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Filed Pursuant to Rule 497(e)
Registration File No.: 33-57789
DEAN WITTER
INTERMEDIATE TERM
U.S. TREASURY TRUST
PROSPECTUS --APRIL 29, 1998
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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 29, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary..................................................... 2
Summary of Fund Expenses............................................... 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 5
Purchase of Fund Shares................................................ 7
Shareholder Services .................................................. 9
Redemptions and Repurchases ........................................... 11
Dividends, Distributions and Taxes .................................... 12
Performance Information................................................ 14
Additional Information ................................................ 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 OR
(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 14).
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OFFERING The price of the shares offered by this Prospectus is determined once
PRICE daily 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
OBJECTIVE of 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 pages 5-7).
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INVESTMENT Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager
MANAGER of the Fund, and its wholly-owned subsidiary, Dean Witter Services Company
Inc. serve in various investment management, advisory, management and
administrative capacities to 101 investment companies and other
portfolios with assets of approximately $113.6 billion at March 31,
1998 (see page 5).
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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 page 5).
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DIVIDENDS AND Dividends are declared daily and paid monthly. Capital gains
CAPITAL GAINS distributions, if any, are paid at least once a year or are retained
DISTRIBUTIONS for reinvestment by 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 pages 12-13).
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DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor") is the distributor
AND PLAN OF of the Fund's shares (see page 7). The Fund is authorized to reimburse
DISTRIBUTION specific 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 9).
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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 11-12).
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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 5-7).
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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 expenses and fees set forth in the table are for the
fiscal year ended February 28, 1998.
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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** ............................................................. 0.34%
Other Expenses* .......................................................... 0.00%
Total Fund Operating Expenses*............................................ 0.34%
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"Total Fund Operating Expenses," as shown above, is based upon the sum of the
12b-1 Fees, Management Fees and "Other Expenses," incurred by the Fund for
the fiscal year ending February 28, 1998.
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* The Investment Manager had undertaken to assume all expenses (except
for the brokerage and 12b-1 fees) and waive the compensation provided
for in its Management Agreement until February 28, 1998 and has
undertaken to continue such expense assumption and compensation waiver
through December 31, 1998. Assuming no waiver of management fees and no
assumption of other expenses, it is estimated that, for the fiscal year
ending February 28, 1998, the "Management Fees" would have been 0.35%,
"Other Expenses" would have been 2.46% and "Total Fund Operating
Expenses" would have been 3.15%. For the fiscal year ended February 28,
1998, the Fund's total operating expenses, consisting only of 12b-1
fees, amounted to 0.34% of the Fund's daily net assets.
** 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 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").
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 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: $3 $11 $19 $43
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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 throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements and 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.
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FOR THE PERIOD
FOR THE YEAR FOR THE YEAR SEPTEMBER 27, 1995*
ENDED ENDED THROUGH
FEBRUARY 28, 1998 FEBRUARY 28, 1997 FEBRUARY 29, 1996
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .... $ 9.71 $ 9.92 $10.00
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Net investment income .................... 0.57 0.53 0.21
Net realized and unrealized gain (loss) . 0.31 (0.21) (0.08)
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Total from investment operations ........ 0.88 0.32 0.13
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Less dividends from net investment income (0.57) (0.53)++ (0.21)
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Net asset value, end of period ........... $10.02 $ 9.71 $ 9.92
================= ================= ===================
TOTAL INVESTMENT RETURN+ .................. 9.33% 3.42% 1.23%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................. 0.34%(3) 0.33%(3) 0.32%(2)(3)
Net investment income .................... 5.69%(3) 5.41%(3) 5.05%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .. $8,717 $1,992 $4,437
Portfolio turnover rate .................. 129% 42% 20%(1)
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* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of
the period.
++ Includes distributions from capital gains of $0.003.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or
waived by the Investment Manager, the annual expense and net investment
income (loss) ratios would have been 3.15% and 2.88%, respectively, for
the year ended February 28, 1998, 7.07% and (1.33)%, respectively, for
the year ended February 28, 1997 and the annualized expense and net
investment income ratios would have been 2.82% and 2.55%, respectively,
after application of the Fund's state expense limitation, for the
period ended February 29, 1996.
4
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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 Morgan Stanley
Dean Witter & Co., a preeminent global financial services firm that maintains
leading market positions in each of its three primary businesses--securities,
asset management and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services
Company, serve in various investment management, advisory, management and
administrative capacities to a total of 101 investment companies, 28 of which
are listed on the New York Stock Exchange, with combined total assets of
approximately $109.5 billion as of March 31, 1998. The Investment Manager
also manages portfolios of pension plans, other institutions and individuals
which aggregated approximately $4.1 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 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 Management Agreement until February 28, 1998 and has undertaken to
continue such expense assumption and compensation waiver through December 31,
1998.
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 as well as on
the yield of the Fund's portfolio securities. 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
5
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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 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 liquid 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
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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.
YEAR 2000. The investment management services provided to the Fund by the
Investment Manager and the services provided to shareholders by the
Distributor and the Transfer Agent depend on the smooth functioning of their
computer systems. Many computer software systems in use today cannot
recognize the year 2000, but revert to 1900 or some other date, due to the
manner in which dates were encoded and calculated. That failure could have a
negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Distributor and the Transfer Agent have
been actively working on necessary changes to their own computer systems to
prepare for the year 2000 and expect that their systems will be adapted
before that date, but there can be no assurance that they will be successful,
or that interaction with other non-complying computer systems will not impair
their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout
the financial services industry beginning January 1, 2000. Improperly
functioning trading systems may result in settlement problems and liquidity
issues. Accordingly, the Fund's investments may be adversely affected.
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"), Morgan Stanley & Co. Incorporated and other
broker-dealers that are affiliates 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 23 funds and fund portfolios, with
approximately $13.6 billion in assets as of March 31, 1998. Rajesh K. Gupta,
Senior Vice President of 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,
Morgan Stanley & Co. Incorporated and other brokers and dealers that are
affiliates of InterCapital. 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
200% in any one year. The Fund will incur costs commensurate with its
portfolio turnover rate. Short-term gains and losses may result from such
transactions. See "Dividends, Distributions and Taxes" for a full discussion
of the tax implications of the Fund's trading policy.
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 Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City, NJ 07303 or
by
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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. The
minimum initial purchase in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase
the investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset
allocations program and (iii) fee-based programs approved by the Distributor,
pursuant to which participants pay an asset based fee for services in the
nature of investment advisory, administrative and/or brokerage services, the
Fund, in its discretion, may accept investments without regard to any minimum
amounts which would otherwise be required, provided, in the case of
Systematic Payroll Deduction Plans, that the Distributor has reason to
believe that additional investments will increase the investment in all
accounts under such plans to at least $1,000. 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 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
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<PAGE>
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. The service fee is a payment
made for personal services and/or the maintenance of shareholder accounts.
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 $22,778 to the Distributor pursuant to the Plan for
the fiscal year ended February 28, 1998. This is an accrual at the annual
rate of 0.34% 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. 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) on the monthly payment
date, which will be no later than the last business day of the month for
which the dividend or distribution is payable. Processing of dividend checks
begins immediately following the monthly payment date. Shareholders who have
requested to receive dividends in cash will normally receive their monthly
dividend check during the first ten days of the following month.
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 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 adminis tration, custodial fees and
other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Transfer Agent.
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<PAGE>
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
Dean Witter Funds that are multiple class funds ("Dean Witter Multi-Class
Funds") and Dean Witter Funds that are not multiple class funds but which are
sold with either a front-end (at time of purchase) sales charge ("FSC 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 and Dean Witter Short-Term
Bond 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 nine funds, including the Fund, are hereinafter collectively
referred to as "Exchange Funds"). Shares of the Exchange Funds received in an
exchange for shares of a Dean Witter Multi-Class Fund may be redeemed and
exchanged only for shares of the corresponding Class of a Dean Witter
Multi-Class Fund or for shares of one of the other Exchange Funds, provided
that shares of the Exchange Funds received in an exchange for Class A shares
of a Dean Witter Multi-Class Fund may also be redeemed and exchanged for
shares of a FSC fund, and shares of the Exchange Funds received in an
exchange for Class B shares of a Dean Witter Multi-Class Fund may also be
redeemed and exchanged for shares of a CDSC fund. In addition, shares of the
Exchange Funds received in an exchange for shares of a FSC fund may be
redeemed and exchanged for Class A shares of a Dean Witter Multi-Class Fund
or for shares of one of the other Exchange Funds, and shares of the Exchange
Funds received in an exchange for shares of a CDSC fund may be redeemed and
exchanged for Class B shares of a Dean Witter Multi-Class Fund or for shares
of one of the other Exchange Funds.
An exchange 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, shares
of the Multi-Class Fund, FSC fund, the CDSC fund or the Exchange 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. Ultimately, any applicable contingent deferred sales charge
("CDSC") will have to be paid upon redemption of shares originally purchased
from a CDSC fund or a Class of a Dean Witter Multi-Class Fund that imposes a
CDSC. (If shares of an Exchange Fund received in exchange for shares
originally purchased from a CDSC fund or Class B of a Dean Witter Fund are
exchanged for shares of another CDSC fund or a Dean Witter Multi-Class Fund
having a different CDSC schedule than that of the CDSC fund or the Dean
Witter Multi-Class 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, or from a class of a
Dean Witter Multi-Class Fund that imposes a CDSC, remain in the Exchange
Fund, the holding period (for the purpose of determining the rate of CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a CDSC
fund or a Dean Witter Multi-Class Fund, the holding period previously frozen
when the first exchange was made resumes on the last day of the month in
which shares of a CDSC fund or shares of a Dean Witter Multi-Class Fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a CDSC fund or in shares of
a Dean Witter Multi-Class Fund. In the case of exchanges of Class A shares of
a Dean Witter Multi-Class Fund which are subject to a CDSC, the holding of
Fund Shares--Plan of Distribution" in the respective Exchange Fund Prospectus
for a description of Exchange Fund distribution fees). Exchanges may be made
after the shares of the fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
ADDITIONAL INFORMATION REGARDING
EXCHANGES
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
10
<PAGE>
abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund and each of the other
Dean Witter Funds may in their discretion limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
The Exchange Privilege may be terminated or revised at any time by the
Fund and/or any of such Dean Witter Funds for which shares of the Fund 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 of
each Class of shares 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
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<PAGE>
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" 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 35 days after the date of the redemption or repurchase, reinstate
any portion or all of the proceeds of such redemption or repurchase in shares
of the Fund 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 intends to distribute dividends from
net short-term or 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.
12
<PAGE>
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 calendar 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.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return
of a por tion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
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. Shareholders will also be notified of their
proportionate share of long-term capital gains distributions that are
eligible for a reduced rate of tax under the Taxpayer Relief Act of 1997.
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 with respect to specific questions regarding federal,
state and local taxes.
13
<PAGE>
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. 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
14
<PAGE>
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.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve its
investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same
investment objective and policies and substantially the same investment
restrictions as those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
15
<PAGE>
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
Wayne E. Hedien
Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and
General Counsel
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
Morgan Stanley Dean Witter Trust FSB
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.
