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Filed Pursuant to Rule 497(e)
Registration File No.: 33-57789
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DEAN WITTER
INTERMEDIATE TERM
U.S. TREASURY TRUST
PROSPECTUS -- APRIL 10, 1996
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Dean Witter Intermediate Term U.S. Treasury Trust (the "Fund") is an open-end
diversified management investment company whose investment objective is
current income and preservation of principal. The Fund seeks to achieve its
objective by investing substantially all of its assets in U.S. Treasury
securities backed by the full faith and credit of the U.S. Government. (See
"Investment Objective and Policies.") Shares of the Fund are not issued,
insured or guaranteed, as to value or yield, by the U.S. Government or its
agencies or instrumentalities.
Shares of the Fund are sold and redeemed at net asset value without the
imposition of a sales charge. The Fund is authorized to reimburse specific
expenses incurred in promoting the distribution of 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 the annual rate of 0.35% of the average
daily net assets of the Fund.
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 April 10, 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 on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 4
Investment Objective and Policies ..................................... 5
Purchase of Fund Shares ............................................... 7
Shareholder Services .................................................. 8
Redemptions and Repurchases ........................................... 10
Dividends, Distributions and Taxes .................................... 11
Performance Information ............................................... 12
Additional Information ................................................ 13
Financial Statements/February 29, 1996 ................................ 14
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
DEAN WITTER
INTERMEDIATE TERM
U.S. TREASURY TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
(800) 869-NEWS (TOLL-FREE)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Dean Witter Distributors Inc., Distributor
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PROSPECTUS SUMMARY
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The Fund The Fund is organized as a Trust, commonly known as a Massachusetts
business trust, and is an open-end diversified management investment
company investing in U.S. Treasury securities backed by the full faith and
credit of the U.S. Government.
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Shares Offered Shares of beneficial interest with $0.01 par value (see page 13).
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Offering The price of the shares offered by this Prospectus is determined once daily
Price as of 4:00 p.m., New York time, on each day that the New York Stock
Exchange is open, and is equal to the net asset value per share without a
sales charge (see page 7).
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Minimum The minimum initial purchase is $1,000 ($100 if the account is opened
Purchase through EasyInvest (Service Mark) ); minimum subsequent investment is $100
(see page 7).
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Investment The investment objective of the Fund is current income and preservation of
Objective principal.
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Investment In order to maximize the amount of the Fund's dividends which are exempt
Policies from state and local income taxation, the Fund will invest substantially
all of its assets in U.S. Treasury securities which are direct obligations
of the U.S. Government (see page 5).
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Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of
Manager the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc. serve in various investment management, advisory, management and
administrative capacities to ninety-six investment companies and other
portfolios with assets of approximately $82.5 billion at February 29, 1996
(see page 4).
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Management Fee The Investment Manager receives a monthly fee at the annual rate of 0.35%
of daily net assets (see pages 4-5).
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Dividends and Dividends are declared daily and paid monthly. Capital gains distributions,
Capital Gains if any, are paid at least once a year or are retained for reinvestment by
Distributions the Fund. Dividends and capital gains distributions are automatically
invested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 11).
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Distributor Dean Witter Distributors Inc. (the "Distributor") is the distributor of the
and Plan of Fund's shares (see page 7). The Fund is authorized to reimburse specific
Distribution expenses incurred in promoting the distribution of the Fund's shares,
including personal services to shareholders and maintenance of shareholders
accounts, in accordance with a Plan of Distribution with the Distributor
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 0.35% of average daily net assets of the Fund (see page 8).
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Redemption At net asset value; account may be involuntarily redeemed if total value of
the account is less than $100 or, if the account was opened through
EasyInvest (Service Mark) , if after twelve months the shareholder has
invested less than $1,000 in the account (see pages 10-11).
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Risks The Fund invests substantially all of its assets in U.S. Treasury
securities which are subject to minimal risk of default but which may be
subject to risk of loss of investment value due to interest rate
fluctuations. It may engage in the purchase of such securities on a
when-issued basis. The value of the Fund's 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. A portion of the U.S.
Treasury securities in which the Fund invests may be zero coupon Treasury
securities. Such securities are subject to greater market price
fluctuations during periods of changing prevailing interest rates (see
pages 5-6).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus
and in the Statement of Additional Information.
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The estimated expenses and fees set forth in the table
are for the fiscal year ending February 28, 1997.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases ................................ None
Maximum Sales Charge Imposed on Reinvested Dividends ..................... None
Deferred Sales Charge .................................................... None
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees+ ......................................................... 0.00%
12b-1 Fees* .............................................................. 0.35%
Other Expenses+ .......................................................... 0.00%
Total Fund Operating Expenses**+ ......................................... 0.35%
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* A portion of the 12b-1 fee, which may not exceed 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 ("NASD")
guidelines and is a payment made for personal service and/or maintenance
of shareholder accounts provided by account executives (See, "Purchase
of Fund Shares").
** "Total Fund Operating Expenses," as shown above, is based upon the sum
of the 12b-1 Fees, Management Fees and estimated "Other Expenses," which
may be incurred by the Fund for the fiscal year ending February 28,
1997.
+ The Investment Manager had undertaken to assume all expenses (except for
any brokerage and 12b-1 fees) and to waive the compensation provided for
in its Management Agreement until such time as the Fund had $50 million
of net assets or until six months from the date of commencement of the
Fund's operations, whichever occurred first. The Investment Manager has
undertaken to continue to assume all expenses (except for the brokerage
and 12b-1 fees) and waive the compensation provided for in its
Management Agreement until March 27, 1997. Assuming no waiver of
management fees and no assumption of other expenses, it is estimated
that, for the fiscal year ending February 28, 1997, the "Management
Fees" would be 0.35%, "Other Expenses" would be 0.25% and "Total Fund
Operating Expenses" would be 0.95%. For the fiscal period September 27,
1995 (commencement of operations) through February 29, 1996, the Fund's
total operating expenses, consisting only of 12b-1 fees, amounted to
0.32% of the Fund's daily net assets.
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EXAMPLE 1 YEAR 3 YEARS
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You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period: ............... $4 $11
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE MORE 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 "Purchase of Fund Shares--Plan of
Distribution" in this Prospectus.
Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charges permitted by
the NASD.
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding for the period September 27, 1995 (commencement of operations)
through February 29, 1996 have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in this Prospectus
commencing on page 17.
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FOR THE PERIOD
SEPTEMBER 27,
1995*
THROUGH
FEBRUARY 29, 1996
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $10.00
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Net investment income ................... 0.21
Net realized and unrealized loss ....... (0.08)
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Total from investment operations ....... 0.13
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Less dividends from net investment
income ................................. (0.21)
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Net asset value, end of period .......... $ 9.92
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TOTAL INVESTMENT RETURN ................. 1.23%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 0.32%(2)(3)
Net investment income ................... 5.05%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $4,437
Portfolio turnover rate ................. 20%(1)
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* Commencement of operations.
(1) Not annualized.
(2) Annualized.
(3) The Investment Manager had undertaken to reimburse all operating
expenses (except brokerage and 12b-1 fees) and waive the compensation
provided for in its Management Agreement until such time as the Fund
had $50 million of net assets or until March 27, 1996, whichever occurs
first. The Investment Manager will continue to reimburse all operating
expenses (except brokerage and 12b-1 fees) and waive the compensation
until March 27, 1997. If the Fund had borne all expenses and not waived
the management fee, the above annualized expense and net investment
income ratios to average net assets, after application of the Fund's
state expense limitation, would have been 2.82% and 2.55%,
respectively.
THE FUND AND ITS MANAGEMENT
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Dean Witter Intermediate Term U.S. Treasury Trust (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 February 9, 1995.
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, serve in various investment management, advisory, management and
administrative capacities to a total of ninety-six investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
total assets of approximately $79.9 billion as of 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
4
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aforementioned administrative services for the Fund. The Fund's Board of
Trustees reviews the various services provided by or under the direction of
the Investment Manager to ensure that the Fund's general investment policies
and programs are being properly carried out and that administrative services
are being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying an
annual rate of 0.35% to the Fund's net assets determined as of the close of
each business day.
The Fund's expenses include: the fee of the Investment Manager; taxes;
certain legal, transfer agent, custodian and auditing fees; and printing and
other expenses relating to the Fund's operations which are not expressly
assumed by the Investment Manager under its Investment Management Agreement
with the Fund. The Investment Manager had undertaken to assume all expenses
(except for brokerage and 12b-1 fees) and waive the compensation provided for
in its Investment Management Agreement until such time as the Fund had $50
million of net assets or until six months from the date of commencement of
the Fund's operations, whichever occurred first. The Investment Manager has
undertaken to continue to assume all expenses (except for brokerage and 12b-1
fees) and waive the compensation provided for in its Management Agreement
until March 27, 1997.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is current income and preservation of
principal. The Fund will seek to achieve its investment objective by
investing, under normal circumstances, at least 95% of its total assets in
U.S. Treasury securities. U.S. Treasury securities, which presently consist
of U.S. Treasury bills, U.S. Treasury notes and U.S. Treasury bonds, are
direct obligations of the U.S. Treasury and are backed by the "full faith and
credit" of the U.S. Government. The investment objective is a fundamental
policy of the Fund and may not be changed without the approval of the holders
of a majority of the Fund's shares. There is no assurance that the Fund's
investment objective will be achieved.
Neither the value nor the yield of the U.S. Treasury securities in which
the Fund invests (or the value or yield of shares of the Fund) are guaranteed
by the U.S. Government. The value of the Fund's portfolio securities and
therefore the net asset value of the Fund's shares may increase or decrease
due to changes in prevailing interest rates and other factors. Generally, as
prevailing interest rates rise, the value of the securities held by the Fund,
and concomitantly, the net asset value of the Fund's shares, will fall.
Intermediate term debt securities are generally subject to a lesser degree of
market fluctuation as a result of changes in interest rates than debt
securities with longer maturities. Conversely, the yield available on
intermediate term securities has also historically been lower than those
available from long term securities. Under normal circumstances, the Fund
will maintain a portfolio with a dollar-weighted average maturity of between
3 and 8 years. There may be periods during which, in the opinion of the
Investment Manager, market conditions warrant the Fund retaining cash or
investing a substantial portion of its assets in short-term U.S. Treasury
securities. During such periods in which the Fund has adopted a temporary
"defensive" posture, the Fund's average dollar-weighted maturity may be less
than three years.
ZERO COUPON TREASURY SECURITIES. A portion of the U.S. Treasury securities
purchased by the Fund may be "zero coupon" Treasury securities. These are
U.S. Treasury 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. Such 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
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make current distributions of interest. Current federal tax law requires that
a holder (such as the Fund) of a zero coupon security accrue a portion of the
discount at which the security was purchased as income each year even though
the Fund receives no interest payments in cash on the security during the
year. See "Dividends, Distributions and Taxes."
Certain banks and brokerage firms have separated ("stripped") the
principal portions ("corpus") from the coupon portions of the U.S. Treasury
bonds and notes and sell them separately in the form of receipts or
certificates representing undivided interests in these instruments (which
instruments are generally held by a bank in a custodial or trust account).
The Fund will not purchase any such receipts or certificates representing
stripped corpus or coupon interests in U.S. Treasury securities sold by banks
and brokerage firms. The Fund will only purchase zero coupon Treasury
securities which have been stripped by the Federal Reserve Bank.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FIRM COMMITMENTS. From time
to time, in the ordinary course of business, the Fund may purchase U.S.
Treasury securities on a when-issued or delayed delivery basis or may
purchase or sell U.S. Treasury securities on a firm commitment basis. For
example, the Fund may wish to purchase U.S. Treasury notes and bonds sold at
periodic U.S. Treasury auctions prior to a month or more of their issuance
("when-issued"). 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. While the Fund will only purchase
securities on a when-issued, delayed delivery or firm 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 accrues
to the purchaser during this period. At the time the Fund makes the
commitment to purchase or sell securities on a when-issued, delayed delivery
or firm 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 portfolio (U.S. Treasury) securities equal in value to commitments
to purchase securities on a when-issued, delayed delivery or firm commitment
basis.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements in an
amount up to 5% of its net assets. Repurchase agreements 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 ("collateral")
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 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
Adviser subject to procedures established by the Board of Trustees of the
Fund. In addition, 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.
The Fund will not invest in repurchase agreements that do not mature within
seven days and in other illiquid securities if, in the aggregate, such
investments amount to more than 15% of its net assets.
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 the Investment
Manager; the views of the 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. The Fund's portfolio is managed within
InterCapital's Taxable Fixed Income Group, which manages 25 funds and fund
portfolios, with approximately $13.3 billion in assets as of February 29,
1996. Rajesh K. Gupta, Senior Vice President of
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InterCapital and a member of InterCapital's Taxable Fixed-Income Group, is
the primary portfolio manager of the Fund. Mr. Gupta has been a portfolio
manager at InterCapital for over five years.
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.
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 opinion of the Investment Manager,
strengthen the Fund's position and contribute to its investment objective. It
is not anticipated that the portfolio trading engaged in by the Fund will
result in its portfolio turnover rate exceeding 100%.
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and others who have entered into Selected Dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York
10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to Dean Witter Intermediate Term
U.S. Treasury Trust, 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 another 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, in its discretion, may accept investments
without regard to any minimum amounts which would otherwise be required if
the Fund has reason to believe that additional investments will increase the
investment in all accounts under such plans to at least $1,000. Certificates
for shares purchased will not be issued unless requested by the shareholder
in writing to the Transfer Agent. The offering price will be the net asset
value per share next determined (see "Determination of Net Asset Value"
below) following receipt of an order.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment generally is due on or before
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 dividends beginning on the next business day following settlement
date. Since DWR and other Selected Broker-Dealers forward investor's funds on
settlement date, they will benefit from the temporary use of the funds where
payment is made prior thereto. Shares purchased through the Transfer Agent
are entitled to dividends 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. Investors will be entitled to receive
capital gains distributions if their order is received by the close of
business on the day prior to the record date for such distributions.
Sales personnel are compensated for selling shares of the Fund at the time
of their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types
of non-cash compensation as special sales incentives including trips,
educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined by taking the value
of all the assets of the Fund, subtracting all liabilities, dividing by the
number of shares outstanding and adjusting the result to the nearest cent.
The net asset value per share is determined by the Investment Manager as of
4:00 P.M. New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open. 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) all portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest
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available bid price prior to the time of valuation; (2) 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 Board of Trustees (valuation
of 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 (3) short-term debt instruments having a maturity date of more
than 60 days are valued on a "mark-to-market" basis, that is, at prices based
on market quotations for securities of similar type, yield, quality and
maturity, until 60 days prior to maturity and thereafter at amortized cost.
Short-term instruments having a maturity date of 60 days or less at the time
of purchase are valued at amortized cost unless the Board of Trustees
determines this does not represent fair market value.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research and 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.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended (the "Act"), with the
Distributor whereby the expenses of certain activities and services,
including personal services to shareholders and maintenance of shareholder
accounts, in connection with the distribution of the Fund's shares are
reimbursed. The principal activities and services which may be provided by
the Distributor and 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 0.35% of the Fund's
average daily net assets. A portion of the amount payable pursuant to the
Plan, which may not exceed 0.25% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of the NASD guidelines.
Expenses incurred pursuant to the Plan in any fiscal year will not be
reimbursed by the Fund through payments accrued in any subsequent fiscal
year. The Fund accrued $5,090 to the Distributor pursuant to the Plan for the
fiscal period ended February 29, 1996. This is an accrual at the annual rate
of 0.32% of the Fund's average daily net assets.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the
shareholder requests that they be paid in cash.
INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
next determined after receipt by the Transfer Agent by returning the check or
the proceeds to the Transfer Agent within 30 days after the payment date.
EASYINVEST. (SERVICE MARK) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Repurchases and Redemptions--Involuntary Redemption").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any
8
<PAGE>
whole percentage of the account balance, on an annualized basis. Only
shareholders having accounts in which no share certificates have been issued
will be permitted to enroll in the Withdrawal Plan.
Shareholders wishing to enroll in the Withdrawal Plan should make this
election on the Investment Application or contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available through the
Investment Manager for use by the self-employed, eligible Individual
Retirement Accounts and Custodial Accounts under Section 403(b)(7) of the
Internal Revenue Code. Adoption of such plans should be on advice of legal
counsel or tax adviser.
For further information regarding plan administration, custodial fees
and other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
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 (at time of redemption) sales charge ("CDSC funds"), may
be exchanged for shares of the Fund, Dean Witter Short-Term U.S. Treasury
Trust, Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond
Fund, Dean Witter Balanced Growth Fund and Dean Witter Balanced Income Fund
and for shares of five Dean Witter Funds which are 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 and Dean Witter New York Municipal Money Market Trust
(which eleven funds, including the Fund, are hereinafter collectively
referred to as the "Exchange Funds"). An exchange from an FESC fund or a CDSC
fund to an Exchange Fund that is not a money market fund is on the basis of
the next calculated net asset value per share of each fund after the exchange
order is received. When exchanging into a money market fund from 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 Fund 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 Exchange Funds, FESC funds or CDSC funds
(however, shares of CDSC funds, including shares acquired in exchange for (i)
shares of FESC funds or (ii) shares of Exchange Funds which were acquired in
exchange for shares of FESC funds, may not be exchanged for shares of FESC
funds). Additionally, shares of 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 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 an 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 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 the Exchange Fund, the holding period
(for the purpose of determining the rate of CDSC) is frozen so that the
charge is based upon the period of time the shareholder actually held shares
of a CDSC fund. However, in the case of shares exchanged into an Exchange
Fund on or after April 23, 1990, upon a redemption of shares which results in
a CDSC being imposed, a credit (not to exceed the amount of the CDSC) will be
given in an amount equal to the Exchange Fund 12b-1 fees, if any, incurred on
or after that date which are attributable to those shares (see "Purchase of
Fund Shares--Plan of Distribution" in the respective Exchange Fund Prospectus
for a description of Exchange Fund distribution fees). 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 Distributor to be abusive
and contrary to the best interests of the Fund's other shareholders and, at
the Distributor's discretion, may be limited by the Fund's refusal to accept
additional purchases and/or exchanges from the investor. Although the Fund
does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests
of the Fund and its other shareholders, investors should be aware that the
Fund and each of the other Dean Witter Funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be
exercised by any investor. Any such restriction will be made by the Fund on a
prospective
9
<PAGE>
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund 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 written notice of
termination will be given to the shareholders who hold shares of the Exchange
Funds pursuant to this 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
their margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain one and read it carefully before
investing. Exchanges are subject to the minimum investment requirement and
any other conditions imposed by each fund. In the case of any shareholder
holding a share certificate or certificates, no exchanges may be made until
all applicable share certificates have been received by the Transfer Agent
and deposited in the shareholder's account. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares,
on which the shareholder may realize a capital gain or loss. However, the
ability to deduct capital losses on an exchange may be limited in situations
where there is an exchange of shares within ninety days after the shares are
purchased. The Exchange Privilege is only available in states where an
exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current broker-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 pursuant to this Exchange Privilege by
contacting their DWR or other Selected Broker-Dealer account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer
but who wish to make exchanges directly by writing or telephoning the
Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization Form, copies of which may be obtained from the
Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made 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 include requiring various forms of personal identification such as
name, mailing address, social security or other tax identification number and
DWR or other Selected Broker-Dealer account number (if any). Telephone
instructions will 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 Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- -----------------------------------------------------------------------------
REDEMPTIONS. Shares of the Fund may 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 at the Transfer Agent without a share certificate, a
written request for redemption must be sent to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, NJ 07303. 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 determined as described under "Purchase of Fund
Shares--Determination of Net Asset Value" after it receives the request, and
certificate, if any, in good order. Any redemption request received after
such determination will be redeemed at the next determined net asset value.
The term "good order"
10
<PAGE>
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. With regard to shares of the Fund acquired pursuant to the
Exchange Privilege, any applicable contingent deferred sales charge will be
imposed upon the redemption of such shares (see "Purchase of Fund
Shares--Exchange Privilege").
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 DWR or any other 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, signature(s) must be guaranteed
by an eligible guarantor acceptable to the Transfer Agent (shareholders
should contact the Transfer Agent for a determination as to whether a
particular institution is 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 revised prospectus.
REPURCHASES. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to
any of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the
net asset value next determined (see "Purchase of Fund Shares--Determination
of Net Asset Value") after such repurchase order is received by DWR or the
other Selected Broker-Dealer. The offers by DWR and other Selected
Broker-Dealers to repurchase shares from shareholders may be suspended by
them at any time. In that event, shareholders may redeem their shares through
the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. If the shares to be redeemed have
recently been purchased by check, payment of the redemption proceeds may be
delayed for the minimum time needed to verify that the check used for
investment has been honored (not more than fifteen days from the time of
receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or other Selected Broker-Dealers 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 30 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 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, on 60 days'
notice and at net asset value, the shares of any shareholder whose shares
have a value of less than $100 as a result of redemptions or repurchases, or
such lesser amount as may be fixed by the Trustees or, in the case of an
account offered 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 him or her 60 days to make an additional
investment in an amount which will increase the value of his or her account
to the applicable amount or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends from net investment
income on each day the New York Stock Exchange is open for business. Such
dividends are payable monthly. The Fund may distribute quarterly net realized
short-term capital gains, if any, in excess of any net realized long-term
capital losses. The Fund intends to
11
<PAGE>
distribute dividends from net long-term capital gains, if any, at least once
each year. The Fund may, however, elect to retain all or a portion of any
such net long-term capital gains in any year.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends or all dividends and distributions be
paid in cash. (See "Shareholder Services--Automatic Investment of Dividends
and Distributions".)
TAXATION
FEDERAL TAXES. Because the Fund intends to distribute subtantially 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 on such income and capital gains.
Shareholders will normally have to pay federal income taxes on the dividends
and capital gains distributions they receive from the Fund. Distributions of
net investment income and net short-term capital gains are taxable to the
shareholder as ordinary dividend income regardless of whether the shareholder
receives such distributions in additional shares or in cash. 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.
Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. Distributions of 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.
No portion of such distributions will be eligible for the dividends
received deduction for 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 accuracy.
Current federal 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. Accordingly, the Fund 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.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes, including
information as to the Federal tax status of dividends and distributions paid
or retained by the Fund.
The foregoing discussion relates solely to the Federal income tax
consequences of an investment in the Fund and dividends (where applicable)
and distributions may also be subject to state and local taxes (see "State
and Local Taxes" below); therefore, each shareholder is advised to consult
his or her own tax adviser.
STATE AND LOCAL TAXES. The Fund intends to invest substantially all of its
assets in U.S. Treasury obligations that provide interest income exempt from
state and local taxes. Because all States presently allow the pass-through of
federal obligation interest derived from specific federal obligations, it is
anticipated that substantially all of the interest income generated by the
Fund and paid out to shareholders as net investment income will be exempt
from state and local taxation. Such investment income, however, will not be
exempt from federal tax. Furthermore, any capital gains realized by the Fund
will not be exempt from federal, and generally, state and local taxes. It
should be noted that although the Fund intends to invest only in securities
the pass-through income from which is believed exempt from state and local
income taxes, it is possible that a state or local taxing authority may seek
to tax an investor on a portion of the interest income of a particular
government obligation held by the Fund. Shareholders are urged to consult
their tax advisers regarding specific questions regarding federal, state and
local taxes.
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
12
<PAGE>
amount is compounded for six months and then annualized for a twelve-month
period to derive the yield of the Fund. The Fund may also quote its
tax-equivalent yield, which is calculated by determining the pre-tax yield
which after being taxed at a stated rate, would be equivalent to the yield
determined as described above.
The "average annual total return" of the Fund refers to a figure
reflecting the average annualized percentage increase (or decrease) in the
value of an initial investment in the Fund of $1,000 over periods of one,
five and ten years, or over the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Fund, any appreciation or depreciation of the assets of the Fund, 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 Lipper Analytical Services Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01 par
value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove the
Trustees.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the
obligations of the Fund. The Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each instrument entered
into or executed by the Fund. Under the Declaration of Trust, indemnification
shall be made 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, the possibility of the
Fund being unable to meet its obligations is remote and thus, in the opinion
of Massachusetts counsel to the Fund, the risk to Fund shareholders 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 also
prohibits engaging in futures and options transactions and profiting on
short-term trading (that is, a purchase within sixty days of a sale or a sale
within sixty days of a purchase) of a security. In addition, investment
personnel may not purchase or sell a security for their personal account
within thirty days before or after any transaction in any Dean Witter Fund
managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute
Advisory Group on Personal Investing.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
13
<PAGE>
DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
PORTFOLIO OF INVESTMENTS February 29, 1996
<TABLE>
<CAPTION>
PRINCIPAL DESCRIPTION
AMOUNT IN AND COUPON
THOUSANDS MATURITY DATE RATE VALUE
- ----------- ---------------------------------------------- -------- ------------
<S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (97.8%)
U.S. Treasury Notes (78.1%)
$1,500 10/31/00 ...................................... 5.75% $1,499,531
1,000 01/31/01 ...................................... 5.25 980,000
1,000 08/15/03 ...................................... 5.75 983,906
------------
3,463,437
------------
1,300 U.S. Treasury Principal Strip (19.7%) 11/15/02 . 0.00 874,947
------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL U.S. GOVERNMENT OBLIGATIONS (Identified Cost $4,379,433)
(a) ............................................................. 97.8% 4,338,384
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................... 2.2 98,188
-------- -----------
NET ASSETS ....................................................... 100.0% $4,436,572
======== ===========
</TABLE>
- ------------
(a) The aggregate cost for federal income tax purposes is $4,379,433; the
aggregate gross unrealized appreciation is $7,968 and the aggregate
gross unrealized depreciation is $49,017, resulting in net unrealized
depreciation of $41,049.
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $4,379,433) ............... $4,338,384
Cash ........................................ 65,854
Interest receivable ......................... 35,604
Receivable from affiliate ................... 18,247
Deferred organizational expenses ............ 164,853
Prepaid expenses and other assets ........... 7,015
------------
TOTAL ASSETS .............................. 4,629,957
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased 7,900
Dividends ................................. 1,337
Plan of distribution fee .................. 1,330
Organizational expenses ..................... 164,853
Accrued expenses and other payables ........ 17,965
------------
TOTAL LIABILITIES ......................... 193,385
------------
NET ASSETS:
Paid-in-capital ............................. 4,476,862
Net unrealized depreciation ................. (41,049)
Undistributed net realized gain ............. 759
------------
NET ASSETS ................................ $4,436,572
============
NET ASSET VALUE PER SHARE,
447,382 shares outstanding (unlimited
shares authorized of $.01 par value) ...... $ 9.92
============
</TABLE>
STATEMENT OF OPERATIONS
FOR THE PERIOD SEPTEMBER 27, 1995* THROUGH FEBRUARY 29, 1996
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INTEREST INCOME ........................ $ 85,694
----------
EXPENSES
Professional fees ...................... 31,956
Organizational expenses ................ 15,147
Trustees' fees and expenses ............ 7,173
Investment management fee .............. 5,586
Plan of distribution fee ............... 5,090
Registration fees ...................... 1,884
Shareholder reports and notices ....... 942
Transfer agent fees and expenses ...... 682
Other .................................. 203
----------
TOTAL EXPENSES BEFORE AMOUNTS
WAIVED/REIMBURSED .................... 68,663
LESS: AMOUNTS WAIVED/REIMBURSED ..... (63,573)
----------
TOTAL EXPENSES AFTER AMOUNTS
WAIVED/REIMBURSED .................... 5,090
----------
NET INVESTMENT INCOME ................ 80,604
----------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain ...................... 759
Net unrealized depreciation ............ (41,049)
----------
NET LOSS ............................. (40,290)
----------
NET INCREASE ........................... $ 40,314
==========
</TABLE>
- ------------
* Commencement of operations.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 27, 1995*
THROUGH FEBRUARY
29, 1996
- -------------------------------------------------------------- -------------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ......................................... $ 80,604
Net realized gain ............................................. 759
Net unrealized depreciation ................................... (41,049)
-------------------
NET INCREASE ................................................ 40,314
Dividends from net investment income .......................... (80,604)
Net increase from transactions in shares of beneficial
interest ..................................................... 4,376,862
-------------------
TOTAL INCREASE .............................................. 4,336,572
NET ASSETS:
Beginning of period ........................................... 100,000
-------------------
END OF PERIOD ............................................... $4,436,572
===================
</TABLE>
- ------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 1996
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Intermediate-Term U.S. Treasury Trust (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 current income and preservation of principal. The Fund seeks to
achieve its objective by investing in U.S. Treasury securities backed by the
full faith and credit of the U.S. Government. The Fund was organized as a
Massachusetts trust on February 9, 1995 and had no operations other than those
relating to organizational matters and the issuance of 10,000 shares
of beneficial interest for $100,000 to Dean Witter InterCapital Inc. (the
"Investment Manager") to effect the Fund's initial capitalization. The Fund
commenced operations on September 27, 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) all 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; (2) when market
quotations are not readily available, 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
(3) short-term debt securities having a maturity date of more than sixty days
at time of purchase are valued on a mark-to-market basis until sixty days
prior to maturity and thereafter at amortized cost based on their value on
the 61st day. Short-term securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts are accreted over the life of the respective securities.
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 record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
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DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 1996, continued
E. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $180,000 which will be
reimbursed exclusive of $15,147 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 0.35%
to the Fund's net assets determined at the close
of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities,
equipment, clerical, bookkeeping and certain legal services and pays the
salaries of all personnel, including officers of the Fund who are employees
of the Investment Manager. The Investment Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
The Investment Manager had undertaken to reimburse all operating expenses
(except brokerage and 12b-1 fees) and waive the compensation provided for in
its Investment Management Agreement until such time as the Fund had $50
million of net assets or until March 27, 1996, whichever occurs first. The
Investment Manager will continue to reimburse all operating expenses (except
brokerage and 12b-1 fees) and waive the compensation until March 27, 1997. At
February 29, 1996, included in the Statement of Assets and Liabilities, was a
receivable from an affiliate which represents expense reimbursements due to
the Fund.
If, in any fiscal year, the Fund's total operating expenses (exclusive of
tax, interest, brokerage fees, distribution fees and extraordinary expenses)
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.
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 0.35% of the
Fund's
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DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
NOTES TO FINANCIAL STATEMENTS February 29, 1996, continued
average daily net assets during the month. Expenses incurred by the
Distributor pursuant to the Plan in any fiscal year will not be reimbursed by
the Fund through payments accrued in any subsequent fiscal year. For the
period ended February 29, 1996, the distribution fee was accrued at the
annual rate of 0.32%.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The costs of purchases and sales/prepayments of portfolio securities,
excluding short-term investments, for the period ended February 29, 1996 were
$4,843,564 and $481,498, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's
transfer agent. At February 29, 1996, the Fund had transfer agent fees and
expenses payable of approximately $200.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 27, 1995*
THROUGH
FEBRUARY 29, 1996
--------------------------
SHARES AMOUNT
----------- -------------
<S> <C> <C>
Sold ...................... 659,183 $ 6,612,088
Reinvestment of dividends 4,161 41,820
----------- -------------
663,344 6,653,908
Repurchased ............... (225,962) (2,277,046)
----------- -------------
Net increase .............. 437,382 $ 4,376,862
=========== =============
</TABLE>
- ------------
* Commencement of operations.
6. SELECTED PER SHARE DATA AND RATIOS
See the "Financial Highlights" table on page 4 of this Prospectus.
18
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DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF DEAN WITTER INTERMEDIATE-TERM U.S. TREASURY TRUST
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
(appearing on page 4 of this Prospectus) present fairly, in all material
respects, the financial position of Dean Witter Intermediate-Term U.S.
Treasury Trust (the "Fund") at February 29, 1996, and the results of its
operations, the changes in its net assets and the financial highlights for
the period September 27, 1995 (commencement of operations) through February
29, 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 owned at February 29, 1996 by correspondence with
the custodian, provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 11, 1996
19
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DEAN WITTER
INTERMEDIATE TERM
U.S. TREASURY TRUST
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
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
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.
