to the Fund's net assets determined as of the close of
each business day. For the fiscal year ended May 31, 1997, the Fund accrued
total compensation to the Investment Manager amounting to 0.35% of the Fund's
average daily net assets and the Fund's total expenses amounted to 0.83% of
the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is current income, preservation of
principal and liquidity. The Fund will seek to achieve its investment
objective by investing all of its net assets in U.S. Treasury securities.
U.S. Treasury securities, which presently consist of U.S. Treasury bills,
U.S. Treasury notes and U.S. Treasury bonds, are direct obligations of the
U.S. Treasury and are backed by the "full faith and credit" of the U.S.
Government. The investment objective is a fundamental policy of the Fund and
may not be changed without the approval of the holders of a majority of the
Fund's shares. There is no assurance that the Fund's investment objective
will be achieved.
Neither the value nor the yield of the U.S. Treasury securities in which
the Fund invests (or the value or yield of shares of the Fund) are guaranteed
by the U.S. Government. The value of the Fund's portfolio securities and
therefore the net asset value of the Fund's shares may increase or decrease
due to changes in prevailing interest rates and other factors. Generally, as
prevailing interest rates rise, the value of the securities held by the Fund,
and concomitantly, the net asset value of the Fund's shares, will fall. Debt
securities with shorter maturities are generally subject to a lesser degree
of market fluctuation as a result of changes in interest rates than debt
securities with longer maturities. In an effort to minimize fluctuations in
market value of its portfolio securities the Fund is expected to maintain a
portfolio with a dollar-weighted average maturity of less than 3 years.
ZERO COUPON TREASURY SECURITIES. A portion of the U.S. Treasury securities
purchased by the Fund may be "zero coupon" Treasury securities. These are
U.S. Treasury notes and bonds which have been stripped of their unmatured
interest coupons and receipts or which are certificates representing
interests in such stripped debt obligations and coupons. Such securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. A zero coupon security pays no
interest to its holder during its life. Its value to an investor consists of
the difference between its face value at the time of maturity and the price
for which it was acquired, which is generally an amount significantly less
than its face value (sometimes referred to as a "deep discount" price).
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
5
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higher yields upon reinvestment of interest received if prevailing interest
rates rise. For this reason, zero coupon securities are subject to
substantially greater market price fluctuations during periods of changing
prevailing interest rates than are comparable debt securities which make
current distributions of interest. 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. See "Dividends, Distributions and Taxes."
Certain banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sell them separately in the form of receipts or
certificates representing undivided interests in these instruments (which
instruments are generally held by a bank in a custodial or trust account).
The Fund will not purchase any such receipts or certificates representing
stripped corpus or coupon interests in U.S. Treasury securities sold by banks
and brokerage firms. The Fund will only purchase zero coupon Treasury
securities which have been stripped by the Federal Reserve Bank.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase U.S.
Treasury securities on a when-issued or delayed delivery basis or may
purchase or sell U.S. Treasury securities on a firm commitment basis. For
example, the Fund may wish to purchase U.S. Treasury notes and bonds sold at
periodic U.S. Treasury auctions prior to a month or more of their issuance
("when-issued"). 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. While the Fund will only purchase
securities on a when-issued, delayed delivery or firm commitment basis with
the intention of acquiring the securities, the Fund may sell the securities
before the settlement date, if it is deemed advisable. The securities so
purchased or sold are subject to market fluctuation and no interest accrues
to the purchaser during this period. At the time the Fund makes the
commitment to purchase or sell securities on a when-issued, delayed delivery
or firm commitment basis, it will record the transaction and thereafter
reflect the value, each day, of such security purchased or, if a sale, the
proceeds to be received, in determining its net asset value. At the time of
delivery of the securities, their value may be more or less than the purchase
or sale price. The Fund will also establish a segregated account with its
custodian bank in which it will continually maintain cash or cash equivalents
or other portfolio (U.S. Treasury) securities equal in value to commitments
to purchase securities on a when-issued, delayed delivery or firm commitment
basis.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean
Witter Reynolds Inc. ("DWR") and other broker-dealer affiliates of
InterCapital, and others regarding economic developments and interest rate
trends, and the Investment Manager's own analysis of factors it deems
relevant. The Fund's portfolio is managed within InterCapital's Taxable Fixed
Income Group, which manages 24 funds and fund portfolios, with approximately
$12.8 billion in assets as of June 30, 1997. Rajesh K. Gupta, Senior Vice
President of InterCapital and Manager of InterCapital's Government
Fixed-Income Group, has been the primary portfolio manager of the Fund since
its inception and has been a portfolio manager at InterCapital for over five
years.
Brokerage commissions are not normally charged on the purchase or sale of
U.S. Government obligations, but such transactions may involve costs in the
form of spreads between bid and asked prices. Pursuant to an order of the
Securities and Exchange Commission, the Fund may effect principal
transactions in certain money market instruments with DWR. In addition, the
Fund may incur brokerage commissions on transactions conducted through DWR
and other brokers and dealers that are affiliates of InterCapital. Although
the Fund does not intend to engage in short-term trading of portfolio
securities as a means of achieving its investment objective, it may sell
portfolio securities without regard to the length of time they have been held
whenever such sale will, in the opinion of the Investment Manager, strengthen
the Fund's position and contribute to its investment objective. It is not
anticipated that the portfolio trading engaged in by the Fund will result in
its portfolio turnover rate exceeding 200% in any one year. The Fund will
incur costs commensurate with its portfolio turnover rate. Short term gains
and losses may result from such transactions. See "Dividends, Distributions
and Taxes" for a full discussion of the tax implications of the Fund's
trading policy.
6
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PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and others who have entered into Selected Dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York
10048.
The minimum initial purchase is $10,000 (the Fund and the Distributor may,
from time to time accept initial purchases of $5,000). The minimum initial
purchase in the case of investments through EasyInvest (Service Mark), an
automatic purchase plan (see "Shareholder Services"), is $1,000, provided
that the schedule of automatic investments will result in investments
totalling at least $10,000 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.
Minimum subsequent purchases of $100 or more may be made by sending a check,
payable to Dean Witter Short-Term U.S. Treasury Trust, directly to Dean
Witter Trust FSB (the "Transfer Agent") at P.O. Box 1040, Jersey City, NJ
07303 or by contacting an account executive of DWR or another Selected
Broker-Dealer. The offering price will be the net asset value per share next
determined (see "Determination of Net Asset Value" below) following receipt
and acceptance by the Transfer Agent of an order in proper form and
accompanied by payment in Federal funds (i.e., monies of member banks within
the Federal Reserve System held on deposit at a Federal Reserve Bank)
available to the Fund for investment. Orders for the purchase of Fund shares
placed by investors through DWR or another Selected Broker-Dealer will be
transmitted to the Transfer Agent for purchase on that date, with payment in
Federal funds transmitted to the Transfer Agent on the business day following
the day the order is placed. Shares commence earning income on the date
following the date of purchase. Certificates for shares purchased will not be
issued unless requested by the shareholder in writing to the Transfer Agent.
Sales personnel of a Selected Broker-Dealer are compensated for shares of
the Fund sold by them by the Distributor or any of its affiliates and/or by a
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips to educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined by taking the value
of all the assets of the Fund, subtracting all liabilities, dividing by the
number of shares outstanding and adjusting the result to the nearest cent.
The net asset value per share is determined by the Investment Manager as of
4:00 p.m. New York time on each day that the New York Stock Exchange is open
(or, on days when the New York Stock Exchange closes prior to 4:00 p.m., at
such earlier time). 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) all portfolio
securities for which over-the-counter market quotations are readily available
are valued at the bid price; (2) when market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as
determined in good faith under procedures established by and under the
general supervision of the Fund's Board of Trustees (valuation of securities
for which market quotations are not readily available may be based upon
current market prices of securities which are comparable in coupon, rating
and maturity or an appropriate matrix utilizing similar factors); and (3)
short-term debt instruments having a maturity date of more than 60 days are
valued on a "mark-to-market" basis, that is, at prices based on market
quotations for securities of similar type, yield, quality and maturity, until
60 days prior to maturity and thereafter at amortized cost. Short-term
instruments having a maturity date of 60 days or less at the time of purchase
are valued at amortized cost unless the Board of Trustees determines this
does not represent 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 and evaluations by its
staff, including review of broker-dealer market price quotations, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "Act"), with the
Distributor whereby the expenses of certain activities and services,
including personal services to shareholders and
7
<PAGE>
maintenance of shareholder accounts, in connection with the distribution of
the Fund's shares are reimbursed. The principal activities and services which
may be provided by the Distributor and its affiliates, or any other Selected
Broker-Dealer under the Plan include: (1) compensation to, and expenses of,
DWR account executives and others, including overhead and telephone expenses;
(2) sales incentives and bonuses to sales representatives and to marketing
personnel in connection with promoting sales of the Fund's shares; (3)
expenses incurred in connection with promoting sales of the Fund's shares;
(4) preparing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation
and television, radio, newspaper, magazine and other media advertisements.
Reim bursements for these services will be made in monthly payments by the
Fund, which will in no event exceed an amount equal to a payment at the
annual rate of 0.35% of the Fund's average daily net assets. A portion of the
amount payable pursuant to the Plan, which may not exceed 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the
meaning of the NASD guidelines. The services fee is a payment made for
personal services and/or the maintenance of shareholder accounts. Expenses
incurred pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. The Fund
accrued $890,492 to the Distributor pursuant to the Plan for the fiscal year
ended May 31, 1997. This is an accrual at the annual rate of 0.35% of the
Fund's average daily net assets.
SHAREHOLDER SERVICES
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund, unless the shareholder requests that they be paid in cash.
Such dividends and distributions will be paid in shares of the Fund at net
asset value per share. At any time an investor may request the Transfer Agent
in writing to have subsequent dividends and/or capital gains distributions
paid to the investor in cash rather than shares. To assure sufficient time to
process the change, such request should be received by the Transfer Agent at
least five business days prior to the payment date for which it commences to
take effect. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payments will be
made to DWR or other Selected Broker-Dealer through whom shares were purchased.
INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who receives a
cash payment representing a dividend or capital gains distribution may invest
such dividend or distribution at the net asset value next determined after
receipt by the Transfer Agent by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date.
TARGETED DIVIDENDS(SERVICE MARK). In states where it is legally permissible,
shareholders may also have all income dividends and capital gains
distributions automatically invested in shares of an open-end investment
company for which InterCapital serves as investment manager (collectively,
the "Dean Witter Funds"), other than Dean Witter Short-Term U.S. Treasury
Trust. Such investment will be made as described above for automatic
investment in shares of the Fund, at the net asset value per share of the
selected Dean Witter Fund as of the close of business on the payment date and
will begin to earn dividends, if any, in the selected Dean Witter Fund the
next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other Selected Broker-Dealer account
executive or the Transfer Agent. Shareholders of the Fund must be
shareholders of the selected Class of the Dean Witter Fund targeted to
receive investments from dividends at the time they enter the Targeted
Dividends program. Investors should review the prospectus of the targeted
Dean Witter Fund before entering the program.
EASYINVEST(SERVICE MARK). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Redemptions and Repurchases--Involuntary Redemption"). Shares pur chased
through EasyInvest will be added to the shareholder's existing account at the
net asset value calculated the same business day the transfer of funds is
effected. For further information or to subscribe to EasyInvest, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
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 offering price.
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. The shares will be
redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be
mailed by the Transfer Agent, or amounts credited to a shareholder's DWR or
other Selected Broker-Dealer brokerage account, within five business days
after the date of redemption. Only
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shareholders having accounts in which no share certificates have been issued
will be permitted to enroll in the Withdrawal Plan.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income, and generally, state and
local tax purposes.
Shareholders wishing to enroll in the Withdrawal Plan should make this
election on the Investment Application or contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Investment Manager for use by the self-employed, eligible Individual
Retirement Accounts and Custodial Accounts under Section 403(b)(7) of the
Internal Revenue Code. Adoption of such plans should be on advice of legal
counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of
certain Dean Witter Funds for shares of the Fund, exists whereby shares of
Dean Witter Funds that are multiple class funds ("Dean Witter Multi-Class
Funds") and Dean Witter Funds that are not multiple class funds but which are
sold with either a front-end (at time of purchase) sales charge ("FSC funds")
or a contingent deferred (at time of redemption) sales charge ("CDSC funds"),
may be exchanged for shares of the Fund, Dean Witter Intermediate Term U.S.
Treasury Trust, Dean Witter Limited Term Municipal Trust and Dean Witter
Short-Term Bond Fund, and for shares of five Dean Witter Funds which are
money market funds: Dean Witter Liquid Asset Fund Inc., Dean Witter U.S.
Government Money Market Trust, Dean Witter Tax-Free Daily Income Trust, Dean
Witter California Tax Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust (which nine funds, including the Fund, are
hereinafter collectively referred to as "Exchange Funds"). Shares of the
Exchange Funds received in an exchange for shares of a Dean Witter
Multi-Class Fund may be redeemed and exchanged only for shares of the
corresponding Class of a Dean Witter Multi-Class Fund or for shares of one of
the other Exchange Funds, provided that shares of the Exchange Funds received
in an exchange for Class A shares of a Dean Witter Multi-Class Fund may also
be redeemed and exchanged for shares of a FSC fund, and shares of the
Exchange Funds received in an exchange for Class B shares of a Dean Witter
Multi-Class Fund may also be redeemed and exchanged for shares of a CDSC
fund. In addition, shares of the Exchange Funds received in an exchange for
shares of a FSC fund may be redeemed and exchanged for Class A shares of a
Dean Witter Multi-Class Fund or for shares of one of the other Exchange
Funds, and shares of the Exchange Funds received in an exchange for shares of
a CDSC fund may be redeemed and exchanged for Class B shares of a Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds.
An exchange to an 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, shares
of the Multi-Class Fund, the FSC fund, the CDSC fund or the Exchange Fund are
redeemed at their next calculated net asset value and exchanged for shares of
the money market fund at their net asset value determined the following
business day. Ultimately, any applicable contingent deferred sales charge
("CDSC") will have to be paid upon redemption of shares originally purchased
from a CDSC fund or a Class of a Dean Witter Multi-Class Fund that imposes a
CDSC. (If shares of an Exchange Fund received in exchange for shares
originally purchased from a CDSC fund or Class B of a Dean Witter Multi-Class
Fund are exchanged for shares of another CDSC fund or a Dean Witter
Multi-Class Fund having a different CDSC schedule than that of the CDSC fund
or the Dean Witter Multi-Class Fund from which the Exchange Fund shares were
acquired, the shares will be subject to the higher CDSC schedule.) During the
period of time the shares originally purchased from a CDSC fund or from a
Class of a Dean Witter Multi-Class Fund that imposes a CDSC remain in the
Exchange Fund, the holding period (for the purpose of determining the rate of
CDSC) is frozen. If those shares are subsequently re-exchanged for shares of
a CDSC fund or a Dean Witter Multi-Class 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 or shares of a Dean Witter Multi-Class Fund
are reacquired. Thus, the CDSC is based upon the time (calculated as
described above) the shareholder was invested in shares of a CDSC fund or in
shares of a Dean Witter Multi-Class Fund. In the case of exchanges of Class A
shares of a Dean Witter Multi-Class Fund which are subject to a CDSC, the
holding period also includes the time (calculated as described above) the
shareholder was invested in shares of a FSC fund. 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 fees, if any, incurred on or after that date which are attributable to
those shares (see "Purchase of Fund Shares--Plan of Distribution" in the
respective Exchange Fund Prospectus for a description
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of Exchange Fund distribution fees). 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.
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should be
made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Distributor to be abusive and contrary to the best interests of
the Fund's other shareholders and, at the Distributor'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.
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 may be
exchanged, upon such notice as may be required by applicable regulatory
agencies (presently sixty days' prior written notice for termination or
material revision), provided that six months' prior written notice of
termination will be given to the shareholders who hold shares of the Exchange
Funds pursuant to this Exchange Privilege, and provided further that the
Exchange Privilege may be terminated or materially revised without notice
under certain unusual circumstances. 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
their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and any other conditions imposed by each fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current broker-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 above Dean Witter Funds pursuant to this Exchange Privilege by
contacting their DWR or other Selected Broker-Dealer 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 by contacting the Transfer Agent at (800) 869-NEWS
(toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the
experience of the Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
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REDEMPTIONS AND REPURCHASES
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REDEMPTIONS. Shares of the Fund may be redeemed through the Transfer Agent
(without redemption or other charge) on any day that the New York Stock
Exchange is open (see "Purchase of Fund Shares--Determination of Net Asset
Value"). Redemptions will be effected at the net asset value per share next
determined after the receipt of a redemption request meeting the applicable
requirements described below.
1. BY CHECK
The Transfer Agent will supply blank checks to any shareholder who has
requested them on an Investment Application. The shareholder may make checks
payable to the order of anyone in any amount not less than $500 (checks
written in amounts under $500 will not be honored by the Transfer Agent).
Shareholders must sign checks exactly as their shares are registered. If the
account is a joint account, the check may contain one signature unless the
joint owners have specifically specified on an Investment Application that
all owners are required to sign checks. Only shareholders having accounts in
which no share certificates have been issued will be permitted to redeem
shares by check or enroll in the Systematic Withdrawal Plan.
Shares will be redeemed at their net asset value next determined (see
"Purchase of Fund Shares--Determination of Net Asset Value") after receipt by
the Transfer Agent of a check which does not exceed the value of the account.
Payment of the proceeds of a check will normally be made on the next business
day after receipt by the Transfer Agent of the check in proper form. Shares
purchased by check (including a certified or bank cashier's check) are not
normally available to cover redemption checks until fifteen days after
receipt of the check used for investment by the Transfer Agent. The Transfer
Agent will not honor a check in an amount exceeding the value of the account
at the time the check is presented for payment. Since the dollar value of an
account is constantly changing, it is not possible for a shareholder to
determine in advance the total value of its account so as to write a check
for the redemption of the entire account. For the same reason, a shareholder
should not write a check for substantially all of the current value of the
shares in its account with the Fund.
2. BY TELEPHONE OR WIRE INSTRUCTIONS WITH PAYMENT TO PREDESIGNATED BANK
ACCOUNT
A shareholder may redeem shares by telephoning or sending wire instructions
to the Transfer Agent. Payment will be made by the Transfer Agent to the
shareholder's bank account at any commercial bank designated by the
shareholder in an Investment Application, by wire if the amount is $1,000 or
more and the shareholder so requests, and otherwise by mail. Normally, the
Transfer Agent will transmit payment the next business day following receipt
of a request for redemption in proper form. Only shareholders having accounts
in which no share certificates have been issued will be permitted to redeem
shares by wire instructions.
DWR and any other participating Selected Broker-Dealers have informed the
Distributor and the Fund that, on behalf of and as agent for their customers
who are shareholders of the Fund, they will transmit to the Fund requests for
redemption of shares owned by their customers. In such cases, the Transfer
Agent will wire proceeds of redemptions to DWR's or other Selected
Broker-Dealer's bank account for credit to the shareholders' accounts the
following business day. DWR and other participating Selected Broker-Dealers
have also informed the Distributor and the Fund that they do not charge for
this service.
Redemption instructions must include the shareholder's name and account
number and be wired or called to the Transfer Agent at 800-869-NEWS
(toll-free).
3. BY MAIL
A shareholder may redeem shares by sending a letter to Dean Witter Trust FSB,
P.O. Box 983, Jersey City, NJ 07303, requesting redemption and surrendering
share certificates if any have been issued.
Redemption proceeds will be mailed to the shareholder at his or her
registered address or mailed or wired to his or her predesignated bank
account, as he or she may request. Proceeds of redemption may also be sent to
some other person, as requested by the shareholder in accordance with the
general redemption requirements listed below.
GENERAL REDEMPTION REQUIREMENTS
Written requests for redemption must be signed by the registered
shareholder(s). If the proceeds are to be paid to anyone other than the
registered shareholder(s) or sent to any address other than the shareholder's
registered address or predesignated bank account, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent,
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor), except in
the case of redemption by check. Additional documentation may be required
where shares are held by a corporation, partnership, trust or other
organization. With regard to shares of the Fund acquired pursuant to the
Exchange Privilege, any applicable contingent deferred sales charge will be
imposed upon the redemption of such shares (see "Purchase of Fund
Shares--Exchange Privilege").
If shares to be redeemed are represented by a share certificate, the
request for redemption must be
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<PAGE>
accompanied by the share certificate and a stock assignment form signed by
the registered shareholder(s) exactly as the account is registered.
Signatures must be guaranteed by a commercial bank or member firm of a
domestic stock exchange. Additional documentation may be required where
shares are held by a corporation, partnership, trust or other organization.
All requests for redemption should be sent to Dean Witter Trust FSB, P.O.
Box 983, Jersey City, NJ 07303.
Generally, the Fund will attempt to make payment for all redemptions
within one business day, and in no event later than seven days after receipt
of such redemption request in proper form. However, if the shares being
redeemed were purchased by check (including a certified or bank cashier's
check), payment 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). In addition, the
Fund may postpone redemptions at certain times when normal trading is not
taking place on the New York Stock Exchange.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than DWR or any other Selected Broker-Dealer for the account of the
shareholder), partnership, trust or fiduciary, or sent to the shareholder at
an address other than the registered address, signature(s) must be guaranteed
by an eligible guarantor acceptable to the Transfer Agent (shareholders
should contact the Transfer Agent for a determination as to whether a
particular institution is such an eligible guarantor). A stock power may be
obtained from any dealer or commercial bank.
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 determined (see "Purchase of Fund Shares--Determination
of Net Asset Value") after such repurchase order is received. Payment for
shares repurchased may be made by the Fund to DWR and other Selected
Broker-Dealers for the account of the shareholder. The offers by DWR and
other Selected Broker-Dealers to repurchase shares from shareholders may be
suspended by them at any time. In that event, shareholders may redeem their
shares through the Fund's Transfer Agent as set forth above under
"Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. 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 other Selected Broker-Dealers are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within 35 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund at net asset value next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on 60 days'
notice and at net asset value, the shares of any shareholder whose shares
have a value of less than $1,000 as a result of redemptions or repurchases,
or such lesser amount as may be fixed by the Trustees or, in the case of an
account opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $10,000 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 him or her 60 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 or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business. Such
dividends are payable monthly. The Fund intends to distribute net capital
gains, if any, at least once each year. The Fund may, however, elect to retain
all or a portion of any such net long-term capital gains in any year.
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 or all dividends and distributions be
paid in cash. (See "Shareholder Services--Automatic Investment of Dividends
and Distributions".)
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TAXATION
FEDERAL TAXES. Because the Fund intends to distribute substantially all of
its net investment income and net short-term capital gains to shareholders
and otherwise remain qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code, it is not expected that the Fund
will be required to pay any federal income tax on such income and capital
gains. Shareholders will normally have to pay federal income taxes on the
dividends and capital gains distributions they receive from the Fund.
Distributions of 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.
Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. Distributions of 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.
No portion of such distributions will be eligible for the dividends
received deduction for corporations. 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 accuracy.
Current federal 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. Accordingly, the Fund may
be required to pay out as an income distribution each year an amount which is
greater than the total amount of cash receipts of interest the Fund actually
received. Such distributions will be made from the available cash of the Fund
or by liquidation of portfolio securities, if necessary.
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 year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes, including
information as to the Federal tax status of dividends and distributions paid
or retained by the Fund.
The foregoing discussion relates solely to the Federal income tax
consequences of an investment in the Fund and dividends (where applicable)
and distributions may also be subject to state and local taxes (see "State
and Local Taxes" below); therefore, each shareholder is advised to consult
his or her own tax adviser.
STATE AND LOCAL TAXES. The Fund intends to invest only in U.S. Treasury
obligations that provide interest income exempt from state and local taxes.
Because all States presently allow the pass-through of federal obligation
interest derived from specific federal obligations, it is anticipated that
substantially all of the interest income generated by the Fund and paid out
to shareholders as net investment income will be exempt from state and local
taxation. Such investment income, however, will not be exempt from federal
tax. Furthermore, any capital gains realized by the Fund will not be exempt
from federal, and generally, state and local taxes. It should be noted that
although the Fund intends to invest only in securities the pass-through
income from which is believed exempt from state and local income taxes, it is
possible that a state or local taxing authority may seek to tax an investor
on a portion of the interest income of a particular government obligation
held by the Fund. Shareholders are urged to consult their tax advisers with
respect to specific questions regarding federal, state and local taxes.
PERFORMANCE INFORMATION
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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 is computed by dividing the net
investment income of the Fund 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
regulatory requirements. Such amount is compounded for six months and then
annualized for a twelve-month period to derive the yield of the Fund. The
Fund may also quote its tax-equivalent yield, which is calculated by
determining the pre-tax yield which after being taxed at a stated rate, would
be equivalent to the yield determined as described above.
The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in the Fund of $1,000 over periods of one,
five and ten years or over the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Fund, any appreciation or depreciation of the assets of the Fund, and all
expenses incurred by the Fund, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
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<PAGE>
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations (such as Lipper Analytical Services Inc.).
ADDITIONAL INFORMATION
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VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of beneficial interest of the Fund is entitled to its
portion of all of the Fund's assets after all debts and expenses have been
paid. The shares do not have cumulative voting rights.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. The Trustees
themselves have the power to alter the number and the terms of office of the
Trustees and they may at any time lengthen their own terms or make their
terms of unlimited duration and appoint their own successors, provided that
always at least a majority of the Trustees has been elected by the
shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right under
certain circumstances to remove the Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each instrument entered
into or executed by the Fund. Under the Declaration of Trust, indemnification
shall be made out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability
and the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and thus, in the opinion
of Massachusetts counsel to the Fund, the risk to Fund shareholders is
remote.
CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering, and also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
14
<PAGE>
DEAN WITTER
SHORT-TERM U.S. TREASURY 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
Barry Fink
Vice President, Secretary and
General Counsel
Rajesh K. Gupta
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust FSB
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.
