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PROSPECTUS TABLE OF CONTENTS
JUNE 10, 1994 Prospectus Summary/2
Dean Witter International Summary of Fund Expenses/3
SmallCap Fund (the "Fund") is an open-end, The Fund and its Management/4
non-diversified management investment Investment Objective and Policies/5
company whose investment objective is to Risk Considerations/6
seek long-term growth of capital. The Fund Investment Restrictions/9
seeks to meet its investment objective by Underwriting/10
investing primarily in securities of small Purchase of Fund Shares--
non-U.S. companies. Continuous Offering/10
Initial Offering--Shares are Shareholder Services/13
being offered in an underwriting by Dean Redemptions and Repurchases/15
Witter Distributors Inc. at $10.00 per share Dividends, Distributions and Taxes/17
with no underwriting commission, with all Performance Information/18
proceeds going to the Fund. All expenses in Additional Information/18
connection with the organization of the Fund This Prospectus sets forth
and this offering will be paid by the concisely the information you should know
Investment Manager and Underwriter except before investing in the Fund. It should be
for a maximum of $250,000 of organizational read and retained for future reference.
expenses to be reimbursed by the Fund. The Additional information about the Fund is
initial offering will run from approximately contained in the Statement of Additional
June 24, 1994 through July 22, 1994. Information, June 10, 1994, which has been
Continuous Offering--A filed with the Securities and Exchange
continuous offering will commence Commission, and which is available at no
approximately one week after the closing charge upon request of the Fund at the
date (anticipated for July 29, 1994) of the address or telephone numbers listed below.
initial offering. Shares of the Fund will be The Statement of Additional Information is
priced at the net asset value per share next incorporated herein by reference.
determined following receipt of an order. SHARES OF THE FUND ARE NOT DEPOSITS OR
Repurchases and/or OBLIGATIONS
redemptions of shares purchased in either OF, OR GUARANTEED OR ENDORSED BY, ANY BANK,
the initial offering or the continuous AND THE SHARES ARE NOT FEDERALLY INSURED BY
offering are subject in most cases to a THE FEDERAL DEPOSIT INSURANCE CORPORATION,
contingent deferred sales charge, scaled THE FEDERAL RESERVE BOARD, OR ANY OTHER
down from 5% to 1% of the amount redeemed, AGENCY.
if made within six years of purchase, which THESE SECURITIES HAVE NOT BEEN
charge will be paid to the Fund's APPROVED OR DISAPPROVED BY THE SECURITIES
Underwriter/Distributor, Dean Witter AND EXCHANGE COMMISSION OR ANY STATE
Distributors Inc. See "Repurchases and SECURITIES COMMISSION NOR HAS THE SECURITIES
Redemptions--Contingent Deferred Sales AND EXCHANGE COMMISSION OR ANY STATE
Charge." In addition, the Fund pays the SECURITIES COMMISSION PASSED UPON THE
Underwriter/Distributor a Rule 12b-1 ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
distribution fee pursuant to a Plan of REPRESENTATION TO THE CONTRARY IS A CRIMINAL
Distribution at the annual rate of 1.0% of OFFENSE.
the lesser of the (i) average daily Dean Witter
aggregate net sales or (ii) average daily International SmallCap Fund
net assets of the Fund. See "Purchase of Two World Trade Center
Fund Shares--Continuous Offering--Plan of New York, New York 10048
Distribution." (212) 392-2550 or (800) 526-3143
DEAN WITTER DISTRIBUTORS INC.
UNDERWRITER/DISTRIBUTOR
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PROSPECTUS SUMMARY
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<CAPTION>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
Fund open-end, non-diversified management investment company. The Fund invests primarily in
securities of small non-U.S. companies.
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Shares Offered Shares of beneficial interest with $.01 par value (see page 18).
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Initial Shares are being offered in an Underwriting by Dean Witter Distributors Inc. at $10.00 per
Offering share with no underwriting discount or commission. The minimum purchase is 100 shares
($1,000). Shares redeemed within six years of purchase are subject to a contingent deferred
sales charge under most circumstances. The initial offering will run approximately from June
24, 1994 through July 22, 1994. The closing will take place on July 29, 1994 or such other
date as may be agreed upon by Dean Witter Distributors Inc. and the Fund (the "Closing Date").
Shares will not be issued and dividends will not be declared by the Fund until after the
Closing Date. If any orders received during the initial offering period are accompanied by
payment, such payment will be returned unless an accompanying request for investment in a Dean
Witter money market fund is received at the time the payment is made. Any purchase order may
be cancelled at any time prior to the Closing Date. (see page 10).
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Continuous A continuous offering will commence within approximately one week after completion of the
Offering initial offering. During the continuous offering, the minimum initial investment will be
$1,000 and the minimum subsequent investment will be $100. (see page 10).
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Investment The investment objective of the Fund is to seek long-term growth of capital.
Objective
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Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
Manager and subsidiary, Dean Witter Services Company Inc., serve in various investment management,
Sub-Advisor advisory, management and administrative capacities to eighty-six investment companies and
other portfolios with net assets under management of approximately $70.6 billion at May 31,
1994. Morgan Grenfell Investment Services Ltd. has been retained by the Investment Manager as
Sub-Advisor to provide investment advice and manage the Fund's portfolio. Morgan Grenfell
Investment Services Ltd. currently serves as investment advisor for U.S. corporate and public
employee benefit plans, investment companies, endowments and foundations with assets of
approximately $8.4 billion at May 31, 1994 (see page 4).
<CAPTION>
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Management The Investment Manager receives a monthly fee at the annual rate of 1.25% of the Fund's daily
Fee net assets, of which the Sub-Advisor receives 40% (see page 4).
<CAPTION>
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Dividends and Dividends from net investment income are paid at least annually. Capital gains, if any, are
Distributions distributed at least annually or retained for reinvestment by the Fund. Dividends and capital
gains distributions are automatically reinvested in additional shares at net asset value
unless the shareholder elects to receive cash (see page 17).
<CAPTION>
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Underwriter Dean Witter Distributors Inc. (the "Underwriter" or "Distributor"). The Distributor receives
and from the Fund a distribution fee accrued daily and payable monthly at the rate of 1.0% per
Distributor 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 page 10).
<CAPTION>
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Redemption-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily
Contingent redeemed if the total value of the account is less than $100. Although no commission or sales
Deferred load is imposed upon the purchase of shares, a contingent deferred sales charge (scaled down
Sales from 5% to 1%) is imposed on any redemption of shares if after such redemption the aggregate
Charge 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 page 14).
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Risks The net asset value of the Fund's shares will fluctuate with changes in market value of
portfolio securities. Investing in lesser known, smaller capitalization companies may involve
greater risk of volatility in the Fund's net asset value than is customarily associated with
investing in larger, more established companies. In addition, it should be recognized that the
foreign securities and markets in which the Fund will invest pose different and greater risks
than those customarily associated with domestic securities and their markets. 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 a result, a relatively high percentage
of the Fund's assets may be invested in a limited number of issuers. However, the Fund intends
to continue to qualify as a regulated investment company under the federal income tax laws
and, as such, is subject to the diversification requirements of the Internal Revenue Code (see
page 6).
<CAPTION>
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</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur.
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SHAREHOLDER TRANSACTION EXPENSES
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Maximum Sales Charge Imposed on Purchases.............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends................................... None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds).... 5.0%
A contingent deferred sales charge is imposed at the following declining rates:
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<CAPTION>
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
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First....................................................................................... 5.0%
Second...................................................................................... 4.0%
Third....................................................................................... 3.0%
Fourth...................................................................................... 2.0%
Fifth....................................................................................... 2.0%
Sixth....................................................................................... 1.0%
Seventh and thereafter...................................................................... None
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Redemption Fees....................................................................... None
Exchange Fee.......................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Management Fees....................................................................... 1.25%
12b-1 Fees*........................................................................... 1.00%
Other Expenses........................................................................ 0.40%
Total Fund Operating Expenses**....................................................... 2.65%
Management and 12b-1 Fees are for the current fiscal period of the Fund ending May 31, 1995.
"Other Expenses," as shown above, are based upon estimated amounts of expenses of the Fund for
the fiscal period ending May 31, 1995.
<FN>
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*THE 12B-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY, AT AN ANNUAL RATE OF 1.0%
OF THE LESSER OF: (A) THE AVERAGE DAILY AGGREGATE GROSS SALES OF THE FUND'S
SHARES SINCE THE 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. A PORTION OF THE 12B-1 FEE EQUAL TO 0.25% OF THE FUND'S
AVERAGE DAILY NET ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES.
**"TOTAL FUND OPERATING EXPENSES," AS SHOWN ABOVE, IS BASED UPON THE SUM OF THE
12B-1 FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES," WHICH MAY BE
INCURRED BY THE FUND.
</TABLE>
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<CAPTION>
EXAMPLE 1 year 3 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:................................................. $ 77 $ 112
You would pay the following expenses on the same investment, assuming no redemption: . $ 27 $ 82
</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 "Redemption and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
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THE FUND AND ITS MANAGEMENT
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Dean Witter International SmallCap Fund (the "Fund") is an open-end,
non-diversified, management investment company. The Fund is a trust of the type
commonly known as a "Massachusetts business trust" and was organized under the
laws of The Commonwealth of Massachusetts on April 21, 1994.
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 eighty-six investment companies (the "Dean Witter
Funds"), thirty of which are listed on the New York Stock Exchange, with
combined assets of approximately $68.6 billion at May 31, 1994. The Investment
Manager also manages portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.0 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and supervise the investment of the Fund's
assets. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments, subject to the overall supervision of the Investment Manager. The
Fund's Trustees review the various services provided by the Investment Manager
and the Sub-Advisor 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.
The Sub-Advisor, whose address is 20 Finsbury Circus, London, England,
currently manages assets in excess of $8.4 billion for U.S. corporate and public
employee benefit plans, investment companies, endowments and foundations. The
Sub-Advisor is an indirect subsidiary of Deutsche Bank AG, the largest
commercial bank in Germany.
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 the
annual rate of 1.25% to the Fund's net assets. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor monthly compensation equal to 40% of its monthly compensation.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly assumed
by the Investment Manager under its Investment Management Agreement with the
Fund. The Investment Manager has undertaken to assume all operating expenses
(except for the Plan of Distribution Fee and any brokerage fees) and waive the
compensation provided for in its Investment Management Agreement until such time
as the Fund has $50 million of net assets or until six months from the date of
commencement of the Fund's operations, whichever occurs first.
4
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INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is long-term growth of capital. The
objective is a fundamental policy of the Fund and may not be changed without
shareholder approval. There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing, under
normal circumstances, at least 65% of its total assets in equity securities of
"small capitalization" companies located outside of the United States. A "small
capitalization" company is defined as being, at the time of purchase of its
equity securities by the Fund, among the smallest capitalized companies (where
capitalization is calculated by multiplying the total number of outstanding
shares of common stock of the company by their market price and by ranking the
resulting companies from smallest to largest capitalization) principally located
in a given country, whose aggregate capitalizations comprise no more than 25% of
the total market capitalization of the country. Equity securities in which the
Fund may invest include common stocks, rights or warrants to purchase common
stocks and securities convertible into common stocks.
The Fund will invest in securities issued by issuers located in at least
three countries outside of the U.S. An issuer of a security will be considered
to be located in a given country if it: (i) is organized under the laws of the
country; (ii) derives at least 50% of its revenues from goods produced or sold,
investments made, or services performed in the country; (iii) maintains at least
50% of its assets in the country; or (iv) has securities which are principally
traded on a stock exchange in the country.
The Fund currently intends to invest, from time to time, more than 25% of
its total assets in securities issued by issuers located in each of the United
Kingdom and Japan. The concentration of the Fund's assets in Japanese issuers
will subject the Fund to the risks of adverse social, political or economic
events which occur in Japan. Specifically, investments in the Japanese stock
market may entail a higher degree of risk than investments in other markets as,
by fundamental measures of corporate valuation, such as its high price-earnings
ratios and low dividend yields, the Japanese market as a whole may appear
expensive relative to other world stock markets, (I.E., the prices of Japanese
stocks may be relatively high). In addition, the prices of securities traded on
the Japanese markets may be more volatile than many other markets.
Generally, the investment risks presented by equity markets in the United
Kingdom are comparable to those occurring in the U.S. However, the concentration
of the Fund's assets in British issuers will subject the Fund's investment
performance to social, political and economic events occurring in the United
Kingdom to a larger effect than to those occurring elsewhere, internationally.
In addition, political and economic developments occurring elsewhere in Europe,
especially as they relate to changes in the structure of the European Economic
Community, and the anticipated development of a unified common market, may have
profound effects upon the value of the British segment of the Fund's portfolio
of investments.
The remainder of the Fund's portfolio equalling, at times, up to 35% of the
Fund's total assets, may be invested in (i) securities issued by companies whose
market capitalizations place them outside the Fund's definition of "small
capitalization" and/or (ii) fixed-income securities issued or guaranteed by
foreign governments. In addition, this portion of the Fund's portfolio will
consist of various other financial instruments such as forward foreign exchange
contracts, futures contracts and options.
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
5
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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.
In constructing its portfolio, the Fund will utilize an
investment/decision-making process that primarily emphasizes stock research and
selection which is complemented by regional asset allocation and order
execution. In recognition of the characteristics of the small-cap security
universe (I.E., lesser liquidity, generally, than securities issued by companies
with larger capitalizations), regional asset allocations are made with a
long-term view in mind. This long-term perspective will be implemented by
searching for securities of companies with long-term growth prospects,
attractive valuation compar-
isons and adequate market liquidity.
The securities selected for purchase by the Fund's Sub-Advisor will be
biased toward price appreciation potential: attractive stocks will exhibit
above-average earnings growth, below-average price-earnings ratios in their
market and relative price-earnings ratios below the historic norm. In addition,
the Fund will maintain a disciplined sell process for liquidating portfolio
holdings.
There may be periods during which, in the opinion of the Investment Manager
or Sub-Advisor, 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 net assets are invested in
cash or money market instruments. Money market instruments in which the Fund may
invest are securities issued or guaranteed by the U.S. Government (Treasury
bills, notes and bonds, including zero coupon securities); bank obligations
(such as certificates of deposit and bankers' acceptances); Yankee instruments;
Eurodollar certificates of deposit; obligations of savings institutions; fully
insured certificates of deposit; and commercial paper 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
SMALL-CAP STOCKS. Investing in lesser-known, smaller capitalized companies
may involve greater risk of volatility of the Fund's net asset value than is
customarily associated with investing in larger, more established companies.
There is typically less publicly available information concerning foreign and
smaller companies than for domestic and larger, more established companies. Some
small companies have limited product lines, distribution channels and financial
and managerial resources and tend to concentrate on fewer geographic markets
than do larger companies. Also, because smaller companies normally have fewer
shares outstanding than larger companies and trade less frequently, it may be
more difficult for the Fund to buy and sell significant amounts of such shares
without an unfavorable impact on prevailing market prices. Some of the companies
in which the Fund may invest may distribute, sell or produce products which have
recently been brought to market and may be dependent on key personnel with
varying degrees of experience.
FOREIGN SECURITIES. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealings between nations. Fluctuations
in the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
6
<PAGE>
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward foreign currency
exchange contracts (described below). The Fund will 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 confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments.
NON-DIVERSIFIED STATUS. The Fund is a non-diversified investment company
and, as such, is not subject to the diversification requirements of 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.
PORTFOLIO CHARACTERISTICS
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into forward
foreign currency exchange contracts ("forward contracts") in connection with its
foreign securities investments.
A 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 (by the Fund or the
counterparty) 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.
7
<PAGE>
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, the Fund 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 securities holdings (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.
This method of hedging, called "cross-hedging," will be selected by the
Investment Manager when it is determined that the foreign currency in which the
portfolio securities are denominated has insufficient liquidity or is 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, the Fund 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.
In all of the above circumstances, if the currency in which the Fund
securities holdings (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 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. The Fund may be limited in
its ability to enter into hedging transactions involving forward contracts by
the Internal Revenue Code requirements relating to qualification as a regulated
investment company (see "Dividends, Distributions and Taxes").
RIGHTS AND WARRANTS. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting rights,
pay no dividends and have no rights with respect to the corporation issuing
them.
CONVERTIBLE SECURITIES. The Fund may acquire, through purchase or a
distribution by the issuer of a security held in its portfolio, a fixed-income
security which is convertible into common stock of the issuer. 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 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
8
<PAGE>
of the convertible security will rise above its investment value and, in
addition, 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. A portion of the convertible securities in which the Fund may invest
may be unrated or, if rated, rated below investment grade by a nationally
recognized statistical rating organization.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and the
Sub-Advisor 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 and the Sub-Advisor will rely on information
from various sources, including research, analysis and appraisals of brokers and
dealers, the views of Trustees of the Fund and others regarding economic
developments and interest rate trends, and the Investment Manager's and
Sub-Advisor's own analysis of factors they deem relevant. The Fund's primary
portfolio manager is Mr. Graham D. Bamping, a Director of the Sub-Advisor. Mr.
Bamping has been managing equity portfolios for the Sub-Advisor for over five
years.
Personnel of the Investment Manager and Sub-Advisor 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.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR and four
affiliated broker-dealers of the Sub-Advisor (Morgan Grenfell Asia and Partners
Securities Pte. Limited, Deutsche Bank Capital Markets Ltd., C.J. Lawrence,
Morgan Grenfell and Deutsche Bank AG). Pursuant to an order of the Securities
and Exchange Commission, the Fund may effect principal transactions in certain
money market instruments with Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of the Investment Manager. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR and the four above-mentioned
affiliated broker-dealers of the Sub-Advisor.
Although the Fund does not intend to engage in short-term trading, it may
sell portfolio securities without regard to the length of time they have been
held when such sale will, in the opinion of the Investment Manager or
Sub-Advisor, contribute to the Fund's investment objective. It is not
anticipated that the Fund's portfolio turnover rate will exceed 100% in any one
year.
The expenses of the Fund relating to its portfolio management are likely to
be greater than those incurred by other investment companies investing primarily
in securities issued by domestic issuers as custodial costs, brokerage
commissions and other transaction charges related to investing on foreign
markets are generally higher than in the United States.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
9
<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. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three years of
continuous operation. This restriction shall not apply to any obligation issued
or guaranteed by the United States Government, its agencies or
instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of its
total assets, purchase more than 10% of the voting securities of any issuer.
UNDERWRITING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Underwriter") has agreed to purchase up
to 10,000,000 shares from the Fund, which number may be increased or decreased
in accordance with the Underwriting Agreement. The initial offering will run
approximately from June 24, 1994 through July 22, 1994. The Underwriting
Agreement provides that the obligation of the Underwriter is subject to certain
conditions precedent and that the Underwriter will be obligated to purchase the
shares on July 29, 1994, or such other date as may be agreed upon by the
Underwriter and the Fund (the "Closing Date"). Shares will not be issued and
dividends will not be declared by the Fund until after the Closing Date. For
this reason, payment is not required to be made prior to the Closing Date. If
any orders received during the initial offering period are accompanied by
payment, such payment will be returned unless an accompanying request for
investment in a Dean Witter money market fund is received at the time the
payment is made. Prospective investors in money market funds should request and
read the money market fund prospectus prior to investing. All such funds
received and invested in a Dean Witter money market fund will be automatically
invested in the Fund on the Closing Date without any further action by the
investor. Any investor may cancel his or her purchase of Fund shares without
penalty at any time prior to the Closing Date.
The Underwriter will purchase shares from the Fund at $10.00 per share. No
underwriting discounts or selling commissions will be deducted from the initial
public offering price. The Underwriter may, however, receive contingent deferred
sales charges from future redemptions of such shares (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge").
The Underwriter shall, regardless of its expected underwriting commitment,
be entitled and obligated to purchase only the number of shares for which
purchase orders have been received by the Underwriter prior to 2:00 p.m., New
York time, on the third business day preceding the Closing Date, or such other
date as may be agreed to between the parties.
The minimum number of Fund shares which may be purchased by any shareholder
pursuant to this offering is 100 shares. Certificates for shares purchased will
not be issued unless requested by the shareholder in writing.
PURCHASE OF FUND SHARES--CONTINUOUS OFFERING
- --------------------------------------------------------------------------------
Dean Witter Distributors Inc. (the "Distributor") will act as the
Distributor of the Fund's shares during the continuous offering. Pursuant to a
Distribution Agreement between the Fund and the Distributor, shares of the Fund
are distributed by the Distributor and offered by DWR and other dealers which
have entered into agreements with the Distributor ("Selected Broker-Dealers").
The principal executive office of the Distributor, an affiliate of InterCapital,
is located at Two World Trade Center, New York, New York 10048.
10
<PAGE>
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of Net
Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Repurchases and Redemptions"). 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 non-cash compensation in the form of trips to
educational and/or business seminars and merchandise as special sales
incentives. The Fund and the Distributor reserve the right to reject any
purchase orders.
The minimum initial purchase is $1,000. Minimum subsequent purchases of $100
or more may be made by sending a check, payable to Dean Witter International
SmallCap Fund, directly to Dean Witter Trust Company (the "Transfer Agent") at
P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive of
DWR or other Selected Broker-Dealer. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans), the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. Shares of the
Fund purchased through the Distributor are entitled to any dividends declared
beginning on the next business day following settlement date. 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. Shares purchased through the Transfer Agent are entitled to any
dividends declared beginning on the next business day following receipt of an
order. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
A portion of the fee payable pursuant to the Plan, equal to 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines.
Amounts paid under the Plan are paid to the Distributor for 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's
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
11
<PAGE>
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.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount, if any, 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, 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 assets are valued; if there were no sales that day,
the security is valued at the latest bid price (in cases where a security is
traded on more than one exchange, the security is valued on the exchange
designated as the primary market by the Trustees); and (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest bid price. When market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager that sale and bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Board of 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
prevailing market rates as of the morning of valuation. Dividends receivable are
accrued as of the ex-dividend date or as of the time that the relevant
ex-dividend date and amounts become known.
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' fair 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 utilizes 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.
12
<PAGE>
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 as acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value per
share next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (see "Redemptions and Repurchases").
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
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.
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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected Dealer
account executive or the Transfer Agent.
EXCHANGE PRIVILEGE. The Fund makes available to its shareholders an
"Exchange Privilege" allowing the exchange of shares of the Fund for shares of
other Dean Witter Funds sold with a contingent deferred sales charge ("CDSC
funds"), and for shares of Dean Witter Short-Term U.S. Treasury Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Limited Term Municipal Trust and five
Dean Witter Funds which are money market funds (the foregoing eight non-CDSC
funds are hereinafter collectively referred to as the "Exchange Funds").
Exchanges may be made after the shares of the Fund acquired by purchase (not by
exchange or
13
<PAGE>
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 to 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, 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 of 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.
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
14
<PAGE>
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 other Selected Broker-Dealers 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) 526-3143 (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the experience 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(s), 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 for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), which will be a percentage of the dollar amount of shares
redeemed and
15
<PAGE>
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
SALES CHARGE
AS A PERCENTAGE OF
YEAR SINCE PURCHASE 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: (i) 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 or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) 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 Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2); and (c) a tax-free return of
an excess contribution to an IRA. 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. 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 either 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
the Distributor at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances; E.G., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption
pro-
16
<PAGE>
ceeds 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 their net asset value next determined after
a reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty
days' notice and at 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. 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 $100 and allow him or her sixty days to make an
additional investment in an amount which will increase the value of his or her
account to $100 or more before the redemption is processed. No CDSC will be
imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay dividends and to
distribute substantially all of its net investment income and distribute capital
gains, if any, once each year. The Fund may, however, determine either to
distribute or to retain all or part of any long-term capital gains in any year
for reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise qualify as
a regulated investment company under Subchapter M of the Internal Revenue Code,
it is not expected that the Fund will be required to pay any Federal income tax
on any such income and capital gains. Shareholders will normally have to pay
Federal income taxes, and any state and local income taxes, on the dividends and
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. Some
part of such dividends and distributions may be eligible for the Federal
dividends received deduction available to the Fund's corporate shareholders.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
To avoid being subject to a 31% Federal backup withholding
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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 makes 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.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in the Fund of $1,000 over 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 incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
Such calculations may or may not reflect the deduction of the contingent
deferred sales charge which, if reflected, would reduce the performance quoted.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations,
such as mutual fund performance rankings of Lipper Analytical Services, Inc.
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
limi-
18
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tations on shareholder personal liability, and the nature of the Fund's assets
and operations, in the opinion of Massachusetts counsel to the Fund, the risk to
shareholders of personal liability is remote.
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.
The Investment Manager provided the initial capital for the Fund by
purchasing 10,000 shares of the Fund for $100,000 on June 2, 1994. As of the
date of this Prospectus, the Investment Manager owned 100% of the outstanding
shares of the Fund. The Investment Manager may be deemed to control the Fund
until such time as it owns less than 25% of the outstanding shares of the Fund.
19
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<S> <C> <C>
Dean Witter
International SmallCap Fund
DEAN WITTER
Two World Trade Center
New York, New York 10048 INTERNATIONAL
(212) 392-2550 SMALLCAP
TRUSTEES FUND
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, New York 10081
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center,
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISOR PROSPECTUS -- JUNE 10, 1994
Morgan Grenfell Investment Services Limited
</TABLE>
