DEAN WITTER BALANCED GROWTH FUND, 497, 1996-03-28

DEAN WITTER BALANCED GROWTH FUND
497, 1996-03-28

Previous: DEAN WITTER BALANCED GROWTH FUND, NSAR-B, 1996-03-28

Next: FIRST TRUST COMBINED SERIES 236, 485BPOS, 1996-03-28

<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 33-56853

PROSPECTUS -- MARCH 26, 1996
- ------------------------------------------------------------------------------

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 March 26, 1996, 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.

Dean Witter
Balanced Growth Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

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 .................................................. 10
Investment Restrictions ............................................... 13
Purchase of Fund Shares ............................................... 13
Shareholder Services .................................................. 15
Redemptions and Repurchases ........................................... 18
Dividends, Distributions and Taxes .................................... 19
Performance Information ............................................... 20
Additional Information ................................................ 21

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR

<PAGE>

<TABLE>
<CAPTION>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<C> <S>
The The Fund is organized as a Trust, commonly known as a Massachusetts business
Fund 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 21).
- ------------------- -----------------------------------------------------------------------------
Offering At net asset value without the imposition of a sales load. The minimum
Price initial investment is $1,000 ($100 if the account is opened through
EasyInvest (Service Mark) ); minimum subsequent investment is $100 (see page
14).
- ------------------- -----------------------------------------------------------------------------
Investment The investment objective of the Fund is to provide capital growth with
Objective reasonable 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-six investment companies and other portfolios with net assets under
management of approximately $82.5 billion at February 29, 1996.
- ------------------- -----------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee at the annual rate of 0.60% of
Fee the Fund's average daily net assets.
- ------------------- -----------------------------------------------------------------------------
Dividends and Dividends from net investment income are paid quarterly. Capital gains, if
Distributions any, are distributed at least annually or retained for reinvestment by the
Fund. Dividends and capital gains distributions are automatically reinvested
in additional shares at net asset value unless the shareholder elects to
receive cash (see page 19).
- ------------------- -----------------------------------------------------------------------------
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
Distribution the Fund's shares, including personal services to shareholders and
maintenance of shareholder accounts, in accordance with a Plan of
Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940.
Reimbursement may in no event exceed an amount equal to payments at 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 14).
- ------------------- -----------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with changes in
Considerations market value 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 or lengthened
by slower than expected prepayments (p. 11). 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 7 through 10).
- ------------------- -----------------------------------------------------------------------------
Shareholder Automatic Investment of Dividends and Distributions; Investment of
Services Distributions Received in Cash; Systematic Withdrawal Plan; Exchange
Privilege; EasyInvest (Service Mark) , Tax-Sheltered Retirement Plans (see
pages 15 through 16).
- ------------------- -----------------------------------------------------------------------------
</TABLE>

The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus
and in the Statement of Additional Information.

<PAGE>

SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------

The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal period ended January 31, 1996, except as otherwise noted.

<TABLE>
<CAPTION>
<S> <C>
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* .......................................................... 0.82%
Total Fund Operating Expenses** .......................................... 2.42%
</TABLE>
- -----------------
* "Management Fees" and "Other Expenses" have been restated to reflect
current fees and expenses. InterCapital assumed all expenses (except
brokerage fees) and waived the compensation provided for in its
investment management agreement until February 9, 1996.

** 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").

<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
-------- ---------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return .................................................................. $25 $75
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.

The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" 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.

<PAGE>

FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------

The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, the notes thereto and the
unqualified report of independent accountants which are contained in the
Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's Annual Report to
Shareholders, which may be obtained without charge upon request to the Fund.

<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH JANUARY
31, 1996
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ....$ 10.00
----------------
Net investment income .................... 0.31
Net realized and unrealized gain ........ 1.88
----------------
Total from investment operations ........ 2.19
Less dividends from net investment income (0.27)**
----------------
Net asset value, end of period ...........$ 11.92
================
TOTAL INVESTMENT RETURN .................. 22.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. --%(2)(3)
Net investment income .................... 4.25%(2)(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $47,596
Portfolio turnover rate .................. 2%(1)
</TABLE>

- ------------

* Commencement of operations.
** Includes a capital gain distribution of $0.004.
(1) Not annualized.
(2) Annualized.
(3) If the Investment Manager had not reimbursed expenses and waived
the management fee, the above annualized expense and net investment
income ratios would have been 2.42% and 1.83%, respectively.

See Notes to Financial Statements

<PAGE>

THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------

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-six investment companies (the "Dean
Witter Funds"), thirty of which are listed on the New York Stock Exchange,
with combined assets of approximately $79.9 billion at February 29, 1996. The
Investment Manager also manages portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.6 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 had 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 had
$50 million in net assets or until March 31, 1996, whichever occurred first.
The Fund began paying fees on February 9, 1996 at which time the Fund had $50
million in net assets. If the waivers were not in effect, the Fund would have
accrued total compensation to the Investment Manager amounting to 0.60% of
the Fund's average daily net assets and the Fund's total expenses would have
amounted to 2.42% of the Fund's average daily net assets.

INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------

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.

<PAGE>

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 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 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 accep-
tances and time deposits, issued by banks with a long-term CD rating in one
of the four highest

<PAGE>

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 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

<PAGE>

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
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.

<PAGE>

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 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

<PAGE>

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.

Zero Coupon Securities. A portion of the fixed-income securities
purchased by the Fund may be zero coupon securities. Such securities are
purchased at a discount from their face amount, giving the purchaser the
right to receive their full value at maturity. The interest earned on such
securities is, implicitly, automatically compounded and paid out at maturity.
While such compounding at a constant rate eliminates the risk of receiving
lower yields upon reinvestment of interest if prevailing interest rates
decline, the owner of a zero coupon security will be unable to participate in
higher yields upon reinvestment of interest received on interest-paying
securities if prevailing interest rates rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.

Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts.

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

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-

<PAGE>

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 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."

<PAGE>

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
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 Growth and Income Group, which manages
twenty equity funds and fund portfolios with approximately $20 billion in
assets as of February 29, 1996. Paul D. Vance, Senior Vice President of
InterCapital and a member of InterCapital's Growth and Income 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 Fixed-Income Group, which manages twenty-five
funds and fund portfolios, with approximately $13.4 billion in assets at
February 29, 1996. Rajesh K. Gupta, Senior Vice President of InterCapital and
a member of InterCapital's Taxable Fixed-

<PAGE>

Income 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 and have
managed the Fund since its inception.

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 DWR. In
addition, the Fund may incur brokerage commissions on transactions conducted
through DWR.

INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------

The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities
of the Fund, as defined in the Act. For purposes of the following
limitations: (i) all percentage limitations apply immediately after a
purchase or initial investment; and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.

The Fund may not:

1. Invest more than 5% of the value of its total assets in the
securities of any one issuer (other than obligations issued, or guaranteed
by, the United States Government, its agencies or instrumentalities).

2. Purchase more than 10% of all outstanding voting securities or any
class of securities of any one issuer.

3. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government or its
agencies or instrumentalities.

4. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation of the United States Government, its agencies or
instrumentalities.

(See the Statement of Additional Information for additional investment
restrictions.)

PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------

The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers who have entered into selected dealer agreements with
the Distributor ("Selected Broker-

<PAGE>

Dealers"). The principal executive office of the Distributor is located at
Two World Trade Center, New York, New York 10048.

The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of
Net Asset Value"). 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. The minimum initial purchase in the
case of investments through EasyInvest (Service Mark) , an automatic purchase
plan (see "Shareholder Services") is $100, provided that the schedule of
automatic investments will result in investments totalling at least $1,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, at 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. (See "Plan of Distribution" below.)

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 subse-

<PAGE>

quent 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
January 31, 1996, the fee payable under the Plan ($204,200) was paid by the
Investment Manager pursuant to an undertaking by the Investment Manager to
waive its management fee and assume all expenses (except brokerage) of the
Fund until such time as the Fund had $50 million in assets or until March 31,
1996. The Fund began paying fees on February 9, 1996 at which time the Fund
attained $50 million in assets.

DETERMINATION OF NET ASSET VALUE

The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time, on each day that the New York Stock Exchange is open
(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 or American Stock Exchange or other
domestic or foreign 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

<PAGE>

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.

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 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, Dean Witter Short-Term Bond Fund, Dean Witter Balanced
Income Fund, Dean Witter, Intermediate Term U.S. Treasury Trust and Dean
Witter Limited Term Municipal Trust (collectively, the Fund, the money market
funds, Dean Witter Short-Term Bond Fund, Dean Witter Short-Term U.S.
Treasury Trust, Dean Witter Balanced Income Fund, Dean Witter Intermediate
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 Bond Fund, Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Balanced Income Fund, Dean Witter
Intermediate 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,

<PAGE>

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 at 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.

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 Autho-

<PAGE>

rization 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) 869-NEWS (toll-free). The Fund
will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. Such procedures may include
requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected 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.

<PAGE>

should contact the Transfer Agent for a determination as to whether a
particular institution is an eligible guarantor).

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 (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100 or such lesser
amount as may be fixed by the Board of Trustees or, in the case of an account
opened through EasyInvest (Service Mark) , if after twelve months, the
shareholder has invested less than $1,000 in the account. However, before the
Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the
applicable amount and allow the shareholder to make an additional investment
in an amount which will increase the value of the account to at least the
applicable amount 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 automati-

<PAGE>

cally credited to the shareholder's account without issuance of a share
certificate unless the shareholder requests in writing that all dividends be
paid in cash. (See "Shareholder Services--Automatic Investment of Dividends
and Distributions".)

Taxes. Because the Fund intends to distribute all of its net investment
income and net short-term capital gains to shareholders and otherwise remain
qualified as a regulated investment company under Subchapter M of the
Internal Revenue Code, it is not expected that the Fund will be required to
pay any federal income tax. Shareholders who are required to pay taxes on
their income will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash.

One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of the Fund's gross income be
derived from gains from the sale or other disposition of securities held for
less than three months. Accordingly, the Fund may be restricted in the
writing of options on securities held for less than three months, in the
writing of options which expire in less than three months, and in effecting
closing transactions with respect to call or put options which have been
written or purchased less than three months prior to such transactions. The
Fund may also be restricted in its ability to engage in transactions
involving futures contracts.

Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the dividends received deduction.

At the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% federal backup withholding tax
on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.

Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.

PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------

From time to time the Fund may quote its "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

<PAGE>

over periods of one, five and ten years, or over the life of the Fund, if
less than any of the foregoing. Total return and average annual total return
reflects 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 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 options 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
1994 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.

(This page has been left blank intentially.)

<PAGE>

THE DEAN WITTER FAMILY OF FUNDS

MONEY MARKET FUNDS
Dean Witter Liquid Asset Fund Inc.
Dean Witter U.S. Government Money
Market Trust
Dean Witter Tax-Free Daily Income Trust
Dean Witter California Tax-Free Daily
Income Trust
Dean Witter New York Municipal Money
Market Trust

EQUITY FUNDS
Dean Witter American Value Fund
Dean Witter Natural Resource Development
Securities Inc.
Dean Witter Dividend Growth Securities Inc.
Dean Witter Developing Growth Securities Trust
Dean Witter World Wide Investment Trust
Dean Witter Value-Added Market Series
Dean Witter Utilities Fund
Dean Witter Capital Growth Securities
Dean Witter European Growth Fund Inc.
Dean Witter Precious Metals and Minerals Trust
Dean Witter Pacific Growth Fund Inc.
Dean Witter Health Sciences Trust
Dean Witter Global Dividend Growth Securities
Dean Witter Global Utilities Fund
Dean Witter International Small Cap Fund
Dean Witter Mid-Cap Growth Fund
Dean Witter Balanced Growth Fund
Dean Witter Capital Appreciation Fund
Dean Witter Information Fund
Dean Witter Japan Fund

FIXED-INCOME FUNDS
Dean Witter High Yield Securities Inc.
Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Securities Trust
Dean Witter Federal Securities Trust
Dean Witter Convertible Securities Trust
Dean Witter California Tax-Free Income Fund
Dean Witter New York Tax-Free Income Fund
Dean Witter World Wide Income Trust
Dean Witter Intermediate Income Securities
Dean Witter Global Short-Term Income Fund Inc.
Dean Witter Multi-State Municipal Series Trust
Dean Witter Premier Income Trust
Dean Witter Short-Term U.S. Treasury Trust
Dean Witter Diversified Income Trust

Dean Witter Limited Term Municipal Trust
Dean Witter Short-Term Bond Fund
Dean Witter National Municipal Trust
Dean Witter High Income Securities
Dean Witter Balanced Income Fund
Dean Witter Hawaii Municipal Trust
Dean Witter Intermediate Term U.S. Treasury Trust

DEAN WITTER RETIREMENT SERIES
Liquid Asset Series
U.S. Government Money Market Series
U.S. Government Securities Series
Intermediate Income Securities Series
American Value Series
Capital Growth Series
Dividend Growth Series
Strategist Series
Utilities Series
Value-Added Market Series
Global Equity Series

ASSET ALLOCATION FUNDS
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund

ACTIVE ASSETS ACCOUNT PROGRAM
Active Assets Money Trust
Active Assets Tax-Free Trust
Active Assets California Tax-Free Trust
Active Assets Government Securities Trust

<PAGE>

Dean Witter
Balanced Growth Fund
Two World Trade Center
New York, New York 10048

TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. Manuel H. Johnson
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 D. Vance
Vice President

Rajesh K. Gupta
Vice President

Thomas F. Caloia
Treasurer

CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust 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.

DEAN WITTER
BALANCED
GROWTH FUND

PROSPECTUS--MARCH 26, 1996

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION DEAN WITTER
MARCH 26, 1996 BALANCED GROWTH
FUND

- -----------------------------------------------------------------------------

Dean Witter Balanced Growth Fund (the "Fund") is an open-end diversified
management investment company whose investment objective is to provide
capital growth with a reasonable income return. 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 with 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 in obligations
issued or guaranteed by the U.S. Government, its agencies and its
instrumentalities. (See "Investment Practices and Policies.")

A Prospectus for the Fund dated March 26, 1996, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at its address or telephone numbers listed below
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc., at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the
Prospectus.

Dean Witter Balanced Growth Fund
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

<PAGE>

TABLE OF CONTENTS
- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management ......... 3
Trustees and Officers ............... 6
Investment Practices and Policies .. 11
Investment Restrictions ............. 20
Portfolio Transactions and Brokerage 21
The Distributor ..................... 23
Shareholder Services ................ 26
Redemptions and Repurchases ......... 30
Dividends, Distributions and Taxes . 31
Performance Information ............. 32
Shares of the Fund .................. 33
Custodian and Transfer Agent ....... 34
Independent Accountants ............. 34
Reports to Shareholders ............. 34
Legal Counsel ....................... 34
Experts ............................. 34
Registration Statement .............. 34
Financial Statements ................ 35
Report of Independent Accountants .. 45
</TABLE>

<PAGE>

THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------

THE FUND

The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on November 23, 1994.

THE INVESTMENT MANAGER

Dean Witter InterCapital Inc. (the "Investment Manager" or
"InterCapital"), a Delaware corporation, whose address is Two World Trade
Center, New York, New York 10048, is the Fund's Investment Manager.
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a Delaware corporation. In an internal reorganization which took
place in January, 1993, InterCapital assumed the investment advisory,
administrative and management activities previously performed by the
InterCapital Division of Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of InterCapital. (As hereinafter used in this Statement of
Additional Information, the terms "InterCapital" and "Investment Manager"
refer to DWR's InterCapital Division prior to the internal reorganization and
to Dean Witter InterCapital Inc. thereafter). The daily management of the
Fund and research relating to the Fund's portfolio are conducted by or under
the direction of officers of the Fund and of the Investment Manager, subject
to review of investments by the Fund's Board of Trustees. In addition,
Trustees of the Fund provide guidance on economic factors and interest rate
trends. Information as to these Trustees and officers is contained under the
caption "Trustees and Officers".

InterCapital is also the investment manager of the following investment
companies: Dean Witter Liquid Asset Fund Inc., InterCapital Income Securities
Inc., Dean Witter High Yield Securities Inc., Dean Witter Tax-Free Daily
Income Trust, Dean Witter Developing Growth Securities Trust, Dean Witter
Tax-Exempt Securities Trust, Dean Witter Natural Resource Development
Securities Inc., Dean Witter Dividend Growth Securities Inc., Dean Witter
American Value Fund, Dean Witter U.S. Government Money Market Trust, Dean
Witter Variable Investment Series, Dean Witter World Wide Investment Trust,
Dean Witter Select Municipal Reinvestment Fund, Dean Witter U.S. Government
Securities Trust, Dean Witter California Tax-Free Income Fund, Dean Witter
New York Tax-Free Income Fund, Dean Witter Convertible Securities Trust, Dean
Witter Federal Securities Trust, Dean Witter Value-Added Market Series, High
Income Advantage Trust, High Income Advantage Trust II, High Income Advantage
Trust III, Dean Witter Government Income Trust, Dean Witter Utilities Fund,
Dean Witter California Tax-Free Daily Income Trust, Dean Witter Strategist
Fund, Dean Witter World Wide Income Trust, Dean Witter Intermediate Income
Securities, Dean Witter New York Municipal Money Market Trust, Dean Witter
Capital Growth Securities, Dean Witter European Growth Fund Inc., Dean Witter
Precious Metals and Minerals Trust, Dean Witter Global Short-Term Income Fund
Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State Municipal
Series Trust, Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Premier
Income Trust, Dean Witter Diversified Income Trust, Dean Witter Health
Sciences Trust, Dean Witter Retirement Series, Dean Witter Global Dividend
Growth Securities, Dean Witter Limited Term Municipal Trust, Dean Witter
Short-Term Bond Fund, Dean Witter Global Utilities Fund, Dean Witter High
Income Securities Trust, Dean Witter International SmallCap Fund, Dean Witter
Select Dimensions Investment Series, Dean Witter Mid-Cap Growth Fund, Dean
Witter Global Asset Allocation Fund, Dean Witter National Municipal Trust,
Dean Witter Hawaii Municipal Trust, Dean Witter Capital Appreciation Fund,
Dean Witter Balanced Income Fund, Dean Witter Intermediate Term U.S. Treasury
Trust, Dean Witter Information Fund, Dean Witter Japan Fund, InterCapital
Quality Municipal Income Trust, InterCapital California Quality Municipal
Securities, InterCapital New York Quality Municipal Securities, Active Assets
Money Trust, Active Assets Tax-Free Trust, Active Assets California Tax-Free
Trust, Active Assets Government Securities Trust, Municipal Income Trust,
Municipal Income Trust II, Municipal Income Trust III, Municipal Income
Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, Prime Income Trust and Municipal Premium
Income Trust. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds. In addition, Dean Witter
Services Company Inc. ("DWSC"), a wholly-owned subsidiary of InterCapital,
serves as manager for the following investment companies for which TCW Funds
Management, Inc. is the investment adviser: TCW/DW Core Equity Trust, TCW/DW
North American Government Income Trust, TCW/DW Latin American Growth Fund,
TCW/DW Income and Growth Fund,

<PAGE>

TCW/DW Small Cap Growth Fund, TCW/DW Balanced Fund, TCW/DW Emerging Markets
Opportunities Trust, TCW/DW Mid-Cap Equity Trust, TCW/DW Total Return Trust,
TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and TCW/DW Term Trust 2003
(the "TCW/DW Funds"). InterCapital also serves as: (i) sub-adviser to
Templeton Global Opportunities Trust, an open-end investment company; (ii)
administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; and (iii) sub-administrator of MassMutual Participation
Investors and Templeton Global Governments Income Trust, closed-end
investment companies.

Pursuant to an Investment Management Agreement (the "Agreement") with the
Investment Manager, the Fund has retained the Investment Manager to manage
the investment of the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Investment Manager obtains and
evaluates such information and advice relating to the economy, securities
markets and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective.

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, such office space, facilities,
equipment, clerical help and bookkeeping and certain legal services as the
Fund may reasonably require in the conduct of its business, including the
preparation of prospectuses, statements of additional information, proxy
statements and reports required to be filed with federal and state securities
commissions (except insofar as the participation or assistance of independent
accountants and attorneys is, in the opinion of the Investment Manager,
necessary or desirable). In addition, the Investment Manager pays the
salaries of all personnel, including officers of the Fund, who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone service, heat, light, power and other utilities provided to the
Fund.

Pursuant to a Services Agreement between InterCapital and DWSC, a
wholly-owned subsidiary of InterCapital, dated December 31, 1993, DWSC
provides administrative services to the Dean Witter Funds. On April 17, 1995,
DWSC was reorganized in the State of Delaware, necessitating the entry into a
new Services Agreement by InterCapital and DWSC on such date. The foregoing
internal reorganizations did not result in any change in the nature or scope
of the administrative services being provided to the Fund or any of the fees
being paid by the Fund for the overall services being performed under the
terms of the Management Agreement.

Expenses not expressly assumed by the Investment Manager under the
Agreement or by Dean Witter Distributiors Inc., the Distributor of the Fund's
shares ("Distributors" or "the Distributor") will be paid by the Fund. The
expenses borne by the Fund include, but are not limited to: expenses of the
Plan of Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing of
share certificates; registration costs of the Fund and its shares under
federal and state securities laws; the cost and expense of printing,
including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Investment Manager or any
corporate affiliate of the Investment Manager; all expenses incident to any
dividend, withdrawal or redemption options; charges and expenses of any
outside service used for pricing of the Fund's shares; fees and expenses of
legal counsel, including counsel to the Trustees who are not interested
persons of the Fund or of the Investment Manager (not including compensation
or expenses of attorneys who are employees of the Investment Manager) and
independent accountants; membership dues of industry associations; interest
on Fund borrowings; postage; insurance premiums on property or personnel
(including officers and Trustees) of the Fund which inure to its benefit;
extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Fund's operation.

As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation

<PAGE>

calculated daily by applying the annual rate of 0.60% to the Fund's daily net
assets. For the period March 28, 1995 (commencement of operations) through
January 31, 1996, the fee payable under the Agreement ($122,520) was waived
by the Investment Manager, pursuant to its undertaking to waive its
management fee until March 31, 1996 or until such time as the Fund had $50
million in assets. The Fund began paying fees on February 9, 1996 at which
time the Fund had $50 million in net assets.

Pursuant to the Agreement, total operating expenses of the Fund are
subject to applicable limitations under rules and regulations of states where
the Fund is authorized to sell its shares. Therefore, operating expenses are
effectively subject to the most restrictive of such limitations as the same
may be amended from time to time. Presently, the most restrictive limitation
is as follows. If, in any fiscal year, the Fund's total operating expenses,
exclusive of taxes, interest, brokerage fees, distribution fees and
extraordinary expenses (to the extent permitted by applicable state
securities laws and regulations), exceed 2 1/2 % of the first $30,000,000 of
average daily net assets, 2% of the next $70,000,000 and 1 1/2 % of any
excess over $100,000,000, the Investment Manager will reimburse the Fund for
the amount of such excess. Such amount, if any, will be calculated daily and
credited on a monthly basis. The Fund did not exceed such limitation for the
fiscal period ended January 31, 1996.

The Agreement provides that in the absence of willful misfeasance, bad
faith, gross negligence or reckless disregard of its obligations thereunder,
the Investment Manager is not liable to the Fund or any of its investors for
any act or omission by the Investment Manager or for any losses sustained by
the Fund or its investors. The Agreement in no way restricts the Investment
Manager from acting as investment manager or adviser to others.

The Investment Manager paid the organizational expenses of the Fund
(approximately $185,000) incurred prior to the offering of the Fund's shares.
The Fund agreed to bear and reimburse the Investment Manager for such
expenses, in an amount of up to a maximum of $250,000. The Fund will defer
and will amortize the reimbursed expenses on the straight line method over a
period not to exceed five years from the date of commencement of the Fund's
operations.

The Agreement was initially approved by the Trustees on January 25, 1995
and by InterCapital as the sole shareholder on February 16, 1995. The
Agreement may be terminated at any time, without penalty, on thirty days'
notice by the Trustees of the Fund, by the holders of a majority of the
outstanding shares of the Fund, as defined in the Investment Company Act of
1940, as amended (the "Act"), or by the Investment Manager. The Agreement
will automatically terminate in the event of its assignment (as defined in
the Act).

Under its terms, the Agreement will continue in effect until April 30,
1996, and from year to year thereafter, provided continuance of the Agreement
is approved at least annually by the vote of the holders of a majority of the
outstanding shares of the Fund, as defined in the Act, or by the Trustees of
the Fund; provided that in either event such continuance is approved annually
by the vote of a majority of the Trustees of the Fund who are not parties to
the Agreement or "interested persons" (as defined in the Act) of any such
party (the "Independent Trustees"), which vote must be cast in person at a
meeting called for the purpose of voting on such approval.

The Fund has acknowledged that the name "Dean Witter" is a property right
of DWR. The Fund has agreed that DWR or its parent company may use or, at any
time, permit others to use, the name "Dean Witter". The Fund has also agreed
that in the event the investment management contract between the Investment
Manager and the Fund is terminated, or if the affiliation between
InterCapital and its parent is terminated, the Fund will eliminate the name
"Dean Witter" from its name if DWR or its parent company shall so request.

<PAGE>

TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------

The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital, and with the 80 Dean Witter Funds and the 12 TCW/DW Funds are
shown below:

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- -------------------------------------------- --------------------------------------------------------
<S> <C>

Michael Bozic (55).......................... Chairman and Chief Executive Officer of Levitz Furniture
Trustee Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Executive
6111 Broken Sound Parkway, N.W. Officer of Hills Department Stores (May, 1991-July, 1995);
Boca Raton, Florida formerly Chairman and Chief Executive Officer (January,
1987-August, 1990) and President and Chief Operating Officer
(August, 1990-February, 1991) of the Sears Merchandise Group
of Sears, Roebuck and Co.; Director of Eaglemark Financial
Services, Inc., the United Negro College Fund, Weirton Steel
Corporation and Domain Inc. (home decor retailer).

Charles A. Fiumefreddo* (62)................ Chairman, Chief Executive Officer and Director of InterCapital,
Chairman, President, Distributors and DWSC; Executive Vice President and Director
Chief Executive Officer and Trustee of DWR; Chairman, Director or Trustee, President and Chief
Two World Trade Center Executive Officer of the Dean Witter Funds; Chairman, Chief
New York, New York Executive Officer and Trustee of the TCW/DW Funds; Chairman
and Director of Dean Witter Trust Company ("DWTC") (since
October, 1989); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and Director
of DWDC (until February, 1993).

Edwin J. Garn (63).......................... Director or Trustee of the Dean Witter Funds; formerly United
Trustee States Senator (R-Utah) (1974-1992) and Chairman, Senate
c/o Huntsman Chemical Corporation Banking Committee (1980-1986); formerly Mayor of Salt Lake
500 Huntsman Way City, Utah (1972-1974); formerly Astronaut, Space Shuttle
Salt Lake City, Utah Discovery (April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); Director of Franklin Quest
(time management systems) and John Alden Financial Corp.;
Member of the board of various civic and charitable
organizations.
John R. Haire (71).......................... Chairman of the Audit Committee and Chairman of the Committee
Trustee of the Independent Directors or Trustees and Director or Trustee
Two World Trade Center of the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York President, Council for Aid to Education (1978-1989) and Chairman
and Chief Executive Officer of Anchor Corporation, an Investment
Adviser (1964-1978); Director of Washington National
Corporation (insurance).
</TABLE>

<PAGE>

Dr. Manuel H. Johnson (47).................. Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm (since June, 1985); Koch Professor of International
c/o Johnson Smick International, Inc. Economics and Director of the Center for Global Market Studies
1133 Connecticut Avenue, N.W. at George Mason University (since September, 1990); Co-Chairman
Washington, DC and a founder of the Group of Seven Council (G7C), an
international economic commission (since September, 1990);
Director or Trustee of the Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of NASDAQ (since June, 1995) Director
of Greenwich Capital Markets, Inc. (broker-dealer); formerly
Vice Chairman of the Board of Governors of the Federal Reserve
System (February, 1986-August, 1990) and Assistant Secretary
of the U.S. Treasury (1982-1986).
Paul Kolton (72)............................ Director or Trustee of the Dean Witter Funds; Chairman of
Trustee the Audit Committee and Chairman of the Committee of the
c/o Gordon Altman Butowsky Independent Trustees and Trustee of the TCW/DW Funds; formerly
Weitzen Shalov & Wein Chairman of the Financial Accounting Standards Advisory Council
Counsel to the Independent Trustees and Chairman and Chief Executive Officer of the American Stock
114 West 47th Street Exchange; Director of UCC Investors Holding Inc. (Uniroyal
New York, New York Chemical Company Inc.); director or trustee of various
not-for-profit organizations.
Michael E. Nugent (59)...................... General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President, Bankers
237 Park Avenue Trust Company and BT Capital Corporation (1984-1988); Director
New York, New York of various business organizations.
Philip J. Purcell* (52)..................... Chairman of the Board of Directors and Chief Executive Officer
Trustee of DWDC, DWR, and Novus Credit Services Inc.; Director of
Two World Trade Center InterCapital, DWSC, and Distributors; Director or Trustee
New York, New York of the Dean Witter Funds; Director and/or officer of various
DWDC subsidiaries.
John L. Schroeder (65)...................... Retired; Director or Trustee of the Dean Witter Funds; Trustee
Trustee of the TCW/DW Funds; Director of Citizens Utilities Company;
c/o Gordon Altman Butowsky formerly Executive Vice President and Chief Investment Officer
Weitzen Shalov & Wein of the Home Insurance Company (August, 1991- September, 1995);
Counsel to the Independent Trustees formerly Chairman and Chief Investment Officer of Axe-Houghton
114 West 47th Street Management and the Axe-Houghton Funds (April, 1983- June,
New York, New York 1991) and President of USF&G Financial Services, Inc. (June,
1990-June, 1991).
</TABLE>

<PAGE>

Sheldon Curtis (64) ........................ Senior Vice President, Secretary, and General Counsel of
Vice President, InterCapital and DWSC; Senior Vice President and Secretary
Secretary and General Counsel of DWTC; Senior Vice President, Assistant Secretary and
Two World Trade Center Assistant General Counsel of Distributors; Assistant Secretary
New York, New York of DWDC and DWR; Vice President, Secretary and General Counsel
of the Dean Witter Funds and the TCW/DW Funds.
Thomas F. Caloia (50) ...................... First Vice President (since May, 1991) and Assistant Treasurer
Treasurer (since January, 1993) of InterCapital; First Vice President
Two World Trade Center and Assistant Treasurer of DWSC; Treasurer of the Dean Witter
New York, New York Funds and the TCW/DW Funds; previously Vice President of
InterCapital.
Paul D. Vance (60).......................... Senior Vice President of InterCapital; Vice President of various
Vice President Dean Witter Funds.
Two World Trade Center
New York, New York
Rajesh K. Gupta (35) ....................... Senior Vice President of InterCapital (since May 1991); Vice
Vice President President of various Dean Witter Funds; previously Vice
Two World Trade Center President of InterCapital.
New York, New York

</TABLE>
- ------------

* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.

In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, David A. Hughey, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and
Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC, and Joseph J. McAlinden, Peter M.
Avelar, Kenton J. Hinchliffe, Mark Bavoso and Jonathan R. Page, Senior Vice
Presidents of InterCapital, are Vice Presidents of the Fund, and Marilyn K.
Cranney and Barry Fink, First Vice Presidents and Assistant General Counsels of
InterCapital and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice Presidents
and Assistant General Counsels of InterCapital and DWSC, and Carsten Otto, a
Staff Attorney with InterCapital, are Assistant Secretaries of the Fund.

THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES

The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Trustees. As of the date of
this Statement of Additional Information, there are a total of 80 Dean Witter
Funds, comprised of 120 portfolios. As of February 29, 1996, the Dean Witter
Funds had total net assets of approximately $74.3 billion and more than five
million shareholders.

Seven Trustees (77% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own
any stock or other securities issued by InterCapital's parent company, DWDC.
These are the "disinterested" or "independent" Trustees. The other two
Trustees (the "management Trustees") are affiliated with InterCapital. Five
of the seven independent Trustees are also Independent Trustees of the TCW/DW
Funds.

Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The Dean Witter Funds seek as Independent
Trustees individuals of distinction and experience in business and finance,
government service or academia; these are people whose advice and counsel

<PAGE>

are in demand by others and for whom there is often competition. To accept a
position on the Funds' Boards, such individuals may reject other attractive
assignments because the Funds make substantial demands on their time. Indeed,
by serving on the Funds' Boards, certain Trustees who would otherwise be
qualified and in demand to serve on bank boards would be prohibited by law
from doing so.

All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of fifteen meetings. The
Committees hold some meetings at InterCapital's offices and some outside
InterCapital. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.

The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Most of the Dean Witter Funds
have such a plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.

Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.

DUTIES OF CHAIRMAN OF COMMITTEES

The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He
screens and/or prepares written materials and identifies critical issues for
the Independent Trustees to consider, develops agendas for Committee
meetings, determines the type and amount of information that the Committees
will need to form a judgment on various issues, and arranges to have that
information furnished to Committee members. He also arranges for the services
of independent experts and consults with them in advance of meetings to help
refine reports and to focus on critical issues. Members of the Committees
believe that the person who serves as Chairman of all three Committees and
guides their efforts is pivotal to the effective functioning of the
Committees.

The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination
of chief executive and support staff of the Independent Trustees.

The Chairman of the Committees is not employed by any other organization
and devotes his time primarily to the services he performs as Committee
Chairman and Independent Trustee of the Dean Witter Funds and as an
Independent Trustee of the TCW/DW Funds. The current Committee Chairman has
had more than 35 years experience as a senior executive in the investment
company industry.

<PAGE>

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL DEAN
WITTER FUNDS

The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the Dean Witter Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of
separate groups of Independent Trustees arriving at conflicting decisions
regarding operations and management of the Funds and avoids the cost and
confusion that would likely ensue. Finally, having the same Independent
Trustees serve on all Fund Boards enhances the ability of each Fund to
obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
Dean Witter Funds.

The Fund will pay each Independent Trustee an annual fee of $1,000 plus a
per meeting fee of $50 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund will pay the Chairman
of the Audit Committee an annual fee of $750 and will pay the Chairman of the
Committee of the Independent Trustees an additional annual fee of $2,400, in
each case inclusive of the Committee meeting fees). The Fund will also
reimburse such Trustees for travel and other out-of-pocket expenses incurred
by them in connection with attending such meetings. Trustees and officers of
the Fund who are or have been employed by the Investment Manager or an
affiliated company will receive no compensation or expense reimbursement from
the Fund. The Fund commenced operations on March 28, 1995 and paid no
compensation to the Independent Trustees for the fiscal period ended January
31, 1996. Payments commenced at the time the Fund began paying management
fees, which, pursuant to an undertaking by the Investment Manager, would be
at such time as the Fund had $50 million in net assets or until March 31,
1996, whichever occurred first. The Fund began paying fees on February 9,
1996 at which time the Fund had $50 million in assets.

At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming that during such
fiscal year the Fund holds the same number of Board and committee meetings as
were held by the other Dean Witter Funds during the calendar year ended
December 31, 1995, it is estimated that the compensation paid to each
Independent Trustee during such fiscal year will be the amount shown in the
following table:

FUND COMPENSATION (ESTIMATED)

<TABLE>
<CAPTION>
AGGREGATE
NAME OF INDEPENDENT COMPENSATION
TRUSTEE FROM THE FUND
- -------------------------- ---------------
<S> <C>
Michael Bozic ............. $ 2,000
Edwin J. Garn ............. 2,000
John R. Haire ............. 4,600*
Dr. Manuel H. Johnson .... 2,000
Paul Kolton ............... 2,000
Michael E. Nugent ......... 2,000
John L. Schroeder ......... 2,000
</TABLE>

- ---------------
* Of Mr. Haire's compensation from the Fund, $3,150 is paid to him as
Chairman of the Committee of the Independent Trustees ($2,400) and as
Chairman of the Audit Committee ($750).

<PAGE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the 79 Dean Witter Funds and, in the case of Messrs. Haire,
Johnson, Kolton and Nugent, the 11 TCW/DW Funds that were in operation at
December 31, 1995. With respect to Messrs. Haire, Johnson, Kolton and Nugent,
the TCW/DW Funds are included solely because of a limited exchange privilege
between those Funds and five Dean Witter Money Market Funds. Mr. Schroeder
was elected as a Trustee of the TCW/DW Funds on April 20, 1995.

CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF
FOR SERVICE AS COMMITTEES OF TOTAL CASH
DIRECTOR OR FOR SERVICE AS INDEPENDENT COMPENSATION
TRUSTEE AND TRUSTEE AND DIRECTORS/ FOR SERVICES TO
COMMITTEE MEMBER COMMITTEE MEMBER TRUSTEES AND 79 DEAN WITTER
NAME OF INDEPENDENT OF 79 DEAN WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
TRUSTEE FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- -------------------------- ----------------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C>
Michael Bozic ............. $126,050 -- -- $126,050
Edwin J. Garn ............. 136,450 -- -- 136,450
John R. Haire ............. 98,450 $82,038 $217,350** 397,838
Dr. Manuel H. Johnson .... 136,450 82,038 -- 218,488
Paul Kolton ............... 136,450 54,788 36,900*** 228,138
Michael E. Nugent ......... 124,200 75,038 -- 199,238
John L. Schroeder ......... 136,450 46,964 -- 183,414
</TABLE>

- ---------------
** For the 79 Dean Witter Funds in operation at December 31, 1995.

*** For the 11 TCW/DW Funds in operation at December 31, 1995.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.

INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------

As discussed in the Prospectus, the Fund offers investors an opportunity
to participate in a diversified portfolio of securities, consisting, under
normal market conditions of 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
securities convertible into common stocks; 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. The portfolio reflects an investment
decision-making process developed by the Fund's Investment Manager.

Zero Coupon Securities. A portion of the U.S. Government securities
purchased by the Fund may be "zero coupon" Treasury securities. These are
U.S. Treasury bills, notes and bonds which have been stripped of their
unmatured interest coupons and receipts or which are certificates
representing interests in such stripped debt obligations and coupons. "Zero
coupon" securities are purchased at a discount from their face amount, giving
the purchaser the right to receive their full value at maturity. A zero
coupon security pays no interest to its holder during its life. Its value to
an investor consists of the difference between its face value at the time of
maturity and the price for which it was acquired, which is generally an
amount significantly less than its face value (sometimes referred to as a
"deep discount" price).

The interest earned on such securities is, implicitly, automatically
compounded and paid out at maturity. While such compounding at a constant
rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received if prevailing interest rates rise. For this reason, zero
coupon securities are subject to substantially greater market price
fluctuations during periods of changing prevailing interest rates than are
comparable debt securities which make

<PAGE>

current distributions of interest. Current federal tax law requires that a
holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though
the Fund receives no interest payments in cash on the security during the
year.

Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts of certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).

OPTIONS AND FUTURES TRANSACTIONS

The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same securities to effect closing
transactions, and may hedge against potential changes in the market value of
investments (or anticipated investments) by purchasing put and call options
on portfolio (or eligible portfolio) securities and engaging in transactions
involving futures contracts and options on such contracts. Call and put
options on U.S. Treasury notes, bonds and bills and equity securities are
listed on Exchanges and are written in over-the-counter transactions ("OTC
options"). Listed options are issued by the Options Clearing Corporation
("OCC"). Ownership of a listed call option gives the Fund the right to buy
from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC the
underlying security at that exercise price prior to the expiration date of
the option, regardless of its then current market price. Ownership of a
listed put option would give the Fund the right to sell the underlying
security to the OCC at the stated exercise price. Upon notice of exercise of
the put option, the writer of the put would have the obligation to purchase
the underlying security from the OCC at the exercise price.

Options on Treasury Bonds and Notes. Because trading in options written
on Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.

Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the underlying security. However, if the Fund holds a long position in
Treasury bills with a principal amount of the securities deliverable upon
exercise of the option, the position may be hedged from a risk standpoint by
the writing of a call option. For so long as the call option is outstanding,
the Fund will hold the Treasury bills in a segregated account with its
Custodian, so that they will be treated as being covered.

OTC Options. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which
have entered into direct agreements with the Fund. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between the Fund and the transacting dealer, without the intermediation of a
third party such as the OCC. If the transacting dealer fails to make or take
delivery of the securities underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.

Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities in order to aid in achieving its investment
objective. Generally, a call option is "covered" if the Fund owns, or has the
right to acquire, without additional cash consideration (or for additional
cash consideration

<PAGE>

held for the Fund by its Custodian in a segregated account) the underlying
security subject to the option except that in the case of call options on
U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a different
series from those underlying the call option, but with a principal amount and
value corresponding to the exercise price and a maturity date not later than
that of the securities deliverable under the call option. A call option is
also covered if the Fund holds a call on the same security as the underlying
security of the written option, where the exercise price of the call used for
coverage is equal to or less than the exercise price of the call written or
greater than the exercise price of the call written if the mark to market
difference is maintained by the Fund in cash, U.S. Government securities or
other high grade debt obligations which the Fund holds in a segregated
account maintained with its Custodian.

The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these
premiums may better enable the Fund to achieve a greater total return than
would be realized from holding the underlying securities alone. Moreover, the
premium received will offset a portion of the potential loss incurred by the
Fund if the securities underlying the option are ultimately sold by the Fund
at a loss. The premium received will fluctuate with varying economic market
conditions. If the market value of the portfolio securities upon which call
options have been written increases, the Fund may receive less total return
from the portion of its portfolio upon which calls have been written than it
would have had such call not been written.

During the option period, the Fund may be required, at any time, to
deliver the underlying security against payment of the exercise price on any
calls it has written (exercise of certain listed options may be limited to
specific expiration dates). This obligation is terminated upon the expiration
of the option period or at such earlier time when the writer effects a
closing purchase transaction. A closing purchase transaction is accomplished
by purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.

Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option to prevent an underlying security from being
called, to permit the sale of an underlying security or to enable the Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Fund. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part or exceeded by a decline in
the market value of the underlying security.

If a written call option expires unexercised, the Fund realizes a gain in
the amount of the premium on the option less the commission paid. Such a
gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a written call option is
exercised, the Fund realizes a gain or loss from the sale of the underlying
security equal to the difference between the purchase price of the underlying
security and the proceeds of the sale of the security plus the premium
received on the option less the commission paid.

Options written by a Fund normally have expiration dates of from up to
nine months (equity securities) to eighteen months (fixed-income securities)
from the date written. The exercise price of a call option may be below,
equal to or above the current market value of the underlying security at the
time the option is written. See "Risks of Options and Futures Transactions,"
below.

Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other high grade debt obligations in an amount equal to at
least the exercise

<PAGE>

price of the option, at all times, during the option period. Similarly, a
short put position could be covered by the Fund by its purchase of a put
option on the same security as the underlying security of the written option,
where the exercise price of the purchased option is equal to or more than the
exercise price of the put written or less than the exercise price of the put
written if the mark to market difference is maintained by the Fund in cash,
U.S. Government securities or other high grade debt obligations which the
Fund holds in a segregated account maintained at its Custodian. In writing
puts, the Fund assumes the risk of loss should the market value of the
underlying security decline below the exercise price of the option (any loss
being decreased by the receipt of the premium on the option written). During
the option period, the Fund may be required, at any time, to make payment of
the exercise price against delivery of the underlying security. The operation
of and limitations on covered put options in other respects are substantially
identical to those of call options.

The Fund will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the
Investment Manager wishes to purchase the security underlying the option at a
price lower than its current market price, in which case it will write the
covered put at an exercise price reflecting the lower purchase price sought.
The potential gain on a covered put option is limited to the premium received
on the option (less the commissions paid on the transaction) while the
potential loss equals the difference between the exercise price of the option
and the current market price of the underlying securities when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).

Purchasing Call and Put Options. As stated in the Prospectus, the Fund
may purchase listed and OTC call and put options on securities and stock
indexes in amounts equalling up to 5% of its total assets. The Fund may
purchase call options only in order to close out a covered call position (see
"Covered Call Writing" above). The purchase of a call option to effect a
closing transaction on a call written over-the-counter may be a listed or OTC
option. In either case, the call purchased is likely to be on the same
securities and have the same terms as the written option. If purchased
over-the-counter, the option would generally be acquired from the dealer or
financial institution which purchased the call written by the Fund.

The Fund may purchase put options on securities 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. If the value of the underlying security were to
fall below the exercise price of the put purchased in an amount greater than
the premium paid for the option, the Fund would incur no additional loss. The
Fund may also purchase put options to close out written put positions in a
manner similar to call options closing purchase transactions. In addi- tion,
the Fund may sell a put option which it has previously purchased prior to the
sale of the securities underlying such option. Such a sale would result in a
net gain or loss depending on whether the amount received on the sale is more
or less than the premium and other transaction costs paid on the put option
which is sold. And such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security. If a put option
purchased by the Fund expired without being sold or exercised, the premium
would be lost.

Risks of Options Transactions. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of
the underlying security increase, but has retained the risk of loss should
the price of the underlying security decline. The secured put writer also
retains the risk of loss should the market value of the underlying security
decline below the exercise price of the option less the premium received on
the sale of the option. In both cases, the writer has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver or receive the underlying securities at the
exercise price.

Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction, it cannot
sell the underlying security until the option expires or the option is
exercised. Accordingly, a covered call option writer may not be able to sell
an underlying security at a time when it

<PAGE>

might otherwise be advantageous to do so. A secured put option writer who is
unable to effect a closing purchase transaction would continue to bear the
risk of decline in the market price of the underlying security until the
option expires or is exercised. In addition, a secured put writer would be
unable to utilize the amount held in cash or U.S. government or other high
grade debt obligations as security for the put option for other investment
purposes until the exercise or expiration of the option.

The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on Option
Exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options. However, the Fund may be able to purchase an
offsetting option which does not close out its position as a writer but
constitutes an asset of equal value to the obligation under the option
written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to
maintain the securities subject to the call, or the collateral underlying the
put, even though it might not be advantageous to do so, until a closing
transaction can be entered into (or the option is exercised or expires).

Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an Exchange; (v) inadequacy of the facilities of an
Exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more Exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange that had been issued by the OCC
as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in
the event of the bankruptcy of the writer of an OTC option purchased by the
Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Investment Manager.

Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written
on one or more accounts or through one or more brokers). An Exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.

Futures Contracts. As stated in the Prospectus, 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, bills and GNMA Certificates ("interest rate"
futures) and such indexes as the S&P 500 Index, the Moody's Investment-Grade
Corporate Bond Index and the New York Stock Exchange Composite Index ("index"
futures).

As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.

<PAGE>

The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager anticipates that interest rates may rise
and, concomitantly, the price of fixed-income securities falls, the Fund may
sell an interest rate futures contract or a bond index futures contract. If
declining interest rates are anticipated, the Fund may purchase an interest
rate futures contract to protect against a potential increase in the price of
U.S. Government securities the Fund intends to purchase. Subsequently,
appropriate fixed-income securities may be purchased by the Fund in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.

The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that
the prices of stock held by the Fund may fall, the Fund may sell a stock
index futures contract. Conversely, if the Investment Manager wishes to hedge
against anticipated price rises in those stocks which the Fund intends to
purchase, the Fund may purchase stock index futures contracts. In addition,
interest rate and stock index futures contracts will be bought or sold in
order to close out a short or long position in a corresponding futures
contract.

Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Stock index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open
or close of the last trading day of the contract and the futures contract
price. A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of equity
security and the same delivery date. If the sales price exceeds the
offsetting purchase price, the seller would be paid the difference and would
realize a gain. If the offsetting purchase price exceeds the sale price, the
seller would pay the difference and would realize a loss. Similarly, a
futures contract purchase is closed out by effecting a futures contract sale
for the same aggregate amount of the specific type of security and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no
assurance that the Fund will be able to enter into a closing transaction.

Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other high grade short-term obligations equal to approximately 2% of the
contract amount. Initial margin requirements are established by the Exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of
those required by the Exchanges.

Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are marked to
market daily and the Fund may be required to make subsequent deposits of cash
or U.S. Government securities called "variation margin", with the Fund's
futures contract clearing broker, which are reflective of price fluctuations
in the futures contract. Currently, interest rate futures contracts can be
purchased on debt securities such as U.S. Treasury Bills and Bonds, U.S.
Treasury Notes with Maturities between 6 1/2 and 10 years, GNMA Certificates
and Bank Certificates of Deposit.

Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.

<PAGE>

The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Fund may be required to make
additional margin payments during the term of the contract.

At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or a gain.

Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Value Line Stock
Index on the Kansas City Board of Trade and the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade.

Options on Futures Contracts. The Fund may purchase and write call and
put options on futures contracts and enter into closing transactions with
respect to such options to terminate an existing position. An option on a
futures contract gives the purchaser the right (in return for the premium
paid), and the writer the obligation, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the term of
the option. Upon exercise of the option, the delivery of the futures position
by the writer of the option to the holder of the option is accompanied by
delivery of the accumulated balance in the writer's futures margin account,
which represents the amount by which the market price of the futures contract
at the time of exercise exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the futures contract.

The Fund will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of its
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Investment Manager seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course,
augment the total return of the Fund and thereby provide a further hedge
against losses resulting from price declines in portions of the Fund's
portfolio.

The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.

Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets, after taking into account unrealized gains
and unrealized losses on such contracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise
price of the call (put) option is less (more) than the market price of the
underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on
the percentage of the Fund's assets which may be subject to a hedge position.
Except as described above, there are no other limitations on the use of
futures and options thereon by the Fund. With respect to futures and options
on futures contracts, segregated accounts will be maintained consisting of
cash or high grade short-term U.S. debt securities with a value (marked-to-
market daily) equal to the dollar amount of the Fund's purchase or sale
obligation under such contracts.

<PAGE>

Risks of Transactions in Futures Contracts and Related Options. The Fund
may sell a futures contract to protect against the decline in the value of
securities held by the Fund. However, it is possible that the futures market
may advance and the value of securities held in the portfolio of the Fund may
decline. If this occurred, the Fund would lose money on the futures contract
and also experience a decline in value of its portfolio securities. However,
while this could occur for a very brief period or to a very small degree,
over time the value of a diversified portfolio will tend to move in the same
direction as the futures contracts.

If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Investment Manager may determine not to invest in the
securities as planned and will realize a loss on the futures contract that is
not offset by a reduction in the price of the securities.

If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other high grade debt obligations equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the
option. Such a position may also be covered by owning the securities
underlying the futures contract (in the case of a stock index futures
contract a portfolio of securities substantially replicating the relevant
index), or by holding a call option permitting the Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.

In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other high grade debt obligations equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Fund by its Custodian. Alternatively, the Fund could cover
its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held
by the Fund.

Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience
delays and/or losses in liquidating open positions purchased or sold through
the broker and/or incur a loss of all or part of its margin deposits with the
broker. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Investment Manager.

There may exist an imperfect correlation between the price movements of
futures contracts purchased by the Fund and the movements in the prices of
the securities which are the subject of the hedge. If participants in the
futures market elect to close out their contracts through offsetting
transactions rather than meet margin deposit requirements, distortions in the
normal relationship between the securities and futures markets could result.
Price distortions could also result if investors in futures contracts opt to
make or take delivery of underlying securities rather than engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions.
Due to the possibility of price distortions in the futures market and because
of the imperfect correlation between movements in the prices of securities
and movements in the prices of futures contracts, a correct forecast of stock
price or interest rate trends by the Investment Manager may still not result
in a successful hedging transaction.

<PAGE>

There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the
event a liquid market does not exist, it may not be possible to close out a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which
futures contracts are traded may compel or prevent the Fund from closing out
a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to
make or take delivery of the underlying securities at a time when it may be
disadvantageous to do so.

Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities.

REPURCHASE AGREEMENTS

When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested
or used for payments of obligations of the Fund. These agreements, which may
be viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer.
The agreement provides that the Fund will sell back to the institution, and
that the institution will repurchase, the underlying security ("collateral")
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease
below the purchase price plus accrued interest. If such decrease occurs,
additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
such date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of the collateral are not subject to any limits.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS

From time to time the Fund may purchase securities on a when-issued or
delayed delivery basis or may purchase or sell securities on a forward
commitment basis. When such transactions are negotiated, the price is fixed
at the time of the commitment, but delivery and payment can take place a
month or more after the date of commitment. While the Fund will only purchase
securities on a when-issued, delayed delivery or forward commitment basis
with the intention of acquiring the securities, the Fund may sell the
securities before the settlement date, if it is deemed advisable. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date.
At the time the Fund makes the commitment to purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be
more or less than the purchase or sale price. The Fund will also establish a
segregated account with its custodian bank in which it will continually
maintain cash or cash equivalents or other high grade debt portfolio
securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis.

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 or
debt restructuring. The commitment for the purchase of any such security will

<PAGE>

not be recognized in the portfolio of the Fund until the Investment Manager
determines that issuance of the security is probable. At such time, the Fund
will record the transaction and, in determining its net asset value, will
reflect the value of the security daily. At such time, the Fund will also
establish a segregated account with its custodian bank in which it will
maintain cash or cash equivalents or other high grade debt portfolio
securities equal in value to recognized commitments for such securities. The
value of the Fund's commitments to purchase the securities of any one issuer,
together with the value of all securities of such issuer owned by the Fund,
may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made (see "Investment
Restrictions"). An increase in the percentage of the Fund's assets committed
to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value. The Investment Manager and
the Trustees do not believe that the net asset value of the Fund will be
adversely affected by its purchase of securities on such basis. The Fund may
also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of sale.

RULE 144A SECURITIES

The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Trustees of the Fund, will make a
determination as to the liquidity of each restricted security purchased by
the Fund. The procedures require that the following factors be taken into
account in making a liquidity determination: (1) the frequency of trades and
price quotes for the security; (2) the number of dealers and other potential
purchasers who have issued quotes on the security; (3) any dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (the time needed to dispose
of the security, the method of soliciting offers, and the mechanics of
transfer). If a restricted security is determined to be "liquid", such
security will not be included within the category "illiquid securities",
which under current policy may not exceed 10% of the Fund's net assets.

PORTFOLIO TURNOVER

It is anticipated that the Fund's portfolio turnover rate of the equity
securities and of the fixed income securities will not exceed 10% and 60%,
respectively. A 100% turnover rate would occur, for example, if 100% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced
within one year.

INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------

In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of Shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund. For purposes of the following restrictions:
(i) all percentage limitations apply immediately after a purchase or initial
investment; and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets
does not require elimination of any security from the portfolio.

The Fund may not:

1. Invest in securities of any issuer if, in the exercise of
reasonable diligence, the Fund has determined that any officer or
trustee/director of the Fund or of the Investment Manager owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers
and trustees/directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.

<PAGE>

2. Purchase or sell real estate or interests therein (including
limited partnership interests), although the Fund may purchase securities
of issuers which engage in real estate operations and securities secured
by real estate or interests therein.

3. Purchase or sell commodities except that the Fund may purchase or
sell (write) futures contracts and related options.

4. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.

5. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.

6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).

7. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(6). For the purpose of this restriction, collateral arrangements with
respect to the writing of options and collateral arrangements with respect
to initial or variation margin for futures are not deemed to be pledges of
assets.

8. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of: (a)
entering into any repurchase agreement; (b) borrowing money in accordance
with restrictions described above.

9. Make loans of money or securities, except: (a) by the purchase of
debt obligations in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements.

10. Make short sales of securities.

11. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.

12. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.

13. Invest for the purpose of exercising control or management of any
other issuer.

In addition, the Fund, as a non-fundamental policy, will not invest more
than 5% of the value of its net assets in warrants, including not more than
2% of such assets in warrants not listed on the New York or American Stock
Exchange. However, the acquisition of warrants attached to other securities
is not subject to this restriction.

PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------

Subject to the general supervision of the Board of Trustees, the
Investment Manager is responsible for decisions to buy and sell securities
for the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. In the over-the-counter market,
securities are generally traded on a "net" basis with dealers acting as
principal for their own accounts without a stated commission, although the
price of the security usually includes a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred
to as the underwriter's concession or discount. Options and futures
transactions will usually be effected through a broker and a commission will
be charged. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or
discounts are paid.

Many of the Fund's portfolio transactions will occur primarily with
issuers, underwriters or major dealers in U.S. Government Securities acting
as principals. Such transactions are normally on a net

<PAGE>

basis which do not involve payment of brokerage commissions. The cost of
securities purchased from an underwriter usually includes a commission paid
by the issuer to the underwriters; transactions with dealers normally reflect
the spread between bid and asked prices.

The Investment Manager currently serves as investment manager to a number
of clients, including other investment companies, and may in the future act
as investment manager or adviser to others. It is the practice of the
Investment Manager to cause purchase and sale transactions to be allocated
among the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client
accounts, various factors may be considered, including the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client
accounts. In the case of certain initial and secondary public offerings, the
Investment Manager may utilize a pro-rata allocation process based on the
size of the Dean Witter Funds involved and the number of shares available
from the public offering.

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Investment
Manager from obtaining a high quality of brokerage and research services. In
seeking to determine the reasonableness of brokerage commissions paid in any
transaction, the Investment Manager relies upon its experience and knowledge
regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.

In seeking to implement the Fund's policies, the Investment Manager
effects transactions with those brokers and dealers who the Investment
Manager believes provide the most favorable prices and are capable of
providing efficient executions. If the Investment Manager believes such
prices and executions are obtainable from more than one broker or dealer, it
may give consideration to placing portfolio transactions with those brokers
and dealers who also furnish research and other services to the Fund or the
Investment Manager. Such services may include, but are not limited to, any
one or more of the following: information as to the availability of
securities for purchase or sale; statistical or factual information or
opinions pertaining to investment; wire services; and appraisals or
evaluations of portfolio securities. The Fund paid $27,484 in brokerage
commissions during the period from commencement of operations (March 28,
1995) through January 31, 1996.

The information and services received by the Investment Manager from
brokers and dealers may be of benefit to the Investment Manager in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly. While the receipt of such information and services
is useful in varying degrees and would generally reduce the amount of
research or services otherwise performed by the Investment Manager and
thereby reduce its expenses, it is of indeterminable value and the management
fee paid to the Investment Manager is not reduced by any amount that may be
attributable to the value of such services. $1,104 of the brokerage
commissions paid by the Fund during the fiscal period ended January 31, 1996
were directed to brokers in connection with research services provided
($793,453 in transactions).

Pursuant to an order of the Securities and Exchange Commission, the Fund
may effect principal transactions in certain money market instruments with
DWR. The Fund will limit its transactions with DWR to U.S. Government and
Government Agency Securities, Bank Money Instruments (i.e., Certificates of
Deposit and Bankers' Acceptances) and Commercial Paper. Such transactions
will be effected with DWR only when the price available from DWR is better
than that available from other dealers.

<PAGE>

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow DWR to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested" persons of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard.

The Fund does not reduce the management fee it pays to the Investment
Manager by any amount of the brokerage commissions it may pay to DWR. The
Fund paid DWR $26,380 in brokerage commissions (95.98% of all brokerage
commissions paid) to effect 97.09% of all transactions effected on behalf
of the Fund on which brokerage commissions were incurred for the period ended
January 31, 1996.

THE DISTRIBUTOR
- -----------------------------------------------------------------------------

As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC.
The Board of Trustees of the Fund including a majority of the Trustees who
are not, and were not at the time they voted, interested persons of the Fund,
as defined in the Act ( the "Independent Trustees"), approved, at their
meeting held on January 25, 1995, a Distribution Agreement appointing the
Distributor as exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. By its
terms, the Distribution Agreement has an initial term ending April 30, 1995,
and provides that it will remain in effect from year to year thereafter if
approved by the Board. At their meeting held on April 20, 1995, the Trustees,
including all of the Independent Trustees, approved the continuation of the
Agreement until April 30, 1996.

The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. Under the Distribution Agreement, the Distributor uses its best
efforts in rendering services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.

PLAN OF DISTRIBUTION

To reimburse the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund reimburses the Distributor for
specific expenses the Distributor incurs in promoting the distribution of the
Fund's shares. Reimbursement may in no event exceed an amount equal to
payments at an annual rate of 1.0% of the average daily net assets of the
Fund. For the period March 28, 1995 (commencement of operations) through
January 31,

<PAGE>

1996, the fee payable under the Plan ($204,200) was waived pursuant to an
undertaking by the Investment Manager to waive its fees and assume all
expenses (except brokerage) until March 31, 1996 or until such time as the
Fund had $50 million in net assets. The Fund began paying fees on February 9,
1996 at which time as the Fund had $50 million in assets.

The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year pursuant to the Plan of Distribution equal to 0.25% of
the Fund's average daily net assets is characterized as a "service fee" under
the Rules of Fair Practice of the National Association of Securities Dealers,
Inc. (of which the Distributor is a member). Such fee is a payment made for
personal service and/or the maintenance of shareholder accounts. The
remaining portion of the Plan of Distribution fee payments made by the Fund
is characterized as an "asset-based sales charge" as such is defined by the
aforementioned Rules of Fair Practice.

The Plan was adopted by a vote of the Trustees of the Fund on January 25,
1995, at a meeting of the Trustees called for the purpose of voting on such
Plan. The vote included the vote of a majority of the Trustees of the Fund
who are not "interested persons" of the Fund (as defined in the Act) and who
have no direct or indirect financial interest in the operation of the Plan
(the "Independent 12b-1 Trustees"). In making their decision to adopt the
Plan, the Trustees requested from the Distributor and received such
information as they deemed necessary to make an informed determination as to
whether or not adoption of the Plan was in the best interests of the
shareholders of the Fund. After due consideration of the information
received, the Trustees, including the Independent 12b-1 Trustees, determined
that adoption of the Plan would benefit the shareholders of the Fund.
InterCapital, as sole shareholder of the Fund, approved the Plan on February
16, 1995, whereupon the Plan went into effect.

Under its terms, the Plan will continue until April 30, 1996 and will
remain in effect from year to year thereafter, provided such continuance is
approved annually by a vote of the Trustees in the manner described above.
Under the Plan and as required by Rule 12b-1, the Trustees will receive and
review promptly after the end of each fiscal quarter a written report
provided by the Distributor of the amounts expended by the Distributor under
the Plan and the purpose for which such expenditures were made.

The Plan provides that the Distributor will bear the expense of all
promotional and distribution related activities on behalf of the Fund,
including personal services to shareholders and maintenance of shareholder
accounts, except for expenses that the Trustees determine to reimburse, as
described below. The following activities and services may be provided by the
Distributor, DWR, its affiliates and any other selected broker-dealer under
the Plan: (1) compensation to and expenses of account executives and other
employees of DWR, its affiliates and other selected broker-dealers, 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 specific expenses incurred or to be
incurred in promoting the distribution of the Fund's shares and in servicing
shareholder accounts. Reimbursement is made through monthly payments in
amounts determined at the beginning of each calendar year by the Trustees,
including a majority of the Independent 12b-1 Trustees. The amount of each
monthly 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.
No interest or other financing charges, if any, incurred on any distribution
expenses will be reimbursable under the Plan. In the event that the
Distributor proposes that monies shall be reimbursed for other than expenses
representing a gross credit to account executives, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular
expenses, and the portions thereof, that may be borne by the Fund, and in
making such a determination shall consider the scope of the Distributor's
commitment to promoting the distribution of the Fund's shares.

<PAGE>

DWR's account executives are credited with an annual residual commission,
currently a gross residual of up to 1.0% of the current value of the
respective accounts for which they are the account executives or dealers of
record. The "gross residual" is a charge which reflects residual commissions
paid by DWR to its account executives and expenses of DWR and its affiliates
associated with the sale and promotion of Fund shares and the servicing of
shareholders' accounts, including the expenses of operating branch offices in
connection with the servicing of shareholders' accounts, which expenses
include lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies and other expenses relating to branch office
servicing of shareholder accounts. The portion of an account executive's
annual gross residual commission allocated to servicing of shareholders'
accounts does not exceed 0.25% of the average annual net asset value of
shares of accounts for which he or she is account executive of record.

Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.

Under the Plan, the Distributor provides the Fund, for review by the
Trustees, and the Trustees review, promptly after the end of each calendar
quarter, a written report regarding the distribution expenses incurred during
such calendar quarter, which report includes (1) an itemization of the types
of expenses and the purposes therefor; (2) the amounts of such expenses; and
(3) a description of the benefits derived by the Fund. In the Trustees'
quarterly review of the Plan they consider its continued appropriateness and
the level of compensation provided therein.

No interested person of the Fund nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that the Distributor, InterCapital, DWR or certain of their employees may be
deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of
the Fund, and all material amendments of the Plan must also be approved by
the Trustees in the manner described above. The Plan may be terminated at any
time, without payment of any penalty, by vote of a majority of the
Independent 12b-1 Trustees or by a vote of a majority of the outstanding
voting securities of the Fund (as defined in the Act) on not more than thirty
days' written notice to any other party to the Plan. So long as the Plan is
in effect, the election and nomination of Independent Trustees shall be
committed to the discretion of the Independent Trustees.

DETERMINATION OF NET ASSET VALUE

As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Unlisted options on debt securities and all options on equity
securities are valued at the mean between their latest bid and asked prices.
Futures are valued at the latest sale price on the commodities exchange on
which they trade unless the Trustees determine such price does not reflect
their market value, in which case they will be valued at their fair value as
determined by the Trustees. All other securities and other assets are valued
at their fair value as determined in good faith under procedures established
by and under the supervision of the Trustees.

The net asset value per share of the Fund is determined once daily at 4:00
p.m. New York time (or on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time) on each day

<PAGE>

that the New York Stock Exchange is open by taking the value of all assets of
the Fund, subtracting its liabilities, dividing by the number of shares
outstanding and adjusting to the nearest cent. The New York Stock Exchange
currently observes the following holidays: New Year's Day; Presidents Day;
Good Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving Day; and
Christmas Day.

SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------

Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is
no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction
from the Fund or from DWR or other selected broker-dealer.

Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid, at the net asset value per share, in shares
of the Fund (or in cash if the shareholder so requests) as of the close of
business on the record date. At any time an investor may request the Transfer
Agent, in writing, to have subsequent dividends and/or capital gains
distributions paid to him or her in cash rather than shares. To assure
sufficient time to process the change, such request should be received by the
Transfer Agent at least five business days prior to the record date of the
dividend or distribution. In the case of recently purchased shares for which
registration instructions have not been received on the record date, cash
payments will be made to DWR or other selected broker-dealer, and will be
forwarded to the shareholder, upon the receipt of proper instructions.

Target Dividends.(Service Mark) In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of an open-end Dean
Witter Fund other than Dean Witter Balanced Growth Fund. Such investment will
be made as described above for automatic investment in shares of the Fund, at
the net asset value per share of the selected Dean Witter Fund as of the
close of business on the payment date of the dividend or distribution and
will begin to earn dividends, if any, in the selected Dean Witter Fund the
next business day. To participate in the Targeted Dividends program,
shareholders should contact their DWR or other selected broker- dealer
account executive or the Transfer Agent. Shareholders of the Fund must be
shareholders of the Dean Witter Fund targeted to receive investments from
dividends at the time they enter the Targeted Dividends program. Investors
should review the prospectus of the targeted Dean Witter Fund before entering
the program.

EasyInvest.(Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.

Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at net
asset value, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset
value per share next determined after receipt of the check or proceeds by the
Transfer Agent.

<PAGE>

Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less then $25, or in any whole percentage of the account balance, on an
annualized basis.

The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's DWR brokerage account, within five business days after the date
of redemption. The Withdrawal Plan may be terminated at any time by the Fund.

Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the share- holder's original
investment will be correspondingly reduced and ultimately exhausted. Each
withdrawal constitutes a redemption of shares and any gain or loss realized
must be recognized for federal income tax purposes.

Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her Account Executive or by written
notification to the Transfer Agent. In addition, the party and/or the address
to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account. The
shareholder may also redeem all or part of the shares held in the Withdrawal
Plan account (see "Redemptions and Repurchases" in the Prospectus) at any
time.

Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
Balanced Growth Fund, directly to the Fund's Transfer Agent. Such amounts
will be applied to the purchase of Fund shares at the net asset value per
share next computed after receipt of the check or purchase payment by the
Transfer Agent. The shares so purchased will be credited to the investor's
account.

EXCHANGE PRIVILEGE

Exchange Privilege. As discussed in the Prospectus, an Exchange Privilege
exists whereby investors who have purchased shares of any of the Dean Witter
Funds sold with either a front-end (at time of purchase) sales charge ("FESC
funds") or a contingent deferred (at time of redemption) sales charge ("CDSC
funds") will be permitted, after the shares of the fund acquired by purchase
(not by exchange or dividend reinvestment) have been held for thirty days, to
redeem all or part of their shares in that fund and have the proceeds
invested in shares of the Fund, Dean Witter Balanced Growth Fund and Dean
Witter Intermediate Term U.S. Treasury Trust, Dean Witter Short-Term Bond Fund,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term U.S. Treasury
Trust and five Dean Witter Funds which are money market funds (the foregoing
eleven non-CDSC funds are hereinafter referred to as "Exchange Funds"). There is
no waiting period for exchanges of shares acquired by exchange or dividend
reinvestment. 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 Exchange Funds, FESC funds or
CDSC funds (however, shares of CDSC funds, including shares acquired in exchange
of (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

<PAGE>

purchased) may be redeemed and exchanged for shares of the 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. An exchange will be treated for federal income tax purposes
and applicable state income tax purposes the same as a repurchase or
redemption of shares, on which the shareholder may realize a capital gain or
loss.

Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.

Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)

When shares of any CDSC fund are exchanged for shares of the Exchange
Funds, the exchange is executed at no charge to the shareholder, without the
imposition of the CDSC at the time of the exchange. During the period of time
the shareholder remains in the Exchange Funds (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period or "year since purchase payment made" is frozen. When shares are
redeemed out of the Exchange Fund, they will be subject to a CDSC which would
be based upon the period of time the shareholder held shares in a CDSC fund.
Shareholders acquiring shares of an Exchange Fund pursuant to this exchange
privilege may exchange those shares back into a CDSC fund from the Exchange
Funds, with no CDSC being imposed on such exchange. The holding period
previously frozen when shares were first exchanged for shares of the Exchange
Fund resumes on the last day of the month in which shares of a CDSC fund are
reacquired. Thus, a CDSC is imposed only upon an ultimate redemption, based
upon the time (calculated as described above) the shareholder was invested in
a CDSC fund. Shares of a CDSC fund acquired in exchange for shares of an FESC
fund (or in exchange for shares of other Dean Witter funds for which shares
of an FESC fund have been exchanged) are not subject to any CDSC upon their
redemption.

When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon
redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC, the amount which represents the
current net asset value of shares at the time of the exchange which were (i)
purchased more than three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions and (iii) acquired in
exchange for shares of FESC funds, or for shares of other Dean Witter Funds
for which shares of FESC funds have been exchanged (all such shares called
"Free Shares"), will be exchanged first. Shares of Dean Witter American Value
Fund acquired prior to April 30, 1984, shares of Dean Witter Dividend Growth
Securities Inc. and Dean Witter Natural Resource Development Securities Inc.
acquired prior to July 2, 1984, and shares of Dean Witter Strategist Fund
acquired prior to November 8, 1989 are also considered Free Shares and will
be the first Free Shares to be exchanged. After an exchange, all dividends
earned on shares in the Fund or the money market fund will be considered Free
Shares. If the exchanged amount exceeds the value of such Free Shares, an
exchange is made, on a block-by-block basis, of non-Free Shares held for the
longest period of time (except that if shares held for identical periods of
time but subject to different CDSC schedules are held in the same Exchange
Privilege Account, the shares of that block that are subject to the lower
CDSC rate will be exchanged prior to the shares of that block that are
subject to a higher CDSC rate). Shares equal to any appreciation in the value
of non-Free Shares exchanged will be treated as Free Shares, and the amount
of the purchase payments for the non-Free Shares of the fund exchanged into
will be equal to the lesser of (a) the purchase payments for, or (b) the
current net asset value of, the exchanged non-Free Shares. If an exchange
between funds would result in exchange of only part of a particular block of
non-Free Shares, then shares equal to any appreciation in the value of the
block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that

<PAGE>

block will be allocated on a pro rata basis between the non-Free Shares of
that block to be retained and the non-Free Shares to be exchanged. The
prorated amount of such purchase payment attributable to the retained
non-Free Shares will remain as the purchase payment for such shares, and the
amount of purchase payment for the exchanged non-Free Shares will be equal to
the lesser of (a) the prorated amount of the purchase payment for, or (b) the
current net asset value of, those exchanged non-Free Shares. Based upon the
procedures described in the CDSC fund Prospectus under the caption
"Contingent Deferred Sales Charge", any applicable CDSC will be imposed upon
the ultimate redemption of shares of any fund, regardless of the number of
exchanges since those shares were originally purchased.

The Transfer Agent acts as agent for shareholders of the fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of
other fund shares. In the absence of negligence on its part, neither the
Transfer Agent nor the Fund shall be liable for any redemption of Fund shares
caused by unauthorized telephone or telegraph instructions. Accordingly, in
such event the investor shall bear the risk of loss. The staff of the
Securities and Exchange Commission is currently considering the propriety of
such a policy.

With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence
of its correspondents or for losses in transit. The Fund shall not be liable
for any default or negligence of the Transfer Agent, the Distributor or any
Selected Broker-Dealer.

The Distributor and any Selected Broker-Dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
Selected Broker-Dealer for any transactions pursuant to this Exchange
Privilege.

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust and Dean Witter
California Tax-Free Daily Income Trust, although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter Short-Term U.S. Treasury Trust is $10,000,
although that fund, in its discretion, may accept initial investments of as
low as $5,000. The minimum initial investment for all other Dean Witter Funds
for which the Exchange Privilege is available is $1,000.) Upon exchange into
an Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege Account separately from accounts of those shareholders who have
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of Dean Witter Short-Term U.S. Treasury or
money market funds, including the check writing feature, will not be
available for funds held in that account.

The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required
by applicable regulatory agencies (presently sixty days' prior written notice
for termination or material revision), provided that six months' prior
written notice of termination will be given to the shareholders who hold
shares of an Exchange Fund, pursuant to this Exchange Privilege and provided
further that the Exchange Privilege may be terminated or materially revised
without notice at times (a) when the New York Stock Exchange is closed for
other than customary weekends and holidays, (b) when trading on that Exchange
is restricted, (c) when an emergency exists as a result of which disposal by
the Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist) or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.

<PAGE>

The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund may be
exchanged, upon such notice as may be required by applicable regulatory
agencies (presently sixty days' prior written notice for termination or
material revision), provided that six months' prior notice of termination
will be given to shareholders who hold shares of Exchange Funds pursuant to
the Exchange Privilege, and provided further that the Exchange Privilege may
be terminated or materially revised without notice under certain unusual
circumstances. Shareholders maintaining margin accounts with DWR or another
Selected Broker-Dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.

The current prospectus for each of the Dean Witter Funds describes its
investment objective(s) and policies. Shareholders should obtain a copy and
read it carefully before investing. Exchange are subject to the minimum
investment requirement and any other conditions imposed by each Fund. In the
case of any shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares on which the shareholder will realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.

For further information regarding the Exchange Privilege, shareholders
should contact their account executives or the Transfer Agent.

REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------

Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next
determined. If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an
accompanying stock power, and the request for redemption, must be signed by
the shareholder or shareholders exactly as the shares are registered. Each
request for redemption, whether or not accompanied by a share certificate,
must be sent to the Fund's Transfer Agent, which will redeem the shares at
their net asset value next computed (see "Purchase of Fund Shares") after it
receives the request, and certificate, if any, in good order. Any redemption
request received after such computation will be redeemed at the next
determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed,
accompanied by any documentation required by the Transfer Agent, and bear
signature guarantees when required by the Fund or the Transfer Agent. If
redemption is requested by a corporation, partnership, trust or fiduciary,
the Transfer Agent may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request is accepted.

Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a new prospectus.

Payment for Shares Redeemed or Repurchased. As discussed in the
Prospectus, 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. The term good order means
that

<PAGE>

the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or Transfer Agent. Such
payment may be postponed or the right of redemption suspended at times (a)
when the New York Stock Exchange is closed for other than customary weekends
and holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during
any other period when the Securities and Exchange Commission by order so
permits; provided that applicable rules and regulations of the Securities and
Exchange Commission shall govern as to whether the conditions prescribed in
(b) or (c) exist. If the shares to be redeemed have recently been purchased
by check, 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 broker-dealer are referred to their account executive regarding
restrictions on redemption of shares of the Fund pledged in the margin
account.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------

As discussed in the Prospectus under "Dividends, Distributions and Taxes",
the Fund will determine either to distribute or to retain all or part of any
net long-term capital gains in any year for reinvestment. If any such gains
are retained, the Fund will pay federal income tax thereon, and shareholders
at year-end will be able to claim their share of the tax paid by the Fund as
a credit against their individual federal income tax. Shareholders will
increase their tax basis of Fund shares owned by an amount equal, under
current law, to 65% of the amount of undistributed capital gains.

The Fund, however, intends to distribute substantially all of its net
investment income and net capital gains to shareholders and otherwise qualify
as a regulated investment company under Subchapter M of the Internal Revenue
Code. It is not expected that the Fund will be required to pay any federal
income tax. Shareholders 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 the net investment income or short-term capital gains, are
taxable to the shareholder as ordinary income regardless of whether the
shareholder receives such payments in additional shares or in cash. Any
dividends declared in the last quarter of any calendar year which are paid in
the following year prior to February 1 will be deemed received by the
shareholder in the prior year. Dividend payments will be eligible for the
federal dividends received deduction available to the Fund's corporate
shareholders only to the extent the aggregate dividends received by the Fund
would be eligible for the deduction if the Fund were the shareholder claiming
the dividends received deduction. In this regard, a 46-day holding period
generally must be met by the Fund and the shareholder.

Gains or losses on the Fund's transactions in listed non-equity options,
futures and options on futures generally are treated as 60% long-term and 40%
short-term. When the Fund engages in options and futures transactions,
various tax regulations applicable to the Fund may have the effect of causing
the Fund to recognize a gain or loss for tax purposes before the gain or loss
is realized, or to defer recognition of a realized loss for tax purposes.
Recognition, for taxes purposes, of an unrealized loss may result in a lesser
amount of the Fund's realized gains being available for annual distribution.

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than twelve months. Gains or losses on the sale of securities with a tax
holding period of twelve months or less will be short-term gains or losses.

After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion taxable as ordinary income,
the portion taxable as long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to
corporations. To avoid being subject to a 31% Federal backup withholding tax
on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.

<PAGE>

One of the requirements for the Fund to remain qualified as a regulated
investment company is that less than 30% of its gross income be derived from
gains from the sale or other disposition of securities held for less than
three months. Accordingly, the Fund may be restricted in the writing of
options on securities held for less than three months, in the writing of
options which expire in less than three months, and in effecting closing
transactions with respect to call or put options which have been written or
purchased less than three months prior to such transactions. The Fund may
also be restricted in its ability to engage in transactions involving futures
contracts.

Under current federal tax law, the Fund will receive net investment income
in the form of interest by virtue of holding Treasury bills, notes and bonds,
and will recognize income attributable to it from holding zero coupon
Treasury securities. Current federal tax law requires that a holder (such as
the Fund) of a zero coupon security accrue a portion of the discount at which
the security was purchased as income each year even though the Fund receives
no interest payment in cash on the security during the year. As an investment
company, the Fund must pay out substantially all of its net investment income
each year. Accordingly, the Fund, to the extent it invests in zero coupon
Treasury securities, may be required to pay out as an income distribution
each year an amount which is greater than the total amount of cash receipts
of interest the Fund actually received. Such distributions will be made from
the available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of
portfolio securities, the Investment Manager will select which securities to
sell. The Fund may realize a gain or loss from such sales. In the event the
Fund realizes net capital gains from such transactions, its shareholders may
receive a larger capital gain distribution, if any, than they would in the
absence of such transactions.

Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value
of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions and some portion of the dividends are subject to federal income
taxes. If the net asset value of the shares should be reduced below a
shareholder's cost as a result of the payment of dividends or the
distribution of realized long-term capital gains, such payment or
distribution would be in part a return of capital but nonetheless would be
taxable to the shareholder. Therefore, an investor should consider the tax
implications of purchasing Fund shares immediately prior to a distribution
record date.

Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.

PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------

As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature.
Yield is calculated for any 30-day period as follows: the amount of interest
and/or dividend income for each security in the Fund's portfolio is
determined in accordance with regulatory requirements; the total for the
entire portfolio constitutes the Fund's gross income for the period. Expenses
accrued during the period are subtracted to arrive at "net investment
income". The resulting amount is divided by the product of the maximum
offering price per share on the last day of the period multiplied by the
average number of Fund shares outstanding during the period that were
entitled to dividends. This amount is added to 1 and raised to the sixth
power. 1 is then subtracted from the result and the difference is multiplied
by 2 to arrive at the annualized yield.

As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period and is computed by finding the annual percentage
rate which will result in the ending redeemable value of a hypothetical
$1,000 investment made at the beginning of a one, five or ten year period, or
for the period from the date of commencement of operations, if shorter than
any of the foregoing. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing the
average annual total return

<PAGE>

involves a percentage obtained by dividing the ending redeemable value by the
amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1
from the result.

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 to total return figures.

In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value by the
initial $1,000 investment and subtracting 1 from the result. Based on the
foregoing calculation, the Fund's aggregate total return for the fiscal
period (March 28, 1995, the commencement of operations through January 31,
1996 was 22.13%. Without the waiver of fees and assumption of expenses by the
Investment Manager, the aggregate total return would have been 21.01%.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal) and multiplying by
$10,000, $50,000 or $100,000, as the case may be. Investments of $10,000,
$50,000 and $100,000 in the Fund at inception would have been $12,213, $61,065,
and $ 122,130, respectively, at January 31, 1996.

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.

SHARES OF THE FUND
- -----------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an
unlimited number of shares of beneficial interest. The Trustees themselves
have the power to alter the number and the terms of office of the Trustees
(as provided for in the Declaration of Trust), and they may at any time
lengthen or shorten their own terms or make their terms of unlimited duration
and appoint their own successors, provided that always at least a majority of
the Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees. The voting rights of shareholders are not cumulative, so that
holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.

The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). However, the Trustees have
not authorized any such additional series or classes of shares and the Fund
has no present intention to add additional series or classes of shares.

The Declaration of Trust further provides that no Trustee, officer,
employee or agent of the Fund is liable to the Fund or to a shareholder, nor
is any Trustee, officer, employee or agent liable to any third persons in
connection with the affairs of the Fund, except as such liability may arise
from his/her or its own bad faith, willful misfeasance, gross negligence or
reckless disregard of his/her or its duties. It also provides that all third
persons shall look solely to the Fund property for satisfaction of claims
arising in connection with the affairs of the Fund. With the exceptions
stated, the Declaration of Trust provides that a Trustee, officer, employee
or agent is entitled to be indemnified against all liability in connection
with the affairs of the Fund.

The Fund is authorized to issue an unlimited number of shares of
beneficial interest.

The Fund shall be of unlimited duration subject to the provisions in the
Declaration of Trust concerning termination by action of the shareholders or
the Trustees.

<PAGE>

CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------

The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.

Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter InterCapital
Inc., the Fund's Investment Manager and Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts; including providing sub-accounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company receives a per shareholder account fee from the Fund.

INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------

Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.

REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------

The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report,
containing financial statements audited by independent account- ants, will be
sent to shareholders each year.

The Fund's fiscal year ends on January 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.

LEGAL COUNSEL
- -----------------------------------------------------------------------------

Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.

EXPERTS
- -----------------------------------------------------------------------------

The Financial Statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus has
been so included and incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.

REGISTRATION STATEMENT
- -----------------------------------------------------------------------------

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1996

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (63.8%)
Aerospace & Defense (3.3%)
32,400 Raytheon Co. ................................................... $ 1,591,650
------------
Aluminum (3.3%)
28,400 Aluminum Co. of America ........................................ 1,576,200
------------
Automotive (3.3%)
52,900 Ford Motor Co. ................................................. 1,567,162
------------
Banking (3.4%)
23,900 BankAmerica Corp. .............................................. 1,610,263
------------
Beverages - Soft Drinks (3.3%)
26,600 PepsiCo Inc. ................................................... 1,586,025
------------
Chemicals (3.4%)
20,900 Du Pont (E.I.) de Nemours & Co., Inc. ......................... 1,606,687
------------
Computer Equipment (3.4%)
14,800 International Business Machines Corp. ......................... 1,609,500
------------
Conglomerates (3.4%)
31,000 Tenneco Inc. ................................................... 1,600,375
------------
Drugs & Healthcare (3.4%)
18,200 Bristol-Myers Squibb Co. ....................................... 1,610,700
------------
Electric - Major (3.4%)
21,000 General Electric Co. ........................................... 1,611,750
------------
Foods (3.3%)
34,300 ConAgra, Inc. .................................................. 1,573,512
------------
Machinery - Agricultural (3.4%)
43,400 Deere & Co. .................................................... 1,627,500
------------
Natural Gas (3.4%)
43,400 Enron Corp. .................................................... 1,605,800
------------
Oil - Domestic (3.3%)
13,900 Atlantic Richfield Co. ......................................... 1,579,387
------------
Paper & Forest Products (3.5%)
36,200 Weyerhaeuser Co. ............................................... 1,669,725
------------
Railroads (3.4%)
34,400 CSX Corp. ...................................................... 1,595,300
------------
Retail (3.4%)
21,400 Dayton-Hudson Corp. ............................................ 1,599,650
------------
Telecommunications (3.2%)
35,700 Sprint Corp. ................................................... 1,539,562
------------
Utilities - Electric (3.3%)
57,300 Pacific Gas & Electric Co. ..................................... 1,590,075
------------
TOTAL COMMON STOCKS (Identified Cost $26,573,929) .............. 30,350,823
------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------------------------------
<C> <S> <C>
U.S. GOVERNMENT & AGENCIES
OBLIGATIONS (30.9%)
Federal National Mortgage Assoc.
$ 973 7.00% due 07/01/25 - 08/01/25 .................................. $ 983,015
1,927 7.50% due 06/01/25 - 09/01/25 .................................. 1,976,477
939 8.00% due 05/01/24 - 05/01/25 .................................. 973,203
2,992 Government National Mortgage Assoc.
7.00% due 07/15/23 - 08/15/25 .................................. 3,025,896
5,500 Resolution Funding Corp. Coupon Strips
0.00% due 04/15/04 - 01/15/08 .................................. 3,030,652
1,000 U.S. Treasury Principal Strip
0.00% due 11/15/97 ............................................. 916,104
1,500 U.S. Treasury Coupon Strip
0.00% due 11/15/04 ............................................. 914,547
U.S. Treasury Notes
1,000 5.875% due 06/30/00 ............................................ 1,025,469
500 6.50% due 04/30/97 ............................................. 509,297
400 6.625% due 03/31/97 ............................................ 407,375
500 6.875% due 03/31/00 ............................................ 530,547
400 7.125% due 02/29/00 ............................................ 427,750
------------
TOTAL U.S. GOVERNMENT & AGENCIES OBLIGATIONS (Identified Cost
$14,336,827) ................................................... 14,720,332
------------
SHORT-TERM INVESTMENTS (5.5%)
U.S. GOVERNMENT AGENCY (a) (2.1%)
1,000 Federal Home Loan Mortgage Corp. 5.30% due 02/15/96 ............ 997,939
------------
REPURCHASE AGREEMENT (3.4%)
1,627 The Bank of New York 5.75% due 02/01/96 (dated 01/31/96; proceeds
$1,627,689; collateralized by $2,193,644 U.S. Treasury Principal
Strip due 05/15/01 valued at $1,659,978) (Identified Cost
$1,627,429 ...................................................... 1,627,429
------------
TOTAL SHORT-TERM INVESTMENTS (Identified Cost $2,625,368) ...... 2,625,368
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
PORTFOLIO OF INVESTMENTS January 31, 1996, continued

VALUE
- ---------------------------------------------------------------- --------

<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $43,536,124) (B) 100.2% $47,696,523
LIABILITIES IN EXCESS OF CASH
AND OTHER ASSETS .................. (0.2) (100,535)
-------- -------------
NET ASSETS ........................ 100.0% $47,595,988
======== =============
</TABLE>

- ---------------
(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 the same as
identified cost.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1996

<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $43,536,124) ... $47,696,523
Cash ................................................................. 2,528
Receivable for:
Shares of beneficial interest sold ................................. 937,114
Interest ........................................................... 85,513
Dividends .......................................................... 70,389
Investments sold ................................................... 68,173
Deferred organizational expenses ..................................... 153,159
Receivable from affiliate ............................................ 61,968
Prepaid expenses ..................................................... 27,418
--------------
TOTAL ASSETS ....................................................... 49,102,785
--------------
LIABILITIES:
Payable for:
Investments purchased .............................................. 1,209,844
Shares of beneficial interest repurchased .......................... 74,638
Organizational expenses .............................................. 153,159
Accrued expenses ..................................................... 69,156
--------------
TOTAL LIABILITIES .................................................. 1,506,797
--------------
NET ASSETS:
Paid-in-capital ...................................................... 43,208,903
Net unrealized appreciation .......................................... 4,160,399
Undistributed net investment income .................................. 172,303
Undistributed net realized gain ...................................... 54,383
--------------
NET ASSETS ......................................................... $47,595,988
==============
NET ASSET VALUE PER SHARE,
3,991,754 shares outstanding (unlimited shares authorized of $.01
par value) .......................................................... $11.92
==============

</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 28, 1995* THROUGH JANUARY 31, 1996

<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
Income
Interest ......................................... $ 475,806
Dividends ........................................ 391,025
------------
TOTAL INCOME ................................... 866,831
------------
EXPENSES
Plan of distribution fee ......................... 204,200
Investment management fee ........................ 122,520
Professional fees ................................ 59,337
Organizational expenses .......................... 31,341
Custodian fees ................................... 20,731
Shareholder reports and notices .................. 19,455
Transfer agent fees and expenses ................. 19,060
Registration fees ................................ 15,887
Other ............................................ 893
------------
TOTAL EXPENSES BEFORE AMOUNTS WAIVED/REIMBURSED 493,424
LESS: AMOUNTS WAIVED/REIMBURSED ................ (493,424)
------------
TOTAL EXPENSES AFTER AMOUNTS WAIVED/REIMBURSED --
------------
NET INVESTMENT INCOME .......................... 866,831
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................ 65,170
Net unrealized appreciation ...................... 4,160,399
------------
NET GAIN ....................................... 4,225,569
------------
NET INCREASE ..................................... $5,092,400
============
</TABLE>

- ------------

* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH JANUARY
31, 1996
- --------------------------------------------------------------- ----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income .......................................... $ 866,831
Net realized gain .............................................. 65,170
Net unrealized appreciation .................................... 4,160,399
----------------
NET INCREASE ................................................. 5,092,400
----------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income .......................................... (694,528)
Net realized gain .............................................. (10,787)
----------------
TOTAL ........................................................ (705,315)
----------------
Net increase from transactions in shares of beneficial interest 43,108,903
----------------
TOTAL INCREASE ............................................... 47,495,988
NET ASSETS:
Beginning of period ............................................ 100,000
----------------
END OF PERIOD
(Including undistributed net investment income of $172,303) .. $47,595,988
================
</TABLE>

- ------------

* Commencement of operations.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1996

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's investment objective is
capital growth with reasonable current income. The Fund seeks to achieve its
objective by investing in common stock of companies which have a record of
paying dividends and, in the opinion of Dean Witter InterCapital Inc. (the
"Investment Manager"), have the potential for increasing dividends,
securities convertible into common stock and investment grade fixed income
securities. 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 the Investment Manager to effect the Fund's initial
capitalization. The Fund commenced operations on March 28, 1995.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates. The following is a summary of significant accounting
policies:

A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic 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) all other portfolio securities for which over-the-counter
market quotations are readily available are valued at the latest available
bid price prior to the time of valuation; (3) when market quotations are not
readily available, including circumstances under which it is determined by
the Investment Manager that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at their fair value
as determined in good faith under procedures established by and under the
general supervision of the Trustees (valuation of debt securities for which
market quotations are not readily available may be based upon current market
prices of securities which are comparable in coupon, rating and maturity or
an appropriate matrix utilizing similar factors); and (4) 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.

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1996, continued

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. Discounts are accreted over the life of the respective securities.
Dividend income and other distributions are recorded on the ex-dividend date.
Interest income is accrued daily.

C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.

D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.

E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $184,500 which will be
reimbursed, exclusive of $31,341 which has been absorbed by the Investment
Manager. Such expenses have been deferred and are being amortized on the
straight-line method over a period not to exceed five years from the
commencement of operations.

2. INVESTMENT MANAGEMENT AGREEMENT

Pursuant to an Investment Management Agreement, the Fund pays 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.

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1996, continued

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 reimburse 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. At January 31,
1996, included in the Statement of Assets and Liabilities, was a receivable
from an affiliate which represents expense reimbursements due the Fund.

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 selected
broker-dealers under the Plan: (1) compensation to, and expenses of, account
executives of DWR 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 January 31, 1996, the distribution fee was
accrued at the annual rate of 1.0%.

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS January 31, 1996, continued

4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the period ended January 31, 1996
aggregated $41,247,813 and $484,251, respectively. Included in the
aforementioned are purchases of U.S. Government securities of $14,343,510.

For the period ended January 31, 1996, the Fund incurred brokerage
commissions of $26,380 with DWR for portfolio transactions executed
on behalf of the Fund. At January 31, 1996, the Fund's receivable for
investments sold and payable for investments purchased included unsettled
trades with DWR of $68,173 and $205,250, respectively.

Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At January 31, 1996, the Fund had transfer agent
fees and expenses payable of approximately $2,700.

5. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH
JANUARY 31, 1996
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold ........................................ 4,686,686 $50,974,046
Reinvestment of dividends and distributions 58,982 654,591
----------- -------------
4,745,668 51,628,637
Repurchased ................................. (763,914) (8,519,734)
----------- -------------
Net increase ................................ 3,981,754 $43,108,903
=========== =============
</TABLE>

- ------------
* Commencement of operations.

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:

<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 28, 1995*
THROUGH JANUARY
31, 1996
- ----------------------------------------- ----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $10.00
----------------
Net investment income .................... 0.31
Net realized and unrealized gain ........ 1.88
----------------
Total from investment operations ........ 2.19
Less dividends from net investment income (0.27)**
----------------
Net asset value, end of period ........... $11.92
================
TOTAL INVESTMENT RETURN .................. 22.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. --%(2)(3)
Net investment income .................... 4.25%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands . $47,596
Portfolio turnover rate .................. 2%(1)
</TABLE>

- ------------

* Commencement of operations.

** Includes a capital gain distribution of $0.004.

(1) Not annualized.

(2) Annualized.

(3) If the Investment Manager had not reimbursed expenses and waived the
management fee, the above annualized expense and net investment income
ratios would have been 2.42% and 1.83%, respectively.

SEE NOTES TO FINANCIAL STATEMENTS

<PAGE>

DEAN WITTER BALANCED GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER BALANCED GROWTH FUND

In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of Dean Witter
Balanced Growth Fund (the "Fund") at January 31, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for
the period March 28, 1995 (commencement of operations) through January 31,
1996, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audit. We conducted our audit of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which included
confirmation of securities at January 31, 1996 by correspondence with the
custodian and brokers, provides a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 8, 1996

1996 FEDERAL TAX NOTICE (unaudited)

During the year ended January 31, 1996, 42% of the income paid
qualified for the dividends received deduction available to
corporations.