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Filed Pursuant to Rule 497(e)
Registration File No.: 33-56853
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DEAN WITTER
BALANCED GROWTH FUND
PROSPECTUS -- SEPTEMBER 15, 1995
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Dean Witter Balanced Growth Fund (the "Fund") is an open-end, diversified
management investment company whose investment objective is to provide
capital growth with reasonable current income. The Fund seeks to achieve its
objective by investing, under normal market conditions, at least 60% of its
total assets in a diversified portfolio of common stocks of companies which
have a record of paying dividends and, in the opinion of the Investment
Manager, have the potential for increasing dividends and in securities
convertible into common stock; and at least 25% of its total assets in
investment grade fixed income (fixed-rate and adjustable-rate) securities
such as corporate notes and bonds and obligations issued or guaranteed by the
U.S. Government, its agencies and its instrumentalities. See "Investment
Objective and Policies."
Shares of the Fund are sold and redeemed at the net asset value without the
imposition of a sales charge. The Fund pays the Distributor a Rule 12b-1
distribution fee pursuant to a Plan of Distribution at the annual rate of up
to 1.0% of the average daily net assets of the Fund. See "Purchase of Fund
Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated September 15, 1995, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed below.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Risk Considerations ................................................... 9
Investment Restrictions ............................................... 11
Purchase of Fund Shares ............................................... 11
Shareholder Services .................................................. 13
Redemptions and Repurchases ........................................... 15
Dividends, Distributions and Taxes .................................... 16
Performance Information ............................................... 17
Additional Information ................................................ 17
Financial Statements (unaudited) ...................................... 19
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
DEAN WITTER
BALANCED GROWTH FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR (800) 869-6397
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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THE FUND The Fund is organized as a Trust, commonly known as a Massachusetts business trust,
and is an open-end, diversified management investment company. Under normal market
conditions the Fund will invest at least 60% of its total assets in common stock of
companies which have a record of paying dividends and, in the opinion of the
Investment Manager, have the potential for increasing dividends and in securities
convertible into common stock; and at least 25% of its total assets in investment
grade fixed income securities such as corporate notes and bonds and obligations
issued or guaranteed by the U.S. Government, its agencies and its instrumentalities.
SHARES OFFERED Shares of beneficial interest with $.01 par value (see page 17).
OFFERING At net asset value without the imposition of a sales load. The minimum initial
PRICE investment will be $1,000 and the minimum subsequent investment will be $100 (see
page 11).
INVESTMENT The investment objective of the Fund is to provide capital growth with reasonable
OBJECTIVE current income.
INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its
MANAGER wholly-owned subsidiary, Dean Witter Services Company Inc., serve in various
investment management, advisory, management and administrative capacities to
ninety-four investment companies and other portfolios with net assets under
management of approximately $75.1 billion at July 31, 1995.
MANAGEMENT The Investment Manager receives a monthly fee at the annual rate of 0.60% of the
FEE Fund's average daily net assets.
DIVIDENDS AND Dividends from net investment income are paid quarterly. Capital gains, if any, are
DISTRIBUTIONS distributed at least annually or retained for reinvestment by the Fund. Dividends
and capital gains distributions are automatically reinvested in additional shares at
net asset value unless the shareholder elects to receive cash (see page 16).
DISTRIBUTOR AND The Fund is authorized to reimburse Dean Witter Distributors Inc., the Fund's
PLAN OF Distributor, for specific expenses incurred in promoting the distribution of the
DISTRIBUTION Fund's shares, including personal services to shareholders and maintenance of
shareholder accounts, in accordance with a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. Reimbursement may in no event exceed
an amount equal to payments at an annual rate of 1.0% of average daily net assets of
the Fund. A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net
assets is characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. ("NASD") guidelines and the remaining
portion of the 12b-1 fee is characterized as an asset-based sales charge (see page
12).
RISK The net asset value of the Fund's shares will fluctuate with changes in market value
CONSIDERATIONS of portfolio securities. The value of the Fund's fixed-income portfolio securities,
and therefore the Fund's net asset value per share, may increase or decrease due to
various factors, principally changes in prevailing interest rates. Generally, a rise
in interest rates will result in a decrease in the Fund's net asset value per share,
while a drop in interest rates will result in an increase in the Fund's net asset
value per share. In addition, the average life of certain of the securities held in
the Fund's portfolio (e.g., GNMA Certificates) may be shortened by prepayments or
refinancings of the mortgage pools underlying such securities (see pages 6 and 7) or
lengthened by slower than expected prepayments (p. 9-10). Such prepayments may have
an impact on dividends paid by the Fund and on the volatility of the Fund's net
asset value per share. Dividends payable by the Fund will also vary in relation to
the amounts of dividends earned on common stock and interest earned on fixed income
securities. The Fund may enter into repurchase agreements, may purchase securities
on a when-issued and delayed delivery basis and may utilize certain investment
techniques including options and futures for hedging purposes all of which involve
certain special risks (see pages 9 through 11).
SHAREHOLDER Automatic Investment of Dividends and Distributions; Investment of Distributions
SERVICES Received in Cash; Systematic Withdrawal Plan; Exchange Privilege; EasyInvest[Service Mark],
Tax-Sheltered Retirement Plans (see pages 13 through 15).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder
of the Fund will incur.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Contingent Deferred Sales Charge ......................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees+ ......................................................... 0.60%
12b-1 Fees*+ ............................................................. 1.00%
Other Expenses+ .......................................................... 0.34%
Total Fund Operating Expenses**+ ......................................... 1.94%
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Management and 12b-1 Fees are for the fiscal period ending January 31,
1996. "Other Expenses," as shown above, are based upon estimated amounts of
expenses of the Fund for the fiscal period ending January 31, 1996.
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* The 12b-1 fee is accrued daily and payable monthly, at an annual rate
of up to 1.00% of the Fund's average daily net assets. A portion of
the 12b-1 fee equal to 0.25% of the Fund's average daily net assets
is characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines and is a
payment made for personal service and/or maintenance of shareholder
accounts provided by account executives. (see "Purchase of Fund
Shares").
** "Total Fund Operating Expenses," as shown above, is based upon the
sum of the 12b-1 Fees, Management Fees and estimated "Other
Expenses," which may be incurred by the Fund.
+ The Investment Manager has undertaken to assume all operating
expenses (except for any brokerage fees) and to waive the
compensation provided for in its Management Agreement until such time
as the Fund has $50 million of net assets or until March 31, 1996,
whichever occurs first. The fees and expenses disclosed above do not
reflect the assumption of any expenses or the waiver of any
compensation by the Investment Manager.
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EXAMPLE 1 YEAR 3 YEARS
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You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return .................................................................. $20 $61
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Plan of Distribution."
Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charge permitted by
the NASD.
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been taken from the records of the
Fund without examination by independent accountants. The financial highlights
should be read in conjunction with the financial statements and notes
thereto. The related unaudited financial statements are contained in this
Prospectus commencing on page 22.
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FOR THE PERIOD
MARCH 28, 1995*
THROUGH JULY
31, 1995
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(UNAUDITED)
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $10.00
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Net investment income .................... 0.10
Net realized and unrealized gain ........ 0.90
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Total from investment operations ........ 1.00
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Less dividends from net investment income (0.07)
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Net asset value, end of period ........... $10.93
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TOTAL INVESTMENT RETURN .................. 10.02%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. -- %(2)(3)
Net investment income .................... 4.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $20,967
Portfolio turnover rate .................. 1%(1)
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* Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not assumed all the expenses and waived
the management fee, the ratios of expenses and net investment income
to average net assets would have been 3.50% and 0.69%, respectively.
See Notes to Financial Statements
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Balanced Growth Fund (the "Fund") is an open-end diversified
management investment company. The Fund is a trust of the type commonly known
as a "Massachusetts business trust" and was organized under the laws of The
Commonwealth of Massachusetts on November 23, 1994.
Dean Witter InterCapital Inc. ("InterCapital" or the "Investment
Manager"), whose address is Two World Trade Center, New York, New York 10048,
is the Fund's Investment Manager. The Investment Manager, which was
incorporated in July, 1992, is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to ninety-four investment companies (the "Dean
Witter Funds"), thirty of which are listed on the New York Stock Exchange,
with combined assets of approximately $72.8 billion at July 31, 1995. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.3 billion at
such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and manage the investment of the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. InterCapital has retained Dean Witter Services Company
Inc. to perform the aforementioned administrative services for the Fund.
The Fund's Trustees review the various services provided by the Investment
Manager to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund incurred by the Investment Manager, the Fund
pays the Investment Manager monthly compensation calculated daily by applying
the annual rate of 0.60% to the Fund's net assets.
The Fund's expenses include: the fee of the Investment Manager; the fee
pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
transfer agent, custodian, auditing fees; and 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. The Investment Manager has undertaken to assume all operating
expenses (except for any brokerage fees) and waive the compensation provided
for in its Investment Management Agreement until such time as the Fund has
$50 million of net assets or until March 31, 1996, whichever occurs first.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to provide capital growth with a
reasonable current income. The objective is a fundamental policy of the Fund
and may not be changed without a vote of a majority of the outstanding voting
securities of the Fund. There is no assurance that the objective will be
achieved.
The Fund seeks to achieve its objective by investing, under normal market
conditions, at least 60% of its total assets in common stock of companies
which have a record of paying dividends and, in the opinion of the Investment
Manager, have the potential for increasing dividends and in securities
convertible into common stock; and at least 25% of its total assets in
investment grade fixed income (fixed-rate and adjustable-rate) securities
such as corporate notes and bonds and obligations issued or guaranteed by the
U.S. Government, its agencies and its instrumentalities ("U.S. Government
securities").
Subject to the above percentage limitations, the Fund may hold equity,
fixed-income securities, cash and money market instruments in whatever
proportion deemed desirable at any given time depending upon the Investment
Manager's assessment of business, economic and investment conditions. Money
market instruments in which the Fund may invest include securities issued or
guaranteed by the U.S. Government, its agencies and instrumentalities
(Treasury bills, notes and bonds, including zero coupon securities); bank
obligations; Eurodollar certificates of deposit; obligations of savings
institutions; fully insured certificates of deposit; and commercial paper
rated within the four highest grades by
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Moody's or Standard & Poor's or, if not rated, issued by a company having an
outstanding debt issue rated at least AA by Standard & Poor's or Aa by
Moody's. Such securities may be used to invest uncommitted cash balances.
The Fund may enter into futures contracts provided that not more than 5%
of its total assets are required as a futures contract deposit. In addition,
the Fund may enter into futures contracts and options transactions only to
the extent that obligations under such contracts or transactions represent
not more than 30% of the Fund's total assets.
COMMON STOCKS AND SECURITIES CONVERTIBLE INTO COMMON STOCKS. As stated above,
the Fund will invest, under normal market conditions, at least 60% of its
total assets in common stocks of companies which have a record of paying
dividends and, in the opinion of the Investment Manager, have the potential
for increasing dividends and in investment grade securities convertible into
common stocks. 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 based on a specified
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).
Part of the portion of the Fund invested in equity securities may include
securities of foreign issuers in the form of American Depository Receipts
(ADRs). ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. Generally, ADRs,
in registered form, are designed for use in the United States securities
markets.
CORPORATE NOTES AND BONDS AND U.S. GOVERNMENT SECURITIES. As stated above,
under normal market conditions, at least 25% of the Fund's assets will be
invested in investment grade fixed income (fixed-rate or adjustable-rate
securities such as corporate notes and bonds and obligations issued or
guaranteed by the U.S. Government, its agencies and instrumentalities.
The non-governmental debt securities in which the Fund will invest will
include: (a) corporate debt securities, including bonds, notes and commercial
paper, rated in the four highest categories by a nationally recognized
statistical rating organization ("NRSRO") including Moody's Investors
Service, Inc., Standard & Poor's Corporation, Duff and Phelps, Inc. and Fitch
Investors Service, Inc.; (b) bank obligations, including CDs, banker's
acceptances and time deposits, issued by banks with a long-term CD rating in
one of the four highest categories by a NRSRO; and (c) investment grade
fixed-rate and adjustable rate Mortgage-Backed and Asset-Backed securities
(see below) of corporate issuers. Investments in securities rated within the
four highest rating categories by a NRSRO are considered "investment grade."
However, such securities rated within the fourth highest rating category by a
NRSRO 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. Where a fixed-income security is
not rated by a NRSRO, the Investment Manager will make a determination of its
creditworthiness and may deem it to be investment grade.
The U.S. Government Securities in which the Fund may invest include
securities which are direct obligations of the United States Government, such
as United States treasury bills, notes and bonds, and which are backed by the
full faith and credit of the United States; securities which are backed by
the full faith and credit of the United States but which are obligations of a
United States agency or instrumentality (e.g., obligations of the Government
National Mortgage Association); securities issued by a United States agency
or instrumentality which has the right to borrow, to meet its obligations,
from an existing line of credit with the United States Treasury (e.g.,
obligations of the Federal National Mortgage Association); securities issued
by a United States agency or instrumentality which is backed by the credit of
the issuing agency or instrumentality (e.g., obligations of the Federal Farm
Credit System); and governmentally issued mortgage-backed securities.
PORTFOLIO CHARACTERISTICS
In addition to the securities noted above, the Fund may also invest in the
following:
MORTGAGE-BACKED SECURITIES. As stated above, a portion of the Fund's
investments may be in Mortgage-Backed securities. Mortgage-Backed securities
are securities that directly or indirectly represent a participation in, or
are secured by and payable from, mortgage loans secured by
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real property. The term Mortgage-Backed Securities as used herein includes
mortgage pass-through securities and adjustable rate mortgage securities.
The basic type of Mortgage-Backed securities in which the Fund will invest
will be those issued or guaranteed by the United States Government or one of
its agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and
the Federal Home Loan Mortgage Corporation ("FHLMC") (securities issued by
GNMA, but not those issued by FNMA or FHLMC, are backed by the "full faith
and credit" of the United States). FNMA and FHLMC certificates are not backed
by the full faith and credit of the United States but the issuing agency or
instrumentality has the right to borrow, to meet its obligations, from an
existing line of credit with the U.S. Treasury. The U.S. Treasury has no
legal obligation to provide such line of credit and may choose not to do so.
MORTGAGE PASS-THROUGH SECURITIES. The Fund will invest in mortgage
pass-through securities representing participation interests in pools of
residential mortgage loans originated by United States governmental or
private lenders and guaranteed, to the extent provided in such securities, by
the United States Government or one of its agencies or instrumentalities.
Such securities, which are ownership interests in the underlying mortgage
loans, differ from conventional debt securities, which provide for periodic
payment of interest in fixed amounts (usually semiannually) and principal
payments at maturity or on specified call dates. Mortgage pass-through
securities provide for monthly payments that are a "pass-through" of the
monthly interest and principal payments (including any prepayments) made by
the individual borrowers on the pooled mortgage loans, net of any fees paid
to the guarantor of such securities and the servicer of the underlying
mortgage loans.
Certificates for Mortgage-Backed securities evidence an interest in a
specific pool of mortgages. These certificates are, in most cases, "modified
pass-through" instruments, wherein the issuing agency guarantees the payment
of principal and interest on mortgages underlying the certificates, whether
or not such amounts are collected by the issuer on the underlying mortgages.
Each of GNMA, FNMA and FHLMC guarantee timely distributions of interest to
certificateholders. GNMA and FNMA also guarantee timely distribution of
scheduled principal payments. FHLMC generally guarantees only the ultimate
collection of principal of the underlying mortgage loans.
ADJUSTABLE RATE MORTGAGE SECURITIES. Adjustable rate mortgage securities
("ARMs"), 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 in 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 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.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery
and payment can take place a month or more after the date of the commitment.
An increase in the percentage of the Fund's assets committed to the purchase
of securities on a when-issued, delayed delivery or forward commitment basis
may increase the volatility of the Fund's net asset value. (See the Statement
of Additional Information for additional risk disclosure.)
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. An increase in the percentage
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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. (See
the Statement of Additional Information for additional risk disclosure.)
LENDING OF PORTFOLIO SECURITIES. The Fund will not lend its portfolio
securities.
RULE 144A SECURITIES. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A 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 buy securities restricted as to
resale to qualified institutional buyers without limitation. The Investment
Manager, pursuant to procedures adopted by the Trustees of the Fund, will
make a determination as to the liquidity of each restricted security
purchased by the Fund. If a restricted security is determined to be "liquid,"
such security will not be included within the category "illiquid securities,"
which under current policy may not exceed 10% of the Fund's net assets.
OPTIONS. The Fund also may purchase and sell (write) call and put options on
debt and equity securities which are listed on Exchanges or are written in
over-the-counter transactions ("OTC Options"). Listed options, which are
currently listed on several different Exchanges, are issued by the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the
Fund the right to buy from the OCC the underlying security covered by the
option at the stated exercise price (the price per unit of the underlying
security) by filing an exercise notice prior to the expiration date of the
option. The writer (seller) of the option would then have the obligation to
sell to the OCC the underlying security at that exercise price prior to the
expiration date of the option, regardless of its then current market price.
Ownership of a listed put option would give the Fund the right to sell the
underlying security to the OCC at the stated exercise price. The Fund will
not write covered options on portfolio securities exceeding in the aggregate
5.0% of the value of its total assets.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Fund. With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the Fund and the transacting dealer,
without the intermediation of a third party such as the OCC. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.
COVERED CALL WRITING. The Fund is permitted to write covered call options on
portfolio securities in order to aid it in achieving its investment
objective. As a writer of a call option, the Fund has the obligation, upon
notice of exercise of the option, to deliver the security underlying the
option (certain listed call options written by the Fund will be exercisable
by the purchaser only on a specific date).
COVERED PUT WRITING. As a writer of covered put options, the Fund incurs an
obligation to buy the security underlying the option from the purchaser of
the put at the option's exercise price at any time during the option period.
The Fund will write put options for two purposes: (1) to receive the premiums
paid by purchasers; and (2) when the Investment Manager wishes to purchase
the security underlying the option at a price lower than its current market
price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought.
PURCHASING CALL AND PUT OPTIONS. The Fund may invest up to 5% of its total
assets in the purchase of put and call options on securities and stock
indexes. The Fund may purchase put options on securities which it holds (or
has the right to acquire) in its portfolio only to protect itself against a
decline in the value of the security. The Fund may also purchase put options
to close out written put positions in a manner similar to call option closing
purchase transactions.
FUTURES CONTRACTS. The Fund may purchase and sell interest rate and stock
index futures contracts ("futures contracts") that are traded on U.S.
commodity exchanges on such underlying securities as U.S. Treasury bonds,
notes, and bills and GNMA Certificates ("interest rate" futures) and such
indexes as the S&P 500 Index and the
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New York Stock Exchange Composite Index ("stock index" futures) and the
Moody's Investment-Grade Corporate Bond Index ("bond index" futures). As a
futures contract purchaser, the Fund incurs an obligation to take delivery of
a specified amount of the obligation underlying the contract at a specified
time in the future for a specified price. As a seller of a futures contract,
the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts and bond index
futures contracts for the purpose of hedging its fixed-income portfolio (or
anticipated portfolio) securities against changes in prevailing interest
rates. The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices.
The Fund also may purchase and write call and put options on futures
contracts and enter into closing transactions with respect to such options to
terminate an existing position.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling
financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase. While repurchase agreements
involve certain risks not associated with direct investments in debt
securities, the Fund follows procedures designed to minimize those risks.
These procedures include effecting repurchase transactions only with large,
well-capitalized and well-established financial institutions and maintaining
adequate collateralization.
RISK CONSIDERATIONS
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COMMON STOCKS AND SECURITIES CONVERTIBLE INTO COMMON STOCKS. The net asset
value of the Fund's shares will fluctuate with changes in market values of
portfolio securities. To the extent that a convertible security's investment
value is greater than its conversion value, its price will be primarily a
reflection of such investment value and its price will be likely to increase
when interest rates fall and decrease when interest rates rise, as with a
fixed-income security (the credit standing of the issuer and other factors
may also have an effect on the convertible security's value). If the
conversion value exceeds the investment value, the price of the convertible
security will rise above its investment value and, in addition, may sell at
some premium over its conversion value. (This premium represents the price
investors are willing to pay for the privilege of purchasing a fixed-income
security with a possibility of capital appreciation due to the conversion
privilege.) At such times the price of the convertible security will tend to
fluctuate directly with the price of the underlying equity security.
CORPORATE NOTES AND BONDS AND U.S. GOVERNMENT SECURITIES. Payments of
interest and principal of U.S. Government securities are guaranteed by the
U.S. Government, however, neither the value nor the yield of corporate notes
and bonds and U.S. Government securities which may be invested in by the Fund
are guaranteed by the U.S. Government. Values and yield of corporate and
government bonds will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of
corporate notes and bonds and government bonds held by the Fund will fall.
Securities with longer maturities generally tend to produce higher yields and
are subject to greater market fluctuation as a result of changes in interest
rates than debt securities with shorter maturities. The Fund is not limited
as to the maturities of the U.S. Government securities in which it may
invest.
MORTGAGE-BACKED SECURITIES. Mortgage-Backed Securities have certain different
characteristics than traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Fund purchases such a security at a premium, a prepayment rate
that is faster than expected may reduce yield to maturity, while a prepayment
rate that is slower than expected may have the opposite effect of increasing
yield to maturity. Alternatively, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments may reduce, yield to maturity.
Mortgage-Backed Securities, like all fixed-income securities, generally
decrease in value as a result of increases in interest rates. In addition,
although generally
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the value of fixed-income securities increases during periods of falling
interest rates and, as stated above, decreases during periods of rising
interest rates, as a result of prepayments and other factors, this is not
always the case with respect to Mortgage-Backed Securities.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed
rate mortgage loans will increase during a period of falling interest rates
and decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a
period of declining interest rates and, as a result, likely to be reinvested
at lower interest rates than during a period of rising interest rates.
Mortgage-Backed Securities generally decrease in value as a result of
increases in interest rates and may benefit less than other fixed-income
securities from declining interest rates because of the risk of prepayment.
OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its position as
writer of an option, or as a buyer or seller of a futures contract only if a
liquid secondary market exists for options or futures contracts of that
series. There is no assurance that such a market will exist. Also, exchanges
may limit the amount by which the price of many futures contracts may move on
any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit
moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such. See "Dividends, Distributions and
Taxes."
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the Investment Manager could be incorrect
in its expectations as to the direction or extent of various interest rate or
price movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down, causing bond prices to rise, the Fund would incur a loss on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash
prices of the Fund's portfolio securities.
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.
REPURCHASE AGREEMENTS. 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 subject to procedures
established by the Board of Trustees of the Fund. In addition, as described
above, the value of the collateral underlying the repurchase agreement will
be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy
by a selling financial institution, the Fund will seek to liquidate such
collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were
less than the repurchase price, the Fund could suffer a loss. It is the
current policy of the Fund not to invest in repurchase agreements that do not
mature within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 10% of its net assets.
FOR ADDITIONAL RISK DISCLOSURE, PLEASE REFER TO THE "INVESTMENT OBJECTIVE
AND POLICIES" AND "PORTFOLIO CHARACTERISTICS" SECTIONS OF THE PROSPECTUS AND
TO THE "INVESTMENT PRACTICES AND POLICIES" SECTION OF THE STATEMENT OF
ADDITIONAL INFORMATION.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager with a
view to achieving the Fund's investment objective. In determining which
securities to purchase for the Fund or hold in the Fund's portfolio, the
Investment Manager will rely on information from various sources, including
research, analysis and appraisals of brokers and dealers, including Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital, the
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views of Trustees of the Fund and others regarding economic developments and
interest rate trends, and the Investment Manager's own analysis of factors it
deems relevant.
PORTFOLIO MANAGERS. The assets of the Fund invested in equity securities are
managed within InterCapital's Large Capitalization Equities Group, which
manages thirty-five equity funds and fund portfolios with approximately $21.7
billion in assets as of July 31, 1995. Paul D. Vance, Senior Vice President
of InterCapital and a member of InterCapital's Large Capitalization Equity
Group, has been a portfolio manager at InterCapital for over five years.
The assets of the Fund invested in fixed-income securities are managed
within InterCapital's Taxable Bond Group, which manages twenty-five funds and
fund portfolios, with approximately $13.5 billion in assets at July 31, 1995.
Rajesh K. Gupta, Senior Vice President of InterCapital and a member of
InterCapital's Taxable Bond Group, has been managing portfolios at
InterCapital for over five years. Mr. Vance and Mr. Gupta are portfolio
managers with primary responsibility for the day-to-day management of the
Fund's portfolio.
Although the Fund does not intend to engage in short-term trading of
portfolio securities as a means of achieving its investment objective, it may
sell portfolio securities without regard to the length of time they have been
held whenever such sale will in the Investment Manager's opinion strengthen
the Fund's position and contribute to its investment objective. The equity
portfolio trading and the fixed-income portfolio trading engaged in by the
Fund may result in portfolio turnover rates exceeding 10% and 60%,
respectively. Brokerage commissions are not normally charged on the purchase
or sale of U.S. Government obligations, but such transactions may involve
costs in the form of spreads between bid and asked prices. Pursuant to an
order of the Securities and Exchange Commission, the Fund may effect
principal transactions in certain money market instruments with Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of InterCapital. In
addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.
INVESTMENT RESTRICTIONS
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The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the Act. For purposes of the following
limitations: (i) all percentage limitations apply immediately after a
purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued, or guaranteed
by, the United States Government, its agencies or instrumentalities).
2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.
4. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or
instrumentalities.
(See the Statement of Additional Information for additional investment
restrictions.)
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. ("the Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into selected dealer agreements with
the Distributor ("Selected Broker-Dealers"). The principal executive office
of the Distributor is located at Two World Trade Center, New York, New York
10048.
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<PAGE>
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of
Net Asset Value"). No sales charge is imposed at the time shares are
purchased or redeemed. Sales personnel are compensated for selling shares of
the Fund by the Distributor and/or Selected Broker-Dealer. (See "Plan of
Distribution" below.) In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
The minimum initial purchase is $1,000. Minimum subsequent purchases of
$100 or more may be made by sending a check, payable to Dean Witter Balanced
Growth Fund directly to Dean Witter Trust Company (the "Transfer Agent") at
P.O. Box 1040, Jersey City, NJ 07303 or by contacting an account executive of
DWR or other Selected Broker-Dealer. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, in its discretion, may accept investments without regard to any
minimum amounts which would otherwise be required if the Fund has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent. The offering price will be the net asset value
per share next determined following receipt of an order (see "Determination
of Net Asset Value").
Shares of the Fund are sold through the Distributor on a normal 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. Shares
of the Fund purchased through the Distributor are entitled to any dividends
declared beginning on the next business day following settlement date. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. Shares purchased through the Transfer Agent are entitled
to any dividends declared beginning on the next business day following
receipt of an order. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund reimburses the Distributor for
certain expenses incurred in the distribution of the Fund's shares. This fee
is treated by the Fund as an expense in the year it is accrued.
The principal activities and services which may be provided by DWR, its
affiliates or any other Selected Broker-Dealer under the Plan include: (1)
compensation to, and expenses of, DWR account executives and others including
overhead and telephone expenses; (2) sales incentives and bonuses to sales
representatives and to marketing personnel in connection with promoting sales
of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature;
and (5) providing advertising and promotional activities, including direct
mail solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a
payment at the annual rate of 1.0% of the Fund's average daily net assets.
Expenses incurred pursuant to the Plan in any fiscal year in excess of 1.0%
of the Fund's average daily net assets will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. A portion of the fee
payable pursuant to the Plan, equal to 0.25% of the Fund's average daily net
assets, is characterized as a service fee within the meaning of NASD
guidelines. The service fee is a payment made for personal service and/or the
maintenance of shareholder accounts. For the period March 28, 1995
(commencement of operations) through July 31, 1995 the fee payable under the
Plan ($38,193) was waived pursuant to an undertaking by the Investment
Manager to waive its fee and assume all expenses (except brokerage) until
March 31, 1996 or until such time that the Fund has $50 million in assets,
whichever comes first.
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 value of all assets
of the Fund, subtracting all its liabilities, dividing by the number of
shares outstanding and adjusting to the nearest cent. The net asset value per
share will not be determined on Good Friday and on such other federal and
non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York
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or American Stock Exchange or quoted by NASDAQ is valued at its latest sale
price on that exchange or quotation service 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 Trustees determine that such price does not reflect its market value, in
which case it will be valued at its fair value as determined by the Board of
Trustees; (4) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest bid price;
(5) when market quotations are not readily available, including circumstances
under which it is determined by the Investment Manager that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (6) the value of short-term debt securities which mature at
a date less than sixty days subsequent to valuation date will be determined
on an amortized cost or amortized value basis; and (7) the value of other
assets will be determined in good faith at fair value under procedures
established by and under the general supervision of the Fund's Trustees.
Dividends receivable are accrued as of the ex-dividend date. Interest income
is accrued daily.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service utilizes
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what it believes is the fair valuation of the portfolio securities valued by
such pricing service.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent, by returning the check
or the proceeds to the Transfer Agent within thirty days after the payment
date.
EASYINVEST. (SERVICE MARK) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any amount, not less than $25, or in any
whole percentage of the account balance, on an annualized basis. Therefore,
any shareholder participating in the Withdrawal Plan will have sufficient
shares redeemed from his or her account so that the proceeds to the
shareholder will be the designated monthly or quarterly amount.
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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
EXCHANGE PRIVILEGE
An "Exchange Privilege", that is, the privilege of exchanging shares of
certain Dean Witter Funds for
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<PAGE>
shares of the Fund, exists whereby shares of various Dean Witter Funds which
are open-end investment companies sold with either a front-end (at time of
purchase) sales charge ("FESC funds") or a contingent deferred sales charge
("CDSC funds") may be redeemed at their next calculated net asset value and
the proceeds of the redemption may be used to purchase shares of the Fund,
shares of Dean Witter Tax-Free Daily Income Trust, Dean Witter U.S.
Government Money Market Trust, Dean Witter Liquid Asset Fund Inc., Dean
Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust (which five funds are hereinafter called "money
market funds") and shares of Dean Witter Short-Term U.S. Treasury Trust and
Dean Witter Limited Term Municipal Trust (collectively, the Fund, the money
market funds, Dean Witter Short-Term U.S. Treasury Trust and Dean Witter
Limited Term Municipal Trust are referred to herein as the "Exchange Funds").
An exchange from an FESC fund or a CDSC fund to the Fund, Dean Witter
Short-Term U.S. Treasury Trust or Dean Witter Limited Term Municipal Trust 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 an FESC fund or a CDSC fund, shares of the FESC fund or the CDSC
fund are redeemed at their next calculated net asset value and exchanged for
shares of the money market fund at their net asset value determined the
following business day. Subsequently, shares of the Exchange Funds received
in an exchange for shares of an FESC fund (regardless of the type of fund
originally purchased) may be redeemed and exchanged for shares of the other
Exchange Funds, FESC funds or CDSC funds (however, shares of CDSC funds,
including shares acquired in exchange for (i) shares of FESC funds or (ii)
shares of the Exchange Funds which were acquired in exchange for shares of
FESC funds, may not be exchanged for shares of FESC funds). Additionally,
shares of the Exchange Funds received in an exchange for shares of a CDSC
fund (regardless of the type of fund originally purchased) may be redeemed
and exchanged for shares of the other Exchange Funds or CDSC funds.
Ultimately, any applicable contingent deferred sales charge ("CDSC") will
have to be paid upon redemption of shares originally purchased from a CDSC
fund. (If shares of the Exchange Fund received in exchange for shares
originally purchased from a CDSC fund are exchanged for shares of another
CDSC fund having a different CDSC schedule than that of the CDSC fund from
which the Exchange Fund's shares were acquired, the shares will be subject to
the higher CDSC schedule.) During the period of time the shares originally
purchased from a CDSC fund remain 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 CDSC) is frozen.
If those shares are subsequently reexchanged for shares of a CDSC fund, the
holding period previously frozen when the first exchange was made resumes on
the last day of the month in which shares of the CDSC fund are reacquired.
Thus, the CDSC is based upon the period of time (calculated as described
above) the shareholder was invested in a CDSC fund. Exchanges involving FESC
funds or CDSC funds may be made after the shares of the FESC fund or CDSC
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.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders
and, at the Investment Manager's discretion, may be limited by the Fund's
refusal to accept additional purchases and/or exchanges from the investor.
Although the Fund does not have any specific definition of what constitutes a
pattern of frequent exchanges, and will consider all relevant factors in
determining whether a particular situation is abusive and contrary to the
best interests of the Fund and its other shareholders, investors should be
aware that the Fund and each of the other Dean Witter Funds may in their
discretion limit or otherwise restrict the number of times this Exchange
Privilege may be exercised by any investor. Any such restriction will be made
by the Fund on a prospective basis only, upon notice to the shareholder not
later than ten days following such shareholder's most recent exchange.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and read it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares on which the shareholder has realized 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.
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<PAGE>
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 above
Dean Witter Funds (for which the Exchange Privilege is available) pursuant to
this Exchange Privilege by contacting their DWR or other Selected Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those who are clients of DWR or other 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 Fund, to initiate an exchange. If the Authorization Form is
used, exchanges may be made in writing or by contacting the Transfer Agent at
(800) 526-3143 (toll free). The Fund will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone are
genuine. Such procedures may include requiring various forms of personal
identification such as name, mailing address, social security or other tax
identification number and DWR or other Selected Dealer account number (if
any). Telephone instructions may also be recorded. If such procedures are not
employed, the Fund may be liable for any losses due to unauthorized or
fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the
experience of the other Dean Witter Funds in the past.
Additional information on the above is available from an account executive
of DWR or another Selected Broker-Dealer or from the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share without any redemption of other charge. 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.
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
at P.O. Box 983, Jersey City, NJ 07303, which will redeem the shares at their
net asset value next determined (see "Purchase of Fund Shares--Determination
of Net Asset Value") after it receives the request, and certificates, if any,
in good order. Any redemption request received after such determination will
be redeemed at the price next determined. The term "good order" means that
the share certificates, 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 Agency may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request will be accepted. A
stock power may be obtained from any dealer or commercial bank. The Fund may
change the signature guarantee requirements upon notice to shareholders,
which may be by means of a new Prospectus.
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 for the account of the shareholder), partnership,
trust or fiduciary, or sent to the shareholder at an address other than the
registered address, signature(s) must be guaranteed by an eligible guarantor
acceptable to the Transfer Agent (shareholders should contact the Transfer
Agent for a determination as to whether a particular institution is an
eligible guarantor).
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<PAGE>
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic or telegraphic request of the shareholder. The repurchase
price is the net asset value per share next determined (see "Purchase of Fund
Shares") after such purchase order is received by DWR or other Selected
Broker-Dealer.
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 thirty days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund at the net asset value next determined after a
reinstatement request, together with the proceeds, is received by the
Transfer Agent.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, upon sixty
days' notice and at net asset value, the shares of any shareholder whose
shares have a value of less than $100 as a result of redemptions or
repurchases, or such lesser amount as may be fixed by the Board of Trustees.
However, before the Fund redeems such shares and sends the proceeds to the
shareholder, it will notify the shareholder that the value of the shares is
less than $100 and allow the shareholder to make an additional investment in
an amount which will increase the value of the account to $100 or more before
the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay quarterly dividends and
to distribute substantially all of the Fund's net investment income and net
short-term and net long-term capital gains, if there are any, at least once
each year. The Fund may, however, determine either to distribute or to retain
all or part of any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code, it is not expected that the Fund will be required to
pay any federal income tax. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash.
One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in the
writing of options on securities held for less than three months, in the
writing of options which expire in less than three months, and in effecting
closing transactions with respect to call or put options which
16
<PAGE>
have been written or purchased less than three months prior to such
transactions. The Fund may also be restricted in its ability to engage in
transactions involving futures contracts.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.
At the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% federal backup withholding tax
on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. Both the yield and the total return
of the Fund are based on historical earnings and are not intended to indicate
future performance. The yield of the Fund is computed by dividing the net
investment income of the Fund over a 30-day period by an average value (using
the average number of shares entitled to receive dividends and the net asset
value per share at the end of the period), all in accordance with applicable
regulatory requirements. Such amount is compounded for six months and then
annualized for a twelve-month period to derive the yield of the Fund.
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years.
Total return and average annual total return reflect all income earned by the
Fund, any appreciation or depreciation of the Fund's assets and all expenses
incurred by the Fund, for the stated periods. It also assumes reinvestment of
all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations (such as mutual fund performance rankings of Lipper Analytical
Services, Inc. and the S&P 500 Index).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the Shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain 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
17
<PAGE>
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.
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 option transactions and profiting on short-term
trading (that is, a purchase within 60 days of a sale or a sale within 60
days of a purchase) of a security. In addition, investment personnel may not
purchase or sell a security for their personal account within 30 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
recent report by the Investment Company Institute Advisory Group on Personal
Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at thetelephone numbers or address set forth on the front cover of
this Prospectus.
18
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited)
<TABLE>
<CAPTION>
<C> <S> <C>
NUMBER OF
SHARES VALUE
- ----------- ------------------------------ -------------
COMMON STOCKS (62.8%)
Aerospace & Defense (3.3%)
8,300 Raytheon Co. $ 685,787
-------------
Aluminum (3.3%)
12,300 Aluminum Co. of America 699,562
-------------
Automotive (3.3%)
24,300 Ford Motor Co. 701,662
-------------
Banking (3.2%)
12,600 BankAmerica Corp. 680,400
-------------
Beverages - Soft Drinks (3.3%)
14,600 PepsiCo Inc. 684,375
-------------
Chemicals (3.3%)
Du Pont (E.I.) de Nemours &
10,400 Co., Inc. 696,800
-------------
Computer Equipment (3.3%)
International Business
6,400 Machines Corp. 696,800
-------------
Conglomerates (3.3%)
14,200 Tenneco Inc. 702,900
-------------
Drugs & Healthcare (3.5%)
10,600 Bristol-Myers Squibb Co. 734,050
-------------
Electric - Major (3.3%)
11,700 General Electric Co. 690,300
-------------
Foods (3.3%)
18,200 ConAgra, Inc. 687,050
-------------
Machinery - Agricultural (3.2%)
7,500 Deere & Co. 674,063
-------------
Natural Gas (3.2%)
19,300 Enron Corp. 670,675
-------------
Oil - Domestic (3.4%)
6,100 Atlantic Richfield Co. 703,025
-------------
Paper & Forest Products (3.2%)
14,500 Weyerhaeuser Co. 677,875
-------------
Railroads (3.4%)
8,400 CSX Corp. 704,550
-------------
Retail (3.3%)
9,100 Dayton Hudson Corp. 688,188
-------------
Telecommunications (3.3%)
20,100 Sprint Corporation 688,425
-------------
Utilities - Electric (3.4%)
24,000 Pacific Gas & Electric Co. 708,000
-------------
TOTAL COMMON STOCKS
(Identified Cost $12,333,909) 13,174,487
-------------
</TABLE>
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1995 (unaudited) continued
<TABLE>
<CAPTION>
<C> <S> <C>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ---------------------------- -------------
U.S. GOVERNMENT & AGENCIES
OBLIGATIONS (31.7%)
979 Federal National Mortgage
Association 7.50% due
06/01/25 $977,424
975 Federal National Mortgage
Association 8.00% due
05/01/24 to 05/01/25 991,197
1,000 Government National Mortgage
Association 7.00% due
08/01/25 975,625
1,000 U.S. Treasury Bond
(Principal Strip) 0.00% due
11/15/97 875,095
400 U.S. Treasury Note 6.625%
due 03/31/97 404,812
500 U.S. Treasury Note 6.50% due
04/30/97 505,156
400 U.S. Treasury Note 7.125%
due 02/29/00 414,563
500 U.S. Treasury Note 6.875%
due 03/31/00 513,438
1,000 U.S. Treasury Note 5.875%
due 06/30/00 987,500
TOTAL U.S. GOVERNMENT &
AGENCIES OBLIGATIONS
(Identified Cost $6,616,194) 6,644,810
-------------
SHORT-TERM INVESTMENTS (8.5%)
U.S. GOVERNMENT AGENCY (a) (7.2%)
1,500 Federal National Mortgage
Association 5.69% due
08/03/95 (Amortized Cost
$1,499,526) 1,499,526
-------------
REPURCHASE AGREEMENT (1.3%)
281 The Bank of New York 5.8125%
due 08/01/95 (dated
07/31/95; proceeds $280,592;
collateralized by $278,211
Federal Mortgage Acceptance
Corp. 9.50% due 04/01/01
valued at $291,629)
(Identified Cost $280,547) 280,547
-------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost $1,780,073) 1,780,073
-------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $20,730,176) (b) 103.0% 21,599,370
LIABILITIES IN EXCESS OF OTHER
ASSETS .......................... (3.0) (632,576)
-------- ------------
NET ASSETS ....................... 100.0% $20,966,794
======== ============
<FN>
- ---------------
(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 is $20,730,176; the
aggregate gross unrealized appreciation is $890,141 and the aggregate
gross unrealized depreciation is $20,947, resulting in net unrealized
appreciation of $869,194.
</TABLE>
See Notes to Financial Statements
19
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $20,730,176) ................ $21,599,370
Receivable for:
Shares of beneficial interest sold ......... 676,980
Interest .................................... 62,176
Dividends ................................... 22,414
Deferred organizational expenses .............. 171,769
Receivable from investment manager ............ 53,399
-------------
TOTAL ASSETS ................................ 22,586,108
-------------
LIABILITIES :
Payable for :
Investments purchased ....................... 1,384,918
Shares of beneficial interest repurchased .. 5,886
Accrued expenses and other payables ........... 56,741
Organizational expenses ....................... 171,769
-------------
TOTAL LIABILITIES ........................... 1,619,314
-------------
NET ASSETS :
Paid-in-capital ............................... 20,032,030
Net unrealized appreciation ................... 869,194
Undistributed net investment income ........... 54,782
Undistributed net realized gain ............... 10,788
-------------
NET ASSETS .................................. $20,966,794
=============
NET ASSET VALUE PER SHARE,
1,917,666 shares outstanding (unlimited
shares authorized of $.01 par value) ........ $10.93
=============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 28, 1995* THROUGH JULY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME :
INCOME
Interest .......................... $ 92,180
Dividends ......................... 67,793
-----------
TOTAL INCOME .................... 159,973
-----------
EXPENSES
Plan of distribution fee .......... 38,193
Investment management fee ......... 22,916
Professional fees ................. 22,403
Transfer agent fees and expenses . 19,716
Custodian fees .................... 13,314
Organizational expenses ........... 12,731
Registration fees ................. 7,834
Shareholder reports and notices .. 5,291
-----------
TOTAL EXPENSES BEFORE AMOUNTS
WAIVED/ASSUMED ................ 142,398
LESS : AMOUNTS WAIVED/ASSUMED .. (142,398)
-----------
TOTAL EXPENSES AFTER AMOUNTS
WAIVED/ASSUMED ................ --
-----------
NET INVESTMENT INCOME ........... 159,973
-----------
NET REALIZED AND UNREALIZED GAIN :
Net realized gain ............... 10,788
Net unrealized appreciation .... 869,194
-----------
NET GAIN ........................ 879,982
-----------
NET INCREASE ...................... $1,039,955
===========
</TABLE>
* Commencement of operations.
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH JULY
31, 1995
- --------------------------------------------------------------- ---------------
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income .......................................... $ 159,973
Net realized gain .............................................. 10,788
Net unrealized appreciation .................................... 869,194
---------------
NET INCREASE ................................................. 1,039,955
---------------
Dividends to shareholders from net investment income .......... (105,191)
Net increase from transactions in shares of beneficial interest 19,932,030
---------------
TOTAL INCREASE ............................................... 20,866,794
NET ASSETS :
Beginning of period ............................................ 100,000
---------------
END OF PERIOD
(Including undistributed net investment income of $54,782) .. $20,966,794
===============
</TABLE>
- ---------------
* Commencement of operations.
See Notes to Financial Statements
20
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Balanced Growth Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund was organized as a
Massachusetts business trust on November 23, 1994 and had no operations other
than those relating to organizational matters and the issuance of 10,000
shares of beneficial interest for $100,000 to Dean Witter InterCapital Inc.
(the "Investment Manager"). The Fund commenced operations on March 28, 1995.
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 Stock Exchange or other domestic 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 by
the Trustees); (2) options are valued at the latest bid and asked price; (3)
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; (4) when market quotations are not readily available,
including circumstances under which it is determined by the Investment
Manager that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision
of the Trustees (valuation of debt securities for which market quotations are
not readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); 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 is recorded on the ex-dividend date. Interest income
is accrued daily and includes accretion of discounts of certain short-term
securities.
C. 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.
21
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited) continued
D. 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.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $184,500 which will be
reimbursed for the full amount thereof, exclusive of amounts assumed. Such
expenses have been deferred and are being amortized by the Fund on the
straight line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement, the Fund pays its Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.60% 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.
The Investment Manager has undertaken to assume all operating expenses
(except brokerage fees) and waive the compensation provided for in its
Investment Management Agreement until such time as the Fund has $50 million
of net assets or until March 31, 1996, whichever occurs first.
3. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Investment Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses
that the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, its affiliates and other
22
<PAGE>
DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1995 (unaudited) continued
selected broker-dealers under the Plan: (1) compensation to, and expenses of,
account executives of DWR's and other employees, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the
Fund's shares; (4) preparing and distributing sales literature; and (5)
providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses the
Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no
event exceed an amount equal to a payment at the annual rate of 1.0% of the
Fund's average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year in excess of 1.0% will
not be reimbursed by the Fund through payments accrued in any subsequent
fiscal year. For the period ended ended July 31, 1995, the distribution fee
was accrued at the annual rate of 1.0%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILITATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the period from March 28, 1995 to July
31, 1995 aggregated $19,012,375 and $80,408, respectively. Included in the
aforementioned are purchases of U.S. Government securities of $6,614,300.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At July 31, 1995, the Fund had transfer agent fees
and expenses payable of approximately $17,000.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH
JULY 31, 1995
--------------------------
<S> <C> <C>
SHARES AMOUNT
----------- -------------
Sold ...................... 2,034,605 $21,279,896
Reinvestment of dividends 8,831 94,143
----------- -------------
2,043,436 21,374,039
Repurchased ............... (135,770) (1,442,009)
----------- -------------
Net increase .............. 1,907,666 $19,932,030
=========== =============
</TABLE>
- ---------------
* Commencement of operations.
23
<PAGE>
DEAN WITTER
BALANCED GROWTH FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Jack F. Bennett
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
Paul Vance
Vice President
Rajesh Gupta
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
