<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998
REGISTRATION NOS.: 33-56239
811-07233
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
---------------
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
---------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
---------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
immediately upon filing pursuant to paragraph (b)
- ------
X on March 2, 1998 pursuant to paragraph (b)
- ------
60 days after filing pursuant to paragraph (a)
- ------
on pursuant to paragraph (a) of rule 485
- ------
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
CROSS-REFERENCE SHEET
FORM N-1A
ITEM CAPTION
- ---- -------
PART A PROSPECTUS
- ------ ----------
1. ..... Cover Page
2. ..... Summary of Fund Expenses; Prospectus Summary
3. ..... Performance Information; Financial Highlights
4. ..... Investment Objective and Policies; Risk
Considerations; The Fund and its Management; Cover
Page; Investment Restrictions; Prospectus Summary;
Appendix
5. ..... The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. ..... Dividends, Distributions and Taxes; Additional
Information
7. ..... Purchase of Fund Shares; Shareholder Services;
Redemptions and Repurchases
8. ..... Purchase of Fund Shares; Redemptions and
Repurchases; Shareholder Services
9. ..... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
- ------ -----------------------------------
10. ..... Cover Page
11. ..... Table of Contents
12. ..... The Fund and Its Management
13. ..... Investment Practices and Policies; Risk Considerations;
Investment Restrictions; Portfolio Transactions and
Brokerage
14. ..... The Fund and Its Management; Trustees and Officers
15. ..... Trustees and Officers
16. ..... The Fund and Its Management; Purchase of Fund Shares;
Custodian and Transfer Agent; Independent Accountants
17. ..... Portfolio Transactions and Brokerage
18. ..... Description of Shares
19. ..... Repurchase of Fund Shares; Purchase of Fund Shares;
Redemptions and Repurchases; Statements of Assets and
Liabilities; Shareholder Services
20. ..... Dividends, Distributions and Taxes
21. ..... Purchase of Fund Shares
22. ..... Dividends, Distributions and Taxes
23. ..... Performance Information
PART C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
MARCH 2, 1998
Dean Witter Global Asset Allocation Fund (the "Fund") is an open-end,
diversified management investment company whose investment objective is to seek
long-term total return on its investments. The Fund seeks to meet its
investment objective by allocating its assets among U.S. and foreign equities,
fixed-income and adjustable rate securities ("fixed-income securities") and
money market instruments. (See "Investment Objectives and Policies.")
The Fund offers four classes of shares (each, a "Class"), each with a
different combination of sales charges, ongoing fees and other features. The
different distribution arrangements permit an investor to choose the method of
purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund Shares--
Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you should know
before investing in the Fund. It should be read and retained for future
reference. Additional information about the Fund is contained in the Statement
of Additional Information, dated March 2, 1998, 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 .............................................. 4
Financial Highlights .................................................. 6
The Fund and its Management ........................................... 9
Investment Objective and Policies ..................................... 10
Risk Considerations ................................................... 11
Investment Restrictions ............................................... 19
Purchase of Fund Shares ............................................... 19
Shareholder Services .................................................. 31
Redemptions and Repurchases ........................................... 34
Dividends, Distributions and Taxes .................................... 35
Performance Information ............................................... 36
Additional Information ................................................ 36
Appendix .............................................................. 38
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Dean Witter
Global Asset Allocation Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
DEAN WITTER DISTRIBUTORS INC.,
DISTRIBUTOR
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund diversified management investment company. The Fund allocates its assets among U.S. and foreign equities,
income securities and money market instruments.
- -----------------------------------------------------------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page 36). The Fund offers four Classes of shares,
Offered each with a different combination of sales charges, ongoing fees and other features (see pages 19-30).
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through EasyInvest
Purchase (Service Mark) ). Class D shares are only available to persons investing $5 million ($25 million for certain
qualified plans) or more and to certain other limited categories of investors. For the purpose of meeting
the minimum $5 million (or $25 million) investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Fund, an investor's existing holdings of Class A shares and shares
of funds for which Dean Witter InterCapital Inc. serves as investment manager ("Dean Witter Funds") that
are sold with a front-end sales charge, and concurrent investments in Class D shares of the Fund and other
Dean Witter Funds that are multiple class funds, will be aggregated. The minimum subsequent investment is
$100 (see page 19).
- -----------------------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to seek long-term total return on its investments
Objective (see page 10).
- -----------------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager and subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management
Sub-Adviser and administrative capacities to 103 investment companies and other portfolios with net assets under management
of approximately $105 billion at November 30, 1997. InterCapital has retained Morgan Grenfell Investment
Services Ltd. ("MGIS") as Sub-Adviser to provide investment advice and manage the Fund's investments outside
of the Western Hemisphere. MGIS currently serves as investment adviser for primarily U.S. corporate and
public employee benefit plans, investment companies, endowments and foundations with assets of approximately
$17.3 billion at December 31, 1997 (see page 9).
- -----------------------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 1.0% of the Fund's average daily net
Fee assets. The Sub-Adviser receives a monthly fee from InterCapital equal to 30% of InterCapital's investment
management fee (see page 9).
- -----------------------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant to
and Rule 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid
Distribution by the Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee payable
Fee by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C equal to 0.25% of the average
daily net assets of the Class are currently each characterized as a service fee within the meaning of the
National Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if
any, is characterized as an asset-based sales charge (see pages 19 and 28).
- -----------------------------------------------------------------------------------------------------------------------------------
Alternative Four classes of shares are offered:
Purchase
Arrangements o Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger purchases.
Investments of $1 million or more (and investments by certain other limited categories of investors) are
not subject to any sales charge at the time of purchase but a contingent deferred sales charge ("CDSC")
of 1.0% may be imposed on redemptions within one year of purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's Class A shares and
servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an
amount equal to payments at an annual rate of 0.25% of average daily net assets of the Class (see pages
19, 23 and 28).
- -----------------------------------------------------------------------------------------------------------------------------------
2
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
o Class B shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate current value of a Class B
account with the Fund falls below the aggregate amount of the investor's purchase payments made during
the six years preceding the redemption. A different CDSC schedule applies to investments by certain
qualified plans. Class B shares are also subject to a 12b-1 fee assessed at the annual rate of 1.0% of
the lesser of: (a) the average daily net sales of the Fund's Class B shares or (b) the average daily net
assets of Class B. All shares of the Fund held prior to July 28, 1997 have been designated Class B
shares. Shares held before May 1, 1997 will convert to Class A shares in May, 2007. In all other
instances, Class B shares convert to Class A shares approximately ten years after the date of the
original purchase (see pages 19, 25 and 28).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject to a
CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the
Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C shares
and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event
exceed an amount equal to payments at an annual rate of 1.0% of average daily net assets of the Class
(see pages 19, 27 and 28).
o Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25
million for certain qualified plans) and to certain other limited categories of investors. Class D
shares are offered without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see
pages 19 and 28).
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains, if any, are paid at least
Capital Gains annually. The Fund may, however, determine to retain all or part of any net long-term capital gains in
Distributions any year for reinvestment. Dividends and capital gains distributions paid on shares of a Class are
automatically reinvested in additional shares of the same Class at net asset value unless the
shareholder elects to receive cash. Shares acquired by dividend and distribution reinvestment will not
be subject to any sales charge or CDSC (see pages 31 and 35).
- -----------------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B
or Class C shares. An account may be involuntarily redeemed if the total value of the account is less
than $100 or, if the account was opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $1,000 in the account (see page 34).
- -----------------------------------------------------------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with changes in market value of portfolio
Considerations securities. It should be recognized that the foreign securities and markets in which the Fund may invest
pose different and greater risks than those customarily associated with domestic securities and their
markets. The Fund may engage in various investment practices which present special risks, including
investments in forward foreign currency exchange contracts, lower-rated fixed-income securities,
convertible securities, adjustable rate mortgages, options and futures, investment companies, rights and
warrants, repurchase agreements, when-issued and delayed delivery securities and forward commitments,
when, as and if issued securities, reverse repurchase agreements and dollar rolls and private placements
(see pages 11-18).
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions; Investment of Distributions Received in Cash;
Services Systematic Withdrawal Plan; Exchange Privilege; EasyInvest (Service Mark), Tax-Sheltered Retirement
Plans (see pages 31-33).
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are based
on the expenses and fees for the fiscal year ended January 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- --------------------------------
Maximum Sales Charge Imposed on Purchases (as a
percentage of offering price) ..................... 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments .... None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or
redemption proceeds)............................... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees..................................... None None None None
Exchange Fee........................................ None None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management Fees .................................... 1.00% 1.00% 1.00% 1.00%
12b-1 Fees (5)(6)................................... 0.25% 0.94% 1.00% None
Other Expenses ..................................... 0.71% 0.71% 0.71% 0.71%
Total Fund Operating Expenses (7)................... 1.96% 2.65% 2.71% 1.71%
</TABLE>
- ------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Class A and a portion of the 12b-1 fee payable by each
of Class B and Class C equal to 0.25% of the average daily net assets
of the Class are currently each characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc.
("NASD") guidelines and are payments made for personal service and/or
maintenance of shareholder accounts. The remainder of the 12b-1 fee, if
any, is an asset-based sales charge, and is a distribution fee paid to
the Distributor to compensate it for the services provided and the
expenses borne by the Distributor and others in the distribution of the
Fund's shares (see "Purchase of Fund Shares--Plan of Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will
be subject to the lower 12b-1 fee applicable to Class A shares. No
sales charge is imposed at the time of conversion of Class B shares to
Class A shares. Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing 1.00% distribution fee (see
"Purchase of Fund Shares--Alternative Purchase Arrangements").
(7) There were no outstanding shares of Class A, Class C or Class D prior
to July 28, 1997. Accordingly, "Total Fund Operating Expenses," as
shown above with respect to those Classes, are estimates based upon the
sum of 12b-1 Fees, Management Fees and estimated "Other Expenses."
4
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
Class A ...................................................... $71 $111 $153 $269
Class B ...................................................... $77 $112 $161 $298
Class C....................................................... $37 $ 84 $143 $304
Class D ...................................................... $17 $ 54 $ 93 $202
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A ...................................................... $71 $111 $153 $269
Class B ...................................................... $27 $ 82 $141 $298
Class C ...................................................... $27 $ 84 $143 $304
Class D ...................................................... $17 $ 54 $ 93 $202
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of
Distribution" and "Redemptions and Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED FOR THE YEAR FEBRUARY 28, 1995*
JANUARY 31, ENDED THROUGH
1998**++ JANUARY 31, 1997 JANUARY 31, 1996
- --------------------------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $11.84 $11.79 $10.00
------------------- ---------------- ------------------
Net investment income (loss)............ 0.03 (0.01) 0.17
Net realized and unrealized gain ...... 0.35 0.55 2.20
------------------- ---------------- ------------------
Total from investment operations ....... 0.38 0.54 2.37
------------------- ---------------- ------------------
Less dividends and distributions:
Net investment income.................. (0.03) (0.11) (0.34)
Net realized gain...................... (0.73) (0.38) (0.24)
------------------- ---------------- ------------------
Total dividends and distributions ...... (0.76) (0.49) (0.58)
------------------- ---------------- ------------------
Net asset value, end of period.......... $11.46 $11.84 $11.79
=================== ================ ==================
TOTAL INVESTMENT RETURN+................ 3.29% 4.58% 23.89%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 2.65% 2.53% 1.14%(2)(3)
Net investment income................... 0.25% 0.11% 1.71%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $52,374 $65,314 $44,271
Portfolio turnover rate................. 94% 63% 71%(1)
Average commission rate paid............ $0.0153 $0.0013 --
</TABLE>
- ------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B
shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not reimbursed all expenses, the above
annualized expense and net investment loss ratios would have been 2.87%
and (0.02)%, respectively.
6
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ----------------------------------------- -----------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 13.09
-----------------
Net investment income .................... 0.05
Net realized and unrealized gain ........ (0.91)
-----------------
Total from investment operations ........ (0.86)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ........... $ 11.50
=================
TOTAL INVESTMENT RETURN+ (6.39)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 2.02%(2)
Net investment income .................... 0.79%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $ 27
Portfolio turnover rate .................. 94%
Average commission rate paid ............. $ 0.0153
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 13.09
-----------------
Net realized and unrealized gain ........ (0.91)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ........... $ 11.45
=================
TOTAL INVESTMENT RETURN+.................. (6.79)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 2.79%(2)
Net investment income .................... 0.07%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $ 53
Portfolio turnover rate .................. 94%
Average commission rate paid ............. $ 0.0153
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
7
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ----------------------------------------- -----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 13.09
-----------------
Net investment income .................... 0.07
Net realized and unrealized gain ........ (0.92)
-----------------
Total from investment operations ........ (0.85)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ........... $ 11.51
=================
TOTAL INVESTMENT RETURN+ ................. (6.32)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 1.80%(2)
Net investment income .................... 1.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $ 17
Portfolio turnover rate .................. 94%
Average commission rate paid ............. $ 0.0153
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
8
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
Dean Witter Global Asset Allocation 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 October 18, 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 Morgan Stanley,
Dean Witter, Discover & Co. ("MSDWD"), a preeminent global financial services
firm that maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 103 investment companies (the "Dean Witter
Funds"), twenty-nine of which are listed on the New York Stock Exchange, with
combined assets of approximately $101 billion at January 31, 1998. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $4 billion at
such date.
The Fund has retained the Investment Manager to manage its business
affairs and manage the investment of the Fund's U.S. assets, including the
placing of orders for the purchase and sale of portfolio securities, and to
supervise the investment of all the Fund's assets. In addition, the Fund has
retained InterCapital to provide it with administrative services and
InterCapital has, in turn, retained Dean Witter Services Company to perform
these administrative services.
Under a Sub-Advisory Agreement between InterCapital and Morgan Grenfell
Investment Services Ltd. ("MGIS" or "Sub-Adviser"), MGIS provides the Fund
with investment advice and portfolio management relating to the Fund's
investments in securities issued by issuers located outside the Western
Hemisphere, subject to the overall supervision of the Investment Manager.
MGIS, whose address is 20 Finsbury Circus, London, England, manages, as of
December 31, 1997, 1997, assets of approximately $17.3 billion for primarily
U.S. corporate and public employee benefit plans, investment companies,
endowments and foundations. MGIS is an indirect subsidiary of Deutsche Bank
AG, the largest commercial bank in Germany.
Prior to March 1998, TCW Funds Management Inc. ("TCW") also served as a
Sub-Adviser to the Fund, providing investment advice and portfolio management
relating to the Fund's investment in securities issued by issuers located in
Canada and Latin America.
In October 1997, TCW informed InterCapital of its intention to resign as a
Sub-Adviser. Effective March 2, 1998, the investment advisory function
performed by TCW was assumed by the Investment Manager.
The Fund's Trustees review the various services provided by the Investment
Manager and the Sub-Adviser 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 1.0% to the Fund's average daily net assets. As compensation
for its service provided pursuant to its Sub-Advisory Agreement, the
Investment Manager pays the Sub-Adviser monthly compensation equal to 30% of
its monthly compensation. Prior to March 1998, the Investment Manager paid
TCW monthly compensation equal to 30% of its monthly
9
<PAGE>
compensation. The Investment Manager will retain the portion of the investment
management fee previously paid to TCW. For the fiscal year ended January 31,
1998, the Fund accrued total compensation to the Investment Manager amounting
to 1.0% of the Fund's average daily net assets (of which 30% was accrued to
each of MGIS and TCW by the Investment Manager) and the total expenses of Class
B amounted to 2.65% of the Fund's average daily net assets of Class B. Shares
of Class A, Class C and Class D were first issued on July 28, 1997. The
expenses of the Fund include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
transfer agent, custodian and auditing fees; certain legal 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 to seek long-term total return on
its investments. This objective is a fundamental policy of the Fund and may
not be changed without shareholder approval. There is no assurance that the
objective will be achieved. The Fund's investment policies described below,
unless otherwise stated, are not fundamental and may be changed without
shareholder approval.
The Fund seeks to achieve its investment objective through a managed
investment policy utilizing a portfolio of U.S. and foreign equity, debt and
money market securities. The Investment Manager, with the assistance of the
Fund's Sub-Adviser, will initially allocate, and periodically reallocate, the
composition of the Fund's assets based upon an overall evaluation of global
monetary, economic and financial market trends and the anticipated relative
total return on securities available in different capital markets around the
world. In allocating among equity, fixed-income and money market securities
within a given capital market, the Investment Manager, with the assistance of
the Sub-Adviser, will consider the relative opportunity for price
appreciation of equity and fixed-income securities, dividend yields and the
level of interest rates paid on fixed-income securities of various
maturities. Therefore, at any given time, the Fund's assets may be invested
in any amounts of either U.S. or foreign equity or fixed-income (including
money market) securities, or in any combination thereof. Under normal
circumstances, the Fund will have at least 65% of its total assets invested
in securities issued in at least three separate countries (including the
U.S.).
The Investment Manager will meet with the Fund's Sub-Adviser, at least
quarterly, to discuss the Fund's overall strategy of asset allocation
described above. Once determinations of the equity, fixed-income and money
market sector allocation and geographic distribution of the Fund's assets
have been made, the Investment Manager and the Sub-Adviser will each be
responsible for the individual security selection within its geographic area
of responsibility. The final determinations of the sector and geographic
asset allocations of the Fund will be made by the Investment Manager.
Within the equity sector, the Fund seeks to invest in those economic
sectors expected by the Investment Manager or Sub-Adviser to benefit from
major trends and in individual stocks which are deemed by them to have
superior investment potential. The Fund may purchase equity securities
(including convertible debt obligations and, except for certain foreign
jurisdictions, convertible preferred stock) sold on the New York, American
and other domestic and foreign stock exchanges and in the over-the-counter
market.
Within the fixed-income sector, the Fund seeks to maximize the return on
its investments by adjusting maturities and coupon rates to prevailing
interest rate trends around the world, and by taking cognizance of various
conditions and trends in the foreign currency exchange markets. The
fixed-income securities in which the Fund may invest include debt securities
with maturities of greater than one year, which are issued or guaranteed by
the U.S. Govern-
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ment and its agencies or instrumentalities, by foreign governments (including
foreign states, provinces and municipalities) and agencies or
instrumentalities thereof and debt securities and preferred stocks issued by
U.S. and foreign corporations and other similar business entities. The Fund
may also invest in fixed-income securities issued or guaranteed by
international organizations designed or supported by multiple governmental
entities (which are not obligations of the U.S. Government or foreign
governments) to promote economic reconstruction or development such as the
International Bank for Reconstruction and Development (the "World Bank").
Generally, the fixed-income securities (including "convertible"
securities, see below) in which the Fund will invest will be rated at the
time of their purchase BBB or better by Standard & Poor's Corporation ("S&P")
or Baa or better by Moody's Investor Service, Inc. ("Moody's"), or investment
grade by a nationally recognized statistical rating organization ("NRSRO"),
or which, if unrated, are deemed to be of comparable quality by the Fund's
Investment Manager and/or Sub-Adviser. However, the Fund may invest up to 10%
of its total assets in fixed-income securities (including convertible
securities) which are rated below investment grade by a NRSRO or which are
unrated (see below for a discussion of the risks of investing in lower-rated
and unrated fixed-income securities and the Appendix for a description of the
Moody's and S&P's ratings).
Investments in securities rated either Baa by Moody's or BBB by S&P may
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 and/or Sub-Adviser determines that it is practicable to
sell the security without undue negative market or tax consequences to the
Fund. In the event that the Fund's below investment grade portfolio
securities, including downgraded securities, constitute 10% or more of the
Fund's total assets, the Fund will seek to immediately sell sufficient
securities to reduce the total to below 10%.
Within its money market sector, the Fund seeks to maximize returns by
exploiting spreads among short-term instruments. The money market portion of
the Fund's portfolio will contain short-term (maturities of up to thirteen
months) fixed-income securities, issued by private and governmental
institutions. Such securities may include: U.S. and foreign government
securities; domestic and foreign bank obligations; certificates of deposit
issued by foreign and domestic banks; obligations of savings institutions;
fully insured certificates of deposit; and commercial paper rated within the
two highest grades by S&P or the highest grade by Moody's or, if not rated,
issued by a company having an outstanding debt issue rated at least AA by S&P
or Aa by Moody's. Also included within the money market sector are repurchase
agreements and reverse repurchase agreements with maturities of under
thirteen months.
The principal currencies in which securities held in the Fund's portfolio
will be denominated are: the U.S. dollar; Australian dollar; Deutsche mark;
Japanese yen; French franc; British pound; Canadian dollar; Mexican peso;
Swiss franc; Dutch guilder; Hong Kong dollar; New Zealand dollar; Spanish
peseta; Swedish krona; and European Currency Unit.
RISK CONSIDERATIONS
- -----------------------------------------------------------------------------
The net asset value of the Fund's shares will fluctuate with changes in
the market value of its portfolio securities and foreign currency rate
fluctuations. The market value of the Fund's portfolio
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<PAGE>
securities will increase or decrease due to a variety of economic, market or
political factors which cannot be predicted.
FOREIGN SECURITIES
Foreign securities investments may be affected by changes in currency
rates or exchange controlregulations, changes in governmental administration
or economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates
of exchange between the currencies of different nations will affect the value
of the Fund's investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and thereby
impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade. The foreign currency
transactions of the Fund will be conducted on a spot basis or through forward
foreign currency exchange contracts (described below). The Fund will incur
certain costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of the Fund's trades effected in
such markets. As such, the inability to dispose of portfolio securities due
to settlement delays could result in losses to the Fund due to subsequent
declines in value of such securities, and the inability of the Fund to make
intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments.
Certain of the foreign markets in which the Fund may invest will be
emerging markets. These new and incompletely formed markets will have
increased risk levels above those occasioned by investing in foreign markets
generally. The types of these risks are set forth above. The Fund's
management will take cognizance of these risks in allocating any of the
Fund's investments in either fixed-income or equity securities issued by
issuers in emerging market countries.
Forward Foreign Currency Exchange Contracts. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") in
connection with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for ex-
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<PAGE>
ample, desire to "lock in" the price of the security in U.S. dollars or some
other foreign currency which the Fund is temporarily holding in its
portfolio. By entering into a forward contract for the purchase or sale, for
a fixed amount of dollars or other currency, of the amount of foreign
currency involved in the underlying security transactions, the Fund will be
able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar or other currency which is
being used for the security purchase (by the Fund or the counterparty) and
the foreign currency in which the security is denominated during the period
between the date on which the security is purchased or sold and the date on
which payment is made or received.
At other times, when, for example, the Fund's Investment Manager or its
Sub-Adviser believes that the currency of a particular foreign country may
suffer a substantial decline against the U.S. dollar or some other foreign
currency, the Fund may enter into a forward contract to sell, for a fixed
amount of dollars or other currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities holdings (or
securities which the fund has purchased for its portfolio) denominated in
such foreign currency. Under identical circumstances, the Fund may enter into
a forward contract to sell, for a fixed amount of U.S. dollars or other
currency, an amount of foreign currency other than the currency in which the
securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected when it is determined that the foreign
currency in which the portfolio securities are denominated has insufficient
liquidity or is trading at a discount as compared with some other foreign
currency with which it tends to move in tandem.
In addition, when the Fund anticipates purchasing securities at some time
in the future, and wishes to lock in the current exchange rate of the
currency in which those securities are denominated against the U.S. dollar or
some other foreign currency, the Fund may enter into a forward contract to
purchase an amount of currency equal to some or all of the value of the
anticipated purchase, for a fixed amount of U.S. dollars or other currency.
In all of the above circumstances, if the currency in which the Fund
securities holdings (or anticipated portfolio securities) are denominated
rises in value with respect to the currency which is being purchased (or
sold), then the Fund will have realized fewer gains than had the Fund not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and
the date it matures. The Fund is not required to enter into such transactions
with regard to its foreign currency-denominated securities and will not do so
unless deemed appropriate. The Fund generally will not enter into a forward
contract with a term of greater than one year, although it may enter into
forward contracts for periods of up to five years. The Fund may be limited in
its ability to enter into hedging transactions involving forward contracts by
the Internal Revenue Code requirements relating to qualification as a
regulated investment company (see "Dividends, Distributions and Taxes").
Depository Receipts. The Fund may also invest in securities of foreign
issuers in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs) or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or
trust company evidencing ownership of the underlying securities. EDRs are
European receipts evidencing a similar arrangement. Generally, ADRs, in
registered form, are designed for use in the United States securities markets
and EDRs, in bearer form, are designed for use in European securities
markets.
FIXED-INCOME SECURITIES
All fixed-income securities are subject to two types of risks: the credit
risk and the interest rate
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<PAGE>
risk. The credit risk relates to the ability of the issuer to meet interest
or principal payments or both as they come due. The interest rate risk refers
to the fluctuations in the net asset value of any portfolio of fixed-income
securities resulting from the inverse relationship between price and yield of
fixed-income securities; that is, when the general level of interest rates
rises, the prices of outstanding fixed-income securities decline, and when
interest rates fall, prices rise.
Lower-Rated Securities. There is no limitation other than the overall 10%
limitation described above on the percentage of the Fund's total assets which
may be invested in convertible securities (see below) and debt securities
below investment grade. Securities below investment grade are the equivalent
of high yield, high risk bonds, commonly known as "junk bonds." Investment
grade is generally considered to be debt securities rated BBB or higher by
S&P or Baa or higher by Moody's. However, the Fund will not invest in debt
securities that are in default in payment of principal or interest.
Because of the special nature of the Fund's permitted investments in lower
rated debt securities, it must take account of certain special considerations
in assessing the risks associated with such investments. The prices of lower
rated securities have been found to be less sensitive to changes in
prevailing interest rates than higher rated investments, but are likely to be
more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. If the issuer of a fixed-income security owned
by the Fund defaults, the Fund may incur additional expenses to seek
recovery. In addition, periods of economic uncertainty and change can be
expected to result in an increased volatility of market prices of lower rated
securities and a corresponding volatility in the net asset value of a share
of the Fund.
Convertible Securities. Among the fixed-income securities in which the
Fund may invest are "convertible" securities. A convertible security is a
bond, debenture, note, preferred stock or other security that may be
converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. Convertible securities rank senior to common stocks in a
corporation's capital structure and, therefore, entail less risk than the
corporation's common stock. The value of a convertible security is a function
of its "investment value" (its value as if it did not have a conversion
privilege), and its "conversion value" (the security's worth if it were to be
exchanged for the underlying security, at market value, pursuant to its
conversion privilege).
Adjustable Rate Mortgage Securities. The Fund may also invest in
adjustable rate mortgage securities ("ARMs"), which are pass-through mortgage
securities collateralized by mortgages with adjustable rather than fixed
rates. ARMs eligible for inclusion in a mortgage pool generally provide for a
fixed initial mortgage interest rate for either the first three, six, twelve
or thirteen scheduled monthly payments. Thereafter, the interest rates are
subject to periodic adjustment based on changes to a designated benchmark
index.
ARMs contain maximum and minimum rates beyond which the mortgage interest
rate may not vary over the lifetime of the security. In addition, certain
ARMs provide for additional limitations on the maximum amount by which the
mortgage interest rate may adjust for any single adjustment period.
Alternatively, certain ARMs contain limitations on changes in the required
monthly payment. In the event that a monthly payment is not sufficient to pay
the interest accruing on an ARM, any such excess interest is added to the
principal balance of the mortgage loan, which is repaid through future
monthly payments. If the monthly payment for such an instrument exceeds the
sum of the interest accrued at the applicable mortgage interest rate and the
principal payment required at such point to
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<PAGE>
amortize the outstanding principal balance over the remaining term of the
loan, the excess is utilized to reduce the then outstanding principal balance
of the ARM.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities which are denominated in either U.S. dollars or foreign currencies
and on the U.S. dollar and foreign currencies, which are or may in the future
be listed on several U.S. and foreign securities exchanges or are written in
over-the-counter transactions ("OTC options"). OTC options are purchased from
or sold (written) to dealers or financial institutions which have entered
into direct agreements with the Fund.
The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency in
which such security is denominated (although such hedge is limited to the
value of the premium received), to close out long call option positions and
to generate income. The Fund may write covered put options, under which the
Fund incurs an obligation to buy the security (or currency) underlying the
option from the purchaser of the put at the option's exercise price at any
time during the option period, at the purchaser's election.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the
price of a security it anticipates purchasing or, in the case of call options
on a foreign currency, to hedge against an adverse exchange rate change of
the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund
may purchase put options on securities which it holds in its portfolio to
protect itself against a decline in the value of the security and to close
out written put positions in a manner similar to call option closing purchase
transactions. There are no limits on the Fund's ability to purchase call and
put options other than compliance with the foregoing policies.
The Fund may purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity
exchanges on underlying portfolio securities, on any currency ("currency"
futures), on U.S. and foreign fixed-income securities ("interest rate"
futures) and on such indexes of U.S. or foreign equity or fixed-income
securities as may exist or come into being ("index" futures). The Fund may
purchase or sell interest rate futures contracts for the purpose of
attempting hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against anticipated changes in prevailing
interest rates. The Fund may purchase or sell index
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<PAGE>
futures contracts for the purpose of hedging some or all of its portfolio (or
anticipated portfolio) securities against changes in their prices (or the
currency in which they are denominated). 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 also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
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.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures
contract, only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist, particularly in the case of OTC options, as such options may generally
only be closed out by entering into a closing purchase transaction with the
purchasing dealer. Also, exchanges may limit the amount by which the price of
many futures contracts may move on any day. If the price moves equal the
daily limit on successive days, then it may prove impossible to liquidate a
futures position until the daily limit moves have ceased.
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 or Sub-Adviser
could be incorrect in its expectations as to the direction or extent of
various interest rate or price movements or the time span within which the
movements take place. For example, if the Fund sold futures contracts for the
sale of securities in anticipation of an increase in interest rates, and then
interest rates went down instead, causing bond prices to rise, the Fund would
lose money on the sale. Another risk which will arise in employing futures
contracts to protect against the price volatility of portfolio securities is
that the prices of securities, currencies and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the U.S. dollar cash prices of the Fund's portfolio
securities and their denominated currencies. See the Statement of Additional
Information for a further discussion of risks.
Investment in Other Investment Vehicles. Under the Investment Company Act
of 1940, as amended (the "Act"), the Fund generally may invest up to 10% of
its total assets in the aggregate in shares of other investment companies and
up to 5% of its total assets in any one investment company. The Fund may not
own more than 3% of the outstanding voting stock of any investment company.
Investment in other investment companies or vehicles may be the sole or most
practical means by which the Fund can participate in certain foreign markets.
Such investment may involve the payment of substantial premiums above the
value of such issuers' portfolio securities, and is subject to limitations
under the Act and market availability. In addition, special tax
considerations may apply. The Fund does not intend to invest in such vehicles
or funds unless, in the judgment of the Investment Manager or Sub-Adviser,
the potential benefits of such investment justify the payment of any
applicable premium or sales charge. As a shareholder in an investment
company, the Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own management fees and other expenses, as
a result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of advisory fees with respect to investments in such other
investment companies.
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<PAGE>
Rights and Warrants. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting
rights, pay no dividends and have no other rights with respect to the
corporation issuing them.
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 government securities or
other securities from a selling financial institution such as a bank, savings
and loan association or broker-dealer. The agreement provides that the Fund
will sell back to the institution, and that the institution will repurchase,
the underlying security at a specified price and at a fixed time in the
future, usually not more than seven days from the date of purchase. While
repurchase agreements involve certain risks not associated with direct
investments in debt securities, including the risks of default or bankruptcy
of the selling financial institution, the Fund follows procedures to minimize
such risks. These procedures include effecting repurchase transactions only
with large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
There is no overall limit on the percentage of the Fund's assets which may be
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a when-issued, delayed delivery or
forward commitment basis may increase the volatility of the Fund's net asset
value.
When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.
Reverse Repurchase Agreements and Dollar Rolls. The Fund may also use
reverse repurchase agreements and dollar rolls as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of
portfolio assets concurrently with an agreement by the Fund to repurchase the
same assets at a later date at a fixed price. The Fund may enter into dollar
rolls in which the Fund sells securities and simultaneously contracts to
repurchase substantially similar (same type and coupon) securities on a
specified future date. Reverse repurchase agreements and dollar rolls involve
the risk that the market value of the securities the Fund is obligated to
repurchase under the agreement may decline below the repurchase price. In the
event the buyer of securities under a reverse repurchase agreement or dollar
roll files for bankruptcy or becomes insolvent, the Fund's use of proceeds of
the agreement may be restricted pending a determination by the other party,
or its trustee or receiver, whether to enforce the Fund's obligation to
repurchase the securities. Reverse Repurchase agreements and dollar rolls are
speculative techniques involving leverage (which may increase investment
risk), and are considered borrowings by the Fund.
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<PAGE>
Restricted Securities. 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
qualifed institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by
the Fund. The procedures require that the following factors be taken into
account in making a liquidity determination: (1) the frequency of trades and
price quotes for the security; (2) the number of dealers and other potential
purchasers who have issued quotes on the security; (3) any dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (the time needed to dispose
of the security, the method of soliciting offers, and the mechanics of
transfer). Investing in restricted securities sellable pursuant to Rule 144A
could have the effect of increasing the level of the illiquidity of the Fund
to the extent that qualified institutional buyers of such securities become,
for a time, uninterested in purchasing these securities. 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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and its
Sub-Adviser with a view to achieving the Fund's investment objective. In
determining which securities to purchase for the Fund or hold in the Fund's
portfolio, the Investment Manager and the Sub-Adviser will rely on
information from various sources, including research, analysis and appraisals
of brokers and dealers, the views of Trustees of the Fund and others
regarding economic developments and interest rate trends, and the Investment
Manager's and Sub-Adviser's own analysis of factors they deem relevant.
The individuals who are primarily responsible for the day-to-day
management of the Fund's portfolio are Mark Bavoso, Senior Vice President of
InterCapital and Michael Bullock, Chairman and Chief Investment Officer of
MGIS. Mr. Bavoso is a member of InterCapital's Growth & Income Group and has
been a portfolio manager at InterCapital for over five years. Mr. Bullock is
Chairman of MGIS and chief investment officer of its parent company, Morgan
Grenfell Asset Management Limited.
Personnel of the Investment Manager and the Sub-Adviser have substantial
experience in the use of the investment techniques described above under the
heading "Options and Futures Transactions," which techniques require skills
different from those needed to select the portfolio securities underlying
various options and futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including Dean
Witter Reynolds Inc. ("DWR"), Morgan Stanley & Co. Incorporated, other
broker-dealer affiliates of InterCapital, and broker-dealers affiliates of
MGIS. 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, Morgan Stanley & Co. Incorporated and
other affiliated brokers or dealers of InterCapital and affiliated brokers or
dealers of MGIS.
18
<PAGE>
Although the Fund does not intend to engage in short-term trading, it may
sell portfolio securities without regard to the length of time they have been
held when such sale will, in the opinion of the Investment Manager or
Sub-Adviser, contribute to the Fund's investment objective.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 200%. The Fund is expected to incur higher than
normal brokerage commission costs due to its portfolio turnover rate.
Short-term gains and losses taxable at ordinary income rates may result from
such portfolio transactions. See "Dividends, Distributions and Taxes" for a
full 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.
The expenses of the Fund relating to its portfolio management are likely
to be greater than those incurred by other investment companies investing
primarily in securities issued by domestic issuers as custodial costs,
brokerage commissions and other transaction charges related to investing on
foreign markets are generally higher than in the United States.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the 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. As to 75% of its total assets, 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. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
3. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
4. As to 75% of its total assets, purchase more than 10% of the voting
securities, or more than 10% of any class of securities, of any issuer.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, shares of the Fund are distributed by the Distributor and
offered by DWR and other dealers which have entered into 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.
19
<PAGE>
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales
charge are subject to a contingent deferred sales charge ("CDSC") of 1.0% if
redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but
are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most
redemptions within six years after purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0%
if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold
without an initial sales charge or CDSC and are available only to investors
meeting an initial investment minimum of $5 million ($25 million for certain
qualified plans), and to certain other limited categories of investors. At
the discretion of the Board of Trustees of the Fund, Class A shares may be
sold to categories of investors in addition to those set forth in this
prospectus at net asset value without a front-end sales charge, and Class D
shares may be sold to certain other categories of investors, in each case as
may be described in the then current prospectus of the Fund. See "Alternative
Purchase Arrangements--Selecting a Particular Class" for a discussion of
factors to consider in selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25
million for certain qualified plans) or more and to certain other limited
categories of investors. For the purpose of meeting the minimum $5 million
(or $25 million) initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares of the Fund and other Dean Witter Funds
that are multiple class funds ("Dean Witter Multi-Class Funds") and shares of
Dean Witter Funds sold with a front-end sales charge ("FSC Funds") and
concurrent investments in Class D shares of the Fund and other Dean Witter
Multi-Class Funds will be aggregated. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter Global Asset
Allocation Fund, directly to Dean Witter Trust FSB (the "Transfer Agent" or
"DWT") at P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account
executive of DWR or other Selected Broker-Dealer. When purchasing shares of
the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent
will not process the transaction until the proper Class is identified. The
minimum initial purchase in the case of investments through EasyInvest
(Service Mark), an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling $1,000 within the first twelve months. The minimum
initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase
the investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset
allocation program and (iii) fee-based programs approved by the Distributor,
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory or administrative services, the Fund, in its
discretion, may accept investments without regard to any minimum amounts
which would otherwise be required, provided, in the case of Systematic
Payroll Deduction Plans, that the Distributor has reason to believe that
additional investments will increase the investment in all accounts under
such Plans to at least $1,000. 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 ac-
20
<PAGE>
counts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless requested by the shareholder in writing to the
Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. Orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income
dividends and capital gains distributions if their order is received by the
close of business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated
for selling shares of the Fund by the Distributor or any of its affiliates
and/or the Selected Broker-Dealer. In addition, some sales personnel of the
Selected Broker-Dealer will receive various types of non-cash compensation as
special sales incentives, including trips, educational and/or business
seminars and merchandise. The Fund and the Distributor reserve the right to
reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their
needs. The general public is offered three Classes of shares: Class A shares,
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors
(see "No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class.
This summary is qualified in its entirety by detailed discussion of each
Class that follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain
other limited categories of investors) are not subject to any sales charges
at the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase, except for certain specific circumstances.
Class A shares are also subject to a 12b-1 fee of up to 0.25% of the average
daily net assets of the Class. See "Initial Sales Charge Alternative--Class A
Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to
1.0%) if redeemed within six years of purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0%
if redeemed within three years after purchase.) This CDSC may be waived for
certain redemptions. Class B shares are also subject to an annual 12b-1 fee
of 1.0% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's Class B shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distribu-
21
<PAGE>
tions), less the average daily aggregate net asset value of the Fund's Class
B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (b) the average daily net assets of Class B. The Class
B shares' distribution fee will cause that Class to have higher expenses and
pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition,
a certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class C shares. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class A or
Class D shares. See "Level Load Alternative--Class C Shares."
Class D Shares. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are
not subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any
other relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are
not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C
shares over the term of the investment. As an alternative, Class B and Class
C shares are sold without any initial sales charge so the entire purchase
price is immediately invested in the Fund. Any investment return on these
additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to
an ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a
front-end sales charge and they are uncertain as to the length of time they
intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Dean
Witter Multi-Class Funds, shares of FSC Funds and shares of Dean Witter Funds
for which such shares have been exchanged will be included together with the
current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors
22
<PAGE>
should understand that the purpose of a CDSC is the same as that of the
initial sales charge in that the sales charges applicable to each Class
provide for the financing of the distribution of shares of that Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- -------------------------------------------------------------------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- -------------------------------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- -------------------------------------------------------------------------------
D None None No
- -------------------------------------------------------------------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees
for each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase (calculated from the last day of the month in which the
shares were purchased), except for certain specific circumstances. The CDSC
will be assessed on an amount equal to the lesser of the current market value
or the cost of the shares being redeemed. The CDSC will not be imposed (i) in
the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references
to six years in the first paragraph of that section shall mean one year in
the case of Class A shares, and (ii) in the circumstances identified in the
section "Additional Net Asset Value Purchase Options" below. Class A shares
are also subject to an annual 12b-1 fee of up to 0.25% of the average daily
net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
--------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- -------------------- --------------- ---------------
<S> <C> <C>
Less than $25,000 .. 5.25% 5.54%
$25,000 but less
than $50,000 ...... 4.75% 4.99%
$50,000 but less
than $100,000 ..... 4.00% 4.17%
$100,000 but less
than $250,000 ..... 3.00% 3.09%
$250,000 but less
than $1 million .. 2.00% 2.04%
$1 million and over 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the
sales charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
23
<PAGE>
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; and for
investments in Individual Retirement Accounts of employees of a single
employer through Systematic Payroll Deduction plans; or (g) any other
organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class
A shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The
sales charge payable on the purchase of the Class A shares of the Fund, the
Class A shares of the other Dean Witter Multi-Class Funds and the shares of
the FSC Funds will be at their respective rates applicable to the total
amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single
transaction, together with shares of the Fund and other Dean Witter Funds
previously purchased at a price including a front-end sales charge (including
shares of the Fund and other Dean Witter Funds acquired in exchange for those
shares, and including in each case shares acquired through reinvestment of
dividends and distributions), which are held at the time of such transaction,
amounts to $25,000 or more. If such investor has a cumulative net asset value
of shares of FSC Funds and Class A and Class D shares that, together with the
current investment amount, is equal to at least $5 million ($25 million for
certain qualified plans), such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Selected Broker-Dealer or the Transfer Agent
fails to confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or shares of other Dean Witter Funds which were previously
purchased at a price including a front-end sales charge during the 90-day
period prior to the date of receipt by the Distributor of the Letter of
Intent, or of Class A shares of the Fund or shares of other Dean Witter Funds
acquired in exchange for shares of such funds purchased during such period at
a price including a front-end sales charge, which are still owned by the
shareholder, may also be included in determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments of
$1 million or more,
24
<PAGE>
Class A shares also may be purchased at net asset value by the following:
(1) trusts for which DWT (an affiliate of the Investment Manager) provides
discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for
services in the nature of investment advisory or administrative services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs and
restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement.
(5) investors who are clients of a Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if the shares are
being purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase
was made within sixty days after the redemption and the proceeds of the
redemption had been maintained in the interim in cash or a money market fund;
and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the Fund. A CDSC, however, will be
imposed on most Class B shares redeemed within six years after purchase. The
CDSC will be imposed on any redemption of shares if after such redemption the
aggregate current value of a Class B account with the Fund falls below the
aggregate amount of the investor's purchase payments for Class B shares made
during the six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) preceding the redemption. In addition, Class B
shares are subject to an annual 12b-1 fee of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's Class B shares since the
inception of the Fund (not including reinvestments of dividends or capital
gains distributions), less the average daily aggregate net asset value of the
Fund's Class B shares redeemed since the Fund's inception upon which a CDSC
has been imposed or waived, or (b) the average daily net assets of Class B.
Except as noted below, Class B 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 CDSC upon
redemption. Shares redeemed earlier than six years after purchase may,
however, be subject to a CDSC which will be a percentage of the dollar amount
of shares redeemed and will be assessed on an amount equal to the lesser of
the current market value or the cost
25
<PAGE>
of the shares being redeemed. The size of this percentage will depend upon
how long the shares have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third...................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject
to any CDSC upon redemption. However, shares redeemed earlier than three
years after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First ..................... 2.0%
Second .................... 2.0%
Third ..................... 1.0%
Fourth and thereafter .... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three
years) preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
Qualified Retirement Plans, three years) prior to the redemption; and (iii)
the current net asset value of shares purchased through reinvestment of
dividends or distributions and/or shares acquired in exchange for shares of
FSC Funds or of other Dean Witter Funds acquired in exchange for such shares.
Moreover, in determining whether a CDSC is applicable it will be assumed that
amounts described in (i), (ii) and (iii) above (in that order) are redeemed
first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account ("IRA") or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code ("403(b) Custodial Account"), provided in either
case that the redemption is requested within one year of the death or initial
determination of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or, in the
case of a "key employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Investment Manager or its subsidiary, Dean Witter Services Company Inc., as
self-directed investment alternatives and for which DWT serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (A)
the plan continues to be an Eligible Plan
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<PAGE>
after the redemption; or (B) the redemption is in connection with the
complete termination of the plan involving the distribution of all plan
assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Conversion to Class A Shares. All shares of the Fund held prior to July
28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances Class B
shares will convert automatically to Class A shares, based on the relative
net asset values of the shares of the two Classes on the conversion date,
which will be approximately ten (10) years after the date of the original
purchase. The ten year period is calculated from the last day of the month in
which the shares were purchased or, in the case of Class B shares acquired
through an exchange or a series of exchanges, from the last day of the month
in which the original Class B shares were purchased, provided that shares
originally purchased before May 1, 1997 will convert to Class A shares in
May, 2007. The conversion of shares purchased on or after May 1, 1997 will
take place in the month following the tenth anniversary of the purchase.
There will also be converted at that time such proportion of Class B shares
acquired through automatic reinvestment of dividends and distributions owned
by the shareholder as the total number of his or her Class B shares
converting at the time bears to the total number of outstanding Class B
shares purchased and owned by the shareholder. In the case of Class B shares
held by a Qualified Retirement Plan for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, the plan is treated as a single investor
and all Class B shares will convert to Class A shares on the conversion date
of the first shares of a Dean Witter Multi-Class Fund purchased by that plan.
In the case of Class B shares previously exchanged for shares of an "Exchange
Fund" (see "Shareholder Services--Exchange Privilege"), the period of time
the shares were held in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired) is excluded from
the holding period for conversion. If those shares are subsequently
re-exchanged for Class B shares of a Dean Witter Multi-Class Fund, the
holding period resumes on the last day of the month in which Class B shares
are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior
to the date for conversion. Class B shares evidenced by share certificates
that are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions
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<PAGE>
made within one year after purchase (calculated from the last day of the
month in which the shares were purchased). The CDSC will be assessed on an
amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed in the circumstances set
forth above in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case
of Class C shares. Class C shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares,
Class C shares have no conversion feature and, accordingly, an investor that
purchases Class C shares will be subject to 12b-1 fees applicable to Class C
shares for an indefinite period subject to annual approval by the Fund's
Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million
for Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the InterCapital mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory or administrative services (subject to all of the terms
and conditions of such programs referred to in (i) and (ii) above, which may
include termination fees, mandatory redemption upon termination and such
other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) 401(k) plans
established by DWR and SPS Transaction Services, Inc. (an affiliate of DWR)
for their employees; (iv) certain Unit Investment Trusts sponsored by DWR;
(v) certain other open-end investment companies whose shares are distributed
by the Distributor; and (vi) other categories of investors, at the discretion
of the Board, as disclosed in the then current prospectus of the Fund.
Investors who require a $5 million (or $25 million) minimum initial
investment to qualify to purchase Class D shares may satisfy that requirement
by investing that amount in a single transaction in Class D shares of the
Fund and other Dean Witter Multi-Class Funds, subject to the $1,000 minimum
initial investment required for that Class of the Fund. In addition, for the
purpose of meeting the $5 million (or $25 million) minimum investment amount,
holdings of Class A shares in all Dean Witter Multi-Class Funds, shares of
FSC Funds and shares of Dean Witter Funds for which such shares have been
exchanged will be included together with the current investment amount. If a
shareholder redeems Class A shares and purchases Class D shares, such
redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C
shares of the Fund. In the case of Class A and Class C shares, the Plan
provides that the Fund will reimburse the Distributor and others for the
expenses of certain activities and services incurred by them specifically on
behalf of those shares. Reimbursements for these expenses will be made in
monthly payments by the Fund to the Distributor, which will in no event
exceed amounts equal to payments at the annual rates of 0.25% and 1.0% of the
average daily net assets of Class A and Class C, respectively. In the case of
Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestments
of dividends or capital gains distributions), less the average daily
aggregate net asset value of the Fund's Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (b) the
average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee cur-
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<PAGE>
rently represents a service fee within the meaning of the NASD guidelines. In
the case of Class B and Class C shares, a portion of the fee payable pursuant
to the Plan, equal to 0.25% of the average daily net assets of each of these
Classes, is currently characterized as a service fee. A service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses
borne by the Distributor and others in the distribution of the shares of
those Classes, including the payment of commissions for sales of the shares
of those Classes and incentive compensation to and expenses of DWR's account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan in the case of Class B shares to compensate DWR and other Selected
Broker-Dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
For the fiscal year ended January 31, 1998, Class B shares of the Fund
accrued payments under the Plan amounting to $580,914, which amount is equal
to 0.94% of the average daily net assets of Class B for the fiscal year.
These payments accrued under the Plan were calculated pursuant to clause (a)
of the compensation formula under the Plan. All shares held prior to July 28,
1997 have been designated Class B shares. For the period July 28, 1997
through January 31, 1998, Class A and Class C shares of the Fund accrued
payments under the Plan amounting to $28 and $241, respectively, which
amounts on an annualized basis are equal to 0.25% and 1.00% of the average
daily net assets of Class A and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B shares. For example,
if $1 million in expenses in distributing Class B shares of the Fund had been
incurred and $750,000 had been received as described in (i) and (ii) above,
the excess expense would amount to $250,000. The Distributor has advised the
Fund that such excess amounts, including the carrying charge described above,
totalled $3,856,463 at January 31, 1998, which was equal to 7.36% of the net
assets of Class B 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
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made
to the Distributor under the Plan, and the proceeds of CDSCs paid by
investors upon redemption of shares, if for any reason the Plan is terminated
the Trustees will consider at that time the manner in which to treat such
expenses. Any cumulative expenses incurred, but not yet recovered through
distribution fees or CDSCs, may or may not be recovered through future
distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund in any subsequent year, except that expenses representing a gross sales
commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the
Fund that unreimbursed expenses representing a gross sales commission
credited to account executives at the time of sale totalled $303 in the case
of Class C at December 31, 1997, which amount was equal to 0.57% of the net
assets of Class C on such date, and that there
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<PAGE>
were no such expenses that may be reimbursed in the subsequent year in the
case of Class A on such date. No interest or other financing charges will be
incurred on any Class A or Class C distribution expenses incurred by the
Distributor under the Plan or on any unreimbursed expenses due to the
Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time) by taking the net assets of the
Fund, dividing by the number of shares outstanding and adjusting to the
nearest cent. The assets belonging to the Class A, Class B, Class C and Class
D shares will be invested together in a single portfolio. The net asset value
of each Class, however, will be determined separately by subtracting each
Class's accrued expenses and liabilities. The net asset value per share will
not be determined on Good Friday and on such other federal and non-federal
holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange or prior to the time assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where a
security is traded on more than one exchange, the security is valued on the
exchange designated as the primary market pursuant to procedures adopted by
the Trustees); (2) 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 or Sub-Adviser 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.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events which affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange and will
therefore not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of some Trustees.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research evaluations by its staff,
in-
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<PAGE>
cluding 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 applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end Dean Witter Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are
acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Redemptions and Repurchases").
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 in shares of the
applicable Class 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 acquired at
net asset value and are not subject to the imposition of a front end sales
charge or a CDSC (see "Redemptions and Repurchases").
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Redemptions and Repurchases--
Involuntary Redemption").
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 CDSC will be imposed on shares redeemed under the Withdrawal Plan
(See "Purchase of Fund Shares"). Therefore, any shareholder participating in
the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable CDSC) to the shareholder
will be the designated monthly or quarterly amount. Withdrawal plan payments
should not be considered as dividends, yields or income. If periodic
withdrawal plan payments continuously exceed net investment income and net
capital gains, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Each withdrawal constitutes a redemption of
shares and any gain or loss realized must be recognized for federal income
tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax-Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange
fee. Shares may also be exchanged for shares of the following funds: Dean
Witter Short-
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Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury
Trust and five Dean Witter funds which are money market funds (the "Exchange
Funds"). Class A shares may also be exchanged for shares of Dean Witter
Multi-State Municipal Series Trust and Dean Witter Hawaii Municipal Trust,
which are Dean Witter Funds sold with a front-end sales charge ("FSC Funds").
Class B shares may also be exchanged for shares of Dean Witter Global
Short-Term Income Fund Inc. ("Global Short-Term"), which is a Dean Witter
Fund offered with a CDSC. Exchanges may be made after the shares of the Fund
acquired by purchase (not by exchange or dividend reinvestment) have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment.
An exchange to another Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term or any Exchange Fund that is not a money market fund is on the
basis of the next calculated net asset value per share of each fund after the
exchange order is received. When exchanging into a money market fund from the
Fund, shares of the Fund are redeemed out of the Fund at their next
calculated net asset value and the proceeds of the redemption are used to
purchase shares of the money market fund at their net asset value determined
the following business day. Subsequent exchanges between any of the money
market funds and any of the Dean Witter Multi-Class Funds, FSC Funds or
Global Short-Term or any Exchange Fund that is not a money market fund can be
effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains in an Exchange Fund (calculated from the last
day of the month in which the Exchange Fund shares were acquired), the
holding period (for the purpose of determining the rate of the CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a Dean
Witter Multi-Class Fund or shares of Global Short-Term, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a Dean Witter Multi-Class Fund or shares of
Global Short-Term are reacquired. Thus, the CDSC is based upon the time
(calculated as described above) the shareholder was invested in shares of a
Dean Witter Multi-Class Fund or in shares of Global Short-Term (see "Purchase
of Fund Shares"). In the case of exchanges of Class A shares which are
subject to a CDSC, the holding period also includes the time (calculated as
described above) the shareholder was invested in shares of a FSC Fund. In the
case of shares exchanged into an Exchange Fund on or after April 23, 1990,
upon a redemption of shares which results in a CDSC being imposed, a credit
(not to exceed the amount of the CDSC) will be given in an amount equal to
the Exchange Fund 12b-1 distribution fees incurred on or after that date
which are attributable to those shares. (Exchange Fund 12b-1 distribution
fees are described in the prospectuses for those funds.) Class B shares of
the Fund acquired in exchange for Class B shares of another Dean Witter
Multi-Class Fund having a different CDSC schedule than that of this Fund will
be subject to the higher CDSC schedule, even if such shares are subsequently
re-exchanged for shares of the fund with the lower CDSC schedule.
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Investment Manager to be abusive and contrary to the best
interests of the Fund's other shareholders and, at the Investment Manager's
discretion, may be limited by the Fund's refusal to accept additional
purchases and/or exchanges from the investor. Although the Fund does not have
any specific definition of what constitutes a pattern of frequent exchanges,
and will consider all relevant factors in determining whether a 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
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<PAGE>
each of the other Dean Witter Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be
exercised by any investor. Any such restriction will be made by the Fund on a
prospective basis only, upon notice to the shareholder not later than ten
days following such shareholder's most recent exchange. Also, the Exchange
Privilege may be terminated or revised at any time by the Fund and/or any of
such Dean Witter Funds for which shares of the Fund have been exchanged, upon
such notice as may be required by applicable regulatory agencies.
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions
on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
of each Class of shares and any other conditions imposed by each fund. In the
case of a shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the Dean
Witter Funds (for which the Exchange Privilege is available) pursuant to this
Exchange Privilege by contacting their account executive (no Exchange
Privilege Authorization Form is required). Other shareholders (and those
shareholders who are clients of DWR or another Selected Broker-Dealer but who
wish to make exchanges directly by writing or telephoning the Transfer Agent)
must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent,
to initiate an exchange. If the Authorization Form is used, exchanges may be
made in writing or by contacting the Transfer Agent at (800) 869-NEWS
(toll-free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
with the Dean Witter Funds in the past.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
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REDEMPTIONS AND REPURCHASES
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Redemption. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along
with any additional documentation required by the Transfer Agent.
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value 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
or the Distributor. The offer by DWR and other Selected Broker-Dealers to
repurchase shares may be suspended without notice by them at any time. In
that event, shareholders may redeem their shares through the Fund's Transfer
Agent as set forth above under "Redemption."
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances, e.g., when normal trading is not
taking place on the New York Stock Exchange. If the shares to be redeemed
have recently been purchased by check, payment of the redemption proceeds may
be delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
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.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund in the same Class from which such shares were redeemed
or repurchased, at 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 (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares have a
value of less than $100 as a result of redemptions or repurchases, or such
lesser amount as may be fixed by the Board of Trustees or, in the case of an
account opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $1,000 in the account. However, before the
Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the
applicable amount and allow the shareholder to make an additional investment
in an amount which will increase the value of the account to at least the
applicable amount before the redemption is processed. No CDSC will be imposed
on any involuntary redemption.
34
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to distribute substantially all of the
Fund's net investment income and net realized short-term capital gains, if
there are any, at least annually. 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 shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends be paid in cash. Shares
acquired by dividend and distribution reinvestments will not be subject to
any front-end sales charge or CDSC. Class B shares acquired through dividend
and distribution reinvestments will become eligible for conversion to Class A
shares on a pro rata basis. Distributions paid on Class A and Class D shares
will be higher than for Class B and Class C shares because distribution fees
paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise 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. Any dividends
declared in the last quarter of any calendar year which are paid in the
following year prior to February 1 will be deemed, for tax purposes, to have
been received by the shareholder in the prior year.
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.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
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.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and makes the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election,
the Fund would deduct foreign tax in computing the amount of its
distributable income.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
35
<PAGE>
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A,
Class B, Class C and Class D shares. The total return of the Fund is based on
historical earnings and is not intended to indicate future performance. The
"average annual total return" of the Fund refers to a figure reflecting the
average annualized percentage increase (or decrease) in the value of an
initial investment in a Class of the Fund of $1,000 over periods of one, five
and ten years, or for the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Fund, any appreciation or depreciation of the Fund's assets, all expenses
incurred by the applicable Class and all sales charges which would be
incurred by shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted.The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein,
Class A, Class B and Class C bear the expenses related to the distribution of
their respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be 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.
36
<PAGE>
Code of Ethics. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code
of Ethics adopted by those companies. The Code of Ethics is intended to
ensure that the interests of shareholders and other clients are placed ahead
of any personal interest, that no undue personal benefit is obtained from a
person's employment activities and that actual and potential conflicts of
interest are avoided. To achieve these goals and comply with regulatory
requirements, the Code of Ethics requires, among other things, that personal
securities transactions by employees of the companies be subject to an
advance clearance process to monitor that no Dean Witter Fund is engaged at
the same time in a purchase or sale of the same security. The Code of Ethics
bans the purchase of securities in an initial public offering and prohibits
engaging in futures and options transactions and profiting on short-term
trading (that is, a purchase within sixty days of a sale or a sale within
sixty days of a purchase) of a security. In addition, investment personnel
may not purchase or sell a security for their personal account within thirty
days before or after any transaction in any Dean Witter Fund managed by them.
Any violations of the Code of Ethics are subject to sanctions, including
reprimand, demotion or suspension or termination of employment. The Code of
Ethics comports with regulatory requirements and the recommendations in the
1994 report by the Investment Company Institute Advisory Group on Personal
Investing. Each of the Fund's Sub-Advisers also have Code of Ethics which
comply with regulatory requirements and, insofar as they relate to persons
associated with the Fund, the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
The Fund's Sub-Adviser also has a Code of Ethics which complies with
regulatory requirements and, in so far as it relates to persons associated
with the Fund, the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.
Master/Feeder Conversion. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
37
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
<TABLE>
<CAPTION>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the various protective
elements are likely to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa
group they comprise what are generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as
upper medium grade obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to impairment sometime in the
future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered
as well assured. Often the protection of interest and principal payments may be very moderate, and
therefore not well safeguarded during both good and bad times in the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of
interest and principal payments or of maintenance of other terms of the contract over any long period
of time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment standing.
</TABLE>
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
38
<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. The ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
<TABLE>
<CAPTION>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than
for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative grade debt. However, it
faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity or willingness to pay interest and repay principal.
39
<PAGE>
B Debt rated "B" has a greater vulnerability to default but presently has the capacity to meet interest payments
and principal repayments. Adverse business, financial or economic conditions would likely impair capacity or
willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and is dependent upon favorable
business, financial and economic conditions to meet timely payments of interest and repayments of principal.
In the event of adverse business, financial or economic conditions, it is not likely to have the capacity to
pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied
"CCC-" debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace period. The 'D' rating also will be used
upon the filing of a bankruptcy petition if debt service payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient information on which to base a rating
or that Standard & Poor's does not rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having predominantly speculative characteristics
with respect to capacity to pay interest and repay principal. "BB" indicates the least degree of speculation
and "C" the highest degree of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the addition of a plus or minus sign
to show relative standing within major ratings categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by Standard & Poor's from other sources
it considers reliable. The ratings may be changed, suspended, or withdrawn as
a result of changes in or unavailability of such information. Ratings are
graded into group categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Ratings are applicable to both taxable and
tax-exempt commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.
<TABLE>
<CAPTION>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However, the relative
degree of safety is not as overwhelming as for issues designated "A-1."
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this designation are, however,
somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the
higher designations.
</TABLE>
40
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
MONEY MARKET FUNDS
Dean Witter California Tax-Free Daily Income Trust
Dean Witter Liquid Asset Fund Inc.
Dean Witter New York Municipal Money Market Trust
Dean Witter Tax-Free Daily Income Trust
Dean Witter U.S. Government Money Market Trust
EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Capital Growth Securities
Dean Witter Developing Growth Securities Trust
Dean Witter Dividend Growth Securities Inc.
Dean Witter European Growth Fund Inc.
Dean Witter Financial Services Trust
Dean Witter Fund of Funds
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter Health Sciences Trust
Dean Witter Income Builder Fund
Dean Witter Information Fund
Dean Witter International SmallCap Fund
Dean Witter Japan Fund
Dean Witter Market Leader Trust
Dean Witter Mid-Cap Growth Fund
Dean Witter Natural Resource Development Securities Inc.
Dean Witter Pacific Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Special Value Fund
Dean Witter S&P 500 Index Fund
Dean Witter Utilities Fund
Dean Witter Value-Added Market Series
Dean Witter World Wide Investment Trust
Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas" Portfolio
ASSET ALLOCATION FUNDS
Dean Witter Global Asset Allocation Fund
Dean Witter Strategist Fund
FIXED-INCOME FUNDS
Dean Witter Balanced Income Fund
Dean Witter California Tax-Free Income Fund
Dean Witter Convertible Securities Trust
Dean Witter Diversified Income Trust
Dean Witter Federal Securities Trust
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Hawaii Municipal Trust
Dean Witter High Yield Securities Inc.
Dean Witter Intermediate Income Securities
Dean Witter Intermediate Term U.S. Treasury Trust
Dean Witter Limited Term Municipal Trust
Dean Witter Multi-State Municipal Series Trust
Dean Witter New York Tax-Free Income Fund
Dean Witter Short-Term Bond Fund
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter World Wide Income Trust
DEAN WITTER RETIREMENT SERIES
American Value Series
Capital Growth Series
Dividend Growth Series
Global Equity Series
Intermediate Income Securities Series
Liquid Asset Series
Strategist Series
U.S. Government Money Market Series
U.S. Government Securities Series
Utilities Series
Value-Added Market Series
ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust
Active Assets Money Trust
Active Assets Tax-Free Trust
<PAGE>
Dean Witter
Global Asset Allocation Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and
General Counsel
Mark Bavoso
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, NY 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISER
Morgan Grenfell Investment Services Limited
DEAN WITTER
GLOBAL ASSET
ALLOCATION FUND
PROSPECTUS--MARCH 2, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
MARCH 2, 1998
DEAN WITTER
GLOBAL ASSET ALLOCATION
FUND
- -----------------------------------------------------------------------------
Dean Witter Global Asset Allocation Fund (the "Fund") is an open-end
diversified management investment company whose investment objective is to
seek long-term total return on its investments. The Fund seeks to meet its
investment objective by allocating its assets among U.S. and foreign
equities, fixed-income securities and money market instruments. (See
"Investment Practices and Policies.")
A Prospectus for the Fund dated March 2, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone numbers listed below
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc., at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the
Prospectus.
Dean Witter Global Asset Allocation Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management.................. 3
Trustees and Officers........................ 7
Investment Practices and Policies............ 13
Investment Restrictions...................... 28
Portfolio Transactions and Brokerage ........ 29
The Distributor.............................. 31
Purchase of Fund Shares ..................... 36
Shareholder Services......................... 38
Redemptions and Repurchases.................. 43
Dividends, Distributions and Taxes........... 44
Performance Information...................... 46
Shares of the Fund........................... 47
Custodian and Transfer Agent ................ 48
Independent Accountants...................... 48
Reports to Shareholders...................... 48
Legal Counsel................................ 48
Experts ..................................... 49
Registration Statement....................... 49
Financial Statements at January 31, 1998 .... 50
Report of Independent Accountants............ 71
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on October 18, 1994.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager.
InterCapital is a wholly-owned subsidiary of Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD"), a Delaware corporation. In an internal
reorganization which took place in January, 1993, InterCapital assumed the
investment advisory, administrative and management activities previously
performed by the InterCapital Division of Dean Witter Reynolds Inc. ("DWR"),
a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund and research relating to the portfolio of of the Fund
is conducted by or under the direction of officers of the Fund and of the
Investment Manager and Sub-Advisers, subject to review by the Fund's Board of
Trustees. Information as to these Trustees and officers is contained under
the caption "Trustees and Officers."
InterCapital is also the investment manager (or investment adviser and
administrator) of the following investment companies: Dean Witter Liquid
Asset Fund, Inc., InterCapital Income Securities Inc., Dean Witter High Yield
Securities Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter
Developing Growth Securities Trust, Dean Witter Tax-Exempt Securities Trust,
Dean Witter Dividend Growth Securities Inc., Dean Witter Natural Resource
Development Securities Inc., Dean Witter American Value Fund, Dean Witter
U.S. Government Money Market Trust, Dean Witter Variable Investment Series,
Dean Witter World Wide Investment Trust, Dean Witter Select Municipal
Reinvestment Fund, Dean Witter U.S. Government Securities Trust, Dean Witter
California Tax-Free Income Fund, Dean Witter New York Tax-Free Income Fund,
Dean Witter Convertible Securities Trust, Dean Witter Federal Securities
Trust, Dean Witter Value-Added Market Series, High Income Advantage Trust,
Dean Witter Government Income Trust, InterCapital Insured Municipal Bond
Trust, Dean Witter Utilities Fund, High Income Advantage Trust II, Dean
Witter California Tax-Free Daily Income Trust, Dean Witter Strategist Fund,
High Income Advantage Trust III, Dean Witter World Wide Income Trust, Dean
Witter Intermediate Income Securities, Dean Witter New York Municipal Money
Market Trust, Dean Witter Capital Growth Securities, Dean Witter European
Growth Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Precious
Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund Inc.,
Dean Witter Multi-State Municipal Series Trust, Dean Witter Short-Term U.S.
Treasury Trust, InterCapital Quality Municipal Investment Trust, InterCapital
Insured Municipal Trust, Dean Witter Diversified Income Trust, Dean Witter
Health Sciences Trust, Dean Witter Global Dividend Growth Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Special Value Fund, Dean
Witter Income Builder Fund, Dean Witter Financial Services Trust, Dean Witter
Market Leader Trust, InterCapital Insured Municipal Securities, InterCapital
Insured California Municipal Securities, InterCapital Insured Municipal
Income Trust, InterCapital California Insured Municipal Income Trust,
InterCapital Quality Municipal Income Trust, InterCapital Quality Municipal
Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, Active Assets Money
Trust, Active Assets Tax-Free Trust, Active Assets California Tax-Free Trust,
Active Assets Government Securities Trust, Municipal Income Trust, Municipal
Income Trust II, Municipal Income Trust III, Municipal Income Opportunities
Trust, Municipal Income Opportunities Trust II, Municipal Income
Opportunities Trust III, Prime Income Trust, Municipal Premium Income Trust,
Dean Witter Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean
Witter International SmallCap Fund, Dean Witter Retirement Series, Dean
Witter Mid-Cap Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Balanced Growth Fund, Dean Witter Hawaii Municipal Trust, Dean Witter
Information Fund, Dean Witter Intermediate Term U.S. Treasury
3
<PAGE>
Trust, Dean Witter Japan Fund, Dean Witter S&P 500 Index Fund, Dean Witter
Fund of Funds, Morgan Stanley Dean Witter Growth Fund, Morgan Stanley Dean
Witter Competitive Edge Fund and Dean Witter Select Dimensions Investment
Series. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
companies for which TCW Funds Management, Inc. is the investment adviser:
TCW/DW North American Government Income Trust, TCW/DW Latin American Growth
Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW
Term Trust 2000, TCW/DW Term Trust 2002, TCW/DW Term Trust 2003, TCW/DW
Mid-Cap Equity Trust, TCW/DW Total Return Trust, TCW/DW Emerging Markets
Opportunities Trust and TCW/DW Global Telecom Trust (the "TCW/DW Funds").
InterCapital also serves as: (i) administrator of The BlackRock Strategic
Term Trust Inc., a closed-end investment company; (ii) sub-administrator of
MassMutual Participation Investors and Templeton Global Governments Income
Trust, closed-end investment companies, and (iii) investment adviser of
Offshore Dividend Growth Fund and Offshore Money Market Fund, mutual funds
established under the laws of the Cayman Islands and available only to
investors who are participants in DWR's International Active Assets Account
program and are neither citizens nor residents of the United States.
Pursuant to an Investment Management Agreement (the "Management
Agreement") with the Investment Manager, the Fund has retained the Investment
Manager to manage the investment of the Fund's U.S. assets, including the
placing of orders for the purchase and sale of portfolio securities and
supervise the investment of all of the Fund's assets. The Investment Manager
in conjunction with Morgan Grenfell Investment Services Ltd. ("MGIS" or
"Sub-Adviser") obtains and evaluates such information and advice relating to
the economy, securities markets and specific securities as it considers
necessary or useful to continuously manage the assets of the Fund in a manner
consistent with its investment objective.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or
any of its investors for any act or omission by the Investment Manager or for
any losses sustained by the Fund or its investors. The Management Agreement
in no way restricts the Investment Manager from acting as investment manager
or adviser to others.
Under the terms of the Management Agreement, in addition to managing the
Fund's investments, the Investment Manager maintains certain of the Fund's
books and records and furnishes, at its own expense, such office space,
facilities, equipment, clerical help and bookkeeping and legal services as
the Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone service, heat, light, power and other utilities provided to the
Fund.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, the Sub-Adviser pursuant to the Sub-Advisory Agreement
(see below), or by Dean Witter Distributors Inc., the Distributor of the
Fund's shares ("Distributors" or "the Distributor") will be paid by the Fund.
These expenses will be allocated among the four classes of shares of the Fund
(each, a "Class") pro rata based on the net assets of the Fund attributable
to each Class, except as described below. Such expenses include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1 (the
"12b-1 fee") (see "The Distributor"); charges and expenses of any registrar;
custodian, stock transfer and dividend disbursing agent; brokerage
commissions; taxes; engraving and printing of share certificates;
registration costs of the Fund and its shares under federal and state
securities laws; the cost and expense of printing, including typesetting, and
distributing Prospectuses and Statements of
4
<PAGE>
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or
Sub-Adviser or any corporate affiliate of the Investment Manager or
Sub-Adviser; all expenses incident to any dividend, withdrawal or redemption
options; charges and expenses of any outside service used for pricing of the
Fund's shares; fees and expenses of legal counsel, including counsel to the
Trustees who are not interested persons of the Fund or of the Investment
Manager or Sub-Adviser (not including compensation or expenses of attorneys
who are employees of the Investment Manager) and independent accountants;
membership dues of industry associations; interest on Fund borrowings;
postage; insurance premiums on property or personnel (including officers and
Trustees) of the Fund which inure to its benefit; extraordinary expenses
(including, but not limited to, legal claims and liabilities and litigation
costs and any indemnification relating thereto); and all other costs of the
Fund's operation. The 12b-1 fees relating to a particular Class will be
allocated directly to that Class. In addition, other expenses associated with
a particular Class (except advisory or custodial fees) may be allocated
directly to that Class, provided that such expenses are reasonably identified
as specifically attributable to that Class and the direct allocation to that
Class is approved by the Trustees.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the
annual rate of 1.0% to the Fund's average daily net assets. The management
fee is allocated among the Classes pro rata based on the net assets of the
Fund attributable to each Class. The Investment Manager assumed all operating
expenses (except for the Plan of Distribution fee and any brokerage fees) and
waived the compensation provided for in the Management Agreement for the
period February 28, 1995 (commencement of operations) through December 31,
1995. For the period February 28, 1995 through January 31, 1996 and for the
fiscal years ended January 31, 1997 and 1998, the Fund accrued to the
Investment Manager total compensation under the Investment Management
Agreement of $35,663 (after deduction of waived fees), $589,449 and $621,396,
respectively.
Pursuant to a Sub-Advisory Agreement between the Investment Manager and
MGIS, MGIS has been retained, subject to the overall supervision of the
Investment Manager and the Trustees of the Fund, to assist the Investment
Manager in determining the asset allocations of the Fund, and to manage the
portion of the Fund's portfolio invested in securities issued by issuers
located outside of the Western Hemisphere.
MGIS was organized as a British corporation in 1972 and manages, as of
December 31, 1997, assets of approximately $17.3 billion for primarily U.S.
and Canadian corporate and public employee benefit plans, investment
companies, endowments and foundations. MGIS' principal office is located at
20 Finsbury Circus, London, England. MGIS is a subsidiary of London based
Morgan Grenfell Asset Management Limited, which is itself a subsidiary of
London-based Morgan Grenfell Group plc (which is owned by Deutsche Bank AG,
an international commercial and investment banking group) and is registered
as an investment adviser under the Investment Advisers Act of 1940. In 1838,
Morgan Grenfell was founded to provide merchant banking services, primarily
trade financing between Great Britain and the United States. In 1958, its
investment management arm began operations. In recent years, Morgan Grenfell
Group plc has achieved a prominent position in the securities industry by
providing investment and commercial banking services, financial services, and
discretionary management and advisory services covering all of the world's
leading securities markets. Morgan Grenfell Asset Management Limited, through
its various investment management subsidiaries, which have extensive
experience in global investment management, is managing, as of December 31,
1997, approximately $144.2 billion worldwide.
Prior to March 1998, TCW Funds Management, Inc. ("TCW"), a wholly-owned
subsidiary of the TCW Group, Inc., served as a sub-adviser to the Fund
pursuant to a Sub-Advisory Agreement between the Investment Manager and TCW.
In October 1997, TCW indicated its intention to resign as sub-adviser. Prior
to November 6, 1997, the Investment Manager informed the Board of Trustees of
its intention to
5
<PAGE>
assume the investment management function performed by TCW. On November 6,
1997, the Board approved the submission to shareholders for approval at a
special meeting of shareholders of a new Investment Management Agreement
between the Fund and the Investment Manager. The new Investment Management
Agreement clarified the Investment Manager's ability to manage all or part of
the Fund's portfolio itself, rather than through a sub-adviser. The Fund's
shareholders approved the new Investment Management Agreement at a meeting
held on February 26, 1998. TCW's resignation and the new Investment
Management Agreement became effective on March 2, 1998.
Both the Investment Manager and the Sub-Adviser have authorized any of
their directors, officers and employees who have been elected as Trustees or
officers of the Fund to serve in the capacities in which they have been
elected. Services furnished by the Investment Manager and the Sub-Adviser may
be furnished by directors, officers and employees of the Investment Manager
and the Sub-Adviser. In connection with the services rendered by the
Sub-Adviser, the Sub-Adviser bears the following expenses: (a) the salaries
and expenses of its personnel; and (b) all expenses incurred by it in
connection with performing the services provided by it as Sub-Adviser, as
described above.
As full compensation for the services and facilities furnished to the Fund
and the Investment Manager and expenses of the Fund and the Investment
Manager assumed by the Sub-Adviser, the Investment Manager pays the
Sub-Adviser monthly compensation equal to 30% of the Investment Manager's
monthly compensation payable under the Management Agreement. For the period
February 28, 1995 (commencement of operations) through January 31, 1996, and
for the fiscal years ended January 31, 1997 and 1998, the Investment Manager
informed the Fund that it accrued to the Sub-Adviser total compensation of
$10,699, $176,835 and $186,419, respectively, under its Sub-Advisory
Agreement. For the period February 28, 1995 (commencement of operations)
through January 31, 1996 and for the fiscal years ended January 31, 1997 and
1998, the Investment Manager informed the Fund that it accrued to TCW
compensation of $10,699, $176,835 and $186,419, respectively, under the
Sub-Advisory Agreement between the Investment Manager and TCW (the "TCW
Sub-Advisory Agreement"). The Investment Manager will retain the portion
of the Investment Management fee previously paid to TCW.
The Investment Manager has paid the organizational expenses of the Fund,
approximately $177,000, incurred prior to the offering of the Fund's shares.
The Fund has reimbursed the Investment Manager $144,000 for such expenses.
The Fund has deferred and is amortizing the organizational expenses on the
straight line method over a period not to exceed five years from the date of
commencement of the Fund's operations.
The Management Agreement was initially approved by the Board of Trustees
at a meeting held November 6, 1997 and by shareholders at a special meeting
held on February 26, 1998 and took effect on March 2, 1998. The Sub-Advisory
Agreement and the TCW Sub-Advisory Agreement were initially approved by the
Board of Trustees on February 21, 1997 and by the shareholders of the Fund at
a Special Meeting of Shareholders held on May 21, 1997. The Management
Agreement is substantially identical to a prior investment management
agreement and the Sub-Advisory Agreement is substantially identical to the
prior sub-advisory agreement initially approved by the Board of Trustees on
December 6, 1994 and by InterCapital, as the then sole shareholders of the
Fund on December 7, 1994. The Agreements took effect on May 31, 1997 upon the
consummation of the merger of Dean Witter, Discover & Co. with Morgan Stanley
Group Inc. The Management Agreement and the Sub-Advisory Agreement may be
terminated at any time, without penalty, on thirty days' notice by the Board
of Trustees of the Fund, by the holders of a majority, as defined in the
Investment Company Act of 1940 (the "Act"), of the outstanding shares of the
Fund, or by the Investment Manager. The Management Agreement and the
Sub-Advisory Agreement will automatically terminate in the event of their
assignment (as defined in the Act).
Under their terms, the Management Agreement and the Sub-Advisory Agreement
have initial terms ending April 30, 1999 and will remain in effect from year
to year thereafter, provided continuance of the Agreements is approved at
least annually by the vote of the holders of a majority, as defined in the
Act, of the outstanding shares of the Fund, or by the Board of Trustees of
the Fund; provided that in either
6
<PAGE>
event such continuance is approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to the Agreement or "interested
persons" (as defined in the Act) of any such party (the "Independent
Trustees"), which vote must be cast in person at a meeting called for the
purpose of voting on such approval.
The following owned more than 5% of the outstanding shares of Class A of
the Fund on February 5, 1998: Dean Witter InterCapital Inc., Two World Trade
Center, 73rd Floor, New York, New York 10048 -- 34.69%; Dean Witter Reynolds
Inc., Custodian for Donna K. Elliott, IRA dated 10/8/82, 322 Hagy, Rt. 1, Box
106, Toulon, IL 61483--19.10%; Michael D. Okin, 5425 Avenida Del Mar,
Sarasota, FL 34242 -- 16.58%; Peter O. Okin, 5425 Avenida Del Mar, Sarasota,
FL 34242--14.93% and Dean Witter Reynolds Inc., Custodian for M.D. Petrakis,
Simple IRA, Dated 2/20/97, 2508 N. Campbell, Chicago, IL 60647--14.65%. The
following owned more than 5% of the outstanding shares of Class C of the Fund
on February 5, 1998: Donald F. Griffone Sr., Trustee, Donald F. Griffone
Living Trust, Under Agreement dated 12/9/96, 5521 Washington Street, Downers
Grove, IL 60516--35.91%; Theodore Thompson and Cora Y. Thompson, Thompson
Trustees of the Thompson Family Trust dated 7/1/92, 229 La Cruz Road, Santa
Fe, NM 87501--17.84%; Dean Witter InterCapital Inc., Two World Trade Center,
73rd Floor, New York, NY 10048--17.35%; Dean Witter Reynolds Inc., Custodian
for Jeannette Broughton, IRA standard dated 4/16/96, 925 Chesaco Avenue,
Baltimore, MD 21237--13.26% and Ruth C. Hairgrove and Ann Dietrich, JTTEN,
1000 South Lorraine #309, Wheaton, IL 60187--7.40%. The following owned more
than 5% of the outstanding shares of Class D of the Fund on February 5, 1998:
David R. Dyroff, 15 Woodoaks Trail, Ladue, MO 63124--51.46% and Dean Witter
InterCapital Inc., Two World Trade Center, 73rd Floor, New York, NY
10048--48.47%.
The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use, or at any
time permit others to use, the name "Dean Witter." The Fund has also agreed
that in the event the Management Agreement is terminated, or if the
affiliation between InterCapital and its parent company is terminated, the
Fund will eliminate the name "Dean Witter" from its name if DWR or its parent
company shall so request.
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with 85 Dean Witter Funds and 11 TCW/DW Funds, are shown
below:
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- ---------------------------------------------------------------
<S> <C>
Michael Bozic (57).......................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the Sears
Merchandise Group of Sears, Roebuck and Co.; Director of
Eaglemark Financial Services, Inc., the United Negro College
Fund and Weirton Steel Corporation.
Charles A. Fiumefreddo* (64)................ Chairman, Chief Executive Officer and Director of InterCapital,
Chairman of the Board, DWSC and Distributors; Executive Vice President and Director
President, Chief Executive Officer of DWR; Chairman, Director or Trustee, President and Chief
and Trustee Executive Officer of the Dean Witter Funds; Chairman, Chief
Two World Trade Center Executive Officer and Trustee of the TCW/DW Funds; Chairman
New York, New York and Director of Dean Witter Trust FSB ("DWT"); Director and/or
officer of various MSDWD subsidiaries.
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- ---------------------------------------------------------------
<S> <C>
Edwin J. Garn (65).......................... Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah)(1974-1992) and Chairman, Senate
c/o Huntsman Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1971-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman
Corporation; Director of Franklin Covey (time management
systems); John Alden Financial Corp. (health insurance), United
Space Alliance (joint venture between Lockheed Martin and
the Boeing Company) and Nuskin Asia Pacific (Multilevel
Marketing); member of the board of various civic and charitable
organizations.
John R. Haire (73).......................... Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Chairman of the Audit Committee
New York, New York and Chairman of the Committee of the Independent Trustees
and Trustee of the TCW/DW Funds; formerly President, Council
for Aid to Education (1978-1989) and Chairman and Chief Executive
Officer of Anchor Corporation, an Investment Advisor
(1964-1978); Director of Washington National Corporation
(insurance).
Wayne E. Hedien (64)........................ Retired; Director or Trustee of the Dean Witter Funds; Director
Trustee of The PMI Group, Inc. (private mortgage insurance); Trustee
c/o Gordon Altman Butowsky and Vice Chairman of The Field Museum of Natural History;
Weitzen Shalov & Wein formerly associated with the Allstate Companies (1966-1994),
Counsel to the Independent Trustees most recently as Chairman of The Allstate Corporation (March,
114 West 47th Street 1993-December, 1994) and Chairman and Chief Executive Officer
New York, New York of its wholly-owned subsidiary, Allstate Insurance Company
(July, 1989-December, 1994); director of various other business
and charitable organizations.
Dr. Manuel H. Johnson (49).................. Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick International, Inc. (G7C), an international economic commission; Director or
1133 Connecticut Avenue, N.W. Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds;
Washington, DC Director of NASDAQ (since June, 1995); Director of Greenwich
Capital Markets Inc. (broker-dealer); Chairman and Trustee
of the Financial Accounting Foundation (oversight organization
for the Financial Accounting Standards Board); formerly Vice
Chairman of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S. Treasury.
Michael E. Nugent (61)...................... General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
8
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- ---------------------------------------------------------------
<S> <C>
Philip J. Purcell* (54)..................... Chairman of the Board of Directors and Chief Executive Officer
Trustee of MSDWD, DWR and Novus Credit Services Inc.; Director of
1585 Broadway InterCapital, DWSC and Distributors; Director or Trustee of
New York, New York the Dean Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
John L. Schroeder (67)...................... Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky Formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991-September, 1995).
Counsel to the Independent Trustees
114 West 47th Street
New York, New York
Barry Fink (43)............................. Senior Vice President (since March, 1997) and Secretary and
Vice President, Secretary General Counsel (since February, 1997) of InterCapital and
and General Counsel DWSC; Senior Vice President (since March, 1997) and Assistant
Two World Trade Center Secretary and Assistant General Counsel (since February, 1997)
New York, New York of Distributors; Assistant Secretary of DWR (since August,
1996); Vice President, Secretary and General Counsel of the
Dean Witter Funds and the TCW/DW Funds (since February, 1997);
previously First Vice President (June, 1993-February, 1997),
Vice President (until June, 1993) and Assistant Secretary
and Assistant General Counsel of InterCapital and DWSC and
Assistant Secretary of the Dean Witter Funds and the TCW/DW
Funds.
Mark Bavoso (37)............................ Senior Vice President of InterCapital (since June, 1993);
Vice President formerly Vice President of InterCapital; Vice President of
Two World Trade Center various Dean Witter Funds.
New York, New York
Thomas F. Caloia (51)....................... First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Executive Vice President and Director of DWR, and Director
of SPS Transaction Services, Inc. and various other MSDWD subsidiaries,
Robert M. Scanlan, President and Chief Operating Officer of InterCapital and
DWSC, Executive Vice President of Distributors and DWT and Director of DWT,
Joseph J. McAlinden, Executive Vice President and Chief Investment Officer of
InterCapital and Director of DWT, Robert S. Giambrone, Senior Vice President
of InterCapital, DWSC, Distributors and DWT and Director of DWT, and Edward
F. Gaylor and Paul D. Vance, Senior Vice Presidents of InterCapital, are Vice
Presidents of the Fund. Marilyn K. Cranney, First Vice President and
Assistant General Counsel of InterCapital and DWSC, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, Vice Presidents and Assistant General Counsels
of InterCapital and DWSC, and Frank Bruttomesso and Todd Lebo, staff
attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date
9
<PAGE>
of this Statement of Additional Information, there are a total of 84 Dean
Witter Funds, comprised of 128 portfolios. As of January 31, 1998, the Dean
Witter Funds had total net assets of approximately $96 billion and more than
six million shareholders.
Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, MSDWD.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Four
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel are
in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1997, the three Committees held a combined total of seventeen meetings.
The Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committee of the Independent Trustees and the Audit
Committee maintains an office at the Funds' headquarters in New York. He is
responsible for keeping abreast of regulatory and industry developments and
the Funds' operations and management. He screens and/or prepares written
materials and identifies critical issues for the Independent Trustees to
consider, develops agendas for Committee meetings, determines the type and
amount of information that the Committees will need to form a judgment on
various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
10
<PAGE>
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the Dean Witter Funds and as an Independent Trustee and as
Chairman of the Committee of the Independent Trustees and the Audit Committee
of the TCW/DW Funds. The current Committee Chairman has had more than 35
years experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $800 plus a per
meeting fee of $50 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee
of the Independent Trustees an additional annual fee of $1,200). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take
place on a single day, the Trustees are paid a single meeting fee by the
Fund. The Fund also reimburses such Trustees for travel and other
out-of-pocket expenses incurred by them in connection with attending such
meetings. Trustees and officers of the Fund who are or have been employed by
the Investment Manager or an affiliated company receive no compensation or
expense reimbursement from the Fund.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended January 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- -------------
<S> <C>
Michael Bozic ............. $1,650
Edwin J. Garn ............. 1,850
John R. Haire ............. 3,800
Wayne E. Hedien............ 832
Dr. Manuel H. Johnson .... 1,800
Michael E. Nugent.......... 1,850
John L. Schroeder.......... 1,850
</TABLE>
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for
services to the 84 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the 14 TCW/DW Funds that were in operation at
December 31, 1997. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the TCW/DW Funds are included solely because of a limited exchange
privilege between those Funds and five Dean Witter Money Market Funds. Mr.
Hedien's term as Director or Trustee of each Dean Witter Fund commenced on
September 1, 1997.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
COMMITTEES OF FOR SERVICE AS
INDEPENDENT CHAIRMAN OF
FOR SERVICE DIRECTORS/ COMMITTEES OF TOTAL CASH
AS DIRECTOR OR FOR SERVICE AS TRUSTEES AND INDEPENDENT COMPENSATION
TRUSTEE AND TRUSTEE AND AUDIT TRUSTEES FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER COMMITTEES OF 84 AND AUDIT 84 DEAN WITTER
NAME OF OF 84 DEAN WITTER OF 14 TCW/DW DEAN WITTER COMMITTEES OF 14 FUNDS AND 14
INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS TCW/DW FUNDS TCW/DW FUNDS
- ------------------- ----- ----- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Michael Bozic ........ $133,602 -- -- -- $133,602
Edwin J. Garn ........ 149,702 -- -- -- 149,702
John R. Haire ........ 149,702 $73,725 $157,463 $25,350 406,240
Wayne E. Hedien....... 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson 145,702 71,125 -- -- 216,827
Michael E. Nugent ... 149,702 73,725 -- -- 223,427
John L. Schroeder .... 149,702 73,725 -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, not including the Fund, have adopted a retirement program under
which an Independent Trustee who retires after serving for at least five
years (or such lesser period as may be determined by the Board) as an
Independent Director or Trustee of any Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 25.0% of his or her Eligible Compensation plus 0.4166666%
of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(1) "Eligible Compensation" is
one-fifth of the total compensation earned by such Eligible Trustee for
service to the Adopting Fund in the five year period prior to the date of the
Eligible Trustee's retirement. Benefits under the retirement program are not
secured or funded by the Adopting Funds.
- ----------------
(1) An Eligible Trustee may elect alternate payments of his or her
retirement benefits based upon the combined life expectancy of such
Eligible Trustee and his or her spouse on the date of such Eligible
Trustee's retirement. The amount estimated to be payable under this
method, through the remainder of the later of the lives of such
Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit. In addition, the Eligible Trustee may elect that the
surviving spouse's periodic payment of benefits will be equal to either
50% or 100% of the previous periodic amount, an election that,
respectively, increases or decreases the previous periodic amount so
that the resulting payments will be the actuarial equivalent of the
Regular Benefit.
12
<PAGE>
The following table illustrates the retirement benefits accrued to the
Fund's Independent Trustees by the 57 Dean Witter Funds (not including the
Fund) for the year ended December 31, 1997, and the estimated retirement
benefits for the Fund's Independent Trustees, to commence upon their
retirement, from the 57 Dean Witter Funds as of December 31, 1997.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- --------------------------- ------------- ------------- ------- ----------
<S> <C> <C> <C> <C>
Michael Bozic ............. 10 50.0% $ 20,499 $ 47,025
Edwin J. Garn ............. 10 50.0 30,878 47,025
John R. Haire ............. 10 50.0 (19,823)(3) 127,897
Wayne E. Hedien............ 9 42.5 0 39,971
Dr. Manuel H. Johnson .... 10 50.0 12,832 47,025
Michael E. Nugent ......... 10 50.0 22,546 47,025
John L. Schroeder.......... 8 41.7 39,350 39,504
</TABLE>
- -------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
Forward Foreign Currency Exchange Contracts. As discussed in the
Prospectus, the Fund may enter into forward foreign currency exchange
contracts ("forward contracts") as a hedge against fluctuations in future
foreign exchange rates. The Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign currency exchange market, or through entering into forward
contracts to purchase or sell foreign currencies. A forward contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large, commercial and investment banks) and their customers. Such
forward contracts will only be entered into with United States banks and
their foreign branches or foreign banks whose assets total $1 billion or
more. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
When the Investment Manager and/or the Sub-Adviser of the Fund believes
that the currency of a particular foreign country may suffer a substantial
movement against the U.S. dollar, it may enter into a forward contract to
purchase or sell, for a fixed amount of dollars or other currency, the amount
of foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The Fund will not
enter into such forward contracts or maintain a net exposure to such
contracts where the consummation of the contracts would obligate the Fund to
deliver an amount of foreign currency in excess of the value of the Fund's
portfolio securities or other assets denominated in that currency. Under
normal circumstances, consideration of the prospect for currency parities
will be incorporated into the longer term investment decisions made with
regard to overall diversification strategies. However, the management of the
Fund believes that it is important to have the flexibility to
13
<PAGE>
enter into such forward contracts when it determines that the best interests
of the Fund will be served. The Fund's custodian bank will place cash, U.S.
Government securities or other appropriate liquid portfolio securities in a
segregated account of the Fund in an amount equal to the value of the Fund's
total assets committed to the consummation of forward contracts entered into
under the circumstances set forth above. If the value of the securities
placed in the segregated account declines, additional cash or securities will
be placed in the account on a daily basis so that the value of the account
will equal the amount of the Fund's commitments with respect to such
contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign securities denominated in a foreign currency against adverse exchange
rate moves vis-a-vis the U.S. dollar, at the maturity of the forward contract
for delivery by the Fund of a foreign currency, the Fund may either sell the
portfolio security and make delivery of the foreign currency, or it may
retain the security and terminate its contractual obligation to deliver the
foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the
same amount of the foreign currency (however, the ability of the Fund to
terminate a contract is contingent upon the willingness of the currency
trader with whom the contract has been entered into to permit an offsetting
transaction). It is impossible to forecast the market value of portfolio
securities at the expiration of the contract. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
securities if its market value exceeds the amount of foreign currency the
Fund is obligated to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract
to sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase
of the foreign currency, the Fund will realize a gain to the extent the price
of the currency it has agreed to sell exceeds the price of the currency it
has agreed to purchase. Should forward prices increase, the Fund will suffer
a loss to the extent the price of the currency it has agreed to purchase
exceeds the price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a security or the
currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a
greater extent than the value of the premium received for the option. The
Fund will maintain with its Custodian at all times, cash, U.S. Government
securities, or other appropriate liquid portfolio securities in a segregated
account equal in value to all forward contract obligations and option
contract obligations entered into in hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. It will, however, do so from time to time, and
investors should be aware of the costs of currency conversion. Although
foreign exchange dealers do not charge a fee for conversion, they do realize
a profit based on the spread between the prices at which they are buying and
selling various currencies. Thus a dealer may offer to sell a foreign
currency to the Fund at one rate, while offering a lesser rate of exchange
should the Fund desire to resell that currency to the dealer.
14
<PAGE>
OPTIONS AND FUTURES TRANSACTIONS
As stated in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and stock indexes and purchase options of the same
series to effect closing transactions, and may hedge against potential
changes in the market value of investments (or anticipated investments) and
facilitate the reallocation of the Fund's assets into and out of equities and
fixed-income securities by purchasing put and call options on portfolio (or
eligible portfolio) securities and engaging in transactions involving futures
contracts and options on such contracts. The Fund may also hedge against
potential changes in the market value of the currencies in which its
investments (or anticipated investments) are denominated by purchasing put
and call options on currencies and engage in transactions involving currency
futures contracts and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options
Clearing Corporation ("OCC") and other clearing entities including foreign
exchanges. Ownership of a listed call option gives the Fund the right to buy
from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC the
underlying security at that exercise price prior to the expiration date of
the option, regardless of its then current market price. Ownership of a
listed put option would give the Fund the right to sell the underlying
security to the OCC at the stated exercise price. Upon notice of exercise of
the put option, the writer of the put would have the obligation to purchase
the underlying security from the OCC at the exercise price.
Options on Treasury Bonds and Notes. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if the Fund holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Fund will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the
portfolio securities involved. As a result, the Fund would be enabled to sell
the foreign currency for a fixed amount of U.S. dollars, thereby "locking in"
the dollar value of the portfolio securities (less the amount of the premiums
paid for the options). Conversely, the Fund may purchase call options on
foreign currencies in which securities it anticipates purchasing are
denominated to secure a set U.S. dollar price for such securities and protect
against a decline in the value of the U.S. dollar against such foreign
currency. The Fund may also purchase call and put options to close out
written option positions.
The Fund may also write call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated
in foreign currencies. If the U.S. dollar value of the portfolio securities
falls as a result of a decline in the exchange rate between the foreign
currency in which a
15
<PAGE>
security is denominated and the U.S. dollar, then a loss to the Fund
occasioned by such value decline would be ameliorated by receipt of the
premium on the option sold. At the same time, however, the Fund gives up the
benefit of any rise in value of the relevant portfolio securities above the
exercise price of the option and, in fact, only receives a benefit from the
writing of the option to the extent that the value of the portfolio
securities falls below the price of the premium received. The Fund may also
write options to close out long call option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
management of the Fund, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater than
the risks in connection with the underlying currency, there can be no
assurance that a liquid secondary market will exist for a particular option
at any specific time. In addition, options on foreign currencies are affected
by all of those factors which influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which
have entered into direct agreements with the Fund. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between the Fund and the transacting dealer, without the intermediation of a
third party such as the OCC. If the transacting dealer fails to make or take
delivery of the securities underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities and the U.S. dollar and foreign currencies, without
limit. Generally, a call option is "covered" if the Fund owns, or has the
right to acquire, without additional cash consideration (or for additional
cash consideration held for the Fund by its Custodian in a segregated
account) the underlying security (currency) subject to the option except that
in the case of call options on U.S. Treasury Bills, the Fund might own U.S.
Treasury Bills of a different series from those underlying the call option,
but with a principal amount and value corresponding to the exercise price and
a maturity date no later than that of the securities (currency) deliverable
under the call option. A call option is also covered if the Fund holds a call
on the same security (currency) as the underlying security (currency) of the
written option, where the exercise price of the call used for coverage is
equal to or less than the exercise price of the call written or greater than
the exercise price of the call written if the mark to market difference is
maintained by the Fund in cash, U.S. Government securities or other liquid
portfolio securities which the Fund holds in a segregated account maintained
with its Custodian.
16
<PAGE>
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these
premiums may better enable the Fund to achieve a greater total return than
would be realized from holding the underlying securities (currency) alone.
Moreover, the income received from the premium will offset a portion of the
potential loss incurred by the Fund if the securities (currency) underlying
the option are ultimately sold (exchanged) by the Fund at a loss. The premium
received will fluctuate with varying economic market conditions. If the
market value of the portfolio securities (or the currencies in which they are
denominated) upon which call options have been written increases, the Fund
may receive less total return from the portion of its portfolio upon which
calls have been written than it would have had such calls not been written.
As regards listed options and certain OTC options, during the option
period, the Fund may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to
specific expiration dates). This obligation is terminated upon the expiration
of the option period or at such earlier time when the writer effects a
closing purchase transaction. A closing purchase transaction is accomplished
by purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option to prevent an underlying security (currency)
from being called, to permit the sale of an underlying security (or the
exchange of the underlying currency) or to enable the Fund to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Fund. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security (currency). Conversely, a gain resulting from a
closing purchase transaction could be offset in whole or in part or exceeded
by a decline in the market value of the underlying security (currency).
The Fund may also purchase put options to close out written put positions
in a manner similar to call options closing purchase transactions. In
addition, the Fund may sell a put option which it has previously purchased
prior to the sale of the securities (currency) underlying such option. Such a
sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option which is sold. Any such gain or loss could be
offset in whole or in part by a change in the market value of the underlying
security (currency). If a put option purchased by the Fund expired without
being sold or exercised, the premium would be lost.
Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed and OTC put options written by
the Fund will be exercisable by the purchaser only on a specific date). A put
is "covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other liquid portfolio securities in an amount equal to at
least the exercise price of the option, at all times during the option
period. Similarly, a short put position could be covered by the Fund by its
purchase of a put option on the same security as the underlying security of
the written option, where the exercise price of the purchased option is equal
to or more than the exercise price of the put written or less than the
exercise price of the put written if the mark to market difference is
maintained by the Fund in cash, U.S. Government securities or other liquid
portfolio securities which the Fund holds in a segregated account maintained
at its Custodian. In writing puts, the Fund assumes the risk of loss should
the market value of the underlying security decline below the exercise price
of the option (any loss being decreased by the receipt of the premium on the
option written). In the case of listed options, during the option period, the
Fund may be required, at any time, to make payment of the exercise price
against delivery of the underlying security. The operation of and limitations
on covered put options in other respects are substantially identical to those
of call options.
17
<PAGE>
The Fund will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the
Investment Manager wishes to purchase the security underlying the option at a
price lower than its current market price, in which case it will write the
covered put at an exercise price reflecting the lower purchase price sought.
The potential gain on a covered put option is limited to the premium received
on the option (less the commissions paid on the transaction) while the
potential loss equals the difference between the exercise price of the option
and the current market price of the underlying securities when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).
Purchasing Call and Put Options. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund
may purchase call options in order to close out a covered call position (see
"Covered Call Writing" above) or purchase call options on securities they
intend to purchase. The Fund may also purchase a call option on foreign
currency to hedge against an adverse exchange rate move of the currency in
which the security it anticipates purchasing is denominated vis-a-vis the
currency in which the exercise price is denominated. The purchase of the call
option to effect a closing transaction or a call written over-the-counter may
be a listed or an OTC option. In either case, the call purchased is likely to
be on the same securities (currencies) and have the same terms as the written
option. If purchased over-the-counter, the option would generally be acquired
from the dealer or financial institution which purchased the call written by
the Fund.
The Fund may purchase put options on securities (currency) 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 (currency), if the value of the
underlying security (currency) were to fall below the exercise price of the
put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. The Fund may also purchase put options
to close out written put positions in a manner similar to call options
closing purchase transactions. In addition, the Fund may sell a put option
which it has previously purchased prior to the sale of the securities
(currency) underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less
than the premium and other transaction costs paid on the put option which is
sold. Any such gain or loss could be offset in whole or in part by a change
in the market value of the underlying security (currency). If a put option
purchased by the Fund expired without being sold or exercised, the premium
would be lost.
Risks of Options Transactions. The successful use of options depends on
the ability of the Adviser to forecast correctly interest rates and market
movements. If the market value of the portfolio securities (or the currencies
in which they are denominated) upon which call options have been written
increases, the Fund may receive a lower total return from the portion of its
portfolio upon which calls have been written than it would have had such
calls not been written. During the option period, the covered call writer
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security (or the currency in which it is denominated) increase,
but has retained the risk of loss should the price of the underlying security
(currency) decline. The covered put writer also retains the risk of loss
should the market value of the underlying security (currency) decline below
the exercise price of the option less the premium received on the sale of the
option. In both cases, the writer has no control over the time when it may be
required to fulfill its obligation as a writer of the option. Once an option
writer has received an exercise notice, it cannot effect a closing purchase
transaction in order to terminate its obligation under the option and must
deliver or receive the underlying securities (currency) at the exercise
price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to
purchase an offsetting over-the-counter option, it cannot sell the underlying
security until the option expires or the option is exercised. Accordingly, a
covered call option writer may not be able to sell (exchange) an underlying
security (currency) at a time when it might otherwise be advantageous to do
so. A covered put option writer who is unable to effect a closing purchase
transaction or to purchase an offsetting over-the-counter option would
continue to bear the risk of decline in the market price of the underlying
security (currency) until the option expires or is exercised. In addition, a
covered put writer would be unable to utilize the amount held in cash or U.S.
Government or other liquid portfolio securities as security for the put
option for other investment purposes until the exercise or expiration of the
option.
18
<PAGE>
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option
exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out
by entering into a closing purchase transaction with the purchasing dealer.
However, the Fund may be able to purchase an offsetting option which does not
close out its position as a writer but constitutes an asset of equal value to
the obligation under the option written. If the Fund is not able to either
enter into a closing purchase transaction or purchase an offsetting position,
it will be required to maintain the securities subject to the call, or the
collateral underlying the put, even though it might not be advantageous to do
so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an exchange; (v) inadequacy of the facilities of an
exchange or the Options Clearing Corporation ("OCC") to handle current
trading volume; or (vi) a decision by one or more exchanges to discontinue
the trading of options (or a particular class or series of options), in which
event the secondary market on that exchange (or in that class or series of
options) would cease to exist, although outstanding options on that exchange
that had been issued by the OCC as a result of trades on that exchange would
generally continue to be exercisable in accordance with their terms.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, futures or options thereon, the Fund could
experience delays and/or losses in liquidating open positions purchased or
sold through the broker and/or incur a loss of all or part of its margin
deposits with the broker. Similarly, in the event of the bankruptcy of the
writer of an OTC option purchased by the Fund, the Fund could experience a
loss of all or part of the value of the option. Transactions are entered into
by the Fund only with brokers or financial institutions deemed creditworthy
by the Investment Manager.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different exchanges or are held or written
on one or more accounts or through one or more brokers). An exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities is that the
prices of securities and indexes subject to futures contracts (and thereby
the futures contract prices) may correlate imperfectly with the behavior of
the cash prices of the Fund's portfolio securities. Another such risk is that
prices of interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Fund seeks a hedge. A
correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between
a contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
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The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Stock Index Options. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at
a specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level
of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple (the "multiplier"). The multiplier for an index
option performs a function similar to the unit of trading for a stock option.
It determines the total dollar value per contract of each point in the
difference between the exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a one-point difference
will yield $100. Options on different indexes may have different multipliers.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in
cash and a gain or loss depends on price movements in the stock market
generally (or in a particular segment of the market) rather than the price
movements in individual stocks. Currently, options are traded on the S&P 100
Index and the S&P 500 Index on the Chicago Board Options Exchange, the Major
Market Index and the Computer Technology Index, Oil Index and Institutional
Index on the American Stock Exchange and the NYSE Index and NYSE Beta Index
on the New York Stock Exchange, The Financial News Composite Index on the
Pacific Stock Exchange and the Value Line Index, National O-T-C Index and
Utilities Index on the Philadelphia Stock Exchange, each of which and any
similar index on which options are traded in the future which include stocks
that are not limited to any particular industry or segment of the market is
referred to as a "broadly based stock market index." Options on stock indexes
provide the Fund with a means of protecting the Fund against the risk of
market wide price movements. If the Investment Manager anticipates a market
decline, the Fund could purchase a stock index put option. If the expected
market decline materialized, the resulting decrease in the value of the
Fund's portfolio would be offset to the extent of the increase in the value
of the put option. If the Investment Manager anticipates a market rise, the
Fund may purchase a stock index call option to enable the Fund to participate
in such rise until completion of anticipated common stock purchases by the
Fund. Purchases and sales of stock index options also enable the Investment
Manager to more speedily achieve changes in the Fund's equity positions.
The Fund will write put options on stock indexes only if such positions
are covered by cash, U.S. Government securities or other high grade debt
obligations equal to the aggregate exercise price of the puts, which cover is
held for the Fund in a segregated account maintained for it by the Fund's
Custodian. All call options on stock indexes written by the Fund will be
covered either by a portfolio of stocks substantially replicating the
movement of the index underlying the call option or by holding a separate
call option on the same stock index with a strike price no higher than the
strike price of the call option sold by the Fund.
Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its
writing position by holding a diversified portfolio of stocks similar to
those on which the underlying index is based. However, most investors cannot,
as a practical matter, acquire and hold a portfolio containing exactly the
same stocks as the underlying index, and, as a result, bear a risk that the
value of the securities held will vary from the value of the index. Even if
an index call writer could assemble a stock portfolio that exactly reproduced
the composition of the underlying index, the writer still would not be fully
covered from a risk standpoint because of the "timing risk" inherent in
writing index options. When an index option is exercised, the amount of cash
that the holder is entitled to receive is determined by the difference
between the exercise price and the closing index level on the date when the
option is exercised. As with other kinds of options, the writer will not
learn that it has been assigned until the next business day, at the earliest.
The time lag between exercise and notice of assignment poses no risk for the
writer or a
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covered call on a specific underlying security, such as a common stock,
because there the writer's obligation is to deliver the underlying security,
not to pay its value as of a fixed time in the past. So long as the writer
already owns the underlying security, it can satisfy its settlement
obligations by simply delivering it, and the risk that its value may have
declined since the exercise date is borne by the exercising holder. In
contrast, even if the writer of an index call holds stocks that exactly match
the composition of the underlying index, it will not be able to satisfy its
assignment obligations by delivering those stocks against payment of the
exercise price. Instead, it will be required to pay cash in an amount based
on the closing index value on the exercise date; and by the time it learns
that it has been assigned, the index may have declined, with a corresponding
decrease in the value of its stock portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding stock positions.
A holder of an index option who exercises it before the closing index
value for that day is available runs the risk that the level of the
underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the exercising holder will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the
assigned writer.
If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.
Futures Contracts. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S. and
foreign commodity exchanges on such underlying securities as U.S. Treasury
bonds, notes and bills ("interest rate" futures), on the U.S. dollar and
foreign currencies, and such indexes as the S&P 500 Index, the Moody's
Investment-Grade Corporate Bond Index and the New York Stock Exchange
Composite Index ("index" futures).
As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager or a Sub-Adviser anticipates that interest
rates may rise and, concomitantly, the price of fixed-income securities fall,
the Fund may sell an interest rate futures contract or a bond index futures
contract. If declining interest rates are anticipated, the Fund may purchase
an interest rate futures contract to protect against a potential increase in
the price of U.S. Government securities the Fund intends to purchase.
Subsequently, appropriate fixed-income securities may be purchased by the
Fund in an orderly fashion; as securities are purchased, corresponding
futures positions would be terminated by offsetting sales of contracts.
The Fund will purchase or sell futures contracts on the U.S. dollar and on
foreign currencies to hedge against an anticipated rise or decline in the
value of the U.S. dollar or foreign currency in which a portfolio security of
the Fund is denominated vis-a-vis another currency.
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. If the Investment Manager or a Sub-Adviser
anticipates that the prices of stock held by the Fund may fall, the Fund may
sell a stock index futures contract. Conversely, if the Investment Manager or
a Sub-Adviser wishes to hedge against anticipated price rises in those stocks
which the Fund intends to purchase, the Fund may purchase stock index futures
contracts. In addition, interest rate and stock index futures contracts will
be bought or sold in order to close out a short or long position in a
corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Index
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futures contracts provide for the delivery of an amount of cash equal to a
specified dollar amount times the difference between the stock index value at
the open or close of the last trading day of the contract and the futures
contract price. A futures contract sale is closed out by effecting a futures
contract and the futures contract price. A futures contract sale is closed
out by effecting a futures contract purchase for the same aggregate amount of
the specific type of equity security and the same delivery date. If the sale
price exceeds the offsetting purchase price, the seller would be paid the
difference and would realize a gain. If the offsetting purchase price exceeds
the sale price, the seller would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same aggregate amount of the specific type of equity
security and the same delivery date. If the offsetting sale price exceeds the
purchase price, the purchaser would realize a gain, whereas if the purchase
price exceeds the offsetting sale price, the purchaser would realize a loss.
There is no assurance that the Fund will be able to enter into a closing
transaction.
Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities equal to approximately 2% of the contract
amount. Initial margin requirements are established by the exchanges on which
futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required
by the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Fund may be required to make subsequent deposits called
"variation margin," with the Fund's Custodian, in the account in the name of
the broker, which are reflective of price fluctuations in the futures
contract. Currently, interest rates futures contracts can be purchased on
debt securities such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes
with maturities between 6 1/2 and 10 years, GNMA Certificates and Bank
Certificates of Deposit.
Index Futures Contracts. The Fund may invest in index futures contracts.
An index futures contract sale creates an obligation by the Fund, as seller,
to deliver cash at a specified future time. An index futures contract
purchase would create an obligation by the Fund, as purchaser, to take
delivery of cash at a specified future time. Futures contracts on indexes do
not require the physical delivery of securities, but provide for a final cash
settlement on the expiration date which reflects accumulated profits and
losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirement is approximately 5% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Fund may be required to make
additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or a gain.
Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Moody's
Investment-Grade Corporate Bond Index on the Chicago Board of Trade and the
Value Line Stock Index on the Kansas City Board of Trade.
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Options on Futures Contracts. The Fund 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. An option on a futures
contract gives the purchaser the right (in return for the premium paid), and
the writer the obligation, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager or a Sub-Adviser wished to protect against an increase in
interest rates and the resulting negative impact on the value of a portion of
its fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Investment Manager or Sub-Adviser seeks to
hedge. Any premiums received in the writing of options on futures contracts
may, of course, augment the total return of the Fund and thereby provide a
further hedge against losses resulting from price declines in portions of the
Fund's portfolio.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.
Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets, after taking into account unrealized gains
and unrealized losses on such contracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise
price of the call (put), option is less (more) than the market price of the
underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on
the percentage of the Fund's assets which may be subject to a hedge position.
In addition, in accordance with the regulations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempted from
registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions for purposes
of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of
futures and options thereon by the Fund.
Risks of Transactions in Futures Contracts and Related Options. The Fund
may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market
may advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract
and also experience a decline in value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree,
over time the value of a diversified portfolio will tend to move in the same
direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Fund may determine not to invest in the securities as
planned and will realize a loss on the futures contract that is not offset by
a reduction in the price of the securities.
In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other liquid portfolio securities equal to the
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purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Fund by its Custodian. Alternatively, the Fund could cover
its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held
by the Fund.
If the Fund maintains a short position in a futures contract or has sold a
call option on a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the
option. Such a position may also be covered by owning the securities
underlying the futures contract (in the case of a stock index futures
contract a portfolio of securities substantially replicating the relevant
index), or by holding a call option permitting the Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.
Exchanges may limit the amount by which the price of 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"
in the Prospectus and the Statement of Additional Information.
There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of
the securities whcih are the subject of the hedge. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the debt securities and futures markets could
result. Price distortions could also result if investors in futures contracts
opt to make or take delivery of underlying securities rather than engage in
closing transactions due to the resultant reduction in the liquidity of the
futures market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions.
Due to the possibility of price distortions in the futures market and because
of the imperfect correlation between movements in the prices of securities
and movements in the prices of futures contracts, a correct forecast of
interest rate trends by the Investment Manager may still not result in a
successful hedging transaction.
There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the
event a liquid market does not exist, it may not be possible to close out a
futures position, and in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which
futures contracts are traded may compel or prevent the Fund from closing out
a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to
make or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities.
OTHER INVESTMENT PRACTICES
Zero Coupon Securities. As discussed in the Prospectus, a portion of the
U.S. Government securities purchased by the Fund may be "zero coupon"
Treasury securities. These are U.S. Treasury bills, notes and bonds which
have been stripped of their unmatured interest coupons and receipts or
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which are certificates representing interests in such stripped debt
obligations and coupons. In addition, a portion of the fixed-income
securities purchased by the Fund may be "zero coupon" securities. "Zero
coupon" securities are purchased at a discount from their face amount, giving
the purchaser the right to receive their full value at maturity. A zero
coupon security pays no interest to its holder during its life. Its value to
an investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an
amount significantly less than its face value (sometimes referred to as a
"deep discount" price).
The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant
rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received if prevailing interest rates rise. For this reason, zero
coupon securities are subject to substantially greater market price
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities which make current distributions of interest.
Current federal tax law requires that a holder (such as the Fund) of a zero
coupon security accrue a portion of the discount at which the security was
purchased as income each year even though the Fund receives no interest
payments in cash on the security during the year.
Currently, the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
Warrants and Rights. The Fund may invest up to 5% of the value of its net
assets in warrants, including not more than 2% in warrants not listed on
either the New York or American Stock Exchange. Warrants are, in effect, an
option to purchase equity securities at a specific price, generally valid for
a specific period of time, and have no voting rights, pay no dividends and
have no rights with respect to the corporations issuing them. The Fund may
acquire warrants attached to other securities without reference to the
foregoing limitations.
The Fund may also invest up to 5% of the value of its net assets in stock
rights.
Repurchase Agreements. As discussed in the Prospectus, when cash may be
available for only a few days, it may be invested by the Fund in repurchase
agreements until such time as it may otherwise be invested or used for
payments of obligations of the Fund. These agreements, which may be viewed as
a type of secured lending by the Fund, 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 ("collateral") at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be maintained in a segregated account
and will be marked-to-market daily to determine that the value of the
collateral, as specified in the agreement, does not decrease below the
purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject ot repurchase agreements are not subject
to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such 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 and Sub-Advisers 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
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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. The Fund's investments in repurchase
agreements may at times be substantial when, in the view of the Investment
Manager, liquidity, tax or other considerations warrant.
Reverse Repurchase Agreements and Dollar Rolls. As discussed in the
Prospectus, the Fund may also use reverse repurchase agreements and dollar
rolls as part of its investment strategy. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement
by the Fund to repurchase the same assets at a later date at a fixed price.
Generally, the effect of such a transaction is that the Fund can recover all
or most of the cash invested in the portfolio securities involved during the
term of the reverse repurchase agreement, while it will be able to keep the
interest income associated with those portfolio securities. Such transactions
are only advantageous if the interest cost to the Fund of the reverse
repurchase transaction is less than the cost of obtaining the cash otherwise.
The Fund may enter into dollar rolls in which the Fund sells securities
for delivery in the current months and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date. During the roll period, the Fund forgoes principal and interest paid on
the securities. The Fund is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often
referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale.
The Fund will establish a segregated account with its custodian bank in
which it will maintain cash, U.S. Government Securities or other liquid
portfolio securities equal in value to its obligations in respect of reverse
repurchase agreements and dollar rolls. Reverse repurchase agreements and
dollar rolls involve the risk that the market value of the securities the
Fund is obligated to repurchase under the agreement may decline below the
repurchase price. In the event the buyer of securities under a reverse
repurchase agreement or dollar roll files for bankruptcy or becomes
insolvent, the Fund's use of proceeds of the agreement may be restricted
pending a determination by the other party, or its trustee or receiver,
whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage and are considered borrowings by the Fund.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to notice provisions described below), and are
at all times secured by cash or cash equivalents, which are maintained in a
segregated account pursuant to applicable regulations and that are equal to
at least the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive the income on
the loaned securities while at the same time earning interest on the cash
amounts deposited as collateral, which will be invested in short-term
obligations. The Fund will not lend its portfolio securities if such loans
are not permitted by the laws or regulations of any state in which its shares
are qualified for sale and will not lend more than 25% of the value of its
total assets. A loan may be terminated by the borrower on one business day's
notice, or by the Fund on four business days' notice. If the borrower fails
to deliver the loaned securities within four days after recepit of notice,
the Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with
any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Fund's management to be creditworthy
and when the income which can be earned from such loans justifies the
attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price
during the loan period would inure to the Fund. The creditworthiness of firms
to which the Fund lends its portfolio securities will be monitored on an
ongoing basis by the Investment Manager and Sub-Advisers pursuant to
procedures adopted and reviewed, on an ongoing basis, by the Board of
Trustees of the Fund.
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<PAGE>
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned
securities, to be delivered within one day after notice, to permit the
exercise of such rights if the matters involved would have a material effect
on the Fund's investment in such loaned securities. The Fund will pay
reasonable finder's, administrative and custodial fees in connection with a
loan of its securities. However, the Fund has no intention of lending any of
its portfolio securities during its fiscal year ending January 31, 1999.
When-Issued and Delayed Delivery Securities and Forward Commitments. As
discussed in the Prospectus, from time to time 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 commitment.
While the Fund will only purchase securities on a when-issued, delayed
delivery or forward commitment basis with the intention of acquiring the
securities, the Fund may sell the securities before the settlement date, if
it is deemed advisable. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. At the time the Fund makes the commitment to purchase
or sell securities on a when-issued, delayed delivery or forward commitment
basis, it will record the transaction and thereafter reflect the value, each
day, of such security purchased, or if a sale, the proceeds to be received,
in determining its net asset value. At the time of delivery of the
securities, the value may be more or less than the purchase or sale price.
The Fund will also establish a segregated account with its custodian bank in
which it will continually maintain cash or cash equivalents or other liquid
portfolio securities equal in value to commitments to purchase securities on
a when-issued, delayed delivery or forward commitment basis. Subject to the
foregoing restrictions, the Fund may purchase securities on such basis
without limit.
When, As and If Issued Securities. As discussed in the Prospectus, the
Fund may purchase securities on a "when, as and if issued" basis under which
the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged
buyout or debt restructuring. The commitment for the purchase of any such
security will not be recognized in the portfolio of the Fund until the
Investment Manager or Sub-Adviser determines that issuance of the security is
probable. At such time, the Fund will record the transaction and, in
determining its net asset value, will reflect the value of the security
daily. At such time, the Fund will also establish a segregated account with
its custodian bank in which it will maintain cash or cash equivalents or
other liquid portfolio securities equal in value to recognized commitments
for such securities. Once a segregated account has been established, if the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. The value of the Fund's commitments
to purchase the securities of any one issuer, together with the value of all
securities of such issuer owned by the Fund, may not exceed 5% of the value
of the Fund's total assets at the time the initial commitment to purchase
such securities is made (see "Investment Restrictions"). Subject to the
foregoing restrictions, the Fund may purchase securities on such basis
without limit. An increase in the percentage of the Fund's assets committed
to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value. The Fund may also sell
securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
Private Placements. As discussed in the Prospectus, 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 of the
Securities Act, and determined to be liquid pursuant to the procedures
discussed in the following paragraph, are not subject to the foregoing
restriction.) 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.
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<PAGE>
The Securities and Exchange Commission ("SEC") has adopted Rule 144A under
the Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by
the Fund. The procedures require that the following factors be taken into
account in making a liquidity determination: (1) the frequency of trades and
price quotes for the security; (2) the number of dealers and other potential
purchasers who have issued quotes on the security; (3) any dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (the time needed to dispose
of the security, the method of soliciting offers, and the mechanics of
transfer). If a restricted security is determined to be "liquid," such
security will not be included within the category "illiquid securities,"
which under the SEC's current policies may not exceed 15% of the Fund's net
assets, and will not be subject to the 5% limitation set out in the preceding
paragraph.
The Rule 144A marketplace of sellers and qualified institutional buyers is
new and still developing and may take a period of time to develop into a
mature liquid market. As such, the market for certain private placements
purchased pursuant to Rule 144A may be initially small or may, subsequent to
purchase, become illiquid. Furthermore, the Investment Manager may not posses
all the information concerning an issue of securities that it wishes to
purchase in a private placement to which it would normally have had access,
had the registration statement necessitated by a public offering been filed
with the Securities and Exchange Commission.
PORTFOLIO TURNOVER
The Fund's portfolio turnover rate for the fiscal years ended January 31,
1997 and 1998 were 62.82% and 93.62%, respectively. A 100% turnover rate
would occur, for example, if 100% of the securities held in the Fund's
portfolio (excluding all securities whose maturities at acquisition were one
year or less) were sold and replaced within one year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of Shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund. For purposes of the following restrictions:
(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. Purchase or sell real estate or interests therein, including
investments in limited partnerships the sole purpose of which is investing
in real estate, although the Fund may purchase securities of issuers which
engage in real estate operations and securities secured by real estate or
interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed), and (ii) may engage in reverse repurchase agreements and
dollar rolls.
4. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(3). For the purpose of this restriction, collateral
28
<PAGE>
arrangements with respect to the writing of options and collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.
5. Issue senior securities as defined in the Act, except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase or reverse repurchase agreement; (b)
purchasing any securities on a when-issued or delayed delivery basis; (c)
purchasing or selling futures contracts, forward foreign exchange
contracts or options; (d) borrowing money in accordance with restrictions
described above; or (e) lending portfolio securities.
6. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objective and policies; (b) by investment
in repurchase agreements; or (c) by lending its portfolio securities.
7. Make short sales of securities.
8. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.
9. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
10. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell futures contracts or option on futures.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially
all of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
As a non-fundamental policy, the Fund will not invest in other investment
companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of
the Act.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Board of Trustees, the
Investment Manager and the Sub-Adviser are responsible for decisions to buy
and sell securities for the Fund, the selection of brokers and dealers to
effect the transactions, and the negotiation of brokerage commissions, if
any. Purchases and sales of securities on a stock exchange are effected
through brokers who charge a commission for their services. In the
over-the-counter market, securities are generally traded on a "net" basis
with dealers acting as principal for their own accounts without a stated
commission, although the price of the security usually includes a profit to
the dealer. The Fund also expects that securities will be purchased at times
in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or
discount. Options and futures transactions will usually be effected through a
broker and a commission will be charged. On occasion, the Fund may also
purchase certain money market instruments directly from an issuer, in which
case no commissions or discounts are paid. During the period from February
28, 1995 (commencement of operations) through January 31, 1996 and for the
fiscal years ended January 31, 1997 and 1998, the Fund paid $84,109, $131,642
and $183,625, respectively, in brokerage commissions.
The Investment Manager and the Sub-Adviser currently serve as investment
manager to a number of clients, including other investment companies, and may
in the future act as investment adviser to others. It is the practice of the
Investment Manager and the Sub-Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it
manages in such manner as it deems equitable. In making such allocations
among the Fund and other client accounts, various factors may be considered,
including the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held and
the opinions of the persons responsible for managing the portfolios of the
Fund and other client accounts. In the case of certain initial and secondary
public offerings, the
29
<PAGE>
Investment Manager may utilize a pro rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available
from the public offering.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager and Sub-Adviser from obtaining a high quality of brokerage and
research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Investment Manager and Sub-Adviser
rely upon their experience and knowledge regarding commissions generally
charged by various brokers and on their judgment in evaluating the brokerage
and research services received from the broker effecting the transaction.
Such determinations are necessarily subjective and imprecise, as in most
cases an exact dollar value for those services is not ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on foreign securities exchanges. Fixed
commissions on such transactions are generally higher than negotiated
commissions on domestic transactions. There is also generally less government
supervision and regulation of foreign securities exchanges and brokers than
in the United States.
In seeking to implement the Fund's policies, the Investment Manager and
Sub-Adviser effect transactions with those brokers and dealers who the
Investment Manager and Sub-Adviser believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager
and/or Sub-Adviser believe such prices and executions are obtainable from
more than one broker or dealer, they may give consideration to placing
portfolio transactions with those brokers and dealers who also furnish
research and other services to the Fund or the Investment Manager and/or
Sub-Adviser. Such services may include, but are not limited to, any one or
more of the following: information as to the availability of securities for
purchase or sale; statistical or factual information or opinions pertaining
to investment; wire services; and appraisals or evaluations of portfolio
securities. During the fiscal year ended January 31, 1998, the Fund directed
the payment of $6,931 in brokerage commissions in connection with
transactions in the aggregate amount of $5,167,568 to brokers because of
research services provided.
The information and services received by the Investment Manager and
Sub-Adviser from brokers and dealers may be of benefit to them in the
management of accounts of some of their other clients and may not in all
cases benefit the Fund directly. While the receipt of such information and
services is useful in varying degrees and would generally reduce the amount
of research or services otherwise performed by the Investment Manager and/or
Sub-Adviser and thereby reduce their expenses, it is of indeterminable value
and the management fee paid to the Investment Manager is not reduced by any
amount that may be attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. Such transactions
will be effected with DWR only when the price available from DWR is better
than that available from other dealers. During the period from February 28,
1995 (commencement of operations) through January 31, 1996 and for the fiscal
years ended January 31, 1997 and 1998, the Fund did not effect any principal
transactions with DWR.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to the unlisted trading privileges
may be effected through DWR, Morgan Stanley & Co. Incorporated ("MS & Co.")
other affiliated brokers and dealers of the Investment Manager and affiliated
brokers and dealers of a Sub-Adviser. In order for these affiliated brokers
and dealers to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by them must
30
<PAGE>
be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow the affiliated broker or
dealer to receive no more than the remuneration which would be expected to be
received by an unaffiliated broker in a commensurate arm's-length
transaction. Furthermore, the Board of Trustees of the Fund, including a
majority of the Trustees who are not "interested" persons of the Fund, as
defined in the Act, have adopted procedures which are reasonably designed to
provide that any commissions, fees or other remuneration paid to an
affiliated broker or dealer of the Investment Manager or the Sub-Adviser are
consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the
brokerage commissions it may pay to an affiliated broker or dealer. The Fund
paid DWR $21,991 in brokerage commissions (11.98% of all commissions) during
the fiscal year ended January 31, 1998 to effect 31.26% of all transactions
entered into by the Fund during the fiscal year in which brokerage
commissions were incurred. During the period June 1, 1997 through January 31,
1998, the Fund paid a total of $3,481 in brokerage commissions to MS & Co.,
which broker-dealer became an affiliate of the Investment Manager on May 31,
1997 upon consummation of the merger of Dean Witter, Discover & Co. with
Morgan Stanley Group Inc. The brokerage commissions paid to Morgan Stanley &
Co., Inc. represented approximately 1.90% of the total brokerage commissions
paid by the Fund for this period and were paid on account of transactions
having an aggregate dollar value equal to approximately 1.74% of the
aggregate dollar value of all portfolio transactions of the Fund during the
period for which commissions were paid.
During the fiscal year ended January 31, 1998, the Fund did not acquire
any securities of the ten brokers who executed the largest dollar amounts of
the Fund's portfolio transactions or of the ten dealers who executed the
largest dollar amounts of principal transactions with the Fund during the
period, or securities of the parents of those broker-dealers.
THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of MSDWD.
The Trustees of the Fund, including a majority of the Trustees who are not,
and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Trustees"), approved, at their meeting
held on June 30, 1997, the current Distribution Agreement appointing the
Distributor as exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. By its
terms, the Distribution Agreement has an initial term ending April 30, 1998
and will remain in effect from year to year thereafter if approved by the
Board.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal securities laws and pays
filing fees in accordance with state securities laws. The Fund and the
Distributor have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for losses sustained by the
Fund or its shareholders.
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<PAGE>
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan") pursuant to which each Class, other than Class D, pays
the Distributor compensation accrued daily and payable monthly at the
following annual rates: 0.25% and 1.0% of the average daily net assets of
Class A and Class C, respectively, and, with respect to Class B, 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
shares since the inception of the Fund (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's Class B shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or
upon which such charge has been waived, or (b) the average daily net assets
of Class B. The Distributor also receives the proceeds of front-end sales
charges and of contingent deferred sales charges imposed on certain
redemptions of shares, which are separate and apart from payments made
pursuant to the Plan (see "Purchase of Fund Shares" in the Prospectus). The
Distributor has informed the Fund that it and/or DWR received (a)
approximately $76,000, $132,581 and $191,520 in contingent deferred sales
charges from Class B for the period February 28, 1995 (commencement of
operations) through January 31, 1996 and the fiscal years ended January 31,
1997 and 1998, respectively, (b) approximately $0 and $33 in contingent
deferred sales charges from Class A and Class C, respectively, for the fiscal
year ended January 31, 1998, and (c) approximately $1,018 in front-end sales
charges from Class A for the fiscal year ended January 31, 1998, none of
which was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class's average daily net assets
are currently each characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). The "service fee" is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan fees payable by a Class, if any, is
characterized as an "asset-based sales charge" as such is defined by the
aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees of the Fund who are not "interested persons" of
the Fund (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent 12b-1 Trustees"),
cast in person at a meeting called for the purpose of voting on the Plan, on
December 6, 1994 and by InterCapital, as the then sole shareholder of the
Fund on December 7, 1994. At their meeting held on October 26, 1995, the
Trustees of the Fund, including all of the Independent 12b-1 Trustees,
approved an amendment to the Plan to permit payments to be made under the
Plan with respect to certain distribution expenses incurred in connection
with the distribution of shares, including personal services to shareholders
with respect to holdings of such shares, of an investment company whose
assets are acquired by the Fund in a tax-free reorganization. At their
meeting held on June 30, 1997, the Trustees, including a majority of the
Independent 12b-1 Trustees, approved amendments to the Plan to reflect the
multiple-class structure for the Fund, which took effect on July 28, 1997.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended January 31, 1998, of $580,914. This is an accrual at an annual
rate of 0.94% of the average daily net assets of Class B and was calculated
pursuant to clause (a) of the compensation formula under the Plan. This
amount is treated by the Fund as an expense in the year it is accrued. For
the fiscal period July 28, 1997 through January 31, 1998, Class A and Class C
shares of the Fund accrued payments under the Plan amounting to $28 and $241,
respectively, which amounts are equal to 0.25% and 1.00% of the average daily
net assets of Class A and Class C, respectively, for such period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set
forth in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross
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<PAGE>
sales credit of up to 5.0% of the amount sold (except as provided in the
following sentence) and an annual residual commission, currently a residual
of up to 0.25% of the current value of the respective accounts for which they
are the account executives or dealers of record in all cases. On orders of $1
million or more (for which no sales charge was paid) or net asset value
purchases by employer-sponsored 401(k) and other plans qualified under
Section 401(a) of the Internal Revenue Code ("Qualified Retirement Plans")
for which Dean Witter Trust FSB ("DWT") serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement, the Investment Manager compensates DWR's account
executives by paying them, from its own funds, a gross sales credit of 1.0%
of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission,
currently a residual of up to 0.25% of the current value (not including
reinvested dividends or distributions) of the amount sold in all cases. In
the case of Class B shares purchased on or after July 28, 1997 by Qualified
Retirement Plans for which DWT serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement, DWR compensates its account executives by paying them, from its
own funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value
of the respective accounts for which they are the account executives of
record.
With respect to Class D shares other than shares held by participants in
the InterCapital mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of
up to 1.0% of the amount sold. There is a chargeback of 100% of the amount
paid if the Class D shares are redeemed in the first year and a chargeback of
50% of the amount paid if the Class D shares are redeemed in the second year
after purchase. The Investment Manager also compensates DWR's account
executives by paying them, from its own funds, an annual residual commission,
currently a residual of up to 0.10% of the current value of the respective
accounts for which they are the account executives of record (not including
accounts of participants in the InterCapital mutual fund asset allocation
program).
The gross sales credit is a charge which reflects commissions paid by DWR
to its account executives and DWR's Fund-associated distribution-related
expenses, including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery
and supplies, (b) the costs of client sales seminars, (c) travel expenses of
mutual fund sales coordinators to promote the sale of Fund shares and (d)
other expenses relating to branch promotion of Fund sales. The distribution
fee that the Distributor receives from the Fund under the Plan, in effect,
offsets distribution expenses incurred under the Plan on behalf of the Fund
and, in the case of Class B shares, opportunity costs, such as the gross
sales credit and an assumed interest charge thereon ("carrying charge"). In
the Distributor's reporting of the distribution expenses to the Fund, in the
case of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on
loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments
at the end of each month. The amount of each monthly
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<PAGE>
payment may in no event exceed an amount equal to a payment at the annual
rate of 0.25%, in the case of Class A, and 1.0%, in the case of Class C, of
the average net assets of the respective Class during the month. No interest
or other financing charges, if any, incurred on any distribution expenses on
behalf of Class A and Class C will be reimbursable under the Plan. With
respect to Class A, in the case of all expenses other than expenses
representing the service fee, and, with respect to Class C, in the case of
all expenses other than expenses representing a gross sales credit or a
residual to account executives, such amounts shall be determined at the
beginning of each calendar quarter by the Trustees, including, a majority of
the Independent 12b-1 Trustees. Expenses representing the service fee (for
Class A) or a gross sales credit or a residual to account executives (for
Class C) may be reimbursed without prior determination. In the event that the
Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Trustees will
review a quarterly budget of projected distribution expenses to be incurred
on behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A
and Class C shares.
Each Class paid 100% of the amounts accrued with respect to that Class
under the Plan for the fiscal year ended January 31, 1998, to the
Distributor. The Distributor and DWR estimate that they have spent, pursuant
to the Plan, $5,633,834 on behalf of Class B since the inception of the Plan.
It is estimated that this amount was spent in approximately the following
ways: (i) 27.32% ($1,539,192)--advertising and promotional expenses; (ii)
3.60% ($202,713)--printing of prospectuses for distribution to other than
current shareholders; and (iii) 69.08% ($3,891,929)--other expenses,
including the gross sales credit and the carrying charge, of which 7.52%
($292,583) represents carrying charges, 36.99% ($1,439,738) represents
commission credits to DWR branch offices for payments of commissions to
account executives and 55.49% ($2,159,608) represents overhead and other
branch office distribution-related expenses. The amounts accrued by Class A
and Class C for distribution during the fiscal period July 28, 1997 through
January 31, 1998 were for expenses which relate to compensation of sales
personnel and associated overhead expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of
shares. The Distributor has advised the Fund that in the case of Class B
shares the excess distribution expenses, including the carrying charge
designed to approximate the opportunity costs incurred by DWR which arise
from it having advanced monies without having received the amount of any
sales charges imposed at the time of sale of the Fund's Class B shares,
totalled $3,856,463 as of January 31, 1998. Because there is no requirement
under the Plan that the Distributor be reimbursed for all distribution
expenses with respect to Class B shares or any requirement that the Plan be
continued from year to year, this excess amount does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to
pay 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.
No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR, DWSC or certain of their employees may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
Under its terms, the Plan had an initial term ending April 30, 1995 and
will continue from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner
34
<PAGE>
described above. Prior to the Board's approval of amendments to the Plan to
reflect the multiple-class structure for the Fund, the most recent
continuance of the Plan for one year, until April 30, 1998, was approved by
the Board of Trustees of the Fund, including a majority of the Independent
12b-1 Trustees, at a Board meeting held on April 24, 1997. Prior to approving
the continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to
continue the Plan, the Trustees considered: (1) the Fund's experience under
the Plan and whether such experience indicates that the Plan is operating as
anticipated; (2) the benefits the Fund had obtained, was obtaining and would
be likely to obtain under the Plan; and (3) what services had been provided
and were continuing to be provided under the Plan to the Fund and its
shareholders. Based upon their review, the Trustees of the Fund, including
each of the Independent 12b-1 Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of
the affected Class or Classes of the Fund, and all material amendments to the
Plan must also be approved by the Trustees in the manner described above. The
Plan may be terminated at any time, without payment of any penalty, by vote
of a majority of the Independent 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund (as defined in the Act) on not
more than thirty days' written notice to any other party to the Plan. So long
as the Plan is in effect, the election and nomination of Independent 12b-1
Trustees shall be committed to the discretion of the Independent 12b-1
Trustees.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Listed options on debt securities are valued at the latest sale
price on the exchange on which they are listed unless no sales of such
options have taken place that day, in which case they will be valued at the
mean between their latest bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean
between their latest bid and asked prices. Futures are valued at the latest
sale price on the commodities exchange on which they trade unless the
Trustees determine such price does not reflect their market value, in which
case they will be valued at their fair value as determined by the Trustees.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
The net asset value per share for each Class of shares of the Fund is
determined once daily at 4:00 p.m. New York time (or, on days when the New
York Stock Exchange closes prior to 4:00 p.m., at such earlier time), on each
day that the New York Stock Exchange is open by taking the value of all
assets of the Fund, subtracting its liabilities, dividing by the number of
shares outstanding and adjusting to the nearest cent. The New York Stock
Exchange currently observes the following holidays: New Year's Day, Reverend
Dr. Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to 4:00 p.m., New
York time. The values of such securities used in computing the net asset
value of the Fund's shares are determined as of such times. Foreign currency
exchange rates are also generally determined prior to 4:00 p.m., New York
time. Occasionally, events which affect the values of such securities and
such exchange rates may occur between the times at which they are determined
and 4:00 p.m., New York time, and will therefore not be reflected in the
computation of the Fund's net asset
35
<PAGE>
value. If events materially affecting the value of such securities occur
during such period, then these securities may be valued at their fair value
as determined in good faith under procedures established by and under the
supervision of the Trustees.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without
an initial sales charge are subject to a contingent deferred sales charge
("CDSC") of 1.0% if redeemed within one year of purchase, except in the
circumstances discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for
purchases of shares of the Fund totalling at least $25,000 in net asset
value. For example, if any person or entity who qualifies for this privilege
holds Class A shares of the Fund and/or other Dean Witter Funds that are
multiple class funds ("Dean Witter Multi-Class Funds") or shares of other
Dean Witter Funds sold with a front-end sales charge purchased at a price
including a front-end sales charge having a current value of $5,000, and
purchases $20,000 of additional shares of the Fund, the sales charge
applicable to the $20,000 purchase would be 4.75% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the selected broker-dealer or
shareholder when such an order is placed by mail. The reduced sales charge
will not be granted if: (a) such notification is not furnished at the time of
the order; or (b) a review of the records of the Distributor or Dean Witter
Trust FSB (the "Transfer Agent") fails to confirm the investor's represented
holdings.
Letter of Intent. As discussed in the Prospectus, reduced sales charges
are available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase of Class A shares made during the period will receive the
reduced sales commission applicable to the amount represented by the goal, as
if it were a single purchase. A number of shares equal in value to 5% of the
dollar amount of the Letter of Intent will be held in escrow by the Transfer
Agent, in the name of the shareholder. The initial purchase under a Letter of
Intent must be equal to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to
pay the difference between the sales charge otherwise applicable to the
purchases made during this period and sales charges actually paid. Such
payment may be made directly to the Distributor or, if not paid, the
Distributor is authorized by the shareholder to liquidate a sufficient number
of his or her escrowed shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced
sales charges in the same manner as set forth above under "Right of
Accumulation," but there will be no retroactive reduction of sales charges on
previous purchases. For the purpose of determining whether the investor is
entitled to a further reduced sales charge applicable to purchases at or
above a sales charge level which exceeds the stated goal of a Letter of
Intent, the cumulative current net asset value of any shares owned by the
investor in any other Dean Witter Funds held by the shareholder which were
previously purchased at a price including a front-end sales charge
36
<PAGE>
(including shares of the Fund and other Dean Witter Funds acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions) will be added to the cost or net
asset value of shares of the Fund owned by the investor. However, shares of
"Exchange Funds" (see "Shareholder Services--Exchange Privilege") and the
purchase of shares of other Dean Witter Funds will not be included in
determining whether the stated goal of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction.
The 5% escrow and minimum purchase requirements will be applicable to the new
stated goal. Investors electing to purchase shares of the Fund pursuant to a
Letter of Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As
stated in the Prospectus, a CDSC will be imposed on any redemption by an
investor if after such redemption the current value of the investor's Class B
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Class B shares during the preceding six years
(or, in the case of shares held by certain Qualified Retirement Plans, three
years). However, no CDSC will be imposed to the extent that the net asset
value of the shares redeemed does not exceed: (a) the current net asset value
of shares purchased more than six years (or, in the case of shares held by
certain Qualified Retirement Plans, three years) prior to the redemption,
plus (b) the current net asset value of shares purchased through reinvestment
of dividends or distributions of the Fund or another Dean Witter Fund (see
"Shareholder Services--Targeted Dividends"), plus (c) the current net asset
value of shares acquired in exchange for (i) shares of Dean Witter front-end
sales charge funds, or (ii) shares of other Dean Witter Funds for which
shares of front-end sales charge funds have been exchanged (see "Shareholder
Services--Exchange Privilege"), plus (d) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six (three) years. The CDSC will be
paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares
within the last six years (or, in the case of shares held by certain
Qualified Retirement Plans, three years) will be redeemed first. In the event
the redemption amount exceeds such increase in value, the next portion of the
amount redeemed will be the amount which represents the net asset value of
the investor's shares purchased more than six (three) years prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions and/or shares acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter funds for
which shares of front-end sales charge funds have been exchanged. A portion
of the amount redeemed which exceeds an amount which represents both such
increase in value and the value of shares purchased more than six years (or,
in the case of shares held by certain Qualified Retirement Plans, three
years) prior to the redemption and/or shares purchased through reinvestment
of dividends or distributions and/or shares acquired in the above-described
exchanges will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number
of years from the time of any payment for the purchase of shares, all
payments made during a month will be aggregated and deemed to have been made
on the last day of the month. The following table sets forth the rates of the
CDSC applicable to most Class B shares of the Fund:
37
<PAGE>
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
First ...................... 5.0%
Second ..................... 4.0%
Third ...................... 3.0%
Fourth ..................... 2.0%
Fifth ...................... 2.0%
Sixth ...................... 1.0%
Seventh and thereafter .... None
</TABLE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after July 28, 1997 by Qualified
Retirement Plans for which DWT serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
<S> <C>
First .................... 2.0%
Second ................... 2.0%
Third .................... 1.0%
Fourth and thereafter .... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year or three-year period. This will result in any such
CDSC being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years
(or, in the case of shares held by certain Qualified Retirement Plans, three
years) of purchase which are in excess of these amounts and which redemptions
do not qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC
of 1.0% on most redemptions made within one year after purchase, except in
the circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust FSB (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is
no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction
from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of
the Fund, unless the shareholder requests that they be paid in cash. Each
purchase of shares of the Fund is made upon the condition that the Transfer
Agent is thereby automatically appointed as agent of the investor to receive
all dividends and capital gains distributions on shares
38
<PAGE>
owned by the investor. Such dividends and distributions will be paid, at the
net asset value per share, in shares of the applicable Class of the Fund (or
in cash if the shareholder so requests) as of the close of business on the
record date. At any time an investor may request the Transfer Agent, in
writing, to have subsequent dividends and/or capital gains distributions paid
to him or her in cash rather than shares. To assure sufficient time to
process the change, such request should be received by the Transfer Agent at
least five business days prior to the record date of the dividend or
distribution. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payments will be
made to DWR or other selected broker-dealer, and will be forwarded to the
shareholder, upon the receipt of proper instructions. It has been and remains
the Fund's policy and practice that, if checks for dividends or distributions
paid in cash remain uncashed, no interest will accrue on amounts represented
by such uncashed checks.
Targeted Dividends (Service Mark) . In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of any Class of an
open-end Dean Witter Fund other than Dean Witter Global Asset Allocation Fund
or in another Class of Dean Witter Global Asset Allocation Fund. Such
investment will be made as described above for automatic investment in shares
of the applicable Class of the Fund, at the net asset value per share of the
selected Dean Witter Fund as of the close of business on the payment date of
the dividend or distribution and will begin to earn dividends, if any, in the
selected Dean Witter Fund the next business day. To participate in the
Targeted Dividends program, shareholders should contact their DWR or other
selected broker-dealer account executive or the Transfer Agent. Shareholders
of the Fund must be shareholders of the selected Class of the Dean Witter
Fund targeted to receive investments from dividends at the time they enter
the Targeted Dividends program. Investors should review the prospectus of the
targeted Dean Witter Fund before entering the program.
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected (subject to any applicable
sales charges). Shares of the Dean Witter money market funds redeemed in
connection with EasyInvest are redeemed on the business day preceding the
transfer of funds. For further information or to subscribe to EasyInvest,
shareholders should contact their DWR or other selected broker-dealer account
executive or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution in shares
of the applicable Class at net asset value, without the imposition of a CDSC
upon redemption, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or proceeds by the
Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less then $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed
under the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any
shareholder participating in the Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
CDSC) to the shareholder will be the designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated
39
<PAGE>
in the application. The shares will be redeemed at their net asset value
determined, at the shareholder's option, on the tenth or twenty-fifth day (or
next following business day) of the relevant month or quarter and normally a
check for the proceeds will be mailed by the Transfer Agent, or amounts
credited to a shareholder's brokerage account, within five business days
after the date of redemption. The Withdrawal Plan may be terminated at any
time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the share holder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the
Fund for which they qualify at any time by sending a check in any amount, not
less than $100, payable to Dean Witter Global Asset Allocation Fund, and
indicating the selected Class, directly to the Fund's Transfer Agent. In the
case of Class A shares, after deduction of any applicable sales charge, the
balance will be applied to the purchase of Fund shares, and, in the case of
shares of the other Classes, the entire amount will be applied to the
purchase of Fund shares, at the net asset value per share next computed after
receipt of the check or purchase payment by the Transfer Agent. The shares so
purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of each Class of
shares of the Fund may exchange their shares for shares of the same Class of
shares of any other Dean Witter Multi-Class Fund without the imposition of
any exchange fee. Shares may also be exchanged for shares of any of the
following funds: Dean Witter Short-Term U.S. Treasury Trust, Dean Witter
Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and five Dean Witter Funds which are
money market funds (the foregoing nine funds are hereinafter referred to as
the "Exchange Funds"). Class A shares may also be exchanged for shares of
Dean Witter Multi-State Municipal Series Trust and Dean Witter Hawaii
Municipal Trust, which are Dean Witter Funds sold with a front-end sales
charge ("FSC Funds"). Class B shares may also be exchanged for shares of Dean
Witter Global Short-Term Income Fund Inc. ("Global Short-Term"), which is a
Dean Witter Fund offered with a CDSC. 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 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.
40
<PAGE>
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of a Dean
Witter Multi-Class Fund or Global Short-Term are exchanged for shares of an
Exchange Fund, the exchange is executed at no charge to the shareholder,
without the imposition of the CDSC at the time of the exchange. During the
period of time the shareholder remains in the Exchange Fund (calculated from
the last day of the month in which the Exchange Fund shares were acquired),
the holding period or "year since purchase payment made" is frozen. When
shares are redeemed out of the Exchange Fund, they will be subject to a CDSC
which would be based upon the period of time the shareholder held shares in a
Dean Witter Multi-Class Fund or in Global Short-Term. However, in the case of
shares exchanged into an Exchange Fund on or after April 23, 1990, upon a
redemption of shares which results in a CDSC being imposed, a credit (not to
exceed the amount of the CDSC) will be given in an amount equal to the
Exchange Fund 12b-1 distribution fees incurred on or after that date which
are attributable to those shares. Shareholders acquiring shares of an
Exchange Fund pursuant to this exchange privilege may exchange those shares
back into a Dean Witter Multi-Class Fund or Global Short-Term from the
Exchange Fund, with no CDSC being imposed on such exchange. The holding
period previously frozen when shares were first exchanged for shares of the
Exchange Fund resumes on the last day of the month in which shares of a Dean
Witter Multi-Class Fund or of Global Short-Term are reacquired. A CDSC is
imposed only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a Dean Witter Multi-Class
Fund or in Global Short-Term. In the case of exchanges of Class A shares
which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in
Global Short-Term are exchanged for shares of a Dean Witter Multi-Class Fund,
shares of Global Short-Term, shares of a FSC Fund, or shares of an Exchange
Fund, the date of purchase of the shares of the fund exchanged into, for
purposes of the CDSC upon redemption, will be the last day of the month in
which the shares being exchanged were originally purchased. In allocating the
purchase payments between funds for purposes of the CDSC, the amount which
represents the current net asset value of shares at the time of the exchange
which were (i) purchased more than one, three or six years (depending on the
CDSC schedule applicable to the shares) prior to the exchange, (ii)
originally acquired through reinvestment of dividends or distributions and
(iii) acquired in exchange for shares of FSC Funds, or for shares of other
Dean Witter Funds for which shares of FSC Funds have been exchanged (all such
shares called "Free Shares"), will be exchanged first. After an exchange, all
dividends earned on shares in an Exchange Fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that, with respect to Class B shares, if
shares held for identical periods of time but subject to different CDSC
schedules are held in the same Exchange Privilege account, the shares of that
block that are subject to a lower CDSC rate will be exchanged prior to the
shares of that block that are subject to a higher CDSC rate). Shares equal to
any appreciation in the value of non-Free Shares exchanged will be treated as
Free Shares, and the amount of the purchase payments for the non-Free Shares
of the fund exchanged into will be equal to the lesser of (a) the purchase
payments for, or (b) the current net asset value of, the exchanged non-Free
Shares. If an exchange between funds would result in exchange of only part of
a particular block of non-Free Shares, then shares equal to any appreciation
in the value of the block (up to the amount of the exchange) will be treated
as Free Shares and exchanged first, and the purchase payment for that block
will be allocated on a pro rata basis between the non-Free Shares of that
block
41
<PAGE>
to be retained and the non-Free Shares to be exchanged. The prorated amount
of such purchase payment attributable to the retained non-Free Shares will
remain as the purchase payment for such shares, and the amount of purchase
payment for the exchanged non-Free Shares will be equal to the lesser of (a)
the prorated amount of the purchase payment for, or (b) the current net asset
value of, those exchanged non-Free Shares. Based upon the procedures
described in the Prospectus under the caption "Purchase of Fund Shares," any
applicable CDSC will be imposed upon the ultimate redemption of shares of any
fund, regardless of the number of exchanges since those shares were
originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected broker-dealer, if any, in the performance of such
functions. With respect to exchanges, redemptions or repurchases, the
Transfer Agent shall be liable for its own negligence and not for the default
or negligence of its correspondents or for losses in transit. The Fund shall
not be liable for any default or negligence of the Transfer Agent, the
Distributor or any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Dean Witter Liquid
Asset Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter
California Tax-Free Daily Income Trust and Dean Witter New York Municipal
Money Market Trust, although those funds may, in their discretion, accept
initial investments of as low as $1,000. The minimum initial investment for
the Exchange Privilege account of each Class is $10,000 for Dean Witter
Short-Term U.S. Treasury Trust, although that fund, in its discretion, may
accept initial purchases of as low as $5,000. The minimum initial investment
for the Exchange Privilege account of each Class is $5,000 for Dean Witter
Special Value Fund. The minimum initial investment for the Exchange Privilege
account of each Class of all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of those funds, including the check writing feature, will not be
available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days' prior written notice
for termination or material revision), provided that six months' prior
written notice of termination will be given to the shareholders who hold
shares of Exchange Funds pursuant to the Exchange Privilege, and provided
further that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist) or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
42
<PAGE>
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount
of any applicable CDSC. If shares are held in a shareholder's account without
a share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption. The share certificate, or
an accompanying stock power, and the request for redemption, must be signed
by the shareholder or shareholders exactly as the shares are registered. Each
request for redemption, whether or not accompanied by a share certificate,
must be sent to the Fund's Transfer Agent, which will redeem the shares at
their net asset value next computed (see "Purchase of Fund Shares" in the
Prospectus) after it receives the request, and certificate, if any, in good
order. Any redemption request received after such computation will be
redeemed at the next determined net asset value. The term "good order" means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary,
the Transfer Agent may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a supplement to the prospectus or a
new prospectus.
Repurchase. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by
DWR and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer
reduced by any applicable CDSC.
Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, payment for shares of any Class presented for repurchase or
redemption will be made by check within seven days after receipt by the
Transfer Agent of the certificate and/or written request in good order. Such
payment may be postponed or the right of redemption suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekends
and holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during
any other period when the Securities and Exchange Commission by order so
permits; provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in
(b) or (c) exist. If the shares to be redeemed have recently been purchased
by check (including a certified check or bank cashiers 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). It has been and
remains the Fund's policy that, if checks for redemption proceeds remain
uncashed, no interest will accrue on amounts represented by such uncashed
checks. Shareholders maintaining margin accounts with DWR or another selected
broker-dealer are referred to their account executive regarding restrictions
on redemption of shares of the Fund pledged in the margin account.
43
<PAGE>
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro
rata basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior
to the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may, within 35 days after the date of
redemption or repurchase, reinstate any portion or all of the proceeds of
such redemption or repurchase in shares of the Fund in the same Class at the
net asset value next determined after a reinstatement request, together with
the proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and, if the Fund makes an election, the
shareholders would include such undistributed gains in their income and
shareholders will be able to claim their share of the tax paid by the Fund as
a credit against their individual federal income tax.
Any dividends declared in the last quarter of any calendar year which are
paid in the following calendar year prior to February 1 will be deemed
received by the shareholder in the prior calendar year.
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the
Fund for more than twelve months. Gains or losses on the sale of securities
held for twelve months or less will be generally short-term capital gains or
losses.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). If so
qualified, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, realized during any fiscal year
if it distributes such income and capital gains to its shareholders. In
addition, the Fund intends to distribute to its shareholders each calendar
year a sufficient amount of ordinary income and capital gains to avoid the
imposition of a 4% excise tax.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
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.
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. It is expected that the
Treasury will issue regulations or other guidance to permit shareholders to
take into account their proportionate share of the Fund's capital gains
distributions that will be subject to a reduced rate under the Taxpayer
Relief Act of 1997. The Taxpayer Relief Act reduces the maximum tax on
long-term capital gains from 28% to 20%; however, it also
44
<PAGE>
lengthens the required holding period to obtain the lower rate from more than
12 months to more than 18 months. The lower rates do not apply to
collectibles and certain other assets. Additionally, the maximum capital gain
rate for assets that are held more than five years and that are acquired
after December 31, 2000 is 18%.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value
of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions and dividends are subject to federal income taxes. If the net
asset value of the shares should be reduced below a shareholder's cost as a
result of the payment of dividends or the distribution of realized net
long-term capital gains, such payment or distribution would be in part a
return of the shareholder's investment to the extent of such reduction below
the shareholder's cost, but nonetheless would be fully taxable. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. The amount of dividends paid by the Fund which may qualify for the
dividends received deduction is limited to the aggregate amount of qualifying
dividends which the Fund derives from its portfolio investments which the
Fund has held for a minimum period, usually 46 days within a 90-day period
beginning 45 days before the ex-dividend date of each qualifying dividend.
Shareholders must meet a similar holding period requirement with respect to
their shares to claim the dividends received deduction with respect to any
distribution of qualifying dividends. Any long-term capital gain
distributions will also not be eligible for the dividends received deduction.
The ability to take the dividends received deduction will also be limited in
the case of a Fund shareholder which incurs or continues indebtedness which
is directly attributable to its investment in the Fund.
The Fund may elect to retain net capital gains and pay corporate income
tax thereon. In such event, each shareholder of record on the last day of the
Fund's taxable year would be required to include in income for tax purposes
such shareholder's proportionate share of the Fund's undistributed net
capital gain. In addition, each shareholder would be entitled to credit such
shareholder's proportionate share of the tax paid by the Fund against federal
income tax liabilities, to claim refunds to the extent that the credit
exceeds such liabilities, and to increase the basis of his shares held for
federal income tax purposes by an amount equal to 65% of such shareholder's
proportionate share of the undistributed net capital gain.
Any loss realized by shareholders upon a redemption of shares within six
months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains during
the six-month period.
Dividends, interest and capital gains received by the Fund may give rise
to withholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States may reduce or eliminate such
taxes. Investors may be entitled to claim United States foreign tax credits
or deductions with respect to such taxes, subject to certain provisions and
limitations contained in the Code. If more than 50% of the Fund's total
assets at the close of its fiscal year consist of securities of foreign
corporations, the Fund would be eligible and would determine whether or not
to file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro
rata portions of such withholding taxes in their United States income tax
returns as gross income, treat such respective pro rata portions as taxes
paid by them, and deduct such respective pro rata portions in computing their
taxable income or, alternatively, use them as foreign tax credits against
their United States income taxes. If the Fund does elect to file the election
with the Internal Revenue Service, the Fund will report annually to its
shareholders the amount per share of such withholding.
Special Rules for Certain Foreign Currency Transactions. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in
stock, securities or foreign currencies are currently considered to be
qualifying
45
<PAGE>
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as
the issuer of certain foreign currency instruments or how foreign currency
options, futures, or forward foreign currency contracts will be valued for
purposes of the regulated investment company diversification requirements
applicable to the Fund.
Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's function
currency (i.e., unless certain special rules apply, currencies other than the
U.S. dollar). In general, foreign currency gains or losses from forward
contracts, from futures contracts that are not "regulated futures contracts",
and from unlisted options will be treated as ordinary income or loss under
Code Section 988. Also, certain foreign exchange gains or losses derived with
respect to foreign fixed-income securities are also subject to Section 988
treatment. In general, therefore, Code Section 988 gains or losses will
increase or decrease the amount of the Fund's investment company taxable
income available to be distributed to shareholders as ordinary income, rather
than increasing or decreasing the amount of the Fund's net capital gain.
Additionally, if Code Section 988 losses exceed other investment company
taxable income during a taxable year, the Fund would not be able to make any
ordinary dividend distributions.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of
certain technical tax provisions applying to such companies could result in
the imposition of federal income tax with respect to such investments at the
Fund level which could not be eliminated by distributions to shareholders.
The Taxpayer Relief Act of 1997 establishes a mark to market regime which
allows taxpayers investing in PFIC's to avoid most, if not all, of the
difficulties posed by the PFIC Rules. In any event, it is not anticipated
that any taxes on the Fund wilth respect to investments in PFIC's would be
significant.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. These figures are
computed separately for Class A, Class B, Class C and Class D shares. The
Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten
year period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value
is reduced by any CDSC at the end of the one, five or ten year or other
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing the average
annual total return involves a percentage obtained by dividing the ending
redeemable value by the amount of the initial investment, taking a root of
the quotient (where the root is equivalent to the number of years in the
period) and subtracting 1 from the result. The average annual total returns
of Class B for the fiscal year ended January 31, 1998 and for the period
February 28, 1995 (commencement of the Fund's operation) through January 31,
1998 were -1.55% and 9.62%, respectively.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class A, Class C and Class D for specified periods by
determining the aggregate percentage rate which will result in the ending
value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value by the
initial $1,000 investment and subtracting 1 from the result. The ending
redeemable value is reduced by any CDSC at the end of the period. Based on
the foregoing calculations, the total returns for the period July 28, 1997
through January 31, 1998 were -11.31%, -7.66% and -6.32% for Class A, Class C
and Class D, respectively.
46
<PAGE>
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year-by-year or other types to total return figures. Such calculations may or
may not reflect the imposition of the maximum front-end sales charge for
Class A or the deduction of the CDSC for each of Class B and Class C which,
if reflected, would reduce the performance quoted. For example, the average
annual total return of Class B may be calculated in the manner described
above, but without deduction for any applicable sales charge. Based upon this
calculation, the average annual total returns of Class B for the fiscal year
ended January 31, 1998 and for the period February 28, 1995 through January
31, 1998 were 3.29% and 10.48%, respectively.
The Fund may compute its aggregate total return for each Class for
specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for
computing aggregate total return involves a percentage obtained by dividing
the ending value (without the reduction for any sales charges) by the initial
$1,000 investment and subtracting 1 from the result. Based on the foregoing
calculation, the total return of Class B for the fiscal year ended January
31, 1998 and for the period February 28, 1995 (commencement of operations)
through January 31, 1998 were 3.29% and 33.82%, respectively. Based on the
foregoing calculations, the total returns for Class A, Class C and Class D
for the period July 28 through January 31, 1998 were -6.39%, -6.79% and
- -6.32%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and
multiplying by $9,475, $48,000 and $97,000 in the case of Class A
(investments of $10,000, $50,000 and $100,000 adjusted for the initial sales
charge) or by $10,000, $50,000 and $100,000 in the case of each of Class B,
Class C and Class D, as the case may be. Investments of $10,000, $50,000 and
$100,000 in each Class at inception of the Class would have grown (declined)
to the following amounts at January 31, 1998:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION -----------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----- --------- ------- ------- --------
<S> <C> <C> <C> <C>
Class A .. 07/28/97 $ 8,870 $44,933 $ 90,802
Class B .. 02/28/95 13,382 66,910 133,820
Class C .. 07/28/97 9,321 46,605 93,210
Class D .. 07/28/97 9,368 46,840 93,680
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
SHARES OF THE FUND
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an
unlimited number of shares of beneficial interest. All of the Trustees have
been elected by the shareholders of the Fund, most recently at a Special
Meeting of Shareholders held on May 21, 1997. The Trustees themselves have
the power to alter the number and the terms of office of the Trustees (as
provided for in the Declaration of Trust), and they may at any time lengthen
or shorten their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
47
<PAGE>
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series. The Trustees have not presently authorized any such
additional series or classes of shares other than as set forth in the
Prospectus.
The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his/her or its duties. It also provides that all third
persons shall look solely to the Fund property for satisfaction of claims
arising in connection with the affairs of the Fund. With the exceptions
stated, the Declaration of Trust provides that a Trustee, officer, employee
or agent is entitled to be indemnified against all liability in connection
with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest.
The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 is the
Custodian of the Fund's assets in the United States and around the world. As
Custodian, The Chase Manhattan Bank has contracted with various foreign banks
and depositaries to hold portfolio securities of non-U.S. issuers on behalf
of the Fund. Any of the Fund's cash balances with the Custodian in excess of
$100,000 are unprotected by federal deposit insurance. Such balances may, at
times, be substantial.
Dean Witter Trust FSB, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust FSB is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust FSB's responsibilities include maintaining shareholder accounts,
disbursing cash dividends and reinvesting dividends, processing account
registration changes, handling purchase and redemption transactions, mailing
prospectuses and reports, mailing and tabulating proxies, processing share
certificate transactions, and maintaining shareholder records and lists. For
these services Dean Witter Trust FSB receives a per shareholder account fee
from the Fund.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent account-ants, will be
sent to shareholders each year.
The Fund's fiscal year ends on January 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
48
<PAGE>
EXPERTS
- -----------------------------------------------------------------------------
The financial statements of the Fund for the year ended January 31, 1998
included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
49
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON AND PREFERRED
STOCKS AND BONDS (89.4%)
ARGENTINA (0.5%)
Banking
2,209 Banco de Galicia y Buenos Aires S.A. de C.V. (ADR) .............. $ 48,460
--------------
Energy
2,700 Yacimentos Petroliferos Fiscales S.A. (ADR) ..................... 82,181
--------------
Multi-Industry
11,791 Perez Companc S.A. (Class B) .................................... 77,850
--------------
Telecommunications
1,000 Telefonica de Argentina S.A. (Class B)(ADR) ..................... 34,625
--------------
TOTAL ARGENTINA ................................................. 243,116
--------------
AUSTRALIA (0.6%)
Telecommunications
6,500 Telstra Corp. Ltd. (ADR)* ....................................... 293,719
--------------
BRAZIL (1.5%)
Metals & Mining
2,840 Companhia Vale do Rio Doce S.A. (Pref.)(ADR) .................... 54,847
--------------
Petroleum
944,000 Petroleo Brasileiro S.A. (Pref.) ................................ 201,745
--------------
Telecommunications
3,410 Telecomunicacoes Brasileiras S.A. (ADR) ........................ 378,510
143,234 Telecomunicacoes de Sao Paulo S.A. (Pref.)(RCP)* ............... 41,454
--------------
419,964
--------------
Utilities -Electric
1,400 Centrais Electricas Brasileiras S.A. -Electrobras (ADR) ......... 30,100
2,260 Companhia Energetica de Minas Gerais S.A. (ADR) ................. 88,140
260,000 Companhia Energetica de Minas Gerais S.A. (Pref.) .............. 10,280
--------------
128,520
--------------
TOTAL BRAZIL .................................................... 805,076
--------------
CHILE (0.3%)
Beverages -Soft Drinks
1,420 Embotelladora Andina S.A. (Series A)(ADR) ....................... $ 28,400
--------------
Telecommunications
3,125 Compania de Telecomunicaciones de Chile S.A. (ADR) .............. 75,195
--------------
Utilities -Electric
2,000 Enersis S.A. (ADR) ............................................. 52,875
--------------
TOTAL CHILE .................................................... 156,470
--------------
COLOMBIA (0.1%)
Banking
3,500 Banco Industrial Colombiano S.A. (ADR) .......................... 41,781
--------------
DENMARK (2.4%)
Air Transport
1,200 Kobenhavns Lufthavne AS ........................................ 138,584
--------------
Government Obligations
Kingdom of Denmark
DKK 1,400K 7.00% due 12/15/04 .............................................. 221,815
Kingdom of Denmark
DKK 1,300K 8.00% due 05/15/03 .............................................. 212,610
Kingdom of Denmark
DKK 1,720K 8.00% due 03/15/06 .............................................. 289,665
Kingdom of Denmark
DKK 800K 9.00% due 11/15/00 .............................................. 127,968
--------------
852,058
--------------
Pharmaceuticals
1,880 Novo-Nordisk AS (Series B) ...................................... 269,708
--------------
TOTAL DENMARK ................................................... 1,260,350
--------------
FINLAND (0.8%)
Insurance
7,060 Pohjola Insurance Co. "B" ....................................... 303,453
--------------
Telecommunication Equipment
1,400 Nokia Oyj (A Shares) ............................................ 109,731
--------------
TOTAL FINLAND ................................................... 413,184
--------------
FRANCE (3.7%)
Banks -Money Center
43 Banque Nationale de Paris ....................................... 2,221
4,500 Credit Commercial de France .................................... 306,313
--------------
308,534
--------------
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
Electronics -Semiconductors
1,960 SGS-Thomson Microelectronics N.V.* ............................. $ 134,247
--------------
Household Products
2,060 Societe BIC S.A. ............................................... 150,673
--------------
Insurance
2,700 AXA-UAP ......................................................... 224,174
--------------
Leisure
1,500 Accor S.A. ..................................................... 295,082
--------------
Media
1,380 Canal Plus ..................................................... 278,229
--------------
Oil & Gas
1,690 Elf Aquitaine S.A. .............................................. 190,764
1,650 Total S.A. (B Shares) ........................................... 171,715
--------------
362,479
--------------
Telecommunication Equipment
1,400 Alcatel Alsthom S.A. ........................................... 185,662
--------------
TOTAL FRANCE ................................................... 1,939,080
--------------
GERMANY (4.1%)
Automotive
280 Bayerische Motoren Werke (BMW) AG .............................. 223,510
--------------
Chemicals -Diversified
2,950 Hoechst AG ..................................................... 103,710
--------------
Government Obligations
German Unity Fund
DEM 175K 8.00% due 01/12/02 .............................................. 108,062
DEM 605K Germany (Federal Republic) 5.25% due 10/20/98 ................... 334,520
DEM 661K Germany (Federal Republic) 6.25% due 01/04/24 ................... 391,830
DEM 695K Germany (Federal Republic) 6.50% due 10/14/05 ................... 417,684
DEM 455K Germany (Federal Republic) 7.25% due 10/21/02 ................... 277,154
--------------
1,529,250
--------------
Steel Related
1,050 SGL Carbon AG .................................................. 132,039
--------------
Utilities -Electric
2,650 VEBA AG ......................................................... 183,138
--------------
TOTAL GERMANY ................................................... 2,171,647
--------------
HONG KONG (2.7%)
Banking
37,400 Hang Seng Bank Ltd. ............................................. $ 295,021
--------------
Conglomerates
70,000 Hutchison Whampoa, Ltd. ......................................... 411,871
--------------
Real Estate
41,000 Hong Kong Land Holdings Ltd. ................................... 66,010
--------------
Telecommunications
160,000 Hong Kong Telecommunications Ltd. .............................. 333,118
--------------
Utilities -Electric
55,000 CLP Holdings Ltd. ............................................... 302,276
--------------
TOTAL HONG KONG ................................................. 1,408,296
--------------
ITALY (1.9%)
Government Obligations
Italy (Republic of)
ITL 615,000K 7.75% due 11/01/06 ............................................. 396,607
Italy (Republic of)
ITL 245,000K 10.00% due 08/01/03 ............................................. 166,646
--------------
563,253
--------------
Household Furnishings &
Appliances
6,400 Industrie Natuzzi SpA (ADR) ..................................... 156,800
--------------
Telecommunications
25,000 Telecom Italia Mobile SpA ....................................... 119,206
26,250 Telecom Italia SpA .............................................. 181,822
--------------
301,028
--------------
TOTAL ITALY ..................................................... 1,021,081
--------------
JAPAN (4.7%)
Automotive
9,000 Suzuki Motor Co. Ltd. ........................................... 82,979
--------------
Banking
6,000 Bank of Tokyo-Mitsubishi Ltd. ................................... 86,998
4,000 Mitsubishi Trust & Banking ..................................... 46,336
--------------
133,334
--------------
Building & Construction
4,000 Sekisui House Ltd. .............................................. 33,097
--------------
Business Services
8,000 Ricoh Co., Ltd. ................................................. 94,563
--------------
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
Chemicals
16,000 Asahi Chemical Industrial Co. Ltd. .............................. $ 63,672
7,000 Shin-Etsu Chemical Co. .......................................... 155,556
--------------
219,228
--------------
Electrical Equipment
5,000 Sumitomo Electric Industries ................................... 73,680
--------------
Electronic & Electrical
Equipment
5,000 Canon, Inc. ..................................................... 121,355
9,000 Hitachi, Ltd. ................................................... 70,922
7,000 Matsushita Electric Industrial Co., Ltd. ....................... 105,359
6,000 NGK Insulators, Ltd. ........................................... 54,846
1,500 Sony Corp. ...................................................... 138,298
--------------
490,780
--------------
Engineering & Construction
8,000 Kajima Corp. ................................................... 27,423
--------------
Financial Services
1,000 Japan Associated Finance ....................................... 47,675
3,000 Nomura Securities Co. Ltd. ..................................... 40,189
--------------
87,864
--------------
Insurance
5,000 Tokio Marine & Fire Insurance Co. ............................... 55,556
--------------
Machinery
5,000 Daifuku Co. Ltd. ............................................... 26,990
1,100 Keyence Corp. ................................................... 166,430
8,000 Minebea Co., Ltd. ............................................... 85,106
15,000 NSK Ltd. ........................................................ 53,073
--------------
331,599
--------------
Manufacturing
1,900 Sony Music Entertainment Inc. .................................. 67,376
--------------
Pharmaceuticals
3,000 Yamanouchi Pharmaceutical Co. ................................... 72,813
--------------
Real Estate
5,000 Mitsubishi Estate Co. Ltd. ..................................... 55,162
4,000 Mitsui Fudosan Co. Ltd. ........................................ 39,716
--------------
94,878
--------------
Retail
2,700 Family Mart Co. Ltd. ........................................... 103,191
2,000 Ito-Yokado Co. Ltd. ............................................ 104,964
--------------
208,155
--------------
Steel & Iron
28,000 NKK Corp. ....................................................... $ 30,670
9,000 Yamato Kogyo Co., Ltd. ......................................... 81,560
--------------
112,230
--------------
Telecommunications
19 DDI Corp. ...................................................... 60,788
15 Nippon Telegraph & Telephone Corp. .............................. 135,934
--------------
196,722
--------------
Textiles -Apparel
7,000 Tokyo Style .................................................... 71,710
--------------
TOTAL JAPAN ..................................................... 2,453,987
--------------
MALAYSIA (0.6%)
Telecommunications
138,000 Telekom Malaysia Berhad ......................................... 339,642
--------------
MEXICO (1.5%)
Banking
8,750 Grupo Financiero Inbursa S.A. de C.V. (B Shares) ................ 27,615
--------------
Building & Construction
4,000 Apasco S.A. de C.V. ............................................ 26,005
2,300 Empresa ICA Sociedad Controladora S.A. de C.V. (ADR)* ........... 31,337
--------------
57,342
--------------
Building Materials
20,300 Cemex S.A. de C.V. (B Shares) ................................... 85,903
--------------
Conglomerates
9,443 ALFA S.A. de C.V. (Class A) ..................................... 50,229
15,900 Grupo Carso S.A. de C.V. (Series A1)* ........................... 90,589
--------------
140,818
--------------
Food, Beverage, Tobacco & Household Products
11,300 Fomento Economico Mexicano S.A. de C.V. (B Shares) .............. 70,792
2,730 Panamerican Beverages, Inc. (Class A)(ADR) ...................... 88,725
--------------
159,517
--------------
Media Group
1,700 Grupo Televisa S.A. (GDR)* ...................................... 54,719
--------------
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
Paper & Forest Products
15,600 Kimberly-Clark de Mexico S.A. de C.V. (A Shares) ................ $ 67,397
--------------
Retail
19,000 Cifra S.A. de C.V. (C Shares)* ................................. 32,116
2,212 Cifra S.A. de C.V. (Series V) ................................... 4,021
--------------
36,137
--------------
Telecommunications
2,700 Telefonos de Mexico S.A. de C.V. (Series L)(ADR) ................ 132,975
--------------
TOTAL MEXICO ................................................... 762,423
--------------
NETHERLANDS (2.9%)
Chemicals
780 Akzo Nobel NV .................................................. 141,192
--------------
Electrical Equipment
2,160 Philips Electronics NV .......................................... 145,837
--------------
Insurance
2,528 Aegon NV ........................................................ 241,188
4,771 ING Groep NV .................................................... 218,452
--------------
459,640
--------------
Publishing
9,000 Ver Ned Uitgev Ver Bezit NV ..................................... 251,880
1,212 Wolters Kluwer NV ............................................... 164,014
--------------
415,894
--------------
Record & Tape Distribution
3,100 PolyGram NV ..................................................... 138,332
--------------
Retail
4,656 Koninklijke Ahold NV ............................................ 128,273
--------------
Semiconductor Equipment
1,500 ASM Lithography Holding NV* .................................... 103,313
--------------
TOTAL NETHERLANDS ............................................... 1,532,481
--------------
PERU (0.1%)
Brewery
45,169 Union de Cervecerias Peruanas Backus & Johnston S.A. (T Shares) . 38,400
--------------
Telecommunications
Telefonica del Peru S.A.
1,300 (B Shares)(ADR) ................................................ 25,513
--------------
TOTAL PERU ...................................................... 63,913
--------------
SINGAPORE (1.9%)
Airlines
79,000 Singapore Airlines Ltd. ......................................... $ 516,672
--------------
Banking
120,800 Overseas-Chinese Banking Corp. Ltd. ............................. 504,362
--------------
TOTAL SINGAPORE ................................................. 1,021,034
--------------
SPAIN (2.0%)
Banks
6,750 Banco Bilbao Vizcaya ............................................ 235,880
4,980 Banco Popular Espanol S.A. ..................................... 375,667
--------------
611,547
--------------
Government Obligations
Spain (Government of)
ESP 28,000K 7.90% due 02/28/02 .............................................. 201,299
Spain (Government of)
ESP 16,600K 8.80% due 04/30/06 .............................................. 132,104
--------------
333,403
--------------
Telecommunications
3,400 Telefonica de Espana S.A. ....................................... 111,141
--------------
TOTAL SPAIN ..................................................... 1,056,091
--------------
SWEDEN (3.0%)
Automobiles
3,400 Volvo AB (B Shares) ............................................. 93,086
--------------
Business Services
7,440 Assa Abloy AB (Series B) ........................................ 183,509
5,940 Securitas AB (Series "B" Free) .................................. 173,615
--------------
357,124
--------------
Electrical Equipment
4,950 Ericsson (L.M.) Telephone Co. AB (Series "B" Free) .............. 194,127
--------------
Government Obligations
Sweden (Government of)
SEK 4,600K 6.00% due 02/09/05 .............................................. 584,460
Sweden (Kingdom of)
SEK 300K 8.00% due 08/15/07 .............................................. 43,399
--------------
627,859
--------------
Multi-line Insurance
2,750 Skandia Forsakrings AB .......................................... 143,459
--------------
Pharmaceuticals [PAGE 53]
8,533 Astra AB (B Shares) ............................................. 151,011
--------------
TOTAL SWEDEN .................................................... 1,566,666
--------------
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
SWITZERLAND (2.8%)
Airlines
215 Sairgroup* ..................................................... $ 276,761
--------------
Banking
1,875 Credit Suisse Group-Reg ........................................ 298,844
85 UBS-Bearer ...................................................... 120,992
--------------
419,836
--------------
Foods & Beverages
100 Nestle S.A. ..................................................... 159,553
--------------
Pharmaceuticals
180 Novartis AG ..................................................... 308,537
30 Roche Holdings AG .............................................. 311,789
--------------
620,326
--------------
TOTAL SWITZERLAND ............................................... 1,476,476
--------------
UNITED KINGDOM (12.5%)
Aerospace
44,091 Rolls-Royce PLC ................................................ 149,087
--------------
Auto Parts
32,660 BBA Group PLC .................................................. 191,527
--------------
Building Materials
39,357 Blue Circle Industries PLC ...................................... 208,298
--------------
Electrical Equipment
18,909 BICC Group (The) PLC ............................................ 43,861
38,580 General Electric Co. PLC ........................................ 241,368
--------------
285,229
--------------
Financial Services
29,000 Abbey National PLC .............................................. 582,669
779 HSBC Holdings PLC ............................................... 20,360
--------------
603,029
--------------
Food, Beverage, Tobacco & Household Products
7,770 B.A.T. Industries PLC ........................................... 70,823
16,067 Bass PLC ........................................................ 254,581
--------------
325,404
--------------
Government Obligations
pounds
sterling 43K United Kingdom Treasury Gilt 7.50% due 12/07/06 ................. 76,848
pounds
sterling 162K United Kingdom Treasury Gilt 8.50% due 12/07/05 ................. 302,998
--------------
379,846
--------------
Insurance
28,646 Prudential Corp. PLC ............................................ $ 384,173
39,113 Royal & Sun Alliance Insurance Group PLC ....................... 442,765
--------------
826,938
--------------
Leisure
11,956 Granada Group PLC ............................................... 188,075
27,401 Rank Group PLC ................................................. 134,167
--------------
322,242
--------------
Multi-Industry
54,803 Tomkins PLC .................................................... 295,418
--------------
Natural Gas
36,150 BG PLC .......................................................... 194,868
--------------
Oil -International -Integrated
81,457 Shell Transport & Trading Co. PLC ............................... 553,530
--------------
Pharmaceuticals
28,024 Glaxo Wellcome PLC ............................................. 752,119
--------------
Publishing
15,445 EMAP PLC ........................................................ 264,909
--------------
Retail
14,201 Great Universal Stores PLC ...................................... 170,732
13,000 Kingfisher PLC .................................................. 203,436
--------------
374,168
--------------
Telecommunications
56,545 British Telecommunications PLC .................................. 540,343
41,306 Securicor PLC ................................................... 222,547
--------------
762,890
--------------
Transportation
7,201 British Airways PLC ............................................ 60,579
--------------
TOTAL UNITED KINGDOM ............................................ 6,550,081
--------------
UNITED STATES (38.6%)
Aerospace & Defense
4,980 General Motors Corp. (Class H) .................................. 172,432
--------------
Air Transport
7,340 Continental Airlines, Inc. (Class B)* .......................... 340,392
--------------
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
Automotive
9,730 Chrysler Corp. ................................................. $ 338,726
7,490 Ford Motor Co. ................................................. 381,990
--------------
720,716
--------------
Banking
3,750 BankBoston Corp. ............................................... 335,625
$ 100K Central Fidelity Capital I -144A** 6.75% due 04/15/27 ........... 101,925
2,850 Chase Manhattan Corp. ........................................... 305,484
2,530 Citicorp ........................................................ 301,070
5,440 First Tennessee National Corp. .................................. 320,280
4,750 Washington Mutual, Inc. ......................................... 305,187
--------------
1,669,571
--------------
Beverages -Soft Drinks
8,400 PepsiCo, Inc. ................................................... 302,925
--------------
Chemicals
10,300 Georgia Gulf Corp. ............................................. 336,037
7,300 Monsanto Co. ................................................... 346,294
--------------
682,331
--------------
Computer Software
7,000 HBO & Co. ....................................................... 366,188
2,360 Microsoft Corp.* ............................................... 352,082
--------------
718,270
--------------
Computers
9,880 COMPAQ Computer Corp. ........................................... 297,018
10,740 Gateway 2000, Inc.* ............................................ 404,764
--------------
701,782
--------------
Computers -Systems .............................................
8,900 Sun Microsystems, Inc.* ........................................ 426,644
--------------
Electrical Equipment
4,460 General Electric Co. ........................................... 345,650
4,630 Honeywell, Inc. ................................................ 324,389
--------------
670,039
--------------
Electronics -
Semiconductors/Components
4,040 Intel Corp. .................................................... 327,240
--------------
Entertainment
3,520 The Walt Disney Co. ............................................ 375,100
Financial Services
Associates Corp. N.A.
$ 100K 6.375% due 08/15/99 ............................................ 101,009
6,190 Fannie Mae ..................................................... 382,233
6,560 Travelers Group, Inc. .......................................... 324,720
--------------
807,962
Insurance
3,100 American International Group, Inc. ............................. $ 341,969
Orion Capital Trust I
$ 200K 8.73% due 01/01/37 ............................................. 216,500
--------------
558,469
--------------
Oil -International -Integrated
5,200 Exxon Corp. ..................................................... 308,425
--------------
Oil Related
4,250 Mobil Corp. .................................................... 289,531
5,530 Texaco, Inc. ................................................... 287,906
--------------
577,437
--------------
Packaged Foods
4,290 General Mills, Inc. ............................................ 319,337
--------------
Paper Products
7,100 Bowater, Inc. ................................................... 347,900
5,740 Champion International Corp. .................................... 293,816
--------------
641,716
--------------
Pharmaceuticals
4,500 American Home Products Corp. ................................... 429,469
4,990 Johnson & Johnson .............................................. 334,018
2,270 Warner-Lambert Co. .............................................. 341,635
--------------
1,105,122
--------------
Railroad Equipment
7,020 Trinity Industries, Inc. ....................................... 317,655
--------------
Retail -Department Stores
25,000 Kmart Corp. ..................................................... 275,000
--------------
Retail -Specialty
9,760 Bed Bath & Beyond, Inc.* ........................................ 386,740
5,680 Home Depot, Inc. ................................................ 342,575
12,400 Pep Boys-Manny, Moe & Jack ...................................... 271,250
--------------
1,000,565
--------------
Savings & Loans Association
3,600 Golden West Financial Corp. .................................... 303,975
--------------
Steel
6,430 Nucor Corp. .................................................... 306,229
--------------
Telecommunication Equipment
5,700 Cisco Systems, Inc.* ........................................... 359,456
--------------
Tobacco
7,530 Philip Morris Companies, Inc. ................................... 312,495
--------------
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------------------------------------------------
U.S. Government Obligations
U.S. Treasury Bond
$1,250K 6.875% due 08/15/25 ............................................ $ 1,417,675
U.S. Treasury Note
$ 50K 5.625% due 11/30/00 ............................................ 50,346
U.S. Treasury Note
$1,100K 5.875% due 04/30/98 ............................................ 1,101,375
U.S. Treasury Note
$ 175K 6.50% due 04/30/99 ............................................. 177,518
U.S. Treasury Note
$ 250K 6.50% due 05/15/05 ............................................. 264,610
U.S. Treasury Note
$1,150K 6.625% due 06/30/01 ............................................ 1,193,424
U.S. Treasury Note
$ 570K 6.875% due 08/31/99 ............................................ 583,281
U.S. Treasury Note
$1,000K 6.875% due 05/15/06 ............................................ 1,086,340
U.S. Treasury Note
$ 75K 7.50% due 11/15/01 ............................................. 80,304
--------------
5,954,873
--------------
TOTAL UNITED STATES ............................................ 20,256,158
--------------
VENEZUELA (0.2%)
Telecommunications
2,300 Compania Anonima Nacional Telefonos de Venezuela (Class D)(ADR)* 84,525
--------------
TOTAL COMMON AND PREFERRED STOCKS
AND BONDS
(Identified Cost $41,265,351) ................................... 46,917,277
--------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY DESCRIPTION,
AMOUNT EXPIRATION DATE
IN THOUSANDS AND STRIKE PRICE VALUE
- -------------- ---------------------------------------------------------------- -------------------
PURCHASED CALL OPTION ON
<S> <C> <C>
FOREIGN CURRENCY (0.1%)
FEBRUARY 10, 1998/YEN 120.72
yen 700 (Identified Cost $17,255) ...................................... $ 34,230
----------
PRINCIPAL
AMOUNT
---------
SHORT-TERM INVESTMENT (a) (9.5%)
U.S. GOVERNMENT AGENCY
Federal Home Loan Mortgage Corp. 5.57% due 02/02/98 (Amortized
$5,000K Cost $4,998,969) 4,998,969
----------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $46,281,575)(b) . 99.0% 51,950,476
CASH AND OTHER ASSETS IN EXCESS
OF LIABILITIES.................... 1.0 521,061
-------- ------------
NET ASSETS........................ 100.0% $52,471,537
======== ============
<FN>
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
RCP Receipt shares.
K In thousands.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Security was purchased on a discount basis. The interest rate shown
has been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$7,665,499 and the aggregate gross unrealized depreciation is
$1,996,598, resulting in net unrealized appreciation of $5,668,901.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
SUMMARY OF INVESTMENTS January 31, 1998
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Aerospace.................... $ 149,087 0.3%
Aerospace & Defense.......... 172,432 0.3
Air Transport................ 478,976 0.9
Airlines..................... 793,433 1.5
Auto Parts................... 191,527 0.4
Automobiles.................. 93,086 0.2
Automotive................... 1,027,205 2.0
Banking...................... 3,139,980 6.0
Banks........................ 611,547 1.2
Banks - Money Center.......... 308,534 0.6
Beverages - Soft Drinks....... 331,325 0.6
Brewery...................... 38,400 0.1
Building & Construction ..... 90,439 0.2
Building Materials........... 294,201 0.6
Business Services............ 451,687 0.9
Chemicals.................... 1,042,751 2.0
Chemicals - Diversified....... 103,710 0.2
Computer Software............ 718,270 1.4
Computers ................... 701,782 1.3
Computers - Systems........... 426,644 0.8
Conglomerates................ 552,689 1.1
Currency Option ............. 34,230 0.1
Electrical Equipment......... 1,368,912 2.6
Electronic & Electrical
Equipment................... 490,780 0.9
Electronics - Semiconductors . 134,247 0.3
Electronics
- Semiconductors/Components . 327,240 0.6
Energy....................... 82,181 0.2
Engineering & Construction .. 27,423 0.1
Entertainment................ 375,100 0.7
Financial Services........... 1,498,855 2.8
Food, Beverage, Tobacco, &
Household Products.......... 484,921 0.9
Foods & Beverages............ 159,553 0.3
Government Obligations....... 4,285,669 8.2
Household Furnishings &
Appliances.................. 156,800 0.3
Household Products........... 150,673 0.3
Insurance.................... 2,428,230 4.6
Leisure...................... 617,324 1.2
Machinery.................... 331,599 0.6
Manufacturing................ 67,376 0.1
Media ....................... 278,229 0.5
Media Group.................. 54,719 0.1
Metals & Mining.............. 54,847 0.1
Multi-Industry............... $ 373,268 0.7%
Multi-Line Insurance......... 143,459 0.3
Natural Gas.................. 194,868 0.4
Oil & Gas.................... 362,479 0.7
Oil - International
- Integrated ................ 1,439,392 2.7
Packaged Foods............... 319,337 0.6
Paper & Forest Products ..... 67,397 0.1
Paper Products .............. 641,716 1.2
Petroleum.................... 201,745 0.4
Pharmaceuticals.............. 2,971,099 5.6
Publishing .................. 680,803 1.3
Railroad Equipment........... 317,655 0.6
Real Estate.................. 160,888 0.3
Record & Tape Distribution .. 138,332 0.3
Retail ...................... 746,733 1.4
Retail - Department Stores .. 275,000 0.5
Retail - Specialty............ 1,000,565 1.9
Savings & Loans Association . 303,975 0.6
Semiconductor Equipment ..... 103,313 0.2
Steel........................ 306,229 0.6
Steel & Iron................. 112,230 0.2
Steel Related................ 132,039 0.3
Telecommunication Equipment . 654,849 1.2
Telecommunications........... 3,111,057 5.9
Textiles - Apparel............ 71,710 0.1
Tobacco...................... 312,495 0.6
Transportation .............. 60,579 0.1
U.S. Government Agency....... 4,998,969 9.5
U.S. Government Obligations 5,954,873 11.3
Utilities - Electric ......... 666,809 1.3
------------- ------
$51,950,476 99.0%
============= ======
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ---------------------------- ------------- ------------
<S> <C> <C>
Common Stocks ............... $35,948,975 68.5%
Corporate Bonds.............. 419,434 0.8
Foreign Currency Call
Option...................... 34,230 0.1
Foreign Government
Obligations................. 4,285,669 8.2
Preferred Stocks............. 308,326 0.6
U.S. Government Agency....... 4,998,969 9.5
U.S. Government Obligations . 5,954,873 11.3
------------- ------------
$51,950,476 99.0%
============= ============
</TABLE>
57
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $46,281,575). $51,950,476
Cash (including $45,203 in foreign currency)...................... 187,716
Receivable for:
Interest ....................................................... 234,284
Investments sold ............................................... 219,189
Foreign withholding taxes reclaimed ............................ 32,523
Dividends ...................................................... 32,254
Shares of beneficial interest sold ............................. 5,830
Deferred organizational expenses ................................. 73,239
Prepaid expenses and other assets ................................ 78,353
-------------
TOTAL ASSETS.................................................... 52,813,864
-------------
LIABILITIES:
Payable for:
Investments purchased........................................... 118,812
Plan of distribution fee........................................ 45,092
Investment management fee....................................... 44,913
Shares of beneficial interest repurchased ...................... 36,796
Accrued expenses and other payables .............................. 96,714
-------------
TOTAL LIABILITIES............................................... 342,327
-------------
NET ASSETS ..................................................... $52,471,537
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $49,192,315
Net unrealized appreciation ...................................... 5,660,048
Accumulated undistributed net investment income .................. 222,130
Distributions in excess of net realized gain ..................... (2,602,956)
-------------
NET ASSETS ..................................................... $52,471,537
=============
CLASS A SHARES:
Net Assets ....................................................... $ 26,956
Shares Outstanding (unlimited authorized, $.01 par value) ........ 2,344
NET ASSET VALUE PER SHARE....................................... $ 11.50
=============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $ 12.14
=============
CLASS B SHARES:
Net Assets ....................................................... $52,374,341
Shares Outstanding (unlimited authorized, $.01 par value) ........ 4,568,443
NET ASSET VALUE PER SHARE....................................... $ 11.46
=============
CLASS C SHARES:
Net Assets........................................................ $ 53,358
Shares Outstanding (unlimited authorized, $.01 par value) ....... 4,660
NET ASSET VALUE PER SHARE ...................................... $ 11.45
=============
CLASS D SHARES:
Net Assets ....................................................... $ 16,882
Shares Outstanding (unlimited authorized, $.01 par value) ....... 1,467
NET ASSET VALUE PER SHARE ...................................... $ 11.51
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended January 31, 1998*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest (net of $132 foreign withholding tax)....................... $1,044,521
Dividends (net of $77,953 foreign withholding tax) .................. 759,559
------------
TOTAL INCOME ...................................................... 1,804,080
------------
EXPENSES
Investment management fee ........................................... 621,396
Plan of distribution fee (Class A shares) ........................... 28
Plan of distribution fee (Class B shares) ........................... 580,914
Plan of distribution fee (Class C shares) ........................... 241
Professional fees ................................................... 88,295
Transfer agent fees and expenses..................................... 80,972
Shareholder reports and notices...................................... 78,146
Custodian fees ...................................................... 68,714
Registration fees.................................................... 55,755
Organizational expenses.............................................. 35,303
Trustees' fees and expenses ......................................... 13,810
Other ............................................................... 22,101
------------
TOTAL EXPENSES..................................................... 1,645,675
------------
NET INVESTMENT INCOME.............................................. 158,405
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments ....................................................... 629,076
Foreign exchange transactions ..................................... 361,840
------------
NET GAIN........................................................... 990,916
------------
Net change in unrealized appreciation/depreciation on:
Investments ....................................................... 994,604
Translation of forward foreign currency contracts, other assets
and liabilities denominated in foreign currencies ................ (2,764)
------------
NET APPRECIATION .................................................. 991,840
------------
NET GAIN........................................................... 1,982,756
------------
NET INCREASE ........................................................ $2,141,161
============
</TABLE>
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1998* JANUARY 31, 1997
- ------------------------------------------------------ ----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 158,405 $ 65,971
Net realized gain...................................... 990,916 1,876,766
Net change in unrealized appreciation ................. 991,840 584,125
----------------- ----------------
NET INCREASE ........................................ 2,141,161 2,526,862
----------------- ----------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - Class B shares.................. (148,714) (554,313)
Net realized gain
Class A shares........................................ (1,601) --
Class B shares........................................ (3,307,479) (2,041,599)
Class C shares........................................ (3,196) --
Class D shares........................................ (853) --
----------------- ----------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................... (3,461,843) (2,595,912)
----------------- ----------------
Net increase (decrease) from transactions in shares of
beneficial interest................................... (11,521,571) 21,111,669
----------------- ----------------
NET INCREASE (DECREASE).............................. (12,842,253) 21,042,619
NET ASSETS:
Beginning of period.................................... 65,313,790 44,271,171
----------------- ----------------
END OF PERIOD
(Including undistributed net investment income of
$222,130 and dividends in excess of net investment
income of $41,886)................................... $ 52,471,537 $65,313,790
================= ================
</TABLE>
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Global Asset Allocation 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's investment objective is to
seek long-term total return on its investments. The Fund seeks to achieve its
objective through a managed investment policy utilizing a portfolio of U.S.
and foreign equity, debt and money market securities. The Fund was organized
as a Massachusetts business trust on October 18, 1994 and commenced
operations on February 28, 1995. On July 28, 1997, the Fund commenced
offering three additional classes of shares, with the then current shares
designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a
sales charge. Additionally, Class A shares, Class B shares and Class C shares
incur distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange;
the securities are valued on the exchange designated as the primary market
pursuant to procedures adopted by the Trustees); (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation;
(3) when market quotations are not readily available, including circumstances
under which it is determined Dean Witter InterCapital Inc. (the "Investment
Manager") or by TCW Funds Management, Inc. or Morgan Grenfell Investment
Services, Ltd. (the "Sub-Advisers") that sale and bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the 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 may
61
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
utilize a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research and evaluations by its
staff, including review of broker-dealer market price quotations, if
available, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of purchase
are valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income and other distributions are recorded on the
ex-dividend date except for certain dividends from foreign securities
which are recorded as soon as the Fund is informed after the ex-dividend
date. Discounts are accreted over the life of the respective securities.
Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are
allocated to each class of shares based upon the relative net asset value on
the date such items are recognized. Distribution fees are charged directly to
the respective class.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities, other assets and liabilities and forward foreign
currency contracts are translated at the exchange rates prevailing at the end
of the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in the
Statement of Operations as realized and unrealized gain/loss on foreign
exchange transactions. Pursuant to U.S. Federal income tax regulations,
certain foreign exchange gains/losses included in realized and unrealized
gain/loss are included in or are a reduction of ordinary income for federal
income tax purposes. The Fund does not isolate that portion of the results of
operations arising as a result of changes in the foreign exchange rates from
the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate exchange
rates. The resultant unrealized exchange gains and losses are included in the
Statement of Operations as unrealized foreign currency gain or loss. The Fund
records realized gains or losses on delivery of the currency or at the time
the forward contract is extinguished (compensated) by entering into a closing
transaction prior to delivery.
62
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
F. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option, an
amount equal to the premium received is included in the Fund's Statement of
Assets and Liabilities as a liability which is subsequently marked-to-market
to reflect the current market value of the option written. If a written
option either expires or the Fund enters into a closing purchase transaction,
the Fund realizes a gain or loss without regard to any unrealized gain or
loss on the underlying security or currency and the liability related to such
option is extinguished. If a written call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security or currency
and the proceeds from such sale are increased by the premium originally
received.
When the Fund purchases a call or put option, the premium paid is recorded as
an investment and is subsequently marked-to-market to reflect the current
market value. If a purchased option expires, the Fund will realize a loss to
the extent of the premium paid. If the Fund enters into a closing sale
transaction, a gain or loss is realized for the difference between the
proceeds from the sale and the cost of the option. If a put option is
exercised, the cost of the security or currency sold upon exercise will be
increased by the premium originally paid. If a call option is exercised, the
cost of the security purchased upon exercise will be increased by the premium
originally paid.
G. 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.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
I. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $177,000 of which
approximately $144,000 have been reimbursed. The
63
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
balance has been absorbed by the Investment Manager. Such expenses have been
deferred and are being amortized on the straight-line method over a period
not to exceed five years from commencement of operations.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, calculated daily and payable monthly, by applying
the annual rate of 1.0% to the net assets of the Fund determined as of the
close of each business day.
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.
Under Sub-Advisory Agreements between the Sub-Advisers and the Investment
Manager, the Sub-Advisers provide the Fund with investment advice and
portfolio management relating to the Fund's investments in securities,
subject to the overall supervision of the Investment Manager. As compensation
for the services provided pursuant to the Sub-Advisory Agreements, the
Investment Manager pays each Sub-Adviser monthly compensation equal to 30% of
its monthly compensation.
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. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -up to
0.25% of the average daily net assets of Class A; (ii) Class B -1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
average daily net assets of Class B; and (iii) Class C -up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts
paid under the Plan are paid to the Distributor for services provided. In
the case of Class B and Class C shares, amounts paid under the Plan are paid
to the Distributor for services provided and the expenses borne by it and
others in the distribution of the shares of these Classes, including the
payment of commissions for sales of these Classes and incentive
64
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
compensation to, and expenses of, the account executives of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and others who engage in or support distribution of the 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 these shares to other than current
shareholders and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate DWR and
other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect,
any cumulative expenses incurred by the Distributor but not yet recovered may
be recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the
Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. The Distributor has advised the Fund that such
excess amounts, including carrying charges, totaled $3,856,463, at
January 31, 1998.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses
representing a gross sales credit to account executives may be reimbursed in
the subsequent calendar year. For the period ended January 31, 1998, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the period ended January 31,
1998, it received contingent deferred sales charges from redemptions of the
Fund's Class B shares and Class C shares of $191,520 and $33, respectively,
and received approximately $1,018 in front end sales charges from sales of
the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended January 31, 1998
aggregated $52,418,164 and $70,854,970, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$12,840,577 and $12,053,968, respectively.
65
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
For the period May 31, 1997 through January 31, 1998, the Fund incurred
brokerage commissions of $3,481 with Morgan Stanley & Co., Inc., an affiliate
of the Investment Manager since May 31, 1997, for portfolio transactions
executed on behalf of the Fund.
For the year ended January 31, 1998, the Fund incurred brokerage commissions
of $21,991 with DWR for portfolio transactions executed on behalf of the Fund.
At January 31, 1998, the Fund's payable for investments purchased and
receivable for investments sold included unsettled trades with DWR of
$34,738 and $78,910, respectively.
Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At January 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,200.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1998 JANUARY 31, 1997
------------------------------ ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ----------- --------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold 2,202 $ 28,364 -- --
Reinvestment of dividends and distributions 142 1,601 -- --
------------- --------------- ----------- --------------
Net increase - Class A 2,344 29,965 -- --
------------- --------------- ----------- --------------
CLASS B SHARES
Sold 637,914 7,870,323 2,505,555 $ 30,094,772
Reinvestment of dividends and distributions 277,899 3,138,105 199,063 2,368,262
Redeemed (1,863,599) (22,637,924) (944,898) (11,351,365)
------------- --------------- ----------- --------------
Net increase (decrease) - Class B (947,786) (11,629,496) 1,759,720 21,111,669
------------- --------------- ----------- --------------
CLASS C SHARES*
Sold 4,664 59,900 -- --
Reinvestment of dividends and distributions 262 2,944
Redeemed (266) (3,252) -- --
------------- --------------- ----------- --------------
Net increase - Class C 4,660 59,592 -- --
------------- --------------- ----------- --------------
CLASS D SHARES*
Sold 1,391 17,515 -- --
Reinvestment of dividends and distributions 76 853 -- --
------------- --------------- ----------- --------------
Net increase - Class D 1,467 18,368 -- --
------------- --------------- ----------- --------------
Net increase (decrease) in Fund (939,315) $(11,521,571) 1,759,720 $ 21,111,669
============= =============== =========== ==============
</TABLE>
* For the period July 28, 1997 (issue date) through January 31, 1998.
66
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
6. FEDERAL INCOME TAX STATUS
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $2,450,000 during fiscal 1998.
As of January 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses and permanent book/tax differences
primarily attributable to foreign currency gains, tax adjustments on passive
foreign investment companies sold by the Fund and nondeductible
organizational expense. To reflect reclassifications arising from the
permanent differences, paid-in-capital was charged $32,807, distributions in
excess of net realized gain was charged $221,518 and accumulated
undistributed net investment income was credited $254,325.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward
contracts") to facilitate settlement of foreign currency denominated
portfolio transactions or to manage foreign currency exposure associated with
foreign currency denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their
contracts.
At January 31, 1998, the Fund had no outstanding forward contracts.
8. SUBSEQUENT EVENT
Effective March 2, 1998, the Investment Manager will assume directly the
sub-advisory responsibilities currently being performed by TCW Funds
Management, Inc. (TCW). The Investment Manager will retain the portion of
their fee currently paid to TCW.
67
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED FOR THE YEAR FEBRUARY 28, 1995*
JANUARY 31, ENDED THROUGH
1998**++ JANUARY 31, 1997 JANUARY 31, 1996
- --------------------------------------- ------------------- ---------------- ------------------
<S> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $11.84 $11.79 $10.00
------------------- ---------------- ------------------
Net investment income (loss)............ 0.03 (0.01) 0.17
Net realized and unrealized gain ...... 0.35 0.55 2.20
------------------- ---------------- ------------------
Total from investment operations ....... 0.38 0.54 2.37
------------------- ---------------- ------------------
Less dividends and distributions:
Net investment income.................. (0.03) (0.11) (0.34)
Net realized gain...................... (0.73) (0.38) (0.24)
------------------- ---------------- ------------------
Total dividends and distributions ...... (0.76) (0.49) (0.58)
------------------- ---------------- ------------------
Net asset value, end of period.......... $11.46 $11.84 $11.79
=================== ================ ==================
TOTAL INVESTMENT RETURN+................ 3.29% 4.58% 23.89%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 2.65% 2.53% 1.14%(2)(3)
Net investment income................... 0.25% 0.11% 1.71%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $52,374 $65,314 $44,271
Portfolio turnover rate................. 94% 63% 71%(1)
Average commission rate paid............ $0.0153 $0.0013 --
</TABLE>
- ------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All
shares of the Fund held prior to that date have been designated Class
B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not reimbursed all expenses, the above
annualized expense and net investment loss ratios would have been
2.87% and (0.02)%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
68
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ------------------------------------------ -----------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 13.09
-----------------
Net investment income ..................... 0.05
Net realized and unrealized gain .......... (0.91)
-----------------
Total from investment operations .......... (0.86)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ............ $ 11.50
=================
TOTAL INVESTMENT RETURN+................... (6.39)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 2.02%(2)
Net investment income ..................... 0.79%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $ 27
Portfolio turnover rate ................... 94%
Average commission rate paid .............. $ 0.0153
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 13.09
-----------------
Net realized and unrealized gain .......... (0.91)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ............ $ 11.45
=================
TOTAL INVESTMENT RETURN+................... (6.79)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 2.79%(2)
Net investment income ..................... 0.07%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $ 53
Portfolio turnover rate ................... 94%
Average commission rate paid .............. $ 0.0153
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on
the net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
69
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ------------------------------------------ -----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ..... $ 13.09
-----------------
Net investment income ..................... 0.07
Net realized and unrealized gain .......... (0.92)
-----------------
Total from investment operations .......... (0.85)
-----------------
Less distributions from net realized gain (0.73)
-----------------
Net asset value, end of period ............ $ 11.51
=================
TOTAL INVESTMENT RETURN+ .................. (6.32)% (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................. 1.80%(2)
Net investment income ..................... 1.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $ 17
Portfolio turnover rate ................... 94%
Average commission rate paid .............. $ 0.0153
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day
of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
70
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER GLOBAL ASSET ALLOCATION FUND
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Global Asset Allocation Fund (the "Fund") at January 31, 1998, the results of
its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at January 31, 1998 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 13, 1998
1998 FEDERAL TAX NOTICE (unaudited)
During the year ended January 31, 1998, the Fund paid to Class A, B,
C and D shareholders $0.63 per share from long-term capital gains.
Of this $0.63 distribution, $0.12 is taxable as 28% rate gain and
$0.51 is taxable as 20% rate gain. Additionally, for such period
22.07% of the income paid qualified for the dividends received
deduction available to corporations.
<PAGE>
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included in Prospectus
(Part A):
<TABLE>
Page in
Prospectus
----------
<S> <C>
Financial Highlights for the period February 28, 1995
(commencement of operations) through January 31, 1996 and the
fiscal years ended January 31, 1997 and 1998 (Class B)........ 6
Financial Highlights for the period July 28, 1997 through
January 31, 1998 (Classes A, C and D)......................... 7
(2) Financial statements included in the Statement of Additional
Information (Part B): Page In
SAI
-------
Portfolio of Investments at January 31, 1998.................. 50
Statement of Assets and Liabilities at January 31, 1998....... 58
Statement of Operations for the year ended January 31, 1998... 59
Statement of Changes in Net Assets for the years ended
January 31, 1997 and January 31, 1998......................... 60
Notes to Financial Statements at January 31, 1998 ............ 61
Financial Highlights for the period February 28, 1995 through
January 31, 1996 and the fiscal years ended January 31, 1997
and 1998 (Class B)............................................ 68
Financial Highlights for the period July 28, 1997 through
January 31, 1998 (Classes A, C and D)......................... 69
(3) Financial statements included in Part C:
None
<PAGE>
(b) Exhibits:
11. Consent of Independent Accountants.
16. Schedules for Computation of Performance Quotations.
27. Financial Data Schedules.
- ----------------------------------------------------------------------------
All other exhibits were previously filed via EDGAR and are hereby
incorporated by reference.
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at January 31, 1998
-------------- -------------------
Share of Beneficial Interest
Class A 6
Class B 5,560
Class C 8
Class D 3
</TABLE>
Item 27. Indemnification
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was
not unlawful. In addition, indemnification is permitted only if it is
determined that the actions in question did not render them liable by reason
of willful misfeasance, bad faith or gross negligence in the performance of
their duties or by reason of reckless disregard of their obligations and
duties to the Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined that they are
entitled to indemnification against any liability established in such
litigation. The Registrant may also advance money for these expenses provided
that they give their undertakings to repay the Registrant unless their conduct
is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Investment Management Agreement, neither the
Investment Manager nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in connection with
<PAGE>
the successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling person in
connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act,
and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940,
so long as the interpretation of Sections 17(h) and 17(i) of such Act remains
in effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Trustees, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was
a Trustee, officer, employee, or agent of Registrant, or who is or was serving
at the request of Registrant as a trustee, director, officer, employee or
agent of another trust or corporation, against any liability asserted against
him and incurred by him or arising out of his position. However, in no event
will Registrant maintain insurance to indemnify any such person for any act
for which Registrant itself is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is given
regarding officers of Dean Witter InterCapital Inc. InterCapital is a
wholly-owned subsidiary of Morgan Stanley, Dean Witter, Discover & Co. The
principal address of the Dean Witter Funds is Two World Trade Center, New
York, New York 10048.
The term "Dean Witter Funds" used below refers to the following
registered investment companies:
Closed-End Investment Companies
(1) InterCapital Income Securities Inc.
(2) High Income Advantage Trust
(3) High Income Advantage Trust II
(4) High Income Advantage Trust III
(5) Municipal Income Trust
(6) Municipal Income Trust II
(7) Municipal Income Trust III
(8) Dean Witter Government Income Trust
(9) Municipal Premium Income Trust
(10) Municipal Income Opportunities Trust
(11) Municipal Income Opportunities Trust II
(12) Municipal Income Opportunities Trust III
(13) Prime Income Trust
(14) InterCapital Insured Municipal Bond Trust
(15) InterCapital Quality Municipal Income Trust
(16) InterCapital Quality Municipal Investment Trust
(17) InterCapital Insured Municipal Income Trust
(18) InterCapital California Insured Municipal Income Trust
(19) InterCapital Insured Municipal Trust
<PAGE>
(20) InterCapital Quality Municipal Securities
(21) InterCapital New York Quality Municipal Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities
Open-end Investment Companies:
(1) Dean Witter Short-Term Bond Fund
(2) Dean Witter Tax-Exempt Securities Trust
(3) Dean Witter Tax-Free Daily Income Trust
(4) Dean Witter Dividend Growth Securities Inc.
(5) Dean Witter Convertible Securities Trust
(6) Dean Witter Liquid Asset Fund Inc.
(7) Dean Witter Developing Growth Securities Trust
(8) Dean Witter Retirement Series
(9) Dean Witter Federal Securities Trust
(10) Dean Witter World Wide Investment Trust
(11) Dean Witter U.S. Government Securities Trust
(12) Dean Witter Select Municipal Reinvestment Fund
(13) Dean Witter High Yield Securities Inc.
(14) Dean Witter Intermediate Income Securities
(15) Dean Witter New York Tax-Free Income Fund
(16) Dean Witter California Tax-Free Income Fund
(17) Dean Witter Health Sciences Trust
(18) Dean Witter California Tax-Free Daily Income Trust
(19) Dean Witter Global Asset Allocation Fund
(20) Dean Witter American Value Fund
(21) Dean Witter Strategist Fund
(22) Dean Witter Utilities Fund
(23) Dean Witter World Wide Income Trust
(24) Dean Witter New York Municipal Money Market Trust
(25) Dean Witter Capital Growth Securities
(26) Dean Witter Precious Metals and Minerals Trust
(27) Dean Witter European Growth Fund Inc.
(28) Dean Witter Global Short-Term Income Fund Inc.
(29) Dean Witter Pacific Growth Fund Inc.
(30) Dean Witter Multi-State Municipal Series Trust
(31) Dean Witter Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
<PAGE>
(45) Dean Witter Mid-Cap Growth Fund
(46) Dean Witter Select Dimensions Investment Series
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Information Fund
(53) Dean Witter Japan Fund
(54) Dean Witter Income Builder Fund
(55) Dean Witter Special Value Fund
(56) Dean Witter Financial Services Trust
(57) Dean Witter Market Leader Trust
(58) Dean Witter S&P 500 Index Fund
(59) Dean Witter Fund of Funds
(60) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas"
Portfolio
The term "TCW/DW Funds" refers to the following registered investment
companies:
Open-End Investment Companies
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(11) TCW/DW Emerging Markets Opportunities Trust
Closed-End Investment Companies
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
<TABLE>
<CAPTION>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
<S> <C>
Charles A. Fiumefreddo Executive Vice President and Director of Dean Witter
Chairman, Chief Executive Reynolds Inc. ("DWR"); Chairman, Chief Executive
Officer and Director Officer and Director of Dean Witter
Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman
and Director of Dean Witter Trust FSB ("DWT");
Chairman, Director or Trustee, President and
Chief Executive Officer of the Dean Witter
Funds and Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Director and/or
officer of various Morgan Stanley, Dean Witter,
Discover & Co. ("MSDWD") subsidiaries.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -----------------------------------------------
Philip J. Purcell Chairman, Chief Executive Officer and Director
Director of MSDWD and DWR; Director of DWSC and
Distributors; Director or Trustee of the Dean
Witter Funds; Director and/or officer of various
MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer
Director of Dean Witter Capital, a division of DWR;
Director of DWR, DWSC, Distributors and DWT;
Trustee of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of
Director Dean Witter Financial; Director of DWR,
DWSC, Distributors and DWT.
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice and Administrative Officer of MSDWD; Executive
President, Chief Vice President and Chief Financial Officer of
Financial Officer and DWSC and Distributors; Director of DWR,
Director DWSC, Distributors and MSDWD.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDWD; Executive Vice
President, Secretary and Chief Legal Officer
of Distributors; Director of DWR, DWSC and
Distributors.
Mitchell M. Merin President and Chief Strategic Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Strategic Officer Executive Vice President and Director of DWT;
Executive Vice President and Director of DWR;
Director of SPS Transaction Services, Inc. and
various other MSDWD subsidiaries.
Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWT;
Vice President of the Dean Witter Funds and the
TCW/DW Funds.
John B. Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWT.
President
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President Director of DWT.
and Chief Investment
Officer
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Edward C. Oelsner, III
Executive Vice President
Barry Fink Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
Secretary and General President, Assistant Secretary and Assistant
Counsel General Counsel of Distributors; Vice President,
Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.
Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.
Richard Felegy
Senior Vice President
Edward F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWT and Director of DWT; Vice President
of the Dean Witter Funds and the TCW/DW Funds.
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value Fund.
Senior Vice President
John B. Kemp, III President of Distributors.
Senior Vice President
Anita H. Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ---------------- -------------------------------------------------
Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.
Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari Vice President of Prime Income Trust.
Senior Vice President
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingson Vice President of various Dean Witter Funds.
Senior Vice President
Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.
Elizabeth A. Vetell
Senior Vice President
James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.
Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ------------------ ------------------------------------------------
Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the
TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors; First Vice
and Controller President and Treasurer of DWT.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Nancy Belza
Vice President
Dale Boettcher
Vice President
Maurice Bendrihem
Vice President and
Assistant Controller
Joseph Cardwell
Vice President
Philip Casparius
Vice President
B. Catherine Connelly
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Salvatore DeSteno
Vice President Vice President of DWSC.
Bruce Dunn
Vice President
Jeffrey D. Geffen
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series.
Peter Hermann
Vice President Vice President of various Dean Witter Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
Vice President Vice President of various Dean Witter Funds
Paula LaCosta
Vice President Vice President of various Dean Witter Funds.
Thomas Lawlor
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Gerard J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Sharon K. Milligan
Vice President
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of various Dean Witter Funds.
Vice President
Michael Roan
Vice President
John Roscoe
Vice President
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- ------------------------------------------------
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metal and
Vice President Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.
Carl F. Sadler
Vice President
Deborah Santaniello
Vice President
Peter J. Seeley Vice President of various Dean Witter Funds.
Vice President
Naomi Stein
Vice President
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
Item 29. Principal Underwriters
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation,
is the principal underwriter of the Registrant. Distributors is also
the principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Global Asset Allocation
<PAGE>
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Federal Securities Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Value-Added Market Series
(42) Dean Witter Global Utilities Fund
(43) Dean Witter International SmallCap Fund
(44) Dean Witter Balanced Growth Fund
(45) Dean Witter Balanced Income Fund
(46) Dean Witter Hawaii Municipal Trust
(47) Dean Witter Variable Investment Series
(48) Dean Witter Capital Appreciation Fund
(49) Dean Witter Intermediate Term U.S. Treasury Trust
(50) Dean Witter Information Fund
(51) Dean Witter Japan Fund
(52) Dean Witter Income Builder Fund
(53) Dean Witter Special Value Fund
(54) Dean Witter Financial Services Trust
(55) Dean Witter Market Leader Trust
(56) Dean Witter S&P 500 Index Fund
(57) Dean Witter Fund of Funds
<PAGE>
(58) Morgan Stanley Dean Witter Competitive Edge Fund,
"Best Ideas" Portfolio
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(11) TCW/DW Emerging Markets Opportunities Trust
(b) The following information is given regarding directors and officers of
Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
Name Positions and Office with Distributors
- ---- --------------------------------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Investment Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are maintained
by the Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 26th day of February, 1998.
DEAN WITTER GLOBAL ASSET ALLOCATION FUND
By /s/ Barry Fink
------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ------ ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 2/26/98
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 2/26/98
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 2/26/98
------------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/ David M. Butowsky 2/26/98
-----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
-------------
11. Consent of Independent Accountants.
16. Schedules for Computation of Performance Quotations.
27. Financial Data Schedules.
</TABLE>
<PAGE>
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
February 13, 1998, relating to the financial statements and financial
highlights of Dean Witter Global Asset Allocation Fund, which appears in such
Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 25, 1998
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER GLOBAL ASSET ALLOCATION FUND (A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ --------- ------------ --------- -------------------
<S> <C> <C> <C> <C>
28-Jul-97 $886.90 -11.31% 0.51 NA
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- ----------- -------------- --------------- -----------------
<S> <C> <C> <C> <C>
28-Jul-97 $936.10 -6.39% 0.51 NA
</TABLE>
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- -------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 -6.39 $8,870 $44,933 $90,802
*INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4.00% & 3.00% SALES CHARGE
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER GLOBAL ASSET ALLOCATION FUND (B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 YEARS - n COMPOUND RETURN - T
- ------------ --------- ----------- ------------------
<S> <C> <C> <C>
31-Jan-97 $984.50 1.00 -1.55%
28-Feb-95 $1,308.20 2.92 9.62%
</TABLE>
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
31-Jan-97 $1,032.90 3.29% 1.00 3.29%
28-Feb-95 $1,338.20 33.82% 2.92 10.48%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Feb-95 33.82 $13,382 $66,910 $133,820
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER GLOBAL ASSET ALLOCATION FUND (C)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ --------- ------------ ----------- ------------------
<S> <C> <C> <C> <C>
28-Jul-97 $923.40 -7.66% 0.51 NA
</TABLE>
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------- --------- ----------- ---------- ---------------
<S> <C> <C> <C> <C>
28-Jul-97 $932.10 -6.79% 0.51 NA
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- ------------------ -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 -6.79 $9,321 $46,605 $93,210
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
DEAN WITTER GLOBAL ASSET ALLOCATION FUND (D)
(A) TOTAL RETURN (NO LOAD FUND)
(B) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
<TABLE>
<CAPTION>
(A) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ---------- ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
28-Jul-97 $936.80 -6.32% 0.51 NA
</TABLE>
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ------------- ------------------------- ----------------------------- --------------------------
<S> <C> <C> <C> <C>
28-Jul-97 -6.32 $9,368 $46,840 $93,680
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> GLOBAL ASSET ALLOCATION - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 46,281,575
<INVESTMENTS-AT-VALUE> 51,950,476
<RECEIVABLES> 524,080
<ASSETS-OTHER> 187,716
<OTHER-ITEMS-ASSETS> 151,592
<TOTAL-ASSETS> 52,813,864
<PAYABLE-FOR-SECURITIES> 118,812
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223,515
<TOTAL-LIABILITIES> 342,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,192,315
<SHARES-COMMON-STOCK> 2,344
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 222,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,602,956
<ACCUM-APPREC-OR-DEPREC> 5,660,048
<NET-ASSETS> 52,471,537
<DIVIDEND-INCOME> 759,559
<INTEREST-INCOME> 1,044,521
<OTHER-INCOME> 0
<EXPENSES-NET> 1,645,675
<NET-INVESTMENT-INCOME> 158,405
<REALIZED-GAINS-CURRENT> 990,916
<APPREC-INCREASE-CURRENT> 991,840
<NET-CHANGE-FROM-OPS> 2,141,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 1,601
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,202
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 142
<NET-CHANGE-IN-ASSETS> (12,842,253)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 41,886
<OVERDIST-NET-GAINS-PRIOR> 59,225
<GROSS-ADVISORY-FEES> 621,396
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,645,675
<AVERAGE-NET-ASSETS> 22,412
<PER-SHARE-NAV-BEGIN> 13.09
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> (0.91)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.50
<EXPENSE-RATIO> 2.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> GLOBAL ASSET ALLOCATION - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 46,281,575
<INVESTMENTS-AT-VALUE> 51,950,476
<RECEIVABLES> 524,080
<ASSETS-OTHER> 187,716
<OTHER-ITEMS-ASSETS> 151,592
<TOTAL-ASSETS> 52,813,864
<PAYABLE-FOR-SECURITIES> 118,812
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223,515
<TOTAL-LIABILITIES> 342,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,192,315
<SHARES-COMMON-STOCK> 4,568,443
<SHARES-COMMON-PRIOR> 5,516,229
<ACCUMULATED-NII-CURRENT> 222,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,602,956
<ACCUM-APPREC-OR-DEPREC> 5,660,048
<NET-ASSETS> 52,471,537
<DIVIDEND-INCOME> 759,559
<INTEREST-INCOME> 1,044,521
<OTHER-INCOME> 0
<EXPENSES-NET> 1,645,675
<NET-INVESTMENT-INCOME> 158,405
<REALIZED-GAINS-CURRENT> 990,916
<APPREC-INCREASE-CURRENT> 991,840
<NET-CHANGE-FROM-OPS> 2,141,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (148,714)
<DISTRIBUTIONS-OF-GAINS> 3,307,479
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 637,914
<NUMBER-OF-SHARES-REDEEMED> 1,863,599
<SHARES-REINVESTED> 277,899
<NET-CHANGE-IN-ASSETS> (12,842,253)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 41,886
<OVERDIST-NET-GAINS-PRIOR> 59,225
<GROSS-ADVISORY-FEES> 621,396
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,645,675
<AVERAGE-NET-ASSETS> 62,098,053
<PER-SHARE-NAV-BEGIN> 11.84
<PER-SHARE-NII> 0.03
<PER-SHARE-GAIN-APPREC> 0.35
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> (.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.46
<EXPENSE-RATIO> 2.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> GLOBAL ASSET ALLOCATION - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 46,281,575
<INVESTMENTS-AT-VALUE> 51,950,476
<RECEIVABLES> 524,080
<ASSETS-OTHER> 187,716
<OTHER-ITEMS-ASSETS> 151,592
<TOTAL-ASSETS> 52,813,864
<PAYABLE-FOR-SECURITIES> 118,812
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223,515
<TOTAL-LIABILITIES> 342,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,192,315
<SHARES-COMMON-STOCK> 4,660
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 222,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,602,956
<ACCUM-APPREC-OR-DEPREC> 5,660,048
<NET-ASSETS> 52,471,537
<DIVIDEND-INCOME> 759,559
<INTEREST-INCOME> 1,044,521
<OTHER-INCOME> 0
<EXPENSES-NET> 1,645,675
<NET-INVESTMENT-INCOME> 158,405
<REALIZED-GAINS-CURRENT> 990,916
<APPREC-INCREASE-CURRENT> 991,840
<NET-CHANGE-FROM-OPS> 2,141,161
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 3,196
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4,664
<NUMBER-OF-SHARES-REDEEMED> 266
<SHARES-REINVESTED> 262
<NET-CHANGE-IN-ASSETS> (12,842,253)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 41,886
<OVERDIST-NET-GAINS-PRIOR> 59,225
<GROSS-ADVISORY-FEES> 621,396
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,645,675
<AVERAGE-NET-ASSETS> 47,299
<PER-SHARE-NAV-BEGIN> 13.09
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (0.91)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (0.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 2.79
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> GLOBAL ASSET ALLOCATION - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 46,281,575
<INVESTMENTS-AT-VALUE> 51,950,476
<RECEIVABLES> 524,080
<ASSETS-OTHER> 187,716
<OTHER-ITEMS-ASSETS> 151,592
<TOTAL-ASSETS> 52,813,864
<PAYABLE-FOR-SECURITIES> 118,812
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 223,515
<TOTAL-LIABILITIES> 342,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 49,192,315
<SHARES-COMMON-STOCK> 1,467
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 222,130
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 2,602,956
<ACCUM-APPREC-OR-DEPREC> 5,660,048
<NET-ASSETS> 52,471,537
<DIVIDEND-INCOME> 759,559
<INTEREST-INCOME> 1,044,521
<OTHER-INCOME> 0
<EXPENSES-NET> 1,645,675
<NET-INVESTMENT-INCOME> 158,405
<REALIZED-GAINS-CURRENT> 990,916
<APPREC-INCREASE-CURRENT> 991,840
<NET-CHANGE-FROM-OPS> 2,141,161
<EQUALIZATION> 0
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<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 76
<NET-CHANGE-IN-ASSETS> (12,842,253)
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<OVERDISTRIB-NII-PRIOR> 41,886
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<INTEREST-EXPENSE> 0
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<AVERAGE-NET-ASSETS> 11,795
<PER-SHARE-NAV-BEGIN> 13.09
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> (0.92)
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<PER-SHARE-DISTRIBUTIONS> (0.73)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.51
<EXPENSE-RATIO> 1.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
