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Filed Pursuant to Rule 497(e)
Registration File No.: 33-53955
DEAN WITTER
MID-CAP GROWTH FUND
PROSPECTUS-JANUARY 18, 1995
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DEAN WITTER MID-CAP GROWTH FUND (THE "FUND") IS AN OPEN-END, DIVERSIFIED
MANAGEMENT INVESTMENT COMPANY WHOSE INVESTMENT OBJECTIVE IS TO SEEK LONG-TERM
CAPITAL GROWTH. THE FUND SEEKS TO MEET ITS INVESTMENT OBJECTIVE BY INVESTING
PRIMARILY IN EQUITY SECURITIES OF "MID-CAP" COMPANIES.
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, redemptions and/or repurchases are
subject in most cases to a contingent deferred sales charge, scaled down from
5% to 1% of the amount redeemed, if made within six years of purchase, which
charge will be paid to the Fund's Distributor, Dean Witter Distributors Inc.
(See "Redemptions and Repurchases--Contingent Deferred Sales Charge.") In
addition, the Fund pays the Distributor a Rule 12b-1 distribution fee
pursuant to a Plan of Distribution at the annual rate of 1% of the lesser of
the (i) average daily aggregate net sales or (ii) average daily net assets of
the Fund. (See "Purchase of Fund Shares--Plan of Distribution.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated January 18, 1995, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 4
Investment Objective and Policies ..................................... 5
Risk Considerations ................................................... 9
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 10
Shareholder Services .................................................. 12
Redemptions and Repurchases ........................................... 14
Dividends, Distributions and Taxes .................................... 16
Performance Information ............................................... 16
Additional Information ................................................ 17
Financial Statements--
November 30, 1994 (unaudited) ........................................ 18
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
MID-CAP GROWTH FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 526-3143
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 NOR 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. The Fund invests primarily in equity securities of "mid-cap"
companies.
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Shares Offered Shares of beneficial interest with $.01 par value (see page 17).
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Offering Price At net asset value without sales charge. Shares redeemed within six years
of purchase are subject to a contingent deferred sales charge under most
circumstances (see page 10)
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Minimum The minimum initial investment is $1,000 and the minimum subsequent
Purchase investment is $100 (see page 10).
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Investment The investment objective of the Fund is to seek long-term capital growth.
Objective
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Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety investment companies and other
portfolios with net assets under management of approximately $67.8 billion
at November 30, 1994.
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Management Fee The Investment Manager receives a monthly fee at the annual rate of 0.75%
of the Fund's average daily net assets. The fee should not be compared with
fees paid by other investment companies without also considering applicable
sales loads and distribution fees, including those noted below (see page
4).
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Dividends and Dividends from net investment income are paid at least annually. Capital
Distributions gains, if any, are 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 (without
sales charge) unless the shareholder elects to receive cash (see page 16).
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Distributor Dean Witter Distributors Inc. ("Distributor"). The Distributor receives
from the Fund a Rule 12b-1 distribution fee accrued daily and payable
monthly at the rate of 1.0% per annum of the lesser of (i) the Fund's
average daily aggregate net sales or (ii) the Fund's average daily net
assets. This fee compensates the Distributor for the services provided in
distributing shares of the Fund and for sales related expenses. The
Distributor also receives the proceeds of any contingent deferred sales
charges (see page 10).
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Redemption-- Shares are redeemable by the shareholder at net asset value. An account may
Contingent be involuntarily redeemed if the total value of the account is less than
Deferred Sales $100. Although no commission or sales load is imposed upon the purchase of
Charge shares, a contingent deferred sales charge (which declines from 5% to 1%)
is imposed on any redemption of shares if after such redemption the
aggregate current value of an account with the Fund falls below the
aggregate amount of the investor's purchase payments made during the first
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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Risk The net asset value of the Fund's shares will fluctuate with changes in the
Considerations market value of portfolio securities. Investing in medium-sized market
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 may invest up to
35% of its total assets pose different and greater risks than those
customarily associated with domestic securities and their markets. (see
page 9).
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Shareholder Automatic Investment of Dividends and Distributions; Investment of
Services Distributions Received in Cash; Systematic Withdrawal Plan; Exchange
Privilege; EasyInvest(sm), Tax-Sheltered Retirement Plans (see pages 12
through 14).
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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.
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SHAREHOLDER TRANSACTION EXPENSES
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%
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A contingent deferred sales charge is imposed at the following declining
rates:
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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)
Management Fees .......................................................... 0.75%
12b-1 Fees* .............................................................. 1.00%
Other Expenses ........................................................... 0.54%
Total Fund Operating Expenses** .......................................... 2.29%
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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.
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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.
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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: ......................... $73 $102
You would pay the following expenses on the same investment, assuming no
redemption: ....................................................................... $23 $ 72
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The above example should not be considered a representation of past or
future expenses or performance. Actual expenses of the Fund may be greater or
less than those shown.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "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.
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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 the period has been taken from the records of the Fund
without examination by independent accountants. The financial highlights
should be read in conjunction with the financial statements and notes
thereto. The related unaudited financial statements are contained in this
Prospectus commencing on page 22.
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FOR THE PERIOD
SEPTEMBER 29, 1994*
THROUGH NOVEMBER
30, 1994
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .......... $ 10.00
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Net investment income ......................... 0.02
Net realized and unrealized loss on investments (0.08)
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Total from investment operations .............. (0.06)
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Net asset value, end of period ................ $ 9.94
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TOTAL INVESTMENT RETURN+ ........................ (.60)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) ....... $ 83,660
Ratios to average net assets:
Expenses ...................................... 2.29%(2)
Net investment income ......................... 0.97%(2)
Portfolio turnover rate ....................... 57%(1)
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* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
THE FUND AND ITS MANAGEMENT
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Dean Witter Mid-Cap Growth Fund (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 May 25, 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 ninety investment companies, thirty of which are
listed on the New York Stock Exchange, with combined assets of approximately
$65.8 billion at November 30, 1994. The Investment Manager also manages
portfolios of pension plans, other institutions and individuals which
aggregated approximately $2 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by 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 the
annual rate of 0.75% to the Fund's net assets. This fee is higher than the
fee paid by most
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other investment companies. For the period ended November 30, 1994, the Fund
accrued total compensation to the Investment Manager amounting to 0.75% of
the Fund's average daily net assets and the Fund's total expenses amounted to
an annualized rate of 2.29% of the Fund's average daily net assets.
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.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is long-term capital growth. The
objective is a fundamental policy of the Fund and may not be changed without
a vote of a majority of the outstanding voting securities of the Fund. 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 a diversified
portfolio of domestic and foreign equity securities of "mid-cap" companies. A
mid-cap company is a company whose market capitalization falls within the
range of $250 million to $5 billion. The Fund may invest up to 35% of its
total assets in (i) U.S. Government Securities and investment grade corporate
debt securities; or (ii) equity securities of companies with market
capitalizations which fall outside of the range of $250 million to $5 billion
at the time of purchase as long as such investments are consistent with the
Fund's investment objective. The Fund may invest up to 35% of its total
assets in the equity securities of non-U.S. companies, including American or
other Depository Receipts, rights, warrants, and the direct purchase of
foreign securities. Equity securities in which the Fund may invest include
common stocks and securities convertible into common stocks. The Fund
utilizes an investment process that placesprimary emphasis on seeking to
identify industries, rather than individual companies, as prospects for
capital appreciation and whereby the Investment Manager seeks to invest
assets of the Fund in industries it considers to be attractive at the time of
purchase and to sell those it considers overvalued. The Investment Manager
will invest principally in those mid-cap companies that in the opinion of the
Investment Manager have above-average relative growth potential. Mid-cap
companies typically have a better growth potential than their large-cap
counterparts because they are still in the early and more dynamic period of
their corporate existences. Often mid-size companies and the industries in
which they are focused are still evolving as opposed to the more mature
industries served by large-cap companies. Moreover, mid-cap companies are not
considered "emerging" stocks, nor are they as volatile as small-cap firms.
This is due to the fact that mid-cap companies have increased liquidity,
attributable to their larger market capitalization as well as longer and more
established track records, and a stronger market presence and dominance than
small-cap firms. Consequently, because of the better growth inherent in these
companies and their industries, mid-cap companies offer superior return
potential to large-cap companies, yet owing to their relatively larger size
and better recognition in the investment community, they have a reduced risk
profile compared to smaller, emerging or micro-cap companies.
In selecting stocks within the mid-cap universe, the Investment Manager
will use an industry approach that seeks to diversify the assets of the Fund
in approximately 18 to 25 industries. The Fund will hold less than 5% of its
net assets in any one security and will hold less than 10% of its net assets
in any one industry. Companies will be selected based on at least three-year
track records, and purchases will be primarily focused on companies that: 1)
have the potential for above-average relative earnings growth; 2) are focused
in industries that are rapidly expanding or have the potential to see
increasing sales or earnings; 3) historically have had well-defined and
recurring revenues; or 4) are attractive based on an assessment of private
market or franchise values.
After selection of the Fund's target industries, specific company
investments are selected. In this process, the Investment Manager seeks to
identify companies whose prospects are deemed attractive on the basis of an
evaluation of valuation screens and prospective company fundamentals. From
the total of all companies included in the industry valuation process, the
Investment Manager selects a limited number from each industry as
representative of that industry. Such selections are made on the basis of
various criteria, including size and quality of a company, the visibility of
its earnings and various valuation parameters. Valuation screens may include
dividend discount model values, price-to-book ratios, price-to-cash flow
values, relative and absolute price-to-earnings ratios and ratios of
price-earnings multiples to earnings growth. Price and earnings momentum
ratings derived from external sources are also factored into the stock
selection decision. Those
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companies which the Investment Manager believes to be attractive investments
are finally selected for inclusion in the Fund. For a discussion of the risks
of mid-cap stocks, see "Risk Considerations" below.
ASSET ALLOCATION. Common stocks, particularly those sought for possible
capital appreciation, have historically experienced a great amount of price
fluctuation. The Investment Manager believes it is desirable to attempt to
reduce the risks of extreme price fluctuations even if such an attempt
results, as it likely will at times, in reducing the probabilities of
obtaining greater capital appreciation. Accordingly, the Investment Manager's
investment process incorporates elements which may reduce, although certainly
not eliminate, the volatility of a portfolio. The Fund may hold a portion of
its portfolio in investment grade fixed-income securities, including
convertible securities, in an effort to moderate extremes of price
fluctuation. The determination of the appropriate asset allocation as between
equity and fixed-income investments will be made by the Investment Manager in
its discretion, based upon its evaluation of economic and market conditions.
PORTFOLIO CHARACTERISTICS
FIXED-INCOME SECURITIES. Investments in fixed-income securities rated either
BBB by S&P or Baa by Moody's (the lowest credit ratings designated
"investment grade") have speculative characteristics and, therefore, changes
in economic conditions or other circumstances are more likely to weaken their
capacity to make principal and interest payments than would be the case with
investments in securities with higher credit ratings. If a fixed-income
security held by the Fund is rated BBB or Baa and is subsequently downgraded
by a rating agency, the Fund will retain such security in its portfolio until
the Investment Manager determines that it is practicable to sell the security
without undue market or tax consequences to the Fund. In the event that such
downgraded securities constitute 5% or more of the Fund's net assets, the
Investment Manager will sell such securities as soon as is practicable, in
sufficient amounts to reduce the total to below 5%.
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 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
An increase in the percentage of the Fund's assets committed to the purchase
of securities on a when-issued, delayed delivery or forward commitment basis
may increase the volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. As with any extensions of
credit, there are risks of delay in recovery and in some cases even loss of
rights in the collateral should the borrower of the
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securities fail financially. However, loans of portfolio securities will only
be made to firms deemed by the Investment Manager to be creditworthy and when
the income which can be earned from such loans justifies the attendant risks.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on
the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as
to the liquidity of each restricted security purchased by the Fund. If a
restricted security is determined to be "liquid," such security will not be
included within the category "illiquid securities," which under current
policy may not exceed 15% of the Fund's net assets. The Fund's illiquidity
could increase if qualified institutional buyers become unavailable.
OPTIONS. The Fund also may purchase and sell (write) call and put options on
debt and equity securities which are listed on Exchanges or are written in
over-the-counter transactions ("OTC Options"). Listed options, which are
currently listed on several different Exchanges, are issued by the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the
Fund the right to buy from the OCC the underlying security covered by the
option at the stated exercise price (the price per unit of the underlying
security) by filing an exercise notice prior to the expiration date of the
option. The writer (seller) of the option would then have the obligation to
sell to the OCC the underlying security at that exercise price prior to the
expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security to the OCC at the stated exercise price. The Fund will
not write covered options on portfolio securities exceeding in the aggregate
25% of the value of its total assets.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Fund. With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the Fund and the transacting dealer,
without the intermediation of a third party such as the OCC. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options on
portfolio securities in order to aid it in achieving its investment
objective. As a writer of a call option, the Fund has the obligation, upon
notice of exercise of the option, to deliver the security underlying the
option (certain listed call options written by the Fund will be exercisable
by the purchaser only on a specific date). See "Options and Futures
Transactions--Covered Call Writing" in the Statement of Additional
Information.
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security underlying the option from the purchaser of
the put at the option's exercise price at any time during the option period.
The Fund will write put options for two purposes: (1) to receive the premiums
paid by purchasers; and (2) when the Investment Manager wishes to purchase
the security underlying the option at a price lower than its current market
price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought. See "Options and Futures
Transactions--Covered Put Writing" in the Statement of Additional
Information.
PURCHASING CALL AND PUT OPTIONS. The Fund may invest up to 5% of its total
assets in the purchase of put and call options on securities and stock
indexes. The Fund may purchase put options on securities which it holds (or
has the right to acquire) in its portfolio only to protect itself against a
decline in the value of the security. The Fund may also purchase put options
to close out written put positions in a manner similar to call option closing
purchase transactions. There are no other limits on the Fund's ability to
purchase call and put options.
STOCK INDEX OPTIONS. The Fund may purchase and write options on stock indexes
only for hedging purposes. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at
a specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level
of the stock index upon which the option is based is greater than, in
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the case of a call, or less than, in the case of a put, the exercise price of
the option. See "Stock Index Options" and "Risks of Options on Indexes" in
the Statement of Additional Information.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S.
commodity exchanges on such underlying securities as U.S. Treasury bonds,
notes, and bills and GNMA Certificates ("interest rate" futures) and such
indexes as the S&P 500 Index and the New York Stock Exchange Composite Index
("stock index" futures) and the Moody's Investment-Grade Corporate Bond Index
("bond index" futures). As a futures contract purchaser, the Fund incurs an
obligation to take delivery of a specified amount of the obligation
underlying the contract at a specified time in the future for a specified
price. As a seller of a futures contract, the Fund incurs an obligation to
deliver the specified amount of the underlying obligation at a specified time
in return for an agreed upon price. The Fund will purchase or sell interest
rate futures contracts and bond index futures contracts for the purpose of
hedging its fixed-income portfolio (or anticipated portfolio) securities
against changes in prevailing interest rates. The Fund will purchase or sell
stock index futures contracts for the purpose of hedging its equity portfolio
(or anticipated portfolio) securities against changes in their prices. See
"Options and Futures Transactions--Futures Contracts" in the Statement of
Additional Information.
The Fund also may purchase and write call and put options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase. While repurchase agreements
involve certain risks not associated with direct investments in debt
securities, the Fund follows procedures designed to minimize those risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continually monitored by the Investment Manager subject to
procedures established by the Board of Trustees of the Fund. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any
accrued interest earned on the repurchase agreement. In the event of a
default or bankruptcy by a selling financial institution, the Fund will seek
to liquidate such collateral. However, the exercising of the Fund's right to
liquidate such collateral could involve certain costs or delays and, to the
extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amounts to more than 15% of its
net assets.
FOREIGN SECURITIES. The Fund may invest up to 35% of the value of its total
assets, at the time of purchase, in equity securities, rights and warrants
issued by foreign issuers. Such investments may also be in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities of foreign issuers. These securities may not
necessarily be denominated in the same currency as the securities into which
they may be converted. ADRs are receipts typically issued by a United States
bank or trust company evidencing ownership of the underlying securities. EDRs
are European receipts evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the United States securities markets
and EDRs, in bearer form, are designed for use in European securities
markets. The Fund's investments in unlisted foreign securities are subject to
the Fund's overall policy limiting its investment in illiquid securities to
15% or less of its net assets. For a discussion of the risks of foreign
securities, see "Risk Considerations" below.
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"), a broker-dealer affiliate of InterCapital, the
views of Trustees of the Fund and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant. No particular emphasis is given to investments
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in securities for the purpose of earning current income. The Fund's portfolio
is managed within InterCapital's Small Capitalization Equities Group, which
manages eight equity funds and fund portfolios with approximately $2.2
billion in assets as of November 30, 1994. Anita H. Kolleeny, Senior Vice
President of InterCapital and Peter Hermann, Senior Equity Portfolio Manager,
each a member of InterCapital's Small Capitalization Equity Group, are the
primary portfolio co-managers of the Fund and have been since the Fund's
inception. Ms. Kolleeny has been a portfolio manager at InterCapital for over
five years. Prior to joining InterCapital in March 1994, Mr. Hermann was a
portfolio manager at The Bank of New York from August 1987 through 1994.
The Fund intends to buy and hold securities for capital appreciation.
Although the Fund does not intend to engage in substantial short-term trading
as a means of achieving its investment objective, it may sell portfolio
securities without regard to the length of time they have been held, in
accordance with the investment policies described earlier. Portfolio changes
will be effected whenever the Fund's Investment Manager believes they will
benefit the performance of the portfolio. As a result the Fund does expect to
engage in a substantial number of portfolio transactions. The Fund will incur
brokerage costs commensurate with its portfolio turnover rate. Short term
gains and losses may result from such portfolio transactions. See "Dividends,
Distributions and Taxes" for a discussion of the tax implications of the
Fund's trading policy. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
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.
RISK CONSIDERATIONS
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MID-CAP STOCKS. Investing in medium-sized market capitalization 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.
Often mid-size companies and the industries in which they are focused are
still evolving and while this may offer better growth potential than larger,
established companies, it also may make them more sensitive to changing
market conditions. Because prices of stocks, including mid-cap stocks,
fluctuate from day to day, the value of an investment in the Fund will vary
based upon the Fund's investment performance.
FOREIGN SECURITIES. The Fund may invest up to 35% of its total assets in
equity securities of non-U.S. companies, including American or other
Depository Receipts, rights, warrants and the direct purchase of foreign
securities. While investments in foreign securities are intended to reduce
risk by providing further diversification, such investments involve risks
relating to local foreign political or economic developments, potential
nationalization, withholding taxes on dividend or interest payments, and
limitations on the use or transfer of Fund assets and any effects of foreign
social, economic or political instability. 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. Costs may be incurred in connection with conversions between various
currencies held by the Fund. Foreign companies may have less public or less
reliable information available about them and may be subject to less
governmental regulation than U.S. companies. Securities of foreign companies
may be less liquid and more volatile than securities of U.S. companies.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position as
writer of an option, or as a buyer or seller of a futures contract only if a
liquid secondary market exists for options or futures contracts of that
series. There is no assurance that such a market will exist. Also, exchanges
may limit the amount by which the price of many futures contracts may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit
moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such. See "Dividends, Distributions and
Taxes."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the Investment Manager could be incorrect
in its expectations as to the direction or extent of various interest rate or
price movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts
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for the sale of securities in anticipation of an increase in interest rates,
and then interest rates went down, causing bond prices to rise, the Fund
would incur a loss on the sale. Another risk which may arise in employing
futures contracts to protect against the price volatility of portfolio
securities is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities. See
the Statement of Additional Information for a further discussion of risks.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any
such futures, options or products as may be developed, to the extent
consistent with its investment objective and applicable regulatory
requirements.
For additional risk disclosure, please refer to the "Portfolio
Characteristics" section of the Prospectus and to the "Investment Practices
and Policies" section of the Statement of Additional Information.
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.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the securities
of any one issuer (other than obligations issued, or guaranteed by, the United
States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities.
4. 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
of the United States Government, its agencies or instrumentalities.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into selected dealer agreements with
the Distributor ("Selected Broker-Dealers"). The principal executive office
of the Distributor is located at Two World Trade Center, New York, New York
10048.
The 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 various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.
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 Mid-Cap
Growth 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.
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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. For the
period September 29, 1994 (commencement of the Fund's operations) through
November 30, 1994, the Fund accrued payments under the Plan amounting to
$134,731, which amount is equal to 1.0%, on an annualized basis, of the
Fund's average daily net assets for the period. These payments accrued under
the Plan were calculated pursuant to clause (b) of the compensation formula
under the Plan.
At any given time, the expenses in distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan, and (ii) the proceeds of contingent deferred sales charges paid by
investors upon the redemption of shares (see "Redemption and
Repurchases--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing shares of the Fund had been incurred and $750,000
had been received as described in (i) and (ii) above, the excess expense
would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above, totalled
$4,497,522 at November 30, 1994, which was equal to 5.38% of the Fund's net
assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, 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 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); (2)
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an option is valued at the mean between the latest bid and asked prices; (3)
a futures contract is valued at the latest sales price on the commodities
exchange on which it trades unless the Board determines that such price does
not reflect its market value, in which case it will be valued at its fair
value as determined by the Board of Trustees; (4) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest bid price; (5) when market quotations are not
readily available, including circumstances under which it is determined by
the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Fund's Trustees (valuation of debt 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); (6) the value
of short-term debt securities which mature at a date less than sixty days
subsequent to valuation date will be determined on an amortized cost or
amortized value basis; and (7) the value of other assets will be determined
in good faith at fair value under procedures established by and under the
general supervision of the Fund's Trustees. For valuation purposes,
quotations of foreign portfolio securities, other assets and liabilities and
forward contracts stated in foreign currency are translated into U.S. dollar
equivalents at the prevailing market rates prior to the close of the New York
Stock Exchange. 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. Interest income is accrued daily except when collection is uncertain.
Certain securities in the Fund's portfolio 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.
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 (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash. Shares so acquired are not
subject to the imposition of a contingent deferred sales charge upon their
redemption (see "Redemptions and Repurchases").
INVESTMENT OF DIVIDENDS OR 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 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 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.
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.
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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.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege" allowing
the exchange of shares of the Fund for shares of other Dean Witter Funds sold
with a contingent deferred sales charge ("CDSC funds"), and for shares of
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term
Municipal Trust, Dean Witter Short-Term Bond Fund and five Dean Witter Funds
which are money market funds (the foregoing eight non-CDSC funds are
hereinafter collectively referred to in this section as the "Exchange
Funds.") Exchanges may be made after the shares of the Fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange
or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share
of each fund after the exchange order is received. When exchanging into a
money market fund from the Fund, shares of the Fund are redeemed out of the
Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following 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 invested in shares of an
Exchange Fund (calculated from the last day of the month in which the shares
were acquired) the holding period (for the purpose of determining the rate of
the contingent deferred sales charge) 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 shares of a CDSC fund (see "Redemptions and
Repurchases--Contingent Deferred Sales Charge"). However, in the case of
shares exchanged for shares of an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to
the Exchange Fund 12b-1 distribution fees, if any, incurred on or after that
date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for
shares of other Dean Witter Funds for which shares of a front-end sales
charge fund have been exchanged) are not subject to any CDSC upon their
redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange.
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 (presently sixty days' prior written notice for termination or
material revision), provided that six months' prior written notice of
termination will be given to shareholders who hold shares of an Exchange Fund
pursuant to the 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
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executive regarding restrictions on exchange of shares of the Fund pledged in
the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. 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 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 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 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 case
with 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.
REDEMPTIONS AND REPURCHASES
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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 sent to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along
with any additional documentation required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund 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"), and it will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The size of this percentage will depend upon how long the shares
have been held, as set forth in the table on the following page:
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<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SALES CHARGE AS A
YEAR SINCE PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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 asset value of
shares purchased through reinvestment of dividends or distributions and/or
shares acquired in exchange for shares of Dean Witter Funds sold with a
front-end sales charge or of other Dean Witter Funds acquired in exchange for
such shares. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order)
are redeemed first. In addition, no CDSC will be imposed on redemptions of
shares which were purchased by the employee benefit plans established by DWR
and SPS Transaction Services, Inc. (an affiliate of DWR) for their employees
as qualified under Section 401(k) of the Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of (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 or telegraphic request of the shareholder. The repurchase
price is the net asset value per share next determined (see "Purchase of Fund
Shares") after such purchase 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 upon repurchase by the
Fund, the Distributor, DWR or other Selected Broker-Dealer. The offer by DWR
and other Selected Broker-Dealers to repurchase shares may be suspended
without notice by them at any time. In that event, shareholders may redeem
their shares through the Fund's Transfer Agent as set forth above under
"Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. If the shares to be redeemed have
recently been purchased by check, payment of the redemption proceeds may be
delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or another Selected Dealer are referred to their account
executive regarding restrictions on redemption of shares of the Fund pledged
in the margin account.
<PAGE>
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed
or repurchased and has not previously exercised this reinstatement privilege
may, within thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, upon sixty
days' notice and at net asset value, the shares of any shareholder whose
shares have a value of less than $100 as a result of redemptions or
repurchases,
15
<PAGE>
<PAGE>
or such lesser amount as may be fixed by the Board of 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 the shareholder sixty days to make an additional
investment in an amount which will increase the value of the account to $100
or more before the redemption is processed. No CDSC will be imposed on any
involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay dividends at least
annually and to distribute substantially all of the Fund's net investment
income and net short-term capital gains, if there are any. The Fund intends
to distribute dividends from net long-term capital gains, if any, at least
once each year. The Fund may, however, determine either to distribute or to
retain all or part of any long-term capital gains in any year for
reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends 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 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. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income or 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.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in the
writing of options on securities held for less than three months, in the
writing of options which expire in less than three months, and in effecting
closing transactions with respect to call or put options which have been
written or purchased less than three months prior to such transactions. The
Fund may also be restricted in its ability to engage in transactions
involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
At the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
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 their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. 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 a period of one year as well as over
the life of the Fund, if less than any of the foregoing. Average annual total
return reflects all income earned by the Fund, any appreciation or
depreciation of the Fund's assets, all expenses incurred by the Fund and all
sales charges which would be incurred by redeeming shareholders, for the
stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
16
<PAGE>
<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. 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., the S&P Mid-Cap Index, NASDAQ Composite, Russell
Mid Cap Index, S&P 500 Index and the Wilshire Mid Cap Index).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges. There
are no conversion, pre-emptive or other subscription rights. In the event of
a liquidation, each share of beneficial interest of the Fund is entitled to
its portion of all the Fund's assets after all debts and expenses have been
paid. The shares do not have cumulative voting rights.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain limited circumstances, be held personally liable as partners for the
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 notice of such Fund obligations include such disclaimer,
and provides for indemnification 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, in
the opinion of Massachusetts counsel to the Fund, the risk to Fund
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.
17
<PAGE>
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Portfolio of Investments November 30, 1994 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------- -------------
<C> <S> <C>
COMMON STOCKS (61.6%)
BIOTECHNOLOGY (0.2%)
5,000 Biogen, Inc.* ................................... $ 193,750
-------------
COMMUNICATION -EQUIPMENT & SOFTWARE (6.0%)
20,000 3COM Corp.* ..................................... 865,000
5,000 Cascade Communications Corp.* ................... 272,500
40,000 Cisco Systems, Inc.* ............................ 1,290,000
27,000 DSC Communications Corp.* ....................... 840,375
30,000 General Instrument Corp.* ....................... 900,000
15,000 Glenayre Technologies, Inc.* .................... 810,000
2,500 Shiva Corp.* .................................... 76,875
-------------
5,054,750
-------------
COMPUTER SOFTWARE (3.9%)
9,000 Compuware* ...................................... 330,750
12,500 Epic Design Technology, Inc.* ................... 262,500
23,000 Informix Corp.* ................................. 658,375
15,000 Intuit, Inc.* ................................... 1,038,750
5,300 Peoplesoft, Inc.* ............................... 333,900
34,000 Symantec Corp.* ................................. 624,750
-------------
3,249,025
-------------
CONSUMER BUSINESS SERVICES (4.5%)
15,000 Ceridian Corp.* ................................. 375,000
25,000 Computer Sciences Corp.* ........................ 1,153,125
20,000 First Financial Management Corp. ................ 1,177,500
20,000 Omnicom Group, Inc. ............................. 1,042,500
-------------
3,748,125
-------------
ELECTRICAL EQUIPMENT (1.0%)
25,000 Molex, Inc. ..................................... 825,000
-------------
ELECTRONIC COMPONENTS (1.4%)
50,000 EMC Corp.* ...................................... 1,125,000
-------------
ELECTRONICS -SEMICONDUCTORS (4.1%)
20,000 Altera Corp.* ................................... 765,000
25,000 LSI Logic Corp.* ................................ 1,068,750
30,000 Microchip Technology, Inc.* ..................... 885,000
18,000 Micron Technology, Inc. ......................... 747,000
-------------
3,465,750
-------------
ELECTRONICS -SPECIALTY (2.6%)
30,000 Analog Devices, Inc.* ........................... 993,750
5,000 Maxim Integrated Products, Inc.* ................ 308,750
15,000 Xilinx, Inc.* ................................... 877,500
-------------
2,180,000
-------------
ENERGY (2.6%)
30,000 Apache Corp. .................................... 840,000
20,000 Norsk Hydro A.S. (ADR) .......................... 762,500
15,000 Tosco Corp. ..................................... 442,500
8,500 USX Marathon Group .............................. 153,000
-------------
2,198,000
-------------
ENTERTAINMENT (3.8%)
28,000 Broderbund Software, Inc.* ...................... 1,001,000
19,000 Carnival Corp (Class A) ......................... 821,750
26,000 Hollywood Entertainment Corp.* .................. 858,000
2,500 National Gaming Corp.* .......................... 41,875
15,000 Royal Caribbean Cruises, Ltd. ................... 412,500
-------------
3,135,125
-------------
<PAGE>
EQUIPMENT (1.4%)
16,000 KLA Instruments Corp.* .......................... 788,000
10,000 LAM Research Corp.* ............................. 422,500
-------------
1,210,500
-------------
FINANCIAL -MISCELLANEOUS (1.7%)
30,000 Green Tree Financial Corp. ...................... 828,750
25,000 MBNA Corp. ...................................... 590,625
-------------
1,419,375
-------------
FOOD & BEVERAGES (3.5%)
31,000 ConAgra, Inc. ................................... 957,125
45,000 George A. Hormel & Co. .......................... 1,119,375
40,000 Ralcorp Holdings, Inc.* ......................... 815,000
-------------
2,891,500
-------------
</TABLE>
18
<PAGE>
<PAGE>
<TABLE>
DEAN WITTER MID-CAP GROWTH FUND
Portfolio of Investments November 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
SHARES VALUE
- -------- -------------
<C> <S> <C>
GAMING (0.6%)
20,000 Primadonna Resorts, Inc.* ....................... $ 502,500
-------------
HEALTHCARE PRODUCTS & SERVICES (6.9%)
20,000 Allergan, Inc. .................................. 602,500
35,000 Genesis Health Ventures, Inc.* .................. 988,750
19,000 Health Care & Retirement Corp.* ................. 520,125
18,000 Healthsource, Inc.* ............................. 645,750
27,000 Healthsouth Rehabilitation Corp.* ............... 941,625
17,000 Horizon Healthcare Corp.* ....................... 452,625
36,000 Humana, Inc.* ................................... 805,500
20,000 Omnicare, Inc. .................................. 832,500
-------------
5,789,375
-------------
HOTELS / MOTELS (1.8%)
25,000 Hospitality Franchise Systems, Inc.* ............ 612,500
22,500 La Quinta Inns, Inc. ............................ 478,125
50,000 Prime Hospitality Corp.* ........................ 375,000
-------------
1,465,625
-------------
HOUSEHOLD PRODUCTS (2.6%)
6,000 Clorox, Co. ..................................... 349,500
20,000 Duracell International, Inc. .................... 900,000
37,000 Sunbeam-Oster Company, Inc. ..................... 897,250
-------------
2,146,750
-------------
MEDIA GROUP (1.3%)
50,000 Comcast Corp (Class A) .......................... 781,250
25,000 Heftel Broadcasting Corp (A Shares)* ............ 331,250
-------------
1,112,500
-------------
MEDICAL SUPPLIES (1.7%)
19,000 Medtronic, Inc. ................................. 1,007,000
15,000 Ventritex, Inc.* ................................ 382,500
-------------
1,389,500
-------------
METALS (0.1%)
3,000 Alcan Aluminium, Ltd. (ADR) ..................... 74,250
-------------
RESTAURANTS (0.5%)
16,000 Papa John's International, Inc.* ................ 456,000
-------------
RETAIL (1.0%)
23,000 Lowe's Cos, Inc. ................................ 859,625
-------------
RETAIL -SPECIALTY (4.3%)
15,000 Best Buy Co., Inc.* ............................. 661,875
20,000 Callaway Golf Co. ............................... 700,000
8,000 Gymboree Corp.* ................................. 244,000
35,000 OfficeMax, Inc.* ................................ 861,875
27,000 Safeway, Inc.* .................................. 823,500
15,000 Staples, Inc.* .................................. 326,250
-------------
3,617,500
-------------
SEMICONDUCTOR CAPITAL EQUIPMENT (0.5%)
10,000 Ultratech Stepper, Inc.* ........................ 385,000
-------------
TELECOMMUNICATIONS (0.8%)
25,000 ALLTEL Corp. .................................... 703,125
-------------
UTILITIES (2.8%)
40,000 Public Service of Colorado ...................... 1,140,000
45,000 Wisconsin Energy Corp. .......................... 1,170,000
-------------
2,310,000
-------------
TOTAL COMMON STOCKS (IDENTIFIED COST
$51,237,390) .................................... 51,507,650
-------------
</TABLE>
19
<PAGE>
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Portfolio of Investments November 30, 1994 (unaudited) (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT OBLIGATION (3.4%)
$3,000 U.S. Treasury Bond (Identified Cost $2,830,702) .......... 7.50 % 11/15/24 $ 2,826,094
------------
SHORT-TERM INVESTMENTS (36.4%)
U.S GOVERNMENT AGENCIES (a) (32.8%) .......................
17,515 Federal Home Loan Mortgage Corp. .......................... 5.65 12/ 1/94 17,515,000
10,000 Federal National Mortgage Association ..................... 5.05 12/30/94 9,959,319
------------
TOTAL U.S. GOVERNMENT AGENCIES
(Amortized Cost $27,474,319) .......................... 27,474,319
------------
REPURCHASE AGREEMENT (3.6%)
The Bank of New York (dated 11/30/94; proceeds $3,012,049;
collateralized by $1,366,849 Federal National Mortgage
Association 9.35% due 2/12/96 valued at $1,436,738 and
$1,640,062 U.S. Treasury Bill 5.031% due 12/22/94 valued
3,012 at $1,635,088) (Identified Cost $3,011,594) ............... 5.438 12/ 1/94 3,011,594
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $30,485,913) ........................ 30,485,913
------------
TOTAL INVESTMENTS (Identified Cost $84,554,005) (b) ....... 101.4% 84,819,657
LIABILITIES IN EXCESS OF OTHER ASSETS ..................... (1.4) (1,159,898)
-------- -------------
NET ASSETS ................................................ 100.0% $83,659,759
======== =============
<FN>
- ---------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The rates shown have
been adjusted to reflect a bond equivalent yield.
(b) The aggregate cost for federal income tax purposes is $84,554,005; the
aggregate gross unrealized appreciation is $1,663,944 and the aggregate
gross unrealized depreciation is $1,398,292, resulting in net
unrealized appreciation of $265,652.
</TABLE>
See Notes to Financial Statements
20
<PAGE>
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Financial Statements (unaudited)
- -----------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1994
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $84,554,005) (Note 1) .................... $84,819,657
Receivable for:
Investments sold ............................. 2,601,130
Shares of beneficial interest sold ........... 571,879
Dividends .................................... 29,739
Interest ..................................... 10,400
Deferred organizational expenses (Note 1) .... 173,888
Prepaid expenses and other assets ............ 2,414
-------------
Total Assets ................................ 88,209,107
-------------
LIABILITIES:
Payable for:
Investments purchased ........................ 4,175,672
Plan of distribution fee (Note 3) ............ 67,762
Investment management fee (Note 2) ........... 50,822
Shares of beneficial interest repurchased .... 21,645
Accrued expenses and other payables (Note 4) . 53,447
Organizational expenses payable (Note 1) ..... 180,000
-------------
Total Liabilities ........................... 4,549,348
-------------
NET ASSETS:
Paid-in-capital ................................ 84,166,266
Unrealized appreciation on investments ........ 265,652
Undistributed net investment income ............ 130,795
Net realized loss on investments ............... (902,954)
-------------
Net Assets ................................... $83,659,759
=============
Net Asset Value Per Share, 8,413,820
shares outstanding (unlimited shares
authorized of $.01 par value) ................. $ 9.94
=============
<CAPTION>
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the period
September 29, 1994 through November 30, 1994 (Note 1)
- -----------------------------------------------------------------------------
<S> <C>
INVESTMENT INCOME:
Income
Interest ................................ $ 363,505
Dividends (net of $769 foreign
withholding tax) ....................... 75,839
-----------
Total Income ........................... 439,344
-----------
Expenses
Plan of distribution fee (Note 3) ...... 134,731
Investment management fee (Note 2) ..... 101,048
Transfer agent fees and expenses (Note 4) 24,460
Professional fees ....................... 19,430
Registration fees ....................... 10,006
Custodian fees .......................... 6,370
Organizational expenses (Note 1) ....... 6,112
Trustees' fees and expenses ............. 3,329
Shareholder reports and notices ........ 3,063
-----------
Total Expenses ......................... 308,549
-----------
Net Investment Income ................. 130,795
-----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS (Note 1):
Net realized loss on investments ....... (902,954)
Unrealized appreciation on investments . 265,652
-----------
Net Loss on Investments ................ (637,302)
-----------
Net Decrease in Net Assets
Resulting from Operations ............ $(506,507)
===========
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1994 THROUGH
NOVEMBER 30, 1994 (NOTE 1)
-------------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ................................................... $ 130,795
Net realized loss on investments ........................................ (902,954)
Unrealized appreciation on investments .................................. 265,652
------------
Net decrease in net assets resulting from operations ................... (506,507)
Net increase from transactions in shares of beneficial interest (Note 5) 84,066,266
------------
Total increase ......................................................... 83,559,759
NET ASSETS:
Beginning of period ...................................................... 100,000
------------
End of period (including undistributed net investment income of $130,795) $83,659,759
============
</TABLE>
See Notes to Financial Statements
21
<PAGE>
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Notes to Financial Statements (unaudited)
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--Dean Witter Mid-Cap Growth Fund (the
"Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, open-end management investment company. The
Fund was organized as a Massachusetts business trust on May 25, 1994 and
commenced operations on September 29, 1994. On July 12, 1994, the Fund issued
10,000 shares of beneficial interest to Dean Witter InterCapital Inc. (the
"Investment Manager") for $100,000 to effect the Fund's initial
capitalization.
The following is a summary of significant accounting policies:
A. Valuation of Investments--(1) an equity security listed or traded on the
New York or American Stock Exchange or other domestic or foreign stock
exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where securities are traded on more
than one exchange, the security is valued on the exchange designated as the
primary market by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it
is determined by the Investment Manager that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt
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); (4)
certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the securities valued by such
pricing service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term securities having a maturity date of
sixty days or less at the time of purchase are valued at amortized cost.
B. Accounting for Investments--Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined on the identified cost method.
Dividend income is recorded on the ex-dividend date except with respect to
certain dividends on foreign securities which are recorded as soon as the
Fund is informed after the ex-dividend date. Interest income is accrued daily
and includes amortization of discounts for certain short-term securities.
C. Federal Income Tax Status--It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders--The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. Organizational Expenses--The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $180,000 which will be
reimbursed for the full amount. Such expenses have been deferred and are
being amortized by the Fund on the straight-line method over a period not to
exceed five years from the commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT--Pursuant to an Investment Management
Agreement, the Fund pays its Investment Manager a management fee, accrued
daily and payable monthly, by applying the annual rate of 0.75% to the net
assets of the Fund determined as of the close of each business day.
22
<PAGE>
<PAGE>
DEAN WITTER MID-CAP GROWTH FUND
Notes to Financial Statements (unaudited) (continued)
- -----------------------------------------------------------------------------
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. PLAN OF DISTRIBUTION--Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the Act pursuant to which the Fund pays the Distributor
compensation, accrued daily and payable monthly, at an annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
shares since the Fund's inception (not including reinvestment 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 upon which such charge
has been waived; or (b) the Fund's average daily net assets. Amounts paid
under the Plan are paid to the Distributor to compensate it for the services
provided and the expenses borne by it and others in the distribution of the
Fund's shares, including the payment of commissions for sales of the Fund's
shares and incentive compensation to and expenses of account executives of
Dean Witter Reynolds Inc., an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the Fund's
shares or who service shareholder accounts, including overhead and telephone
expenses, printing and distribution of prospectuses and reports used in
connection with offering of the Fund's shares to other than current
shareholders and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may be compensated
under the Plan for its opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the period ended November
30, 1994, it received approximately $9,800 in contingent deferred sales
charges from certain redemptions of the Fund's shares. The Fund's
shareholders pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES--The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended November 30, 1994 aggregated
$75,004,330 and $20,032,118, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $5,194,922 and
$2,351,953, respectively.
For the period ended November 30, 1994, the Fund incurred brokerage
commissions of $27,910 with Dean Witter Reynolds Inc. for portfolio
transactions executed on behalf of the Fund. Included in the Fund's payable
for investment purchased is $849,000 for unsettled trades with Dean Witter
Reynolds, Inc.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At November 30, 1994, the Fund had
transfer agent fees and expenses payable of approximately $15,000.
5. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD SEPTEMBER
29, 1994* THROUGH NOVEMBER
30, 1994
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold .......... 8,636,004 $86,393,226
Repurchased ... (232,184) (2,326,960)
----------- -------------
Net increase .. 8,403,820 $84,066,266
=========== =============
<FN>
- ---------------
*Commencement of operations.
</TABLE>
6. FINANCIAL HIGHLIGHTS--See the "Financial Highlights" table on page 4 of
this Prospectus.
23
<PAGE>
<PAGE>
DEAN WITTER
MID-CAP GROWTH FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Anita H. Kolleeny
Vice President
Peter Hermann
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
