<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1994
FILE NOS.: 33-35530
811-5988
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 4 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 5 /X/
-------------------
DEAN WITTER EUROPEAN GROWTH FUND INC.
(A MARYLAND CORPORATION)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WELTZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after this
Post-Effective
Amendment becomes effective.
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___ immediately upon filing pursuant to paragraph (b)
_X_ on February 18, 1994 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. PURSUANT TO SECTION (B)(2) OF RULE 24F-2, THE
REGISTRANT FILED A RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED OCTOBER 31, 1993,
WITH THE SECURITIES AND EXCHANGE COMMISSION ON OR ABOUT NOVEMBER 24, 1993.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
-------------------------------------------------------
-------------------------------------------------------
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
CROSS-REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ---------------------------------------------- ---------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. ......................................... Cover Page
2. ......................................... Prospectus Summary
3. ......................................... Financial Highlights
4. ......................................... Investment Objective and Policies; The Fund and its Management, Cover
Page; Investment Restrictions; Prospectus Summary; Financial
Highlights
5. ......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. ......................................... Dividends, Distributions and Taxes; Additional Information
7. ......................................... Purchase of Fund Shares; Shareholder Services; Prospectus Summary
8. ......................................... Redemptions and Repurchases; Shareholder Services
9. ......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. ......................................... Cover Page
11. ......................................... Table of Contents
12. ......................................... The Fund and Its Management
13. ......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. ......................................... The Fund and Its Management; Directors and Officers
15. ......................................... The Fund and Its Management; Directors and Officers
16. ......................................... The Fund and Its Management; The Distributor; Shareholder Services;
Custodian and Transfer Agent; Independent Accountants
17. ......................................... Portfolio Transactions and Brokerage
18. ......................................... Description of Shares of the Fund
19. ......................................... The Distributor; Redemptions and Repurchases; Financial Statements;
Shareholder Services
20. ......................................... Dividends, Distributions and Taxes
21. ......................................... Not applicable
22. ......................................... Performance Information
23. ......................................... Experts; Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
FEBRUARY 18, 1994
Dean Witter European Growth Fund Inc. (the "Fund") is an open-end,
diversified management investment company whose investment objective is to
maximize the capital appreciation of its investments. The Fund seeks to achieve
this objective by investing primarily in securities issued by issuers located in
Europe.
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, redemptions and/or repurchases of shares
are subject in most cases to a contingent deferred sales charge, scaled down
from 5% to 1% of the amount redeemed, if made within six years of purchase,
which charge will be paid to the Fund's Distributor, Dean Witter Distributors
Inc. (See "Redemptions and Repurchases--Contingent Deferred Sales Charge.") In
addition, the Fund pays the Distributor a Rule 12b-1 distribution fee pursuant
to a Plan of Distribution at the annual rate of 1.0% of the lesser of the (i)
average daily aggregate net sales or (ii) average daily net assets of the Fund.
(See "Purchase of Fund Shares--Plan of Distribution.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 18, 1994, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER EUROPEAN
GROWTH FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550
OR (800) 526-3143
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
Investment Restrictions/14
Purchase of Fund Shares/15
Shareholder Services/17
Redemptions and Repurchases/19
Dividends, Distributions and Taxes/21
Performance Information/22
Additional Information/23
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The The Fund is an open-end, diversified management investment company investing primarily in
Fund securities issued by issuers located in Europe.
- -------------------------------------------------------------------------------------------------------------------
Shares Shares of common stock with $.01 par value (see page 23).
Offered
- -------------------------------------------------------------------------------------------------------------------
Offering At net asset value without sales charge (see page 15). Shares redeemed within six years of purchase
Price are subject to a contingent deferred sales charge under most circumstances (see page 19).
- -------------------------------------------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000; minimum subsequent investments, $100 (see page 15).
Purchase
- -------------------------------------------------------------------------------------------------------------------
Investment The investment objective of the Fund is to maximize the capital appreciation of its investments
Objective (see page 5).
- -------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary,
Manager and Dean Witter Services Company Inc., serve in various investment management, advisory, management and
Sub-Advisor administrative capacities to seventy-nine investment companies and other portfolios with net assets
under management of approximately $71.2 billion at December 31, 1993. Morgan Grenfell Investment
Services Ltd. has been retained by the Investment Manager as Sub-Advisor to provide investment
advice and manage the Fund's portfolio. Morgan Grenfell Investment Services Ltd. currently serves
as investment advisor for U.S. corporate and public employee benefit plans, investment companies,
endowments and foundations with assets of approximately $7.5 billion at December 31, 1993 (see page
4).
- -------------------------------------------------------------------------------------------------------------------
Management The Investment Manager receives a monthly fee from the Fund at the annual rate of 1.0% of daily net
Fee assets. The Sub-Advisor receives a monthly fee from the Investment Manager equal to 40% of the
Investment Manager's monthly fee (see page 5). Although the management fee is higher than that paid
by most other investment companies, the fee reflects the specialized nature of the Fund's
investment policies.
- -------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains are paid at least
Distributions once each year. Dividends and capital gains distributions are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive cash (see pages 17
and 21).
- -------------------------------------------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a
distribution fee accrued daily and payable monthly at the rate of 1% per annum of the lesser of (i)
the average daily aggregate net sales or (ii) the Fund's average daily net assets. This fee
compensates the Distributor for services provided in distributing shares of the Fund and for sales
related expenses. The Distributor also receives the proceeds of any contingent deferred sales
charges (see pages 15-16).
- -------------------------------------------------------------------------------------------------------------------
Redemption-- At net asset value; redeemable involuntarily if total value of the account is less than $100.
Contingent Although no commission or sales load is imposed upon the purchase of shares, a contingent deferred
Deferred sales charge (scaled down from 5% to 1%) is imposed on any redemption of shares if after such
Sales redemption the aggregate current value of an account with the Fund falls below the aggregate amount
Charge of the investor's purchase payments made during the six years preceding the redemption. However,
there is no charge imposed on redemption of shares purchased through reinvestment of dividends or
distributions (see pages 19-20).
- -------------------------------------------------------------------------------------------------------------------
Special The net asset value of the Fund's shares will fluctuate with changes in the market value of its
Risk portfolio securities. It should be recognized that the foreign securities and markets in which the
Considerations Fund invests pose different and greater risks than those customarily associated with domestic
securities and their markets. Furthermore, investors should consider other risks associated with a
portfolio of international securities, including fluctuations in foreign currency exchange rates
(i.e., if a substantial portion of the Fund's assets are denominated in foreign currencies which
decrease in value with respect to the U.S. dollar, the value of the investor's shares and the
distributions made on those shares will, likewise, decrease in value), foreign securities exchange
controls and foreign tax rates, as well as investments in forward currency contracts, options and
futures contracts (see pages 5-13). The investor should also note that the Fund intends to invest
over 25% of its total assets in securities of issuers located in the United Kingdom.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE
STATEMENT OF ADDITIONAL INFORMATION.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended October 31, 1993.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
- ---------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge Imposed on Purchases.............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends................................... None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds).... 5.0%
A contingent deferred sales charge is imposed at the following declining rates:
</TABLE>
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE
PAYMENT MADE PERCENTAGE
- -------------------------------------------------------------------------------------------- ---------------
<S> <C>
First....................................................................................... 5.0%
Second...................................................................................... 4.0%
Third....................................................................................... 3.0%
Fourth...................................................................................... 2.0%
Fifth....................................................................................... 2.0%
Sixth....................................................................................... 1.0%
Seventh and thereafter...................................................................... None
Redemption Fees........................................................................ None
Exchange Fee........................................................................... None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- ---------------------------------------------------------------------------------------
Management Fees........................................................................ 1.00%
12b-1 Fees*............................................................................ 1.00%
Other Expenses......................................................................... 0.38%
Total Fund Operating Expenses.......................................................... 2.38%
</TABLE>
*A PORTION OF THE 12B-1 FEE EQUAL TO 0.25% OF THE FUND'S AVERAGE DAILY NET
ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:.............................................................. $74 $104 $147 $272
You would pay the following expenses on the same investment, assuming
no redemption:....................................................... $24 $ 74 $127 $272
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following per share data and ratios for a share of capital stock
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. This data should be read in conjunction with the
financial statements, notes thereto, and the unqualified report of independent
accountants which are contained in the Statement of Additional Information.
Further information about the performance of the Fund is contained in the Fund's
Annual Report to Stockholders, which may be obtained without charge upon request
of the Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, MAY 31, 1990*
--------------------------------------- THROUGH
1993 1992 1991 OCTOBER 31, 1990
----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period................. $ 8.57 $ 9.22 $ 9.23 $ 10.00
----------- ----------- ----------- -------
Net investment (loss) income....................... (0.01) 0.01 0.05 0.05
Net realized and unrealized gain (loss) on
investments....................................... 3.30 (0.23) 0.07 (0.82)
----------- ----------- ----------- -------
Total from investment operations..................... 3.29 (0.22) 0.12 (0.77)
----------- ----------- ----------- -------
Less dividends and distributions:
Dividends from net investment income............... -0- (0.03) (0.07) -0-
Distributions from net realized capital gains...... -0- (0.40) (0.06) -0-
----------- ----------- ----------- -------
Total dividends and distributions.................... -0- (0.43) (0.13) -0-
----------- ----------- ----------- -------
Net asset value, end of period....................... $ 11.86 $ 8.57 $ 9.22 $ 9.23
----------- ----------- ----------- -------
----------- ----------- ----------- -------
TOTAL INVESTMENT RETURN+............................. 38.74% (2.39)% 1.33% (7.70)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)............. $459,201 $296,548 $315,944 $303,872
Ratio of expenses to average net assets.............. 2.38% 2.40% 2.44% 2.45%(2)
Ratio of net investment (loss) income to average net
assets.............................................. (.09)% .11% .51% 1.52%(2)
Portfolio turnover rate.............................. 120% 116% 111% 36%
<FN>
- ---------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
Dean Witter European Growth Fund Inc. (the "Fund") is an open-end,
diversified management investment company incorporated in the state of Maryland
on February 13, 1990.
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 Reynolds Inc. ("DWR"). DWR is
a wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a balanced
4
<PAGE>
financial services organization providing a broad range of nationally marketed
credit and investment products.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to seventy-nine other investment companies (the "Dean
Witter Funds"), twenty-seven of which are listed on the New York Stock Exchange,
with combined assets of approximately $69.2 billion as of December 31, 1993. The
Investment Manager also manages and advises portfolios of pension plans, other
institutions and individuals which aggregated approximately $2.0 billion at such
date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and supervise the investment of the Fund's
assets. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities issued by issuers located in Europe and in other
countries located elsewhere around the world, subject to the overall supervision
of the Investment Manager. The Fund's Directors review the various services
provided by the Investment Manager and the Sub-Advisor 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.
The Sub-Advisor, whose address is 20 Finsbury Circus, London, England,
currently manages assets in excess of $7.5 billion for U.S. corporate and public
employee benefit plans, investment companies, endowments and foundations. The
Sub-Advisor is an indirect subsidiary of Deutsche Bank AG, the largest
commercial bank in Germany.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 1.0% to the Fund's net assets. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor monthly compensation equal to 40% of its monthly compensation.
For the fiscal year ended October 31, 1993, the Fund accrued total
compensation to the Investment Manager amounting to 1.0% of the Fund's average
daily net assets (of which 40% was accrued to the Sub-Advisor by the Investment
Manager) and the Fund's total expenses amounted to 2.38% of the Fund's average
daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to maximize the capital appreciation
of its investments. There is no assurance that the objective will be achieved.
The following policies may be changed by the Board of Directors without
shareholder approval.
The Fund seeks to achieve its investment objective by investing at least 65%
of its total assets in securities issued by issuers located in countries located
in Europe. Such issuers will include companies (i) which are organized under the
laws of a European country and have a principal office in a European country, or
(ii) which derive 50% or more of their total revenues from business in Europe,
or (iii) the equity securities of which are traded principally on a stock
exchange in Europe.
The principal countries in which such issuers will be located are France;
the United Kingdom; Germany; the Netherlands; Spain; Sweden; Switzerland and
Italy. The Fund currently intends to invest more than 25% of its total assets in
the United Kingdom. As such, the investment performance of the Fund will be
subject to social, political and economic events occurring in the United Kingdom
to a
5
<PAGE>
greater extent than those occurring in other European countries.
The securities invested in will primarily consist of equity securities
issued by companies based in European countries, but may also include fixed-
income securities issued or guaranteed by European governments (including zero
coupon treasury securities), when it is deemed that such investments are
consistent with the Fund's investment objective. For example, there may be times
when the Sub-Advisor determines that the prices of government securities are
more likely to appreciate than those of equity securities. Such an occasion
might arise when inflation concerns have led to general increases in interest
rates. Such fixed-income securities which will be purchased by the Fund are
likely to be obligations of the treasuries of one of the major European nations.
In addition, the Fund may invest in fixed-income securities which are, either
alone or in combination with a warrant, option or other right, convertible into
the common stock of a European issuer, when the Investment Manager or the
Sub-Advisor determines that such securities are more likely to appreciate in
value than the common stock of such issuers or when the Investment Manager or
Sub-Advisor wishes to hedge the risk inherent in the direct purchase of the
equity of a given issuer. The Fund will select convertible securities of issuers
whose common stock has, in the opinion of the Investment Manager or Sub-Advisor,
a superior investment potential. The Fund may also purchase equity and
fixed-income securities which are issued in private placements and warrants or
other securities conveying the right to purchase common stock.
The remainder of the Fund's portfolio equalling, at times, up to 35% of the
Fund's total assets, may be invested in equity and/or government and convertible
securities issued by issuers located anywhere in the world (with the exception
of South Africa), including the United States, subject to the Fund's investment
objective. In addition, this portion of the Fund's portfolio will consist of
various other financial instruments such as forward foreign exchange contracts,
futures contracts and options (see below).
It is anticipated that the securities held by the Fund in its portfolio will
be denominated, principally, in liquid European currencies. Such currencies
include the German mark, French franc, British pound, Dutch guilder, Swiss
franc, Swedish krona, Italian lira, and Spanish peseta. In addition, the Fund
may hold securities denominated in the European Currency Unit (a weighted
composite of the currencies of member states of the European Monetary System).
Securities of issuers within a given country may be denominated in the currency
of a different country.
The Fund may also invest in securities of foreign issuers in the form of
American Depository Receipts (ADRs), European Depository Receipts (EDRs) or
other similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a United States bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar arrangement.
Generally, ADRs, in registered form, are designed for use in the United States
securities markets and EDRs, in bearer form, are designed for use in European
securities markets.
There may be periods during which market conditions warrant reduction of
some or all of the Fund's securities holdings. During such periods, the Fund may
adopt a temporary "defensive" posture in which greater than 35% of its net
assets are invested in cash or money market instruments. Under such
circumstances, the money market instruments in which the Fund may invest are
securities issued or guaranteed by the U.S. Government; American bank
obligations; Eurodollar certificates of deposit; obligations of American savings
institutions; fully insured certificates of deposit; and commercial paper of
American issuers rated within the two highest grades by Moody's or S&P or, if
not rated, issued by a company having an outstanding debt issue rated at least
AA by S&P or Aa by Moody's.
6
<PAGE>
SPECIAL RISK CONSIDERATIONS
FOREIGN SECURITIES. Investors should carefully consider the risks of
investing in securities of foreign issuers and securities denominated in
non-U.S. currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar vaue of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade. The foreign currency transactions of
the Fund will be conducted on a spot basis or through forward contracts or
futures contracts (see below). The Fund may incur certain costs in connection
with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Political and economic developments in Europe, especially as they
relate to changes in the structure of the European Economic Community and the
anticipated development of a unified common market, may have profound effects
upon the value of a large segment of the Fund's portfolio. Continued progress in
the evolution of, for example, a united European common market may be slowed by
unanticipated political or social events and may, therefore, adversely affect
the value of certain of the securities held in the Fund's portfolio. Foreign
companies are not subject to the regulatory requirements of U.S. companies and,
as such, there may be less publicly available information about such companies.
Moreover, foreign companies are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable to
U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
------------
To hedge against adverse price movements in the securities held in its
portfolio and the currencies in which they are denominated (as well as in the
securities it might wish to purchase and their denominated currencies) the Fund
may engage in transactions in forward foreign currency contracts, options on
securities and currencies, and futures contracts and options on futures
contracts on securities, currencies and indexes. The Fund may also purchase
options on securities to facilitate its participation in the potential
appreciation of the value of the underlying securities. A discussion of these
transactions follows and is supplemented by further disclosure in the Statement
of Additional Information.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
A forward foreign currency exchange contract ("forward contract") involves
an obligation to purchase or sell a currency at a future date, which may
7
<PAGE>
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The Fund may enter into
forward contracts as a hedge against fluctuations in future foreign exchange
rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars or other
currency, of the amount of foreign currency involved in the underlying security
transactions, the Fund will be able to protect itself against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar or
other currency which is being used for the security purchase and the foreign
currency in which the security is denominated during the period between the date
on which the security is purchased or sold and the date on which payment is made
or received.
At other times, when, for example, it is believed that the currency of a
particular foreign country may suffer a substantial decline against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or other currency, the amount of
foreign currency approximating the value of some or all of the Fund's portfolio
securities (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency. Under identical circumstances, the Fund
may enter into a forward contract to sell, for a fixed amount of U.S. dollars or
other currency, an amount of foreign currency other than the currency in which
the securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected when it is determined that the foreign
currency in which the portfolio securities are denominated has insufficient
liquidity or is trading at a discount as compared with some other foreign
currency with which it tends to move in tandem.
In addition, when the Fund anticipates purchasing securities at some time in
the future, and wishes to lock in the current exchange rate of the currency in
which those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount of
currency equal to some or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Investment Manager and/or Sub-Advisor. The Fund generally will not enter
into a forward contract with a term of greater than one year, although it may
enter into forward contracts for periods of up to five years. The Fund may be
limited in its ability to enter into hedging transactions involving forward
contracts by the Internal Revenue Code of 1986 (the "Code") requirements
relating to qualifications as a regulated investment company (see "Dividends,
Distributions and Taxes").
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OPTIONS AND FUTURES TRANSACTIONS
Call and put options on U.S. Treasury notes, bonds and bills, on various
foreign currencies and on equity securities are listed on several U.S. and
foreign securities exchanges and are written in over-the-counter transactions
("OTC Options"). Listed options are issued or guaranteed by the exchange on
which they trade or by a clearing corporation such as the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the right
to buy from the OCC (in the U.S.) or other clearing corporation or exchange, the
underlying security or currency covered by the option at the stated exercise
price (the price per unit of the underlying security or currency) by filing an
exercise notice prior to the expiration date of the option. The writer (seller)
of the option would then have the obligation to sell, to the OCC (in the U.S.)
or other clearing corporation or exchange, the underlying security or currency
at that exercise price prior to the expiration date of the option, regardless of
its then current market price. Ownership of a listed put option would give the
Fund the right to sell the underlying security or currency to the OCC (in the
U.S.) or other clearing corporation or exchange at the stated exercise price.
Upon notice of exercise of the put option, the writer of the option would have
the obligation to purchase the underlying security or currency from the OCC (in
the U.S.) or other clearing corporation or exchange at the exercise price.
OTC OPTIONS. Exchange-listed options are issued by the OCC (in the U.S.) or
other clearing corporation or exchange which assures that all transactions in
such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Fund. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the Fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities or
amount of foreign currency underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities which are denominated in either U.S. dollars or foreign
currencies and on the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency and to
close out long call option positions. Generally, a call option is "covered" if
the Fund owns the security or the currency underlying the option it has written,
holds a call option on the same underlying security or currency with a similar
exercise price or maintains a sufficient amount of cash, cash equivalents or
liquid securities to purchase the underlying security or to exchange for the
underlying currency. As a writer of a call option, the Fund has the obligation,
upon notice of exercise of the option, to deliver the security or amount of
currency underlying the option (certain listed and OTC call options written by
the Fund will be exercisable by the purchaser only on a specific date).
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. The premium received will
offset a portion of the potential loss incurred by the Fund if the securities
underlying the option are ultimately sold by the Fund at a loss. Furthermore, a
premium received on a call written on a foreign currency will ameliorate any
potential loss of value on the portfolio security due to a decline in the value
of the currency. However, during the option period, the covered call writer has,
in return for the premium on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security (or the exchange rate of the currency in which it is denominated)
increase, but has retained the risk of loss should the price of the underlying
security (or the exchange rate of the currency in which it is denominated)
decline. The size of premiums will fluctuate with varying market conditions.
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PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a covered call position or to protect against
an increase in the price of a security it anticipates purchasing or, in the case
of call options on a foreign currency, to hedge against an adverse exchange rate
change of the currency in which the security it anticipates purchasing is
denominated vis-a-vis the currency in which the exercise price is denominated.
The Fund may purchase put options on securities which it holds in its portfolio
only to protect itself against a decline in the value of the security. If the
value of the underlying security were to fall below the exercise price of the
put purchased in an amount greater than the premium paid for the option, the
Fund would incur no additional loss. Similarly, the Fund may purchase put
options on currencies in which securities which it holds are denominated only to
protect itself against a decline in value of such currency vis-a-vis the
currency in which the exercise price is denominated. If the value of the
currency underlying the option were to fall below the exercise price of the put
purchased in an amount greater than the premium paid for the option, the Fund
would incur no additional loss. There are no other limits on the Fund's ability
to purchase call and put options.
FUTURES CONTRACTS. The Fund may purchase and sell futures contracts that
are currently traded, or may in the future be traded, on U.S. and foreign
commodity exchanges on common stocks, such underlying fixed-income securities as
U.S. Treasury bonds, notes, and bills and/or any foreign government fixed-income
security ("interest rate" futures), on various currencies ("currency" futures)
and on such indexes of U.S. or foreign equity and fixed-income securities as may
exist or come into being, such as the Standard & Poor's 500 Index or the
Financial Times Equity Index ("index" futures). As a futures contract purchaser,
the Fund incurs an obligation to take delivery of a specified amount of the
obligation underlying the contract at a specified time in the future for a
specified price. As a seller of a futures contract, the Fund incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If it is anticipated that interest rates may rise and, concomitantly, the price
of certain of its portfolio securities fall, the Fund may sell an interest rate
futures contract. If declining interest rates are anticipated, the Fund may
purchase an interest rate futures contract to protect against a potential
increase in the price of securities the Fund intends to purchase. Subsequently,
appropriate securities may be purchased by the Fund in an orderly fashion; as
securities are purchased, corresponding futures positions would be terminated by
offsetting sales of contracts.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) against changes
in their prices. If it is anticipated that the prices of securities held by the
Fund may fall, the Fund may sell an index futures contract. Conversely, if the
Fund wishes to hedge against anticipated price rises in those securities which
the Fund intends to purchase, the Fund may purchase an index futures contract.
The Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Fund will enter into currency futures contracts for the same reasons as set
forth above for entering into forward foreign currency contracts; namely, to
"lock-in" the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
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In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out a short or long position maintained by the
Fund in a corresponding futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option) and the sale of a futures contract (purchase of a
put option or sale of a call option), or to close out a long or short position
in futures contracts. If, for example, the Investment Manager or Sub-Advisor
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, it
might write a call option on an interest rate futures contract, the underlying
security of which correlates with the portion of the portfolio the Investment
Manager seeks to hedge. Any premiums received in the writing of options on
futures contracts may, of course, provide a further hedge against losses
resulting from price declines in portions of the Fund's portfolio.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which the
Fund is exempted from registration as a commodity pool operator, the Fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid secondary market exists for options or futures contracts of
that series. There is no assurance that such a market will exist, particularly
in the case of OTC options, as such options will generally only be closed out by
entering into a closing purchase transaction with the purchasing dealer.
Exchanges may limit the amount by which the price of many futures contracts
may move on any day. If the price moves equal the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased.
The extent to which the Fund may enter into transactions involving options
and futures contracts
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<PAGE>
may be limited by the Code's requirements for qualification as a regulated
investment company and the Fund's intention to qualify as such. See "Dividends,
Distributions and Taxes."
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Fund's management could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For example,
if the Fund sold futures contracts for the sale of securities in anticipation of
an increase in interest rates, and then interest rates went down instead,
causing bond prices to rise, the Fund would lose money on the sale.
Another risk which may arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indexes subject to futures contracts (and thereby the
futures contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the Fund's portfolio securities and their denominated
currencies. Another such risk is that prices of interest rate futures contracts
may not move in tandem with the changes in prevailing interest rates against
which the Fund seeks a hedge. A correlation may also be distorted by the fact
that the futures market is dominated by short-term traders seeking to profit
from the difference between a contract or security price objective and their
cost of borrowed funds. Such distortions are generally minor and would diminish
as the contract approached maturity.
The Fund, by entering into transactions in foreign futures and options
markets, will also incur risks similar to those discussed above under the
section entitled "Foreign Securities."
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when a purchase of a
call or put option on a futures contract would result in a loss to the Fund when
the purchase or sale of a futures contract would not result in a loss, such as
when there is no movement in the prices of the underlying securities. The
writing of a put or call option on a futures contract involves risks similar to
those relating to transactions in futures contracts, as are described above.
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities. from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis may increase the volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corpo-
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rate reorganization, leveraged buyout or debt restructuring. If the anticipated
event does not occur and the securities are not issued, the Fund will have lost
an investment opportunity. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a "when,
as and if issued" basis. An increase in the percentage of the Fund's assets
committed to the purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as such,
may be changed without shareholder approval.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and the
Sub-Advisor with a view to achieving the Fund's investment objective. In
determining which securities to purchase for the Fund or hold in the Fund's
portfolio, the Investment Manager and the Sub-Advisor will rely on information
from various sources, including research, analysis and appraisals of brokers and
dealers, the views of Directors of the Fund and others regarding economic
developments and interest rate trends, and the Investment Manager's and
Sub-Advisor's own analysis of factors they deem relevant. The Fund's primary
portfolio manager is John C. Armitage, a Director of Morgan Grenfell Asset
Management Limited, the parent of the Sub-Advisor. Mr. Armitage has been the
Fund's primary portfolio manager since its inception and has been managing
portfolios consisting of equity securities issued by European issuers for the
Sub-Adviser for over five years.
Personnel of the Investment Manager and Sub-Adviser have substantial
experience in the use of the investment techniques described above under the
heading "Options and Futures Transactions," which techniques require skills
different from those needed to select the portfolio securities underlying
various options and futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR and
three affiliated broker-dealers of the Sub-Advisor (Deutsche Bank AG, Deutsche
Bank Capital Markets Ltd. and C.J. Lawrence, Morgan Grenfell Inc.). Pursuant to
an order of the Securities and Exchange Commission, the Fund may effect
principal transactions in certain money market instruments with Dean Witter
Reynolds Inc. ("DWR"). In addition, the Fund may incur brokerage commissions on
transactions conducted through DWR and the three above-mentioned affiliated
broker-dealers of the Sub-Advisor.
The portfolio trading engaged in by the Fund may result in its portfolio
turnover rate exceeding 100%. The Fund is expected to incur higher than normal
brokerage commission costs due to its portfolio turnover rate. Short-term gains
and losses taxable at ordinary income rates may result from such portfolio
transactions. See "Dividends, Distributions and Taxes" for a full discussion of
the tax implications of the Fund's trading policy. A more extensive discussion
of the Fund's portfolio brokerage policies is set forth in the Statement of
Additional Information.
The expenses of the Fund relating to its portfolio management are likely to
be greater than those incurred by other investment companies investing primarily
in securities issued by domestic issuers as custodial costs, brokerage
commissions and other transaction charges related to investing on foreign
markets are generally higher than in the United States.
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INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Investment
Company Act of 1940, as amended (the "Act"), a fundamental policy may not be
changed without the vote of a majority of the outstanding voting securities of
the Fund, as defined in the Act. For purposes of the following limitations: (i)
all percentage limitations apply immediately after a purchase or initial
investment, and (ii) any subsequent change in any applicable percentage
resulting from market fluctuations or other changes in total or net assets does
not require elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than obligations
issued, or guaranteed by, the United States Government, its agencies or
instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of all
outstanding voting securities or any class of securities of any one issuer.
3. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction shall not apply to any
obligation issued or guaranteed by the United States Government, its
agencies or instrumentalities.
5. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or write interest rate, currency and stock and bond index
futures contracts and related options thereon.
6. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings. (For the purpose of this restriction,
collateral arrangements with respect to the writing of options and
collateral arrangements with respect to initial or variation margin for
futures are not deemed to be pledges of assets.)
7. Purchase securities on margin (but the Fund may obtain short-term
loans as are necessary for the clearance of transactions). The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the purchase
of a security on margin.
8. Invest more than 10% of its total assets in "illiquid securities"
(securities for which market quotations are not readily available) and
repurchase agreements which have a maturity of longer than seven days. In
addition, no more than 15% of the Fund's net assets will be invested in such
illiquid securites and foreign securities not traded on a recognized
domestic or foreign exchange.
Generally, OTC options and the assets used as "cover" for written OTC
options are illiquid securities. However, the Fund is permitted to treat the
securities it uses as cover for written OTC options as liquid provided it
follows a procedure whereby it will sell OTC options only to qualified
dealers who agree that the Fund may repurchase such options at a maximum
price to be calculated pursuant to a predetermined formula set forth in the
option agreement. The formula may vary from agreement to agreement, but is
generally based on a multiple of the premium received by the Fund for
writing the option plus the amount, if any, of the option's intrinsic value.
An OTC option is considered an illiquid asset only to the extent that the
maximum repurchase price under the formula exceeds the intrinsic value of
the option.
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PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager,
shares of the Fund are distributed by the Distributor and offered by DWR and
other dealers which 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. Subsequent purchases of $100 or more
may be made by sending a check, payable to Dean Witter European Growth Fund
Inc., directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, N.J. 07303 or by contacting an account executive of DWR or
other Selected Broker-Dealer. In the case of investments pursuant to Systematic
Payroll Deduction Plans (including Individual Retirement Plans), the Fund, in
its discretion, may accept investments without regard to any minimum amounts
which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Such investors will be entitled to receive income
dividends and capital gains distributions if their order is received by the
close of business on the day prior to the record date for such distributions
(those investing through the Distributor or other Selected Broker-Dealer will
receive dividends declared the next business day after the order is settled).
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value" below).
While no sales charge is imposed at the time shares are purchased, a contingent
deferred sales charge may be imposed at the time of redemption (see "Redemptions
and Repurchases"). The Fund and the Distributor reserve the right to reject any
purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan"), under which the Fund pays the Distributor a fee, which is
accrued daily and payable monthly, at an annual rate of 1% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's shares since the inception
of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such
15
<PAGE>
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses incurred. For the fiscal year ended October
31, 1993, the Fund accrued payments under the Plan amounting to $3,309,245,
which amount is equal to 1.0% of the Fund's average daily net assets for the
fiscal year. The payments accrued under the Plan were calculated pursuant to
clause (b) of the compensation formula under the Plan.
At any given time, DWR may have incurred expenses in distributing shares of
the Fund which may be in excess of the total of (i) the payments made by the
Fund pursuant to the Plan, and (ii) the proceeds of contingent deferred sales
charges paid by investors upon the redemption of shares (see "Redemptions and
Repurchases -- Contingent Deferred Sales Charge"). For example, if the
Distributor incurred $1 million in expenses in distributing shares of the Fund
and $750,000 had been received by the Distributor in (i) and (ii) above, the
excess expense would amount to $250,000. The Distributor has advised the Fund
that such excess amounts, including the carrying charge described above,
totalled $16,930,883 at October 31, 1993, which equalled 3.68% of the Fund's net
assets at such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, this excess amount does not constitute a liability
of the Fund. Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by the investors upon
redemption of shares, if for any reason the Plan is terminated the Directors
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
contingent deferred sales charges, may or may not be recovered through future
distribution fees or contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time on each day that the New York Stock Exchange is open by
taking the value of all assets of the Fund, subtracting all its liabilities,
dividing by the number of shares outstanding and adjusting to the nearest cent.
The net asset value per share will not be determined on Good Friday and on such
other federal and non-federal holidays as are observed by the New York Stock
Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated as the primary market by the Directors); and (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation.
When market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager or Sub-Advisor 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 Directors. For
valuation purposes, quotations of foreign portfolio securities, other assets and
liabilities and forward contracts stated in foreign currency are translated into
U.S. dollar equivalents at the prevailing market rates as of the morning of
valuation. Dividends receivable are accrued as of the ex-dividend date or as of
the time that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less to
maturity at the time of purchase are valued at amortized cost, unless the
Directors determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Directors.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by
16
<PAGE>
the Fund's Directors. The pricing service utilizes a matrix system incorporating
security quality, maturity and coupon as the evaluation model parameters, and/or
research evaluations by its staff, including review of broker-dealer market
price quotations, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other open-end
investment company for which InterCapital serves as investment manager
(collectively, with the Fund, the "Dean Witter Funds")), unless the shareholder
requests that they be paid in cash. Shares so acquired are not subject to the
imposition of a contingent deferred sales charge upon their redemption (see
"Redemption and Repurchases").
EASYINVEST -SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value per
share next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within thirty days after the payment
date. Shares so acquired are not subject to the imposition of a contingent
deferred sales charge upon their redemption (see "Redemptions and Repurchases").
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. The shares will be
redemed at their net asset value determined, at the shareholder's option, on the
tenth or twenty-fifth day (or next following business day) of the relevant month
or quarter and normally a check for the proceeds will be mailed by the Transfer
Agent, or amounts credited to a shareholder's brokerage account, within five
business days after the date of redemption. Any applicable contingent deferred
sales charge will be imposed on shares redeemed under the Withdrawal Plan (See
"Redemptions and Repurchases--Contingent Deferred Sales Charge"). Therefore, any
shareholder participating in the Withdrawal Plan will have sufficient shares
redeemed from his or her account so that the proceeds (net of any applicable
contingent deferred sales charge) to the shareholder will be the designated
monthly or quarterly amount.
TAX-SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of other Dean Witter
17
<PAGE>
Funds sold with a contingent deferred sales charge ("CDSC funds"), for shares of
Dean Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal
Trust, Dean Witter Short-Term Bond Fund and for shares of five Dean Witter Funds
which are money market funds (the foregoing eight non-CDSC funds are hereinafter
collectively referred to in this section as the "Exchange Funds"). Exchanges may
be made after the shares of the Fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another CDSC fund or any Exchange Fund that is not a money
market fund is on the basis of the next calculated net asset value per share of
each fund after the exchange order is received. When exchanging into a money
market fund from the Fund, shares of the Fund are redeemed out of the Fund at
their next calculated net asset value and the proceeds of the redemption are
used to purchase shares of the money market fund at their net asset value
determined the following day. Subsequent exchanges between any of the money
market funds and any of the CDSC funds can be effected on the same basis. No
contingent deferred sales charge ("CDSC") is imposed at the time of any
exchange, although any applicable CDSC will be imposed upon ultimate redemption.
Shares of the Fund acquired in exchange for shares of another CDSC fund having a
different CDSC schedule than that of this Fund will be subject to the CDSC
schedule of this Fund, even if such shares are subsequently re-exchanged for
shares of the CDSC fund originally purchased. During the period of time the
shareholder remains invested in the Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a CDSC fund, the holding
period previously frozen when the first exchange was made resumes on the last
day of the month in which shares of a CDSC fund are reacquired. Thus, the CDSC
is based upon the time (calculated as described above) the shareholder was
invested in a CDSC fund (see "Redemptions and Repurchases--Contingent Deferred
Sales Charge"). However, in the case of shares exchanged for shares of an
Exchange Fund, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees incurred on or after
that date which are attributable to those shares. (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/ or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
18
<PAGE>
The Exchange Privilege may be terminated or revised at any time by the Fund
and/or any of such Dean Witter Funds for which shares of the Fund have been
exchanged, upon such notice as may be required by applicable regulatory
agencies. Shareholders maintaining margin accounts with DWR or another Selected
Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
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 dealer of record and
its account numbers are part of the account information, stockholders may
initiate an exchange of shares of the Fund for shares of any of the Dean Witter
Funds (for which the Exchange Privilege is available) pursuant to this Exchange
Privilege by contacting their account executive (no Exchange Privilege
Authorization Form is required). Other shareholders (and those shareholders who
are clients of DWR or another Selected Broker-Dealer but who wish to make
exchanges directly by writing or telephoning the Transfer Agent) must complete
and forward to the Transfer Agent an Exchange Privilege Authorization Form,
copies of which may be obtained from the Distributor, to initiate an exchange.
If the Authorization Form is used, exchanges may be made in writing or by
contacting the Transfer Agent at (800) 526-3143 (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. Telephone exchange
instructions will be accepted if received by the Transfer Agent between 9:00
a.m. and 4:00 p.m. New York time, on any day the New York Stock Exchange is
open. Any shareholder wishing to make an exchange who has previously filed an
Exchange Privilege Authorization Form and who is unable to reach the Fund by
telephone should contact his or her DWR or other Selected Broker-Dealer account
executive, if appropriate, or make a written exchange request. Shareholders are
advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to implement,
although this has not been the case with the Dean Witter Funds in the past.
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
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds may
be reduced by the amount of any applicable contingent deferred sales charges
(see below). If shares are held in a shareholder's account
19
<PAGE>
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, N.J. 07303 is required. If
certificates are held by the shareholder(s), the shares may be redeemed by
surrendering the certificate(s) with a written request for redemption, along
with any additional documentation required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), and it will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
-----------------------
<S> <C>
First.............................. 5.0%
Second............................. 4.0%
Third.............................. 3.0%
Fourth............................. 2.0%
Fifth.............................. 2.0%
Sixth.............................. 1.0%
Seventh and thereafter............. None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first. In addition, no CDSC
will be imposed on redemptions of shares which were purchased by the employee
benefit plans established by DWR and SPS Transaction Services, Inc. (an
affiliate of DWR) for their employees as qualified under Section 401(k) of the
Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2; and (c) a tax-free return of an
excess contribution to an IRA. For the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. All waivers will be granted only following receipt by the
Distributor of confirmation of the investor's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be
20
<PAGE>
repurchased by DWR and other Selected Broker-Dealers upon the telephonic request
of the shareholder. The repurchase price is the net asset value next computed
(see "Purchase of Fund Shares") after such repurchase order is received by DWR
or other Selected Broker-Dealer, reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed upon repurchase by the Fund,
the Distributor or other Selected Broker-Dealer. The offers by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice by
them at any time. In that event, shareholders may redeem their shares through
the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the redemption or
repurchase, reinstate any portion or all of the proceeds of such redemption or
repurchase in shares of the Fund at net asset value next determined after a
reinstatement request, together with the proceeds, is received by the Transfer
Agent and receive a pro-rata credit for any CDSC paid in connection with such
redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty
days' notice and at net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Code) whose shares due to redemptions by the
shareholder have a value of less than $100 or such lesser amount as may be fixed
by the Directors. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay dividends and to
distribute substantially all of the Fund's net investment income and net
realized short-term and long-term capital gains, if any, at least once each
year. The Fund may, however, determine either to distribute or to retain all or
part of any long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
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 and/or distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment
income and any net short-term and long-term capital gains to shareholders and
otherwise qualify as a regulated investment company under Subchapter M of the
Code, it is not expected that the Fund will be required to pay any federal
income tax on such income and capital gains.
Gains or losses on the Fund's transactions in certain listed options on
securities and on futures and options on futures generally are treated as 60%
long-term gain or loss and 40% short-term gain or
21
<PAGE>
loss. When the Fund engages in options and futures transactions, various tax
regulations applicable to the Fund may have the effect of causing the Fund to
recognize a gain or loss for tax purposes before that gain or loss is realized,
or to defer recognition of a realized loss for tax purposes. Recognition, for
tax purposes, of an unrealized loss may result in a lesser amount of the Fund's
realized net gains being available for distribution.
As a regulated investment company, the Fund is subject to the requirement
that less than 30% of its gross income be derived from the sale of certain
investments held for less than three months. This requirement may limit the
Fund's ability to engage in options and futures transactions.
Shareholders will normally have to pay federal income taxes, and any
applicable state and/or local income taxes, on the dividends and distributions
they receive from the Fund. Such dividends and distributions, to the extent that
they are derived from net investment income 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, for tax purposes, to
have been received by the shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. It is anticipated that only a small portion, if
any, of the Fund's distributions will be eligible for the dividends received
deduction to corporate shareholders.
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 portion taxable as ordinary income and the portion taxable
as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to deduct their pro rata portion of such taxes
from their taxable income or claim United States foreign tax credits with
respect to such taxes. In the absence of such an election, the Fund would deduct
foreign tax in computing the amount of its distributable income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average annual
total return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over a period of one year as well as the life of the Fund.
Average annual total return reflects all income earned by the Fund, any
appreciation or depreciation of the Fund's assets, all expenses incurred by the
Fund and all sales charges which would be incurred by redeeming shareholders,
for the stated periods. It
22
<PAGE>
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, and 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.
Such calculations may or may not reflect the deduction of the contingent
deferred sales charge which, if reflected, would reduce the performance quoted.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par
value and are equal as to earnings, assets and voting privileges. There are no
conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of common stock of the Fund is entitled to its portion
of all of the Fund's assets after all debts and expenses have been paid. The
shares do not have cumulative voting rights.
In accordance with the Fund's By-Laws, the Directors of the Fund were
elected by a shareholder vote at the first meeting of stockholders held
following the initial offering of the shares of the Fund. The Fund is not
required to hold Annual Meetings of Stockholders and in ordinary circumstances
the Fund does not intend to hold such meetings. The Directors may call Special
Meetings of Stockholders for action by shareholder vote as may be required by
the Act or the Fund's By-Laws.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone number or address set forth on the front cover of
this Prospectus.
23
<PAGE>
Dean Witter
European Growth Fund Inc.
Two World Trade Center
New York, New York 10048
DIRECTORS
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Albert T. Sommers
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank N.A.
One Chase Plaza
New York, New York 10005
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
Prospectus
February 16, 1994
DEAN WITTER
EUROPEAN
GROWTH FUND
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 17, 1994 [LOGO]
- --------------------------------------------------------------------------------
Dean Witter European Growth Fund Inc. (the "Fund") is an open-end,
diversified management investment company, whose investment objective is to
maximize the capital appreciation of its investments. The Fund seeks to achieve
its investment objective by investing primarily in securities issued by issuers
located in Europe.
A Prospectus for the Fund dated February 17, 1994, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone number listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
Dean Witter
European Growth Fund Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management............................................................ 3
Directors and Officers................................................................. 7
Investment Practices and Policies...................................................... 10
Investment Restrictions................................................................ 23
Portfolio Transactions and Brokerage................................................... 24
The Distributor........................................................................ 26
Determination of Net Asset Value....................................................... 28
Shareholder Services................................................................... 29
Redemptions and Repurchases............................................................ 33
Dividends, Distributions and Taxes..................................................... 36
Performance Information................................................................ 38
Description of Common Stock............................................................ 38
Custodian and Transfer Agent........................................................... 39
Independent Accountants................................................................ 39
Reports to Shareholders................................................................ 39
Legal Counsel.......................................................................... 39
Experts................................................................................ 39
Registration Statement................................................................. 39
Financial Statements -- October 31, 1993............................................... 40
Report of Independent Accountants...................................................... 51
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under the laws of the state of Maryland on
February 13, 1990.
THE INVESTMENT MANAGER
Dean Witter InterCapital Inc. (the "Investment Manager" or "InterCapital"),
a Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Investment Manager. InterCapital is a wholly-owned
subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware corporation. In
an internal reorganization which took place in January, 1993, InterCapital
assumed the investment advisory, administrative and management activities
previously performed by the InterCapital Division of DWR. (As hereinafter used
in this Statement of Additional Information, the terms "InterCapital" and
"Investment Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund is conducted by or under the direction of officers of the
Fund and of the Investment Manager and Sub-Advisor, subject to review of
investments by the Fund's Board of Directors. In addition, Directors of the Fund
provide guidance on economic factors and interest rate trends. Information as to
these Directors and Officers is contained under the caption "Directors and
Officers".
The Investment Manager is also the investment manager (or investment
adviser) of the following investment companies: Dean Witter Liquid Asset Fund
Inc., InterCapital Income Securities Inc., Dean Witter High Yield Securities
Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter Developing Growth
Securities Trust, Dean Witter Tax-Exempt Securities Trust, Dean Witter Natural
Resource Development Securities Inc., Dean Witter Dividend Growth Securities
Inc., Dean Witter American Value Fund, Dean Witter U.S. Government Money Market
Trust, Dean Witter Variable Investment Series, Dean Witter World Wide Investment
Trust, Dean Witter Select Municipal Reinvestment Fund, Dean Witter U.S.
Government Securities Trust, Dean Witter California Tax-Free Income Fund, Dean
Witter Equity Income Trust, Dean Witter New York Tax-Free Income Fund, Dean
Witter Convertible Securities Trust, Dean Witter Federal Securities Trust, Dean
Witter Managed Assets Trust, High Income Advantage Trust, High Income Advantage
Trust II, High Income Advantage Trust III, Dean Witter Government Income Trust,
Dean Witter Value-Added Market Series, Dean Witter Utilities Fund, Dean Witter
California Tax-Free Daily Income Trust, Dean Witter Strategist Fund, Dean Witter
World Wide Income Trust, Dean Witter Intermediate Income Securities, Dean Witter
Capital Growth Securities, Dean Witter New York Municipal Money Market Trust,
Dean Witter Precious Metals and Minerals Trust, Dean Witter Global Short-Term
Income Fund Inc., Dean Witter Pacific Growth Fund Inc., Dean Witter Multi-State
Municipal Series Trust, Dean Witter Premier Income Trust, Dean Witter Short-Term
U.S. Treasury Trust, InterCapital Insured Municipal Trust, InterCapital Quality
Municipal Investment Trust, Dean Witter Diversified Income Trust, InterCapital
Quality Municipal Income Trust, InterCapital Insured Municipal Income Trust,
InterCapital California Insured Municipal Income Trust, Dean Witter Health
Sciences Trust, Dean Witter Retirement Series, InterCapital Insured Municipal
Trust, Active Assets Money Trust, Active Assets Tax-Free Trust, Active Assets
California Tax-Free Trust, Active Assets Government Securities Trust, Municipal
Income Trust, Municipal Income Trust II, Municipal Income Opportunities Trust,
Municipal Income Opportunities Trust II, Municipal Income Opportunities Trust
III, Municipal Income Trust III, Prime Income Trust and Municipal Premium Income
Trust. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds. InterCapital Quality
Municipal Securities, InterCapital California Quality Municipal Securities,
InterCapital New York Quality Municipal Securities, Dean Witter Global Dividend
Growth Securities, Dean Witter Limited Term Municipal Trust, Dean Witter
Short-Term Bond Fund. In addition, Dean Witter Services Company Inc. ("DWSC"), a
wholly-owned subsidiary of InterCapital, serves as manager for the following
companies for which TCW Funds Management, Inc. is the investment adviser: TCW/DW
Core Equity Trust, TCW/DW North American Government Income Trust, TCW/DW Latin
American Growth Fund, TCW/DW Income and Growth Fund, TCW/DW Small Cap Growth
Fund, TCW/DW Balanced Fund, TCW/DW Term Trust 2000, TCW/DW Term Trust 2002 and
TCW/ DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves as: (i)
sub-adviser to Templeton
3
<PAGE>
Global Opportunities Trust, an open-end investment company; (ii) administrator
of The BlackRock Strategic Term Trust Inc., a closed-end investment company; and
(iii) sub-administrator of MassMutual Participation Investors and Templeton
Global Governments Income Trust, closed-end investment companies.
The Investment Manager also serves as an investment adviser for Dean Witter
World Wide Investment Fund, an investment company organized under the laws of
Luxembourg, shares of which are not available for purchase in the United States
or by American citizens outside the United States.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the investment Manager to
supervise the investment of the Fund's assets. The Investment Manager, through
consultation with the Sub-Advisor and through its own portfolio management
staff, obtains and evaluates such information and advice relating to the
economy, securities markets, and specific securities as it considers necessary
or useful to continuously oversee the management of the assets of the Fund in a
manner consistent with its investment objective.
Under the terms of the Management Agreement, the Investment Manager also
maintains certain of the Fund's books and records and furnishes, at its own
expense, such office space, facilities, equipment, clerical help and bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business, including the preparation of prospectuses, statements of
additional information, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys is, in the opinion of the
Investment Manager, necessary or desirable). In addition, the Investment Manager
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Investment Manager. The Investment Manager also bears the cost
of telephone service, heat, light, power and other utilities provided to the
Fund.
Effective December 31, 1993, pursuant to a Services Agreement between
InterCapital and DWSC, DWSC began to provide the administrative services to the
Fund which were previously performed directly by InterCapital. The foregoing
internal reorganization did not result in any change of the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Management Agreement.
Expenses not expressly assumed by the Investment Manager under the
Management Agreement, by the Sub-Advisor pursuant to the Sub-Advisory Agreement
(see below), or by the Distributor of the Fund's shares, Dean Witter
Distributors Inc. ("Distributors" or the "Distributor") (see "The Distributor")
will be paid by the Fund. The expenses borne by the Fund include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1 (see
"The Distributor"), charges and expenses of any registrar, custodian, stock
transfer and dividend disbursing agent; brokerage commissions; taxes; engraving
and printing of share certificates; registration costs of the Fund and its
shares under federal and state securities laws; the cost and expense of
printing, including typesetting, and distributing Prospectuses and Statements of
Additional Information of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and directors' meetings and of
preparing, printing and mailing of proxy statements and reports to shareholders;
fees and travel expenses of directors or members of any advisory board or
committee who are not employees of the Investment Manager or Sub-Advisor or any
corporate affiliate of the Investment Manager or Sub-Advisor; all expenses
incident to any dividend, withdrawal or redemption options; charges and expenses
of any outside service used for pricing of the Fund's shares; fees and expenses
of the Fund's legal counsel, including counsel to the directors who are not
interested persons of the Fund or of the Investment Manager or Sub-Advisor (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and independent accountants; membership dues of industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and directors) of the Fund which inure
to its benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification relating
thereto); and all other costs of the Fund's operation.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Investment Manager is not liable to the Fund or any
of its investors for any act or omission by the Investment Manager or for any
losses
4
<PAGE>
sustained by the Fund or its investors. The Management Agreement in no way
restricts the Investment Manager from acting as investment manager or adviser to
others.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Investment Manager, the Fund pays the
Investment Manager monthly compensation calculated daily by applying the annual
rate of 1.0% to the Fund's daily net assets. For the fiscal years ended October
31, 1991, 1992 and 1993, the Fund accrued to the Investment Manager total
compensation under the Management Agreement in the amounts of $3,065,226,
$3,185,437 and $3,309,245, respectively.
Pursuant to a Sub-Advisory Agreement between the Investment Manager and
Morgan Grenfell Investment Services Limited (the "Sub-Advisor"), the Sub-Advisor
has been retained, subject to the overall supervision of the Investment Manager
and the Directors of the Fund, to continuously furnish investment advice
concerning individual security selections, asset allocations and overall
economic trends with respect to Europe and to manage the portion of the Fund's
portfolio invested in securities issued by issuers located in Europe, subject to
the supervision of the Investment Manager. On occasion, the Sub-Advisor will
also provide the Investment Manager with investment advice concerning potential
investment opportunities for the Fund which are available outside of Europe.
Morgan Grenfell Investment Services Limited ("MGIS") was organized as a
British corporation in 1972 and currently manages assets of approximately $7.6
billion for U.S. corporate and public employee benefit plans, investment
companies, endowments and foundations. MGIS' principal office is located at 20
Finsbury Circus, London, England. MGIS is a subsidiary of London based Morgan
Grenfell Asset Management Limited, which is itself a subsidiary of London-based
Morgan Grenfell Group plc (which is owned by Deutsche Bank AG, an international
commercial and investment banking group) and is registered as an investment
adviser under the Investment Advisers Act of 1940. In 1838, Morgan Grenfell was
founded to provide merchant banking services, primarily trade financing between
Great Britain and the United States. In 1958, its investment management arm
began operations. In recent years, Morgan Grenfell Group plc has achieved a
prominent position in the securities industry by providing investment and
commercial banking services, financial services, and discretionary management
and advisory services covering all of the world's leading securities markets.
Morgan Grenfell Asset Management Limited, through its various investment
management subsidiaries, which have extensive experience in global investment
management, is currently managing in excess of $41.8 billion worldwide.
Both the Investment Manager and the Sub-Advisor have authorized any of their
directors, officers and employees who have been elected as Directors or officers
of the Fund to serve in the capacities in which they have been elected. Services
furnished by the Investment Manager and the Sub-Advisor may be furnished by
directors, officers and employees of the Investment Manager and the Sub-Advisor.
In connection with the services rendered by the Sub-Advisor, the Sub-Advisor
bears the following expenses: (a) the salaries and expenses of its personnel;
and (b) all expenses incurred by it in connection with performing the services
provided by it as Sub-Advisor, as described above.
As full compensation for the services and facilities furnished to the Fund
and the Investment Manager and expenses of the Fund and the Investment Manager
assumed by the Sub-Advisor, the Investment Manager pays the Sub-Advisor monthly
compensation equal to 40% of the Investment Manager's monthly compensation
payable under the Management Agreement. For the fiscal years ended October 31,
1991, 1992 and 1993, the Investment Manager informed the Fund that it accrued to
the Sub-Advisor total compensation under the Sub-Advisory Agreement of
$1,226,090, $1,274,175 and $1,323,697, respectively.
Pursuant to the Management Agreement and the Sub-Advisory Agreement (the
"Agreements"), total operating expenses of the Fund are subject to applicable
limitations under rules and regulations of states where the Fund is authorized
to sell its shares. Therefore, operating expenses are effectively subject to the
most restrictive of such limitations as the same may be amended from time to
time. Presently, the most restrictive limitation is as follows. If, in any
fiscal year, the Fund's total operating expenses, exclusive of taxes, interest,
brokerage fees, distribution fees and extraordinary expenses (to the extent
permitted by applicable state securities laws and regulations), exceed 2 1/2% of
the first $30,000,000 of average daily net assets, 2% of the next $70,000,000
and 1 1/2% of any excess over $100,000,000, the Investment Manager will
reimburse the Fund for the amount of such excess. Pursuant to the Sub-Advisory
Agreement, if any such reimbursement is
5
<PAGE>
made by the Investment Manager, the Investment Manager will, in turn, be
reimbursed for 40% of such payment by the Sub-Advisor. The reimbursement, if
any, will be calculated daily and credited on a monthly basis. The
above-described expense limitation was not exceeded during the fiscal years
ended October 31, 1991, 1992 and 1993.
The Agreements were initially approved by the Directors on March 16, 1990
and by DWR as the sole shareholder on March 28, 1990. Subsequently, the
continuance of the Agreements until April 30, 1992 was approved by the Board of
Directors at their April 16, 1991 meeting, which approval was ratified by the
stockholders at their Special Meeting held on June 20, 1991. Both agreements may
be terminated at any time, without penalty, on thirty days' notice by the
Directors of the Fund, by the holders of a majority as defined in the Investment
Company Act of 1940, as amended (the "Act"), of the outstanding shares of the
Fund, by the Investment Manager, or the Sub-Advisor (Sub-Advisory Agreement
only). The agreements will automatically terminate in the event of their
assignment (as defined in the Act).
Under their terms, the agreements continued in effect until April 30, 1991,
and will continue from year to year thereafter, provided continuance of the
agreements are approved at least annually by the vote of the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the Directors of the Fund; provided that in either event such continuances are
approved annually by the vote of a majority of the Directors of the Fund who are
not parties to the Agreement or "interested persons" (as defined in the Act) of
any such party (the "Independent Directors"), which votes must be cast in person
at a meeting called for the purpose of voting on such approval. The continuation
of the Management Agreement and Sub-Advisory Agreement until April 30, 1993, was
approved by the Board of Directors, including a majority of the Independent
Directors, at their meeting held on April 29, 1992 and subsequently by the
shareholders of the Fund at a Special Meeting of the Stockholders held on June
24, 1992.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the Independent Directors of the Fund, approved the assumption
by InterCapital of DWR's rights and duties under the Management Agreement and
Sub-Advisory Agreement, which assumptions took place upon the reorganization
described above. At a special meeting of stockholders held on January 12, 1993,
the stockholders voted to approve a new Investment Management Agreement with
InterCapital and a new Sub-Advisory Agreement with the Sub-Advisor to become
effective upon the spin-off by Sears, Roebuck and Co. of its remaining shares of
DWDC (the "Spin-off"), which Agreements took effect on June 30, 1993, and will
continue in effect until April 30, 1994. Both agreements may be terminated at
any time, without penalty, on thirty days' notice by the Trustees of the Fund,
by the holders of a majority (as defined in the Act), of the outstanding shares
of the Fund, by the Investment Manager, or the Sub-Advisor (Sub-Advisory
Agreement only). The agreements will automatically terminate in the event of
their assignment (as defined in the Act).
As stated in the Prospectus, Sears recently sold approximately 20% of DWDC
to the public. Sears has also announced its intention to spin-off the remaining
DWDC shares to Sears stockholders (the "Spin-off"), subject to necessary
approvals . At their meeting held on October 30, 1992, the Directors of the
Fund, including all of the Independent Directors, approved a new investment
management agreement between the Fund and InterCapital and a new Sub-Advisory
Agreement between InterCapital and the Sub-Advisor, both to take effect upon the
Spin-off. The new agreements were approved by the stockholders at a Special
Meeting of Stockholders held on January 12, 1993. The terms of the new
agreements are substantially identical in all material respects to those of the
present agreements, except for the dates of effectiveness and initial
termination.
The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that the Investment Manager or its parent companies may
use, or at any time permit others to use, the name "Dean Witter". The Fund has
also agreed that in the event the investment management contract between
InterCapital and the Fund is terminated, or if the affiliation between the
Investment InterCapital and/or DWR and their parent companies is terminated, the
Fund will eliminate the name "Dean Witter" from its name if InterCapital and/or
DWR or their parent companies shall so request.
6
<PAGE>
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
InterCapital and with the Dean Witter Funds and the
TCW/DW Funds are shown below.
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------
<S> <C>
Jack F. Bennett Retired; Director or Trustee of the Dean Witter Funds;
Director formerly Senior Vice President and Director of Exxon
141 Taconic Road Corporation (1975-January 31, 1989) and Under Secretary of
Greenwich, Connecticut the U.S. Treasury for Monetary Affairs (1974-1975); Director
of Philips Electronics N.V., Tandem Computers Inc. and
Massachusetts Mutual Insurance Company; director or trustee
of various other not-for-profit and business organizations.
Charles A. Fiumefreddo* Chairman, Chief Executive Officer and Director of
Chairman of the Board, President, InterCapital, Distributors and DWSC; Director and Executive
Chief Executive Officer and Director Vice President of DWR; formerly Director and Executive Vice
Two World Trade Center President of DWDC; Chairman, Director or Trustee, President
New York, New York and Chief Executive Officer of the Dean Witter Funds;
Chairman, Chief Executive Officer and Trustee of the TCW/DW
Funds; Chairman and Director of Dean Witter Trust Company
(since October, 1989); Director and/or officer of various
DWDC subsidiaries; formerly Executive Vice President and
Director of DWDC (until February, 1993).
Edwin J. Garn Director or Trustee of the Dean Witter Funds; formerly
Director United States Senator (R-Utah) (1974-1992) and Chairman,
2000 Eagle Gate Tower Senate Banking Committee (1980-1986); Mayor of Salt Lake
Salt Lake City, Utah 84111 City, Utah (1971-1974); Astronaut, Space Shuttle Discovery
(April 12-19, 1985); Vice Chairman, Huntsman Chemical
Corporation (since January, 1993); member of the board of
various civic and charitable organizations.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------
<S> <C>
John R. Haire Chairman of the Audit Committee and Chairman of the
Director Committee of the Independent Directors or Trustees and
439 East 51st Street Director or Trustee of each Dean Witter Fund; Trustee of the
New York, New York TCW/DW Funds; formerly President, Council for Aid to
Education (1978-October, 1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment
Advisor (1964-1978); Director of Washington National
Corporation (insurance) and Bowne & Co., Inc. (printing).
Dr. John E. Jeuck Retired; Director or Trustee of the Dean Witter Funds;
Director formerly Robert Law Professor of Business Administration.
70 East Cedar Street Graduate School of Business, University of Chicago (until
Chicago, Illinois July, 1989); Business Consultant.
Dr. Manuel H. Johnson Senior Partner, Johnson Smick International, Inc., a
Director consulting firm; Koch Professor of International Economics
7521 Old Dominion Drive and Director of the Center for Global Market Studies at
Maclean, Virginia George Mason University; (since September, 1990) Co-Chairman
and a founder of the Group of Seven Council (G7C), an
international economic commission (since September, 1990);
Director or Trustee of the Dean Witter Funds; Trustee of the
TCW/DW Funds; Director of Greenwich Capital Markets Inc.
(broker-dealer); formerly Vice Chairman of the Board of
Governors of the Federal Reserve System (February,
1986-August, 1990) and Assistant Secretary of the U.S.
Treasury (1982-1986).
Paul Kolton Director or Trustee of the Dean Witter Funds; Chairman of
Director the Audit Committee and Committee of the Independent
9 Hunting Ridge Road Trustees and Trustee of the TCW/DW Funds; formerly Chairman
Stamford, Connecticut of the Financial Accounting Standards Advisory Council;
formerly Chairman and Chief Executive Officer of the
American Stock Exchange; Director of UCC Investors Holding
Inc. (Uniroyal Chemical Company, Inc.); director or trustee
of various not-for-profit organizations.
Michael E. Nugent General Partner, Triumph Capital, L.P., a private invest-
Director ment partnership (since April, 1988); Director or Trustee of
237 Park Avenue the Dean Witter Funds; Trustee of the TCW/DW Funds; formerly
New York, New York Vice President, Bankers Trust Company and BT Capital
Corporation (September, 1984-March, 1988); Director of
various business organizations.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------
<S> <C>
Albert T. Sommers Senior Fellow and Economic Counselor (formerly Senior Vice
Director President and Chief Economist) of the Conference Board, a
845 Third Avenue not-for-profit business research organization; President,
New York, New York Albert T. Sommers, Inc., an economic consulting firm;
Director or Trustee of the Dean Witter Funds; formerly
Chairman, Price Advisory Committee of the Council on Wage
and Price Stability (December, 1979-December, 1980);
Economic Adviser, The Ford Foundation; Director of Grow
Group, Inc. (chemicals), MSI, Inc. (medical services) and
Westbridge Capital, Inc. (insurance).
Edward R. Telling* Retired; Director or Trustee of the Dean Witter Funds;
Director formerly Chairman of the Board of Directors and Chief
Sears Tower Executive Officer (1978-1985) and President (from January,
Chicago, Illinois 1981-March, 1982 and from February, 1984-August, 1984) of
Sears, Roebuck and Co.; formerly Director of Sears, Roebuck
and Co..
Sheldon Curtis Senior Vice President, Secretary and General Counsel of
Vice President, Secretary and General Counsel InterCapital and DWSC; Senior Vice President and Secretary
Two World Trade Center of Dean Witter Trust Company (since October, 1989); Senior
New York, New York Vice President, Assistant Secretary and Assistant General
Counsel of Distributors; Assistant Secretary of DWR and Vice
President, Secretary and General Counsel of the Dean Witter
Funds and the TCW/DW Funds.
Thomas F. Caloia First Vice President (since May, 1991) and Assistant
Treasurer Treasurer (since January, 1993) of InterCapital; First Vice
Two World Trade Center President and Assistant Treasurer of DWSC and Treasurer of
New York, New York the Dean Witter Funds and TCW/DW Funds; previously Vice
President of InterCapital.
- ---------
*Denotes Directors who are "interested persons" of the Fund, as defined in the Act.
</TABLE>
In addition, Robert M. Scanlan, President of InterCapital and DWSC, David A.
Hughey, Executive Vice President of InterCapital and DWSC, Edmund C. Puckhaber,
Executive Vice President of InterCapital and Thomas H. Connelly, Senior Vice
President of InterCapital, are Vice Presidents of the Fund and Barry Fink, First
Vice President and Assistant General Counsel of InterCapital and DWSC, and
Marilyn K. Cranney, Lawrence S. Lafer, Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, are
Assistant Secretaries of the Fund.
The Fund pays each Director who is not an employee of the Investment Manager
or an affiliated company an annual fee of $1,200 ($1,600 prior to December 31,
1993) plus $50 for each meeting of the Board of Directors plus $50 for each
meeting of the Audit Committee of the Directors and each meeting of the
Committee of the Independent Directors attended by the Director (the Fund pays
the Chairman of the Audit Committee an additional annual fee of $1,000 ($1,200
prior to December 31, 1993) and pays the Chairman of the Committee of the
Independent Directors an additional annual fee of $2,400, in each case inclusive
of the Committee meeting fees). The Fund also reimburses such Directors for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Effective January 1, 1994, the Fund has adopted a
retirement program under which an Independent Director who retires after a
minimum required period of service would be entitled to retirement payments upon
reaching the eligible retirement age (normally, after attaining age 72) based
upon length of service and computed as a percentage of one-fifth of the total
compensation earned by such Director for service to the Fund in the
9
<PAGE>
five-year period prior to the date of the Director's retirement. Directors and
officers of the Fund who are employed by the Investment Manager or an affiliated
company receive no compensation or expense reimbursement from the Fund. The Fund
has adopted a retirement program under which a Director who is not an
"interested person" of the Fund and who retires after a minimum required period
of service would be entitled to retirement payments upon reaching the eligible
retirement age (normally, after attaining age 72) based upon length of service
and computed as a percentage of one-fifth of the total compensation earned by
such Director for service to the Fund in the five year period prior to the date
of the Director's retirement. No Independent Director has retired since the
adoption of the program and no payments by the Fund have been made under the
program to any Director. For the fiscal year ended October 31, 1993, the Fund
accrued $35,330 in Directors' fees, expenses, and benefits under the
above-described retirement program, and its predecessor. As of the date of the
Statement of Additional Information, the aggregate shares of common stock of the
Fund owned by the Fund's officers and Directors as a group was less than 1
percent of the Fund's shares of common stock outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
As stated in the Prospectus, while the Fund currently anticipates investing
over 25% of its total assets in securities of issuers located in the United
Kingdom, it may also invest more than 25% of its total assets, at any time, in
the securities of issuers located in each of the following countries: France,
Germany, the Netherlands and Switzerland. While it is not anticipated that the
Fund will invest more than 25% of its total assets in the securities of issuers
located in any such country, the Fund's Registration Statement will be amended
to contain disclosure discussing the risks pertaining to a concentration of the
Fund's assets in such country at such time as the 25% level is exceeded.
PRIVATE PLACEMENTS. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Directors of the Fund, will make a
determination as to the liquidity of each restricted security pruchased by the
Fund. If a restricted secruity is determined to be "liquid", such security will
not be included within the category "illiquid securities", which is limited by
the Fund's investment restrictions to 10% of the Fund's total assets.
CONVERTIBLE SECURITIES. The Fund may invest in fixed-income securities
which are convertible into common stock. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security is
a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, will sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of
10
<PAGE>
capital appreciation due to the conversion privilege.) At such times the price
of the convertible security will tend to fluctuate directly with the price of
the underlying equity security. Convertible securities may be purchased by the
Fund at varying price levels above their investment values and/or their
conversion values in keeping with the Fund's objectives.
WARRANTS. The Fund may acquire warrants, including warrants which are
attached to fixed-income securities purchased for its portfolio, and hold such
warrants until the Investment Manager and/or the Sub-Advisor determines it is
prudent to sell. Warrants are, in effect, an option to purchase equity
securities at a specific price, generally valid for a specific period of time,
and have no voting rights, pay no dividends and have no rights with respect to
the corporations issuing them.
U.S. GOVERNMENT SECURITIES. Securities issued by the U.S. Government, its
agencies or instrumentalities in which the Fund may invest include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt securities
with shorter maturities.
ZERO COUPON TREASURY SECURITIES. A portion of the U.S. Government
securities purchased by the Fund may be "zero coupon" Treasury securities. These
are U.S. Treasury bills, notes and bonds which have been stripped of their
unmatured interest coupons and receipts or which are certificates representing
interests in such stripped debt obligations and coupons. 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 Fund intends
to invest in such zero coupon treasury securities as STRIPS, Treasury Receipts,
Physical Coupons, and Proprietary Receipts. However, the Fund does not intend,
during its current fiscal year, to invest in such securities in amounts
totalling more than 5% of its total assets.
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.
11
<PAGE>
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However, in the last few years a number of banks and brokerage
firms have separated ("stripped") the principal portions from the coupon
portions of the U.S. Treasury bonds and notes and sold them separately in the
form of receipts or certificates representing undivided interests in these
instruments (which instruments are generally held by a bank in a custodial or
trust account).
As stated in the Prospectus, the money market instruments which the Fund may
purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1,000,000,000 or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks
except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of
$1,000,000,000 or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1,000,000,000
or more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions, having total assets of less than $1,000,000,000, if the
principal amount of the obligation is insured by the Federal Deposit Insurance
Corporation, limited to $100,000 principal amount per certificate and to 10% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
S&P or the highest grade by Moody's or, if not rated, issued by a company having
an outstanding debt issue rated at least AA by S&P or Aa by Moody's.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large, commercial banks) and their customers. Such forward
contracts will only be entered into with United States banks and their foreign
branches or foreign banks whose assets total $1 billion or more. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for trades.
When management of the Fund believes that the currency of a particular
foreign country may suffer a substantial movement against the U.S. dollar, it
may enter into a forward contract to purchase or sell, for a fixed amount of
dollars or other currency, the amount of foreign currency approximating the
value of some or all of the Fund's portfolio securities denominated in such
foreign currency. The Fund will also not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts would obligate the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the management of the Fund
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believes that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Fund will be served.
The Fund's custodian bank will place cash, U.S. Government securities or other
appropriate liquid high grade debt securities in a segregated account of the
Fund in an amount equal to the value of the Fund's total assets committed to the
consummation of forward contracts entered into under the circumstances set forth
above. If the value of the securities placed in the segregated account declines,
additional cash or securities will be placed in the account on a daily basis so
that the value of the account will equal the amount of the Fund's commitments
with respect to such contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar, at the maturity of the
forward contract for delivery by the Fund of a foreign currency, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. It is impossible to forecast the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio securities
if its market value exceeds the amount of foreign currency the Fund is obligated
to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a fixed-income security
or the currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a greater
extent than the value of the premium received for the option. The Fund will
maintain with its Custodian at all times, cash, U.S. Government securities and
high grade debt obligations in a segregated account equal in value to all
forward contract obligations and option contract obligations entered into in
hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
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OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and purchase options of the same series
to effect closing transactions, and may hedge against potential changes in the
market value of its investments (or anticipated investments) by purchasing put
and call options on portfolio (or eligible portfolio) securities (and the
currencies in which they are denominated) and engaging in transactions involving
futures contracts and options on such contracts.
OPTIONS ON FOREIGN CURRENCIES. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums paid for the
options). Conversely, the Fund may purchase call options on foreign currencies
in which securities it anticipates purchasing are denominated to secure a set
U.S. dollar price for such securities and protect against a decline in the value
of the U.S. dollar against such foreign currency. The Fund may also purchase
call and put options to close out written option positions.
The Fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which
it is denominated and the U.S. dollar, then a loss to the Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. The Fund may also write options to close out long call
option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the opinion of the management of the
Fund, the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
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COVERED CALL WRITING. As stated in the Prospectus, the Fund is permitted to
write covered call options on portfolio securities and on the U.S. Dollar and
foreign currencies, without limit, in order to aid in achieving its investment
objectives. Generally, a call option is "covered" if the Fund owns, or has the
right to acquire, without additional cash consideration (or for additional cash
consideration held for the Fund by its Custodian in a segregated account) the
underlying security (currency) subject to the option except that in the case of
call options on U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a
different series from those underlying the call option, but with a principal
amount and value corresponding to the exercise price and a maturity date no
later than that of the security (currency) deliverable under the call option. A
call option is also covered if the Fund holds a call on the same security as the
underlying security (currency) of the written option, where the exercise price
of the call used for coverage is equal to or less than the exercise price of the
call written or greater than the exercise price of the call written if the mark
to market difference is maintained by the Fund in cash, U.S. Government
securities or other high grade debt obligations which the Fund holds in a
segregated account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. The premium received will fluctuate with
varying economic market conditions. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written.
As regards listed options and certain over-the-counter ("OTC") options,
during the option period, the Fund may be required, at any time, to deliver the
underlying security (currency) against payment of the exercise price on any
calls it has written (exercise of certain listed and OTC options may be limited
to specific expiration dates). This obligation is terminated upon the expiration
of the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received for the option less the commission paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written. See "Risks of Options and Futures
Transactions," below.
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PURCHASING CALL AND PUT OPTIONS. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing or, in the case of a
call option on foreign currency, to hedge against an adverse exchange rate move
of the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The purchase
of the call option to effect a closing transaction on a call written
over-the-counter may be a listed or an OTC option. In either case, the call
purchased is likely to be on the same securities (currencies) and have the same
terms as the written option. If purchased over-the-counter, the option would
generally be acquired from the dealer or financial institution which purchased
the call written by the Fund.
The Fund may purchase put options on securities (currencies) which it holds
in its portfolio only to protect itself against a decline in the value of the
security. If the value of the underlying security (currency) were to fall below
the exercise price of the put purchased in an amount greater than the premium
paid for the option, the Fund would incur no additional loss. In addition, the
Fund may sell a put option which it has previously purchased prior to the sale
of the securities (currencies) underlying such option. Such a sale would result
in a net gain or loss depending on whether the amount received on the sale is
more or less than the premium and other transaction costs paid on the put option
which is sold. And such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security (currency). If a put
option purchased by the Fund expired without being sold or exercised, the
premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security (or the value of its denominated currency) increase, but has
retained the risk of loss should the price of the underlying security (or the
value of its denominated currency) decline. The writer has no control over the
time when it may be required to fulfill its obligation as a writer of the
option. Once an option writer has received an exercise notice, it cannot effect
a closing purchase transaction in order to terminate its obligation under the
option and must deliver or receive the underlying securities at the exercise
price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call option
writer may not be able to sell an underlying security at a time when it might
otherwise be advantageous to do so.
As discussed in the Prospectus, the Fund's ability to close out its position
as a writer of an option is dependent upon the existence of a liquid secondary
market on Option Exchanges. There is no assurance that such a market will exist,
particularly in the case of OTC options, as such options will generally only be
closed out by entering into a closing purchase transaction with the purchasing
dealer. However, the Fund may be able to purchase an offsetting option which
does not close out its position as a writer but constitutes an asset of equal
value to the obligation under the option written. If the Fund is not able to
either enter into a closing purchase transaction or purchase an offsetting
position, it will be required to maintain the securities subject to the call, or
the collateral underlying the put, even though it might not be advantageous to
do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the Options Clearing Corporation ("OCC") to handle current trading volume; or
(vi) a decision by one or more Exchanges to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in
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that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would generally continue to be excercisable in accordance with
their terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
Each of the Exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different Exchanges or are held or written on one or more accounts or
through one or more brokers). An Exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
FUTURES CONTRACTS. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and index futures contracts ("futures contracts"),
that are traded on U.S. and foreign commodity exchanges, on such underlying
securities as U.S. Treasury bonds, notes and bills and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency futures") and on such indexes of U.S. and foreign securities as may
exist or come into being ("index" futures).
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security (currency) and the same delivery date. If the offsetting sale
price exceeds the purchase price, the purchaser would realize a gain, whereas if
the purchase price exceeds the offsetting sale price, the purchaser would
realize a loss. There is no assurance that the Fund will be able to enter into a
closing transaction.
INTEREST RATE FUTURES CONTRACTS. When the Fund enters into an interest rate
futures contract, it is initially required to deposit with the Fund's Custodian,
in a segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other high grade
short-term obligations equal to approximately 3% of the contract amount. Initial
margin requirements are established by the Exchanges on which futures contracts
trade and may, from time to time, change. In addition, brokers may establish
margin deposit requirements in excess of those required by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a brokers' client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities called "variation margin", with the Fund's futures contract clearing
broker, which are reflective of price fluctuations in the futures contract.
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Currently, interest rate futures contracts can be purchased on debt securities
such as U.S. Treasury Bills and Bonds, U.S. Treasury Notes with Maturities
between 6 1/2 and 10 years, GNMA Certificates and Bank Certificates of Deposit.
CURRENCY FUTURES. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the delivery date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Investment Manager will assess such factors as cost spreads, liquidity and
transaction costs in determining whether to utilize futures contracts or forward
contracts its in foreign currency transactions and hedging strategy. Currently,
currency futures exist for, among other foreign currencies, the Japanese yen,
German marks, Canadian dollars, British pound, Swiss franc and European currency
unit.
Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulation regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Investment Manager's opinion, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying foreign
currency futures contracts.
INDEX FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in the
form of variation margin payments. The Fund may be required to make additional
margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. The writer of an option on a futures contract
is required to deposit initial and variation margin pursuant to requirements
similar to those applicable to futures contracts. Premiums received from the
writing of an option on a futures contract are included in initial margin
deposits.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities (or the currency in which they are
denominated) held by the Fund. However, it is possible that the futures market
may
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advance and the value of securities (or the currency in which they are
denominated) held in the portfolio of the Fund may decline. If this occurred,
the Fund would lose money on the futures contract and also experience a decline
in value of its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a diversified
portfolio will tend to move in the same direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Fund may determine not to invest in the securities as planned and will realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities.
In order to assure that the Fund is entering into transactions in futures
contracts for hedging purposes as such is defined by the Commodity Futures
Trading Commission either: 1) a substantial majority (i.e., approximately 75%)
of all anticipatory hedge transactions (transactions in which the Fund does not
own at the time of the transaction, but expects to acquire, the securities
underlying the relevant futures contract) involving the purchase of futures
contracts will be completed by the purchase of securities which are the subject
of the hedge or 2) the underlying value of all long positions in futures
contracts will not exceed the total value of a) all short-term debt obligations
held by the Fund; b) cash held by the Fund; c) cash proceeds due to the Fund on
investments within thirty days; d) the margin deposited on the contracts; and e)
any unrealized appreciation in the value of the contracts.
If the Fund has sold a call option in a futures contract, it will cover this
position by holding, in a segregated account maintained at its Custodian, cash,
U.S. Government securities or other high grade debt obligations equal in value
(when added to any initial or variation margin on deposit) to the market value
of the securities (currencies) underlying the futures contract or the exercise
price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract it will
hold cash, U.S. Government securities or other high grade debt obligations equal
to the purchase price of the contract (less the amount of initial or variation
margin on deposit) in a segregated account maintained for the Fund by its
Custodian. Alternatively, the Fund could cover its long position by purchasing a
put option on the same futures contract with an exercise price as high or higher
than the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instruments underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
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<PAGE>
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
Similarly, in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Investment Manager.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted by the fact that the futures market is dominated by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and the
movements in the prices of the securities (currencies) which are the subject of
the hedge. If participants in the futures market elect to close out their
contracts through offsetting transactions rather than meet margin deposit
requirements, distortions in the normal relationship between the debt securities
or currency markets and futures markets could result. Price distortions could
also result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends may still not result in a successful hedging
transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities (currencies) at a time when it may
be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities (currencies).
OTHER INVESTMENT POLICIES
REPURCHASE AGREEMENTS. When cash may be available for only a few days, it
may be invested by the Fund in repurchase agreements until such time as it may
otherwise be invested or used for payments of obligations of the Fund. A
repurchase agreement may be viewed as a type of secured lending by the
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Fund which typically involves the acquisition by the Fund of government
securities from a selling financial institution such as a bank, savings and loan
association or broker-dealer. The agreement provides that the Fund will sell
back to the institution, and that the institution will repurchase, the
underlying security ("collateral") at a specified price and at a fixed time in
the future, usually not more than seven days from the date of purchase. The
collateral will be maintained in a segregated account and will be
marked-to-market daily to determine that the full value of the collateral, as
specified in the agreement, is always at least equal to the purchase price plus
accrued interest. If required, additional collateral will be added to the
account to maintain full collateralization. In the event the original seller
defaults on its obligations to repurchase, as a result of its bankruptcy or
otherwise, the Fund will seek to sell the collateral, which action could involve
costs or delays. In such case, the Fund's ability to dispose of the collateral
to recover its investment may be restricted or delayed.
The Fund will accrue interest from the institution until the time when the
repurchase is to occur. Although such date is deemed by the Fund to be the
maturity date of a repurchase agreement, the maturities of securities subject to
repurchase agreements are not subject to any limits and may exceed one year.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. Repurchase agreements will be transacted only with large,
well-capitalized and well-established financial institutions whose financial
condition will be continuously monitored by the management of the Fund subject
to procedures established by the Directors. The procedures also require that the
collateral underlying the agreement be specified. The Fund has not to date nor
does it presently intend to enter into repurchase agreements so that more than
5% of the Fund's net assets are subject to such agreements.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Fund of the reverse repurchase transaction is less than the cost of obtaining
the cash otherwise. Opportunities to achieve this advantage may not always be
available, and the Fund intends to use the reverse repurchase technique only
when it will be to its advantage to do so. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash or cash
equivalents or other portfolio securities (i.e., U.S. Government securities)
equal in value to its obligations in respect of reverse repurchase agreements.
Reverse repurchase agreements are considered borrowings by the Fund and, in
accordance with legal requirements, the Fund will maintain an asset coverage
(including the proceeds) of at least 300% with respect to all reverse repurchase
agreements. Reverse repurchase agreements may not exceed 10% of the Fund's total
assets. The Fund will make no purchases, during its current fiscal year, of
portfolio securities while it is still subject to a reverse repurchase
agreement. The Fund has not to date nor does it presently intend to enter into
any reverse repurchase agreements.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. When
such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
the Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of
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<PAGE>
delivery of the securities, the value may be more or less than the purchase
price. The Fund will also establish a segregated account with the Fund's
custodian bank in which it will continuously maintain cash or U.S. Government
securities or other high grade debt portfolio securities equal in value to
commitments for such when-issued or delayed delivery securities; subject to this
requirement, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. The Fund's management and the
Directors do not believe that the Fund's net asset value or income will be
adversely affected by its purchase of securities on such basis.
WHEN, AS AND IF ISSUED SECURITIES. As discussed in the Prospectus, the Fund
may purchase securities on a "when, as and if issued" basis under which the
issuance of the security depends upon the occurrence of a subsequent event, such
as approval of a merger, corporate reorganization, leveraged buyout or debt
restructuring. The commitment for the purchase of any such security will not be
recognized in the portfolio of the Fund until the Investment Manager determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will also establish a segregated
account with its custodian bank in which it will continuously maintain cash or
U.S. Government securities or other high grade debt portfolio securities equal
in value to recognized commitments for such securities. Settlement of the trade
will occur within five business days of the occurrence of the subsequent event.
The value of the Fund's commitments to purchase the securities of any one
issuer, together with the value of all securities of such issuer owned by the
Fund, may not exceed 5% of the value of the Fund's total assets at the time the
initial commitment to purchase such securities is made (see "Investment
Restrictions"). Subject to the foregoing restrictions, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund's
management and the Directors do not believe that the net asset value of the Fund
will be adversely affected by its purchase of securities on such basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to notice provisions described below), and are at all times
secured by cash or appropriate high-grade debt obligations, which are maintained
in a segregated account pursuant to applicable regulations and that are at least
equal to the market value, determined daily, of the loaned securities. The
advantage of such loans is that the Fund continues to receive the income on the
loaned securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations. The
Fund will not lend its portfolio securities if such loans are not permitted by
the laws or regulations of any state in which its shares are qualified for sale
and will not lend more than 25% of the value of its total assets. A loan may be
terminated by the borrower on one business days' notice, or by the Fund on two
business days' notice. If the borrower fails to deliver the loaned securities
within two days after receipt of notice, the Fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss in
the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the Fund's management pursuant to procedures
adopted and reviewed, on an ongoing basis, by the Board of Directors of the
Fund.
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<PAGE>
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. The Fund has not
to date nor does it presently intend to lend any of its portfolio securities.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the outstanding
shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein, although the Fund
may purchase securities of issuers which engage in real estate operations
and securities secured by real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets or in accordance with the provisions of Section 12(d) of the Act and
any Rules promulgated thereunder. The Fund, however, has no present
intention to make any investments, during the current fiscal year, in
securities issued by other investment companies.
The Fund anticipates that it will incur any indirect expenses incurred
through investment in an investment company, such as the payment of a
management fee. Furthermore, it should be noted that foreign investment
companies are not subject to the U.S. securities laws and may be subject to
fewer or less stringent regulations than U.S. investment companies.
4. Borrow money (except insofar as to the Fund may be deemed to have
borrowed by entrance into a reverse repurchase agreement up to an amount not
exceeding 10% of the Fund's total assets), except that the Fund may borrow
from a bank for temporary or emergency purposes in amounts not exceeding 5%
(taken at the lower of cost or current value) of its total assets (not
including the amount borrowed).
5. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase or reverse repurchase agreement; (b) purchasing
any securities on a when-issued or delayed delivery basis; (c) purchasing or
selling futures contracts, forward foreign exchange contracts or options;
(d) borrowing money in accordance with restrictions described above; or (e)
lending portfolio securities.
6. Make loans of money or securities, except: (a) by the purchase of
publicly distributed debt obligations in which the Fund may invest
consistent with its investment objectives and policies; (b) by investment in
repurchase or reverse repurchase agreements; or (c) by lending its portfolio
securities.
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<PAGE>
7. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it either owns an equal amount of
such securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the
same issue as, and equal in amount to, the securities sold short.
8. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
9. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a nonfundamental policy, the Fund will not invest more than
5% of its net assets in warrants, including not more than 2% of such assets in
warrants not listed on either a recognized domestic or foreign exchange.
However, the acquisition of warrants attached to other securities is not subject
to this restriction.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Fund's Directors, the Investment
Manager and the Sub-Advisor are responsible for decisions to buy and sell
securities of the Fund, the selection of brokers and dealers to effect the
transactions, and the negotiation of brokerage commissions, if any. Purchases
and sales of securities on a stock exchange are effected through brokers who
charge a commission for their services. In the over-the-counter market,
securities are generally traded on a "net" basis with non-affiliated dealers
acting as principal for their own accounts without a stated commission, although
the price of the security usually includes a profit to the dealer. The Fund also
expects that securities will be purchased at times in underwritten offerings
where the price includes a fixed amount of compensation, generally referred to
as the underwriter's concession or discount. In the underwritten offerings,
securities are purchased at a fixed price which includes an amount of
compensation equal to the underwriter's concession. On occasion, certain money
market instruments may be purchased directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal years ended October 31,
1991, 1992 and 1993, the Fund paid $1,356,671, $1,334,039 and $1,404,525,
respectively, in brokerage commissions.
The Investment Manager and the Sub-Advisor currently serve as investment
advisors to a number of clients, including, in the case of the Investment
Manager, other investment companies, and may in the future act as investment
manager or adviser to others. It is the practice of the Investment Manager and
the Sub-Advisor to cause purchase and sale transactions to be allocated among
the Fund and others whose assets it manages in such manner as it deems
equitable. In making such allocations among the Fund and other client accounts,
the main factors considered are the respective investment objectives, the
relative size of portfolio holdings of the same or comparable securities, the
availability of cash for investment, the size of investment commitments
generally held and the opinions of the persons responsible for managing the
portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and the Sub-Advisor from obtaining
a high quality of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the Investment
Manager and the Sub-Advisor rely upon their experience and knowledge regarding
commissions generally charged by various brokers and on their
24
<PAGE>
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily subjective
and imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
In seeking to implement the Fund's policies, the Investment Manager and the
Sub-Advisor effect transactions with those brokers and dealers who the
Investment Manager and the Sub-Advisor believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager
and/or the Sub-Advisor believe such prices and executions are obtainable from
more than one broker or dealer, they may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Investment Manager and/or the Sub-Advisor. Such
services may include, but are not limited to, any one or more of the following:
information as to the availability of securities for purchase or sale;
statistical or factual information or opinions pertaining to investment; wire
services; and appraisals or evaluations of portfolio securities.
The information and services received by the Investment Manager and the
Sub-Advisor from brokers and dealers may be of benefit to the Investment Manager
and the Sub-Advisor in the management of accounts of some of its other clients
and may not in all cases benefit the Fund directly. While the receipt of such
information and services is useful in varying degrees and would generally reduce
the amount of research or services otherwise performed by the Investment Manager
and the Sub-Advisor and thereby reduce their expenses, it is of indeterminable
value and the fees paid to the Investment Manager and the Sub-Advisor are not
reduced by any amount that may be attributable to the value of such services.
Pursuant to an order of the Securities and Exchange Commission, the Fund may
effect principal transactions in certain money market instruments with DWR. The
Fund will limit its transactions with DWR to U.S. Government and Government
Agency Securities, Bank Money Instruments (i.e., Certificates of Deposit and
Bankers' Acceptances) and Commercial Paper. Such transactions will be effected
with DWR only when the price available from DWR is better than that available
from other dealers.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR and/or three affiliated broker-dealers of the Sub-Adviser
- -- Deutsche Bank A.G., Deutsche Bank Capital Markets Ltd. and C.J. Lawrence,
Morgan Grenfell Inc. In order for these broker-dealers to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration received
by them must be reasonable and fair compared to the commissions, fees or other
remuneration paid to other brokers in connection with comparable transactions
involving similar securities being purchased or sold on an exchange during a
comparable period of time. This standard would allow them to receive no more
than the remuneration which would be expected to be received by an unaffiliated
broker in a commensurate arm's-length transaction. Furthermore, the Directors of
the Fund, including a majority of the Directors who are not "interested" persons
of the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to
these broker-dealers are consistent with the foregoing standard.
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<PAGE>
THE DISTRIBUTOR
- --------------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of DWDC. The Directors who
are not, and were not at the time they voted, interested persons of the Fund, as
defined in the Act (the "Independent Directors"), approved, at their meeting
held on October 30, 1992, a Distribution Agreement appointing the Distributor as
exclusive distributor of the Fund's shares and providing for the Distributor to
bear distribution expenses not borne by the Fund. At the same meeting, the
Directors of the Fund, including all of the Independent Directors, approved a
new Distribution Agreement between the Fund and the Distributor, to take effect
upon the Spin-off (the Spin-off took place on June 30, 1993). The new
Distribution Agreement is substantively identical to the current Distribution
Agreement in all material respects, except for the dates of effectiveness. By
its terms, the Distribution Agreement has an initial term ending April 30, 1994,
and provides that it will remain in effect from year to year thereafter if
approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws. The Fund and the Distributor
have agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act of 1933, as amended. Under the Distribution
Agreement, the Distributor uses its best efforts in rendering services to the
Fund, but in the absence of willful misfeasance, bad faith, gross negligence or
reckless disregard of its obligations, the Distributor is not liable to the Fund
or any of its shareholders for any error of judgment or mistake of law or for
any act or omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION. To compensate the Distributor for the services it
provides and for the expenses borne by the Distributor or any selected dealer
under the Distribution Agreement, the Fund has adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act (the "Plan") pursuant to which the Fund
pays the Distributor compensation accrued daily and payable monthly at the
annual rate of 1% of the lesser of: (a) the average daily aggregate gross sales
of the Fund's shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's shares redeemed since the Fund's
inception upon which a contingent deferred sales charge has been imposed or upon
which such charge has been waived; or (b) the Fund's average daily net assets.
The Distributor also receives the proceeds of contingent deferred sales charges
imposed on certain redemptions of shares, which are separate and apart from
payments made pursuant to the Plan (see "Redemption and Repurchases --
Contingent Deferred Sales Charge" in the Prospectus). DWR, the then Distributor
of the shares of the Fund, has informed the Fund that it received approximately
$1,139,000, $1,174,000 and $861,000 in contingent deferred sales charges for the
fiscal years ended October 31, 1991, 1992 and 1993, respectively.
Under its terms, the Plan had an initial term ending April 30, 1990, and
provided that it will remain in effect from year to year thereafter, provided
such continuance is approved annually by a vote of the Directors, including a
majority of the Directors who are not "interested persons" of the Fund (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Directors"). The Plan was
submitted to and approved by the Directors of the Fund, including a majority of
the Independent 12b-1 Directors, at their meeting held on April 16, 1991 and
subsequently by the stockholders at the Special Meeting of Stockholders held on
June 20, 1991. At the
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<PAGE>
April 29, 1992 meeting, the Directors and the Independent 12b-1 Directors, after
evaluating all the information they deemed necessary to make an informed
determination of whether the Plan should be continued, approved the continuation
of the Plan until April 30, 1993. In making their determination to continue the
Plan, the Directors considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan; and (3) what services had been provided and were continuing to
be provided under the Plan by DWR to the Fund and its stockholders. Based upon
their review, the Directors of the Fund, including each of the Independent 12b-1
Directors, determined that continuation of the Plan would be in the best
interest of the Fund and would have a reasonable likelihood of continuing to
benefit the Fund and its stockholders. In the Directors' quarterly review of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
At their meeting held on October 30, 1992, the Directors of the Fund,
including all of the independent 12b-1 Directors, approved certain amendments to
the Plan which took effect in January, 1993 and were designed to reflect the
facts that, upon the reorganization described above, the share distribution
activities theretofore performed for the Fund by DWR were assumed by the
Distributor and that DWR's sales activities are now being performed pursuant to
the terms of a selected dealer agreement between the Distributor rather than to
DWR as they had been before the amendment, and that the Distributor in turn is
authorized to make payments to DWR, its affiliates or other selected
broker-dealers (or direct that the Fund pay such entities directly). The
Distributor is also authorized to retain part of such fee as compensation for
its own distribution-related expenses.
The Distributor has informed the Fund that a portion of the fees payable by
the Fund each year pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a "service fee" under the Rules of Fair
Practice of the National Association of Securities Dealers, Inc. (of which the
Distributor is a member). Such portion of the fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by the Fund is characterized as an "asset-based sales
charge" as defined in the aforementioned Rules of Fair Practice.
Pursuant to the Plan and as required by Rule 12b-1, the Directors receive
and review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended by the Distributor under the
Plan and the purpose for which such expenditures were made. The Fund accrued
amounts payable to the Distributor under the Plan, during the fiscal year ended
October 31, 1993, of $3,309,245. This amount is equal to payments required to be
paid monthly by the Fund which were computed at the annual rate of 1.0% of the
average daily net assets of the Fund. This 12b-1 fee is treated by the Fund as
an expense in the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares without
any deduction for sales charges. Shares of the Fund may be subject to a
contingent deferred sales charge, payable to the Distributor, if redeemed during
the six years after their purchase. DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of the Fund's shares,
currently a gross sales credit of up to 5% of the amount sold and an annual
residual commission of up to 0.25 of 1% of the current value of the amount sold.
The gross sales credit is a charge which reflects commissions paid by DWR to its
account executives and DWR's Fund associated distribution-related expenses,
including sales compensation, and overhead and other branch office distribution-
related expenses including: (a) the expenses of operating DWR's branch offices
in connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund share sales. The distribution fee that the Distributor
receives from the Fund under the Plan, in effect, offsets distribution expenses
incurred on behalf of the Fund opportunity costs, such as the gross sales credit
and an assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of its distribution expenses to the Fund,
27
<PAGE>
such assumed interest (computed at the "broker's call rate") has been calculated
on the gross sales credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received by
the Distributor upon redemption of shares of the Fund. No other interest charge
is included as a distribution expense in the Distributor's calculation of its
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $3,309,245 accrued under the Plan for the fiscal
year ended October 31, 1993 to DWR, the then exclusive distributor of the Fund's
shares. DWR estimates that it has spent, pursuant to the Plan, $31,080,799 on
behalf of the Fund since the inception of the Fund. It is estimated that this
amount was spent in approximately the following ways; (i) 4.07% ($1,267,231) --
advertising and promotional expenses; (ii) 0.40% ($123,065) -- printing of
prospectuses for distribution to other than current shareholders; and (iii)
95.53% ($29,690,503) -- other expenses, including the gross sales credit and the
carrying charge, of which 8.22% ($2,440,791) represents carrying charges, 35.30%
($10,480,239) represents commission credits to DWR branch offices for payments
of commissions to account executives and 56.48% ($16,769,473) represents
overhead and other branch office distribution-related expenses.
At any given time, the expenses of distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to the
Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. DWR has advised the Fund that such excess
amount, including the carrying charge designed to approximate the opportunity
costs incurred by DWR which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's shares, totalled $16,930,883 as of October 31, 1993. Because there is no
requirement under the Plan that the Distribution be reimbursed for all its
expenses or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay expenses in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales charges
paid by investors upon redemption of shares, if for any reason the Plan is
terminated, the Directors will consider at that time the manner in which to
treat such expenses. Any cumulative expenses incurred, but not yet recovered
through future distribution fees or contingent deferred sales charges, may or
may not be recovered through future distribution fees or contingent deferred
sales charges.
No interested person of the Fund, nor any Director of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that the
Distributor, InterCapital, DWR or certain of its employees may be deemed to have
such an interest as a result of benefits derived from the successful operation
of the Plan or as a result of receiving a portion of the amounts expended
thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval of the shareholders of the
Fund, and all material amendments of the Plan must also be approved by the
Directors in the manner described above. The Plan may be terminated at any time,
without payment of any penalty, by vote of a majority of the Independent 12b-1
Directors or by a vote of a majority of the outstanding voting securities of the
Fund (as defined in the Act) on not more than thirty days' written notice to any
other party to the Plan. So long as the Plan is in effect, the election and
nomination of Independent Directors shall be committed to the discretion of the
Independent Directors.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (which corresponds to the closing time on various options
exchanges) on each day that the New York Stock Exchange is open by taking the
value of all assets of the Fund, subtracting its liabilities, dividing by the
number of shares outstanding and adjusting to the nearest cent. The New York
Stock Exchange
28
<PAGE>
currently observes the following holidays: New Year's Day, President's Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
Short-term debt securities with remaining maturities of 60 days or less to
maturity at the time of purchase are valued at amortized cost, unless the
Directors determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Directors. Other short-term debt securities will be valued on a mark to market
basis until such time as they reach a remaining maturity of 60 days, whereupon
they will be valued at amortized cost using their value on the 61st day unless
the Directors determine such does not reflect the securities' fair value, in
which case these securities will be valued at their fair value as determined by
the Directors. Options are valued at the mean between their latest bid and asked
prices. Futures are valued at the last sale price as of the close of the
commodities exchange on which they trade unless the Directors determine that
such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Directors. All other securities
and other assets are valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Directors.
Generally, trading in foreign securities, as well as corporate bonds, United
States government securities and money market instruments, is substantially
completed each day at various times prior to 4:00 p.m., New York time. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to 4:00 p.m., New York time. Occasionally, events
which affect the values of such securities and such exchange rates may occur
between the times at which they are determined and 4:00 p.m., New York time, and
will therefore not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities will be valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Directors.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Fund's
Transfer Agent, Dean Witter Trust Company (the "Transfer Agent"). This is an
open account in which shares owned by the investor are credited by the Transfer
Agent in lieu of issuance of a share certificate. If a share certificate is
desired, it must be requested in writing for each transaction. Certificates are
issued only for full shares and may be redeposited in the account at any time.
There is no charge to the investor for issuance of a certificate. Whenever a
shareholder instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction from
the Fund or from DWR or other selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS.__As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of the
Fund is made upon the condition that the Transfer Agent is thereby automatically
appointed as agent of the investor to receive all dividends and capital gains
distributions on shares owned by the investor. Such dividends and distributions
will be paid, at the net asset value per share in shares of the Fund (or in cash
if the shareholder so requests) as of the close of business on the record date.
At any time an investor may request the Transfer Agent, in writing, to have
subsequent dividends and/or capital gains distributions paid to him or her in
cash rather than shares. To assure sufficient time to process the change, such
request should be received by the Transfer Agent at least five business days
prior to the record date of the dividend or distribution. In the case of
recently purchased shares for which registration instructions have not been
received on the record date, cash payments will be made to DWR or other selected
broker-dealer, and will be forwarded to the shareholder, upon the receipt of
proper instructions.
TARGETED DIVIDENDS.SM____In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end Dean
29
<PAGE>
Witter Fund other than Dean Witter European Growth Fund Inc. Such investment
will be made as described above for automatic investment in shares of the Fund,
at the net asset value per share of the selected Dean Witter Fund as of the
close of business on the payment date of the dividend or distribution and will
begin to earn dividends, if any, in the selected Dean Witter Fund the next
business day. To participate in the Targeted Dividends program, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent. Shareholders of the Fund must be shareholders of the Dean
Witter Fund targeted to receive investments from dividends at the time they
enter the Targeted Dividends program. Investors should review the prospectus of
the targeted Dean Witter Fund before entering the program.
EASYINVEST.SM____Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected. For further information or to subscribe to
EasyInvest, shareholders should contact their DWR or other selected
broker-dealer account executive or the Transfer Agent.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at the net
asset value next determined after receipt by the Transfer Agent, without the
imposition of a contingent deferred sales charge upon redemption, by returning
the check or the proceeds to the Transfer Agent within 30 days after the payment
date. If the shareholder returns the proceeds of a dividend or distribution,
such funds must be accompanied by a signed statement indicating that the
proceeds constitute a dividend or distribution to be invested. Such investment
will be made at the net asset value per share next determined after receipt of
the check or proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a 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.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent within five business days after the date of redemption.
The Withdrawal Plan may be terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six years
(see "Redemptions and Repurchases -- Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by a commercial bank or trust company (not a savings bank), or by a
member of a
30
<PAGE>
national securities exchange. A shareholder may, at any time, change the amount
and interval of withdrawal payments through his or her Account Executive or by
written notification to the Transfer Agent. In addition, the party and/or the
address to which checks are mailed may be changed by written notification to the
Transfer Agent, with signature guarantees required in the manner described
above. The shareholder may also terminate the Withdrawal Plan at any time by
written notice to the Transfer Agent. In the event of such termination, the
account will be continued as a regular shareholder investment account.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to Dean Witter
European Growth Fund Inc., directly to the Fund's Transfer Agent. Such amounts
will be applied to the purchase of Fund shares at the net asset value per share
next computed after receipt of the check or purchase payment by the Transfer
Agent. The shares so purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of the Fund may exchange their shares
for shares of other Dean Witter Funds sold with a contingent deferred sales
charge ("CDSC funds"), for shares of Dean Witter Short-Term U.S. Treasury Trust,
Dean Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund and
for shares of five Dean Witter Funds which are money market funds (the foregoing
eight non-CDSC funds are referred to hereinafter as "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge," a contingent deferred sales
charge ("CDSC") may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of the Fund or any
other CDSC fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a CDSC fund. However, in the case of shares exchanged
for shares of an Exchange Fund on or after April 23, 1990, upon a redemption of
shares which results in a CDSC being imposed, a credit (not to exceed the amount
of the CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees incurred on or after that date which are attributable to those
shares. Shareholders acquiring shares of the Exchange Fund pursuant to this
exchange privilege may exchange those shares back into a CDSC fund from the
money market fund, with no CDSC being imposed on such exchange. The investment
period previously frozen when shares were first exchanged for shares of the
Exchange Fund resumes on the last day of the month in which shares of a CDSC
fund are reacquired. A CDSC is imposed only upon an ultimate redemption, based
upon the time (calculated as described above) the shareholder was invested in a
CDSC fund.
31
<PAGE>
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
When shares initially purchased in a CDSC fund are exchanged for shares of
another CDSC fund, or for shares of an Exchange Fund, the date of purchase of
the shares of the fund exchanged into, for purposes of the CDSC upon redemption,
will be the last day of the month in which the shares being exchanged were
originally purchased. In allocating the purchase payments between funds for
purposes of the CDSC, the amount which represents the current net asset value of
shares at the time of the exchange which were (i) purchased more than six years
(depending on the CDSC schedule applicable to the shares) prior to the exchange,
(ii) originally acquired through reinvestment of dividends or distributions and
(iii) acquired in exchange for shares of front-end sales charge funds, or for
shares of other Dean Witter Funds for which shares of front-end sales charge
funds have been exchanged (all such shares called "Free Shares"), will be
exchanged first. Shares of Dean Witter Strategist Fund acquired prior to
November 8, 1989, shares of Dean Witter American Value Fund acquired prior to
April 30, 1984, and shares of Dean Witter Dividend Growth Securities Inc. and
Dean Witter Natural Resource Development Securities Inc. acquired prior to July
2, 1984, will be the first Free Shares to be exchanged. After an exchange, all
dividends earned on shares in an Exchange Fund will be considered Free Shares.
If the exchanged amount exceeds the value of such Free Shares, an exchange is
made, on a block-by-block basis, of non-Free Shares held for the longest period
of time (except that if shares held for identical periods of time but subject to
different CDSC schedules are held in the same Exchange Privilege account, the
shares of that block that are subject to a lower CDSC rate will be exchanged
prior to the shares of that block that are subject to a higher CDSC rate).
Shares equal to any appreciation in the value of non-Free Shares exchanged will
be treated as Free Shares, and the amount of the purchase payments for the
non-Free Shares of the fund exchanged into will be equal to the lesser of (a)
the purchase payments for, or (b) the current net asset value of, the exchanged
non-Free Shares. If an exchange between funds would result in exchange of only
part of a particular block of non-Free Shares, then shares equal to any
appreciation in the value of the block (up to the amount of the exchange) will
be treated as Free Shares and exchanged first, and the purchase payment for that
block will be allocated on a pro rata basis between the non-Free Shares of that
block to be retained and the non-Free Shares to be exchanged. The prorated
amount of such purchase payment attributable to the retained non-Free Shares
will remain as the purchase payment for such shares, and the amount of purchase
payment for the exchanged non-Free Shares will be equal to the lesser of (a) the
prorated amount of the purchase payment for, or (b) the current net asset value
of, those exchanged non-Free Shares. Based upon the procedures described in the
Prospectus under the caption "Contingent Deferred Sales Charge", any applicable
CDSC will be imposed upon the ultimate redemption of shares of any fund,
regardless of the number of exchanges since those shares were originally
purchased.
The Transfer Agent acts as agent for shareholders of the Fund in effecting
redemptions of Fund shares and in applying the proceeds to the purchase of other
fund shares. In the absence of negligence on its part, neither the Transfer
Agent nor the Fund shall be liable for any redemption of Fund shares caused by
unauthorized telephone instructions. Accordingly, in such an event, the investor
shall bear the risk of loss. The staff of the Securities and Exchange Commission
is currently considering the propriety of such a policy.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or
32
<PAGE>
negligence of its correspondents or for losses in transit. The Fund shall not be
liable for any default or negligence of the Transfer Agent, the Distributor or
any selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter New York Municipal Money Market
Trust, Dean Witter Tax-Free Daily Income Trust and Dean Witter California
Tax-Free Daily Income Trust although those funds may, at their discretion,
accept initial investments of as low as $1,000. The minimum initial investment
is $10,000 for Dean Witter Short-Term U.S. Treasury Trust, although that fund,
in its discretion, may accept initial purchases of as low as $5,000. The minimum
initial investment for all other Dean Witter Funds for which the Exchange
Privilege is available is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of money market funds, including the check writing feature, will
not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months' prior written notice of termination will be
given to the shareholders who hold shares of Exchange Funds, pursuant to the
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective(s), policies and restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected dealer account executive or the
Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of the Fund can be redeemed
for cash at any time at the net asset value per share next determined; however,
such redemption proceeds may be reduced by the amount of any applicable
contingent deferred sales charges (see below). If shares are held in a
shareholder's account without a share certificate, a written request for
redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey City, NJ 07303
is required. If certificates are held by the shareholder, the shares may be
redeemed by surrendering the certificates with a written request for redemption.
The share certificate, or an accompanying stock power, and the request for
redemption, must be signed by the shareholder or shareholders exactly as the
shares are registered. Each request for redemption, whether or not accompanied
by a share certificate, must be sent to the Fund's Transfer Agent, which will
redeem the shares at their net asset value next computed (see "Purchase of Fund
Shares") after it receives the request, and certificate, if any, in good order.
Any redemption request
33
<PAGE>
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any, and
request for redemption are properly signed, accompanied by any documentation
required by the Transfer Agent, and bear signature guarantees when required by
the Fund or the Transfer Agent. If redemption is requested by a corporation,
partnership, trust or fiduciary, the Transfer Agent may require that written
evidence of authority acceptable to the Transfer Agent be submitted before such
request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or it the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a new
prospectus.
CONTINGENT DEFERRED SALES CHARGE. As stated in the Prospectus, a contingent
deferred sales charge ("CDSC") will be imposed on any redemption by an investor
if after such redemption the current value of the investor's shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Fund shares during the preceding six years. However, no CDSC will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed: (a) the current net asset value of shares purchased more than six years
prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another Dean Witter Fund (See "Shareholder Services--Targeted Dividends"), plus
(c) the current net asset value of shares acquired in exchange for (i) shares of
Dean Witter front-end sales charge funds, or (ii) shares of other Dean Witter
Funds for which shares of front-end sales charge funds have been exchanged (See
"Shareholder Services--Exchange Privilege"), plus (d) increases in the net asset
value of the investor's shares above the total amount of payments for the
purchase of Fund shares made during the preceding six years. The CDSC will be
paid to the Distributor. In addition, no CDSC will be imposed on redemptions of
shares which were purchased by the employee benefit plans established by DWR and
SPS Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions and/or shares acquired in
exchange for shares of Dean Witter front-end sales charge funds, or for shares
of other Dean Witter funds for which shares of front-end sales charge funds have
been exchanged. A portion of the amount redeemed which exceeds an amount which
represents both such increase in value and the value of shares purchased more
than six years prior to the redemption and/or shares purchased through
reinvestment of dividends or distributions and/or shares acquired in the
above-described exchanges will be subject to CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years from
the time of any payments for the purchase of shares, all payments
34
<PAGE>
made during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- -------------------------------------------------------------------- --------------------
<S> <C>
First............................................................... 5.0%
Second.............................................................. 4.0%
Third............................................................... 3.0%
Fourth.............................................................. 2.0%
Fifth............................................................... 2.0%
Sixth............................................................... 1.0%
Seventh and thereafter.............................................. None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year period. This will result in any such CDSC being imposed at
the lowest possible rate. Accordingly, shareholders may redeem, without
incurring any CDSC, amounts equal to any net increase in the value of their
shares above the amount of their purchase payments made within the past six
years and amounts equal to the current value of shares purchased more than six
years prior to the redemption and shares purchased through reinvestment of
dividends or distributions or acquired in exchange for shares of Dean Witter
front-end sales charge funds, or for shares of other Dean Witter funds for which
shares of front-end sales charge funds have been exchanged. The CDSC will be
imposed, in accordance with the table shown above, on any redemptions within six
years of purchase which are in excess of these amounts and which redemptions are
not (a) requested within one year of death or initial determination of
disability of a shareholder, or (b) made pursuant to certain taxable
distributions from retirement plans or retirement accounts, as described in the
Prospectus.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares presented for repurchase or redemption will be made by check
within seven days after receipt by the Transfer Agent of the certificate and/or
written request in good order. The term good order means that 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. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check, payment of the redemption proceeds may be
delayed for the minimum time needed to verify that the check used for investment
has been honored (not more than fifteen days from the time of receipt of the
check by the Transfer Agent). Shareholders maintaining margin accounts with DWR
or another selected broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the margin
account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will be
made on a pro-rata basis (that is, by transferring shares in the same proportion
that the transferred shares bear to the total shares in the account immediately
prior to the transfer). The transferred shares will continue to be subject to
any applicable contingent deferred sales charge as if they had not been so
transferred.
35
<PAGE>
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date of
redemption or repurchase reinstate any portion of all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with such proceeds, is
received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
INVOLUNTARY REDEMPTION. As discussed in the Prospectus, the Fund reserves
the right, on sixty days' notice, to redeem, at their net asset value, the
shares of any shareholder whose shares due to redemptions by the shareholder
have a value of less than $100 or such lesser amount as may be fixed by the
Directors. However, before the Fund redeems such shares and sends the proceeds
to the shareholder, it will notify the shareholder that the value of the shares
is less than $100 and allow him or her sixty days to make an additional
investment in an amount which will increase the value of his or her account to
$100 or more before the redemption is processed. No CDSC will be imposed on any
involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and, if the Fund makes an election, the shareholders would include
such undistributed gains in their income and shareholders will be able to claim
their share of the tax paid by the Fund as a credit against their individual
federal income tax.
During the fiscal year ended October 31, 1993, the Fund utilized
approximately $26,582,000 of its net capital loss carryovers. At October 31,
1993, the Fund had a net capital loss carryover of approximately $207,000 which
will be available through October 31, 1999, to offset future capital gains, to
the extent provided by regulations. To the extent that these capital loss
carryovers are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders.
Gains or losses on sales of securities by the Fund will generally be
long-term capital gains or losses if the securities have been held by the Fund
for more than twelve months. Gains or losses on the sale of securities held for
twelve months or less will be generally short-term gains or losses.
The Fund intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). If so qualified,
the Fund will not be subject to federal income tax on its net investment income
and capital gains, if any, realized during any fiscal year in which it
distributes such income and capital gains to its shareholders.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a distribution
record date.
Dividends, interest and capital gains received by the Fund may give rise to
withhholding and other taxes imposed by foreign countries. Tax conventions
between certain countries and the United States
36
<PAGE>
may reduce or eliminate such taxes. Investors may be entitled to claim United
States foreign tax credits with respect to such taxes, subject to certain
provisions and limitations contained in the Code. If more than 50% of the Fund's
total assets at the close of its fiscal year consist of securities of foreign
corporations, the Fund would be eligible and would determine whether or not to
file an election with the Internal Revenue Service pursuant to which
shareholders of the Fund will be required to include their respective pro rata
portions of such withholding taxes in their United States income tax returns as
gross income, treat such respective pro rata portions as taxes paid by them, and
deduct such respective pro rata portions in computing their taxable income or,
alternatively, use them as foreign tax credits against their United States
income taxes. If the Fund does elect to file the election with the Internal
Revenue Service, the Fund will report annually to its shareholders the amount
per share of such withholding.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund. The Fund may request a private letter ruling from the Internal Revenue
Service on some or all of these issues.
Under Code Section 988, special rules are provided for certain transactions
in a foreign currency other than the taxpayer's functional currency (I.E.,
unless certain special rules apply, currencies other than the U.S. dollar). In
general, foreign currency gains or losses from forward contracts, from futures
contracts that are not "regulated futures contracts", and from unlisted options
will be treated as ordinary income or loss under Code Section 988. Also, certain
foreign exchange gains or losses derived with respect to foreign fixed-income
securities are also subject to Section 988 treatment. In general, therefore,
Code Section 988 gains or losses will increase or decrease the amount of the
Fund's investment company taxable income available to be distributed to
shareholders as ordinary income, rather than increasing or decreasing the amount
of the Fund's net capital gain. Additionally, if Code Section 988 losses exceed
other investment company taxable income during a taxable year, the Fund would
not be able to make any ordinary dividend distributions.
The Fund may be subject to taxes in foreign countries in which it invests.
In addition, if the Fund were deemed to be a resident of the United Kingdom for
United Kingdom tax purposes or if the Fund were treated as being engaged in a
trading activity through an agent in the United Kingdom, there is a risk that
the United Kingdom would attempt to tax all or a portion of the Fund's gains or
income. In light of the structure of the Fund and the terms and conditions of
the Investment Management and Sub-Advisory Agreements, it is believed that any
such risk is minimal.
If the Fund invests in an entity which is classified as a "passive foreign
investment company" ("PFIC") for U.S. tax purposes, the application of certain
technical tax provisions applying to such companies could result in the
imposition of federal income tax with respect to such investments at the Fund
level which could not be eliminated by distributions to shareholders. The U.S.
Treasury issued proposed regulation section 1.1291-8 which establishes a
mark-to-market regime which allows investment companies investing in PFIC's to
avoid most, if not all of the difficulties posed by the PFIC rules. In any
event, it is not anticipated that any taxes on the Fund with respect to
investments in PFIC's would be significant.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return over
a particular period and is computed by finding the annual percentage rate which
37
<PAGE>
will result in the ending redeemable value of a hypothetical $1,000 investment
made at the beginning of a one, five or ten year period, or for the period from
the date of commencement of the Fund's operations, if shorter than any of the
foregoing. The ending redeemable value is reduced by any contingent deferred
sales charge at the end of the one, five or ten year or other period. For the
purpose of this calculation, it is assumed that all dividends and distributions
are reinvested. The formula for computing the average annual total return
involves a percentage obtained by dividing the ending redeemable value by the
amount of the initial investment, taking a root of the quotient (where the root
is equivalent to the number of years in the period) and subtracting 1 from the
result. The average annual total return of the Fund for the period June 1, 1990
through October 31, 1993 and for the fiscal year ended October 31, 1993 was
6.66% and 33.74%, respectively.
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. Such calculations may or may not reflect the
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described above, but without deduction
for any applicable contingent deferred sales charge. Based on this calculation,
the average annual total return of the Fund for the period June 1, 1990 through
October 31, 1993 and for the fiscal year ended October 31, 1993 was 7.16% and
38.74%, respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without the
reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the Fund's total return for the period June 1, 1990 through October
31, 1993 and for the fiscal year ended October 31, 1993 was 26.66% and 38.74%,
respectively.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF COMMON STOCK
- --------------------------------------------------------------------------------
The Fund is authorized to issue 200,000,000 shares of common stock of $0.01
par value. Shares of the Fund, when issued, are fully paid, non-assessable,
fully transferable and redeemable at the option of the holder. All shares are
equal as to earnings, assets and voting privileges. There are no conversion,
preemptive or other subscription rights. In the event of liquidation, each share
of common stock of the Fund is entitled to its portion of all of the Fund's
assets after all debts and expenses have been paid. Except for agreements
entered into by the Fund in its ordinary course of business within the
limitations of the Fund's fundamental investment policies (which may be modified
only by shareholder vote), the Fund will not issue any securities other than
common stock.
The shares of the Fund do not have cumulative voting rights, which means
that the holders of more than 50% of the shares voting for the election of
directors can elect 100% of the directors if they choose to do so, and in such
event, the holders of the remaining less than 50% of the shares voting for the
election of directors will not be able to elect any person or persons to the
Board of Directors.
The Fund's By-Laws provide that one or more of the Fund's Directors may be
removed, either with or without cause, at any time by the affirmative vote of
the Fund's stockholders holding a majority of the outstanding shares entitled to
vote for the election of Directors. A special meeting of the stockholders of the
Fund will be called by the Fund's Secretary upon the written request of
stockholders entitled to vote at least 25% of the Fund's outstanding shares.
38
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Chase Manhattan Bank, N.A., One Chase Plaza, New York, New York 10005 is
the Custodian of the Fund's assets in the United States and around the world. As
Custodian, The Chase Manhattan Bank has contracted with various foreign banks
and depositaries to hold portfolio securities of non-U.S. issuers on behalf of
the Fund. Any of the Fund's cash balances with the Custodian in excess of
$100,000 are unprotected by federal deposit insurance. Such balances may, at
times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07302 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts; disbursing
cash dividends and reinvesting dividends; processing account registration
changes; handling purchase and redemption transactions; mailing prospectuses and
reports; mailing and tabulating proxies; processing share certificate
transactions; and maintaining shareholder records and lists. For these services
Dean Witter Trust Company receives a per shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on October 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Directors.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund included in this Statement of
Additional Information and incorporated by reference in the Prospectus have been
so included and incorporated in reliance on the report of Price Waterhouse,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
39
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCKS, WARRANTS AND BONDS (93%)
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
<C> <S> <C>
BELGIUM (2.2%)
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
12,896 Quillmes..................... $ 4,158,960
-------------
RETAIL
37,100 Colruyt SA................... 6,067,947
-------------
TOTAL BELGIUM................ 10,226,907
-------------
DENMARK (0.6%)
MULTI-INDUSTRY
29,500 Sophus Berendsen............. 2,066,878
-------------
TELECOMMUNICATIONS
24,600 Teledanmark.................. 619,463
-------------
TOTAL DENMARK................ 2,686,341
-------------
FINLAND (1.4%)
ELECTRONICS
118,661 Nokia AB (Pref.)............. 6,550,393
-------------
FRANCE (8.9%)
AUTOMOTIVE
14,100 Renault SA*.................. 5,609,251
-------------
FINANCIAL SERVICES
87,335 Credit Local de France....... 6,835,624
-------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
57,869 Castorama Dubois............. 7,374,735
-------------
INSURANCE
55,000 Scor SA...................... 5,865,917
-------------
MERCHANDISING
8,000 Agache (Societe
Financiere)................ 885,936
-------------
PUBLISHING
14,541 Filipacchi Medias............ 1,986,861
1,793 Filipacchi Medias (Warrants
9/30/96)*.................. 59,873
-------------
2,046,734
-------------
TELECOMMUNICATIONS
45,000 Television Francaise......... 4,324,048
-------------
TEXTILES
100,125 Christian Dior............... 5,544,019
37,000 Hermes International*........ 2,436,408
-------------
7,980,427
-------------
TOTAL FRANCE................. 40,922,672
-------------
GERMANY (8.8%)
BANKING
10,205 Dt. Pfandbrief U.
Hypothekenbank............. 5,163,968
-------------
BUILDING & CONSTRUCTION
4,220 Weru AG...................... 3,523,378
-------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
5,972 Binding Brauerei AG.......... $ 2,101,312
16,000 Holsten Brauerei AG.......... 5,009,541
-------------
7,110,853
-------------
HEALTH & PERSONAL CARE
8,349 Rhoen Klinikum (Pref.)....... 4,381,631
9,780 Schering AG.................. 6,354,550
-------------
10,736,181
-------------
INSURANCE
4,260 Koelnische Rueckvers AG
(Pref.).................... 1,816,495
1,500 Koelnische Rueckvers AG...... 822,996
-------------
2,639,491
-------------
RETAIL
11,900 Ava Allgemeine Handels Der
Verbra..................... 6,316,197
4,435 Hornbach Holding AG
(Pref.).................... 5,012,121
-------------
11,328,318
-------------
TOTAL GERMANY................ 40,502,189
-------------
ITALY (5.7%)
FINANCIAL SERVICES
2,562,000 Parmalat Finanziaria SPA..... 3,174,117
-------------
FOREIGN GOVERNMENT OBLIGATION
ITL 69M BTPS 12.00% due 5/01/02...... 4,963,849
-------------
MANUFACTURING
100,000 Fila Holdings SPA ADR*+...... 1,512,500
-------------
OIL & RELATED
1,726,000 Saipem*...................... 2,940,404
-------------
TELECOMMUNICATIONS
2,736,790 MedioBanca International
(Warrants 3/30/98)*........ 3,469,834
275,000 Sip Di Risp.................. 488,798
9,070,000 Sip Itl (Warrants
12/31/94)*................. 3,286,535
2,066,850 Sip Itl 1000................. 4,528,548
1,989,000 Softe SA (Warrants
3/24/97)*.................. 1,628,120
760 Stet SPA..................... 1,940
-------------
13,403,775
-------------
TOTAL ITALY.................. 25,994,645
-------------
NETHERLANDS (4.0%)
BUSINESS SERVICES
111,050 Randstad Holdings............ 3,254,903
-------------
</TABLE>
40
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
HEALTH & PERSONAL CARE
<C> <S> <C>
204,000 Apothekers Coop.
Verenigri UA............... $ 5,221,048
-------------
PUBLISHING
42,000 Elsevier..................... 3,487,920
-------------
TRANSPORTATION
109,200 Boskalis Westminster......... 2,725,216
80,250 Boskalis Westminster
(Pref.).................... 2,002,734
85,000 KLM NTFL 20.................. 1,791,801
-------------
6,519,751
-------------
TOTAL NETHERLANDS............ 18,483,622
-------------
NORWAY (6.0%)
BANKING
NKr 39M Sparebanken 12.80% due
12/31/97 (Conv)............ 6,286
NKr 36,490M Sparebanken 13.09% due
3/24/97 (Conv.)............ 5,932,117
284,100 Sparebanken NK 100........... 5,200,737
-------------
11,139,140
-------------
FINANCIAL SERVICES
78,300 Norgeskreditt (Pref.)........ 1,620,553
-------------
INSURANCE
248,300 Vital Forsikring............. 2,985,027
-------------
RETAIL
4,490 Tybring -- Gjedde............ 88,941
-------------
TRANSPORTATION
418,750 Helikopter Service........... 6,006,659
27,000 Leif Hoegh & Co.............. 390,983
467,000 Smedvig Tankships*........... 5,103,825
-------------
11,501,467
-------------
TOTAL NORWAY................. 27,335,128
-------------
PORTUGAL (0.3%)
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
26,950 Jeronimo Martins............. 1,516,717
-------------
SPAIN (2.3%)
BANKING
12,800 Banco Popular ESP............ 1,664,715
-------------
BUILDING & CONSTRUCTION
173,450 Iberica de Autopistas........ 2,538,765
-------------
ELECTRIC UTILITIES
120,000 Fuerzs Electricas De
Catoluna, Sec A............ 718,659
128,000 Empresa NAC H.E.R.I.*........ 2,202,458
-------------
2,921,117
-------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
ESP 90M El Aguila 10.00% due 12/02/97
(Conv.).................... 658
-------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
<C> <S> <C>
TRANSPORTATION
65,900 Construcciones Y Auxiliar
Ferrocarriles.............. $ 3,239,776
-------------
TOTAL SPAIN.................. 10,365,031
-------------
SWEDEN (9.0%)
AEROSPACE & DEFENSE
348,700 Celsius Industries*.......... 8,357,280
311,550 Securitas (B Shares)......... 8,615,662
-------------
16,972,942
-------------
BANKING
269,500 Skand Enskilda Bknser*....... 1,987,414
-------------
FINANCIAL SERVICES
119,650 Svenska Handelsbank*......... 1,632,352
-------------
HEALTH & PERSONAL CARE
524,830 Astra AB (A Shares).......... 11,417,481
-------------
INTERNATIONAL TRADE
376,700 Kinnevik Industriforvatnings
(B Shares)................. 9,352,449
-------------
TOTAL SWEDEN................. 41,362,638
-------------
SWITZERLAND (9.5%)
BANKING
10,765 Baer Holdings................ 11,262,740
60,000 Safra Republic Holdings
SA.*....................... 5,244,684
-------------
16,507,424
-------------
FINANCIAL SERVICES
6,000 Bil GT Gruppe................ 2,502,868
2,540 Richemont AG................. 2,263,111
-------------
4,765,979
-------------
HEALTH & PERSONAL CARE
830 Roche Holdings NPV........... 3,221,397
-------------
INDUSTRIALS
8,500 Hilti AG PTG Certs........... 4,589,942
-------------
LEISURE
92 Reiseburo Kuoni (Bearer)..... 2,049,274
1,145 Reiseburo Kuoni.............. 1,221,127
-------------
3,270,401
-------------
MACHINERY
12,000 Schinder Holdings............ 11,501,856
-------------
TOTAL SWITZERLAND............ 43,856,999
-------------
UNITED KINGDOM (34.3%)
AEROSPACE & DEFENSE
515,000 British Aerospace............ 3,254,671
-------------
BANKING
1,125,000 Royal Bank Of Scotland Group,
PLC........................ 5,921,977
1,335,000 TSB Group PLC................ 4,466,576
-------------
10,388,553
-------------
BUILDING & CONSTRUCTION
1,097,000 John Mowlem & Co., PLC....... 1,908,549
-------------
</TABLE>
41
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
BUSINESS SERVICES
<C> <S> <C>
162,000 Reuters Holdings, PLC........ $ 3,919,345
564,592 Saatchi & Saatchi Co.,
PLC*....................... 1,536,372
-------------
5,455,717
-------------
CONGLOMERATES
981,666 BTR, PLC..................... 5,430,222
1,800,000 Harrison & Crosfield......... 4,978,476
-------------
10,408,698
-------------
CONSTRUCTION PLANT &
EQUIPMENT
888,000 CRH, PLC..................... 4,265,072
-------------
ELECTRIC UTILITIES
475,000 Powergen, PLC................ 3,256,158
760,000 Scottish Power, PLC.......... 4,689,998
-------------
7,946,156
-------------
FOOD, BEVERAGE, TOBACCO &
HOUSEHOLD PRODUCTS
460,000 Allied Lyons, PLC............ 4,022,037
611,153 BAT Industries, PLC.......... 4,525,746
350,000 Dalgety, PLC................. 2,420,092
630,000 Grand Metropolitan, PLC...... 3,906,497
820,000 Tate & Lyle.................. 4,633,492
481,000 Rothmans International
Units...................... 2,989,732
1,290,000 Vendome Luxury GRP Units..... 6,042,424
-------------
28,540,020
-------------
FOREST PRODUCTS, PAPER &
PACKAGING
350,000 De La Rue Co................. 3,929,397
-------------
HEALTH & PERSONAL CARE
749,000 Glaxo Holdings............... 7,595,863
540,000 Smithkline Beecham........... 3,011,175
-------------
10,607,038
-------------
INSURANCE
460,000 Britannic Assurance, PLC..... 3,132,811
298,342 Commercial Union Assurance
Co., PLC................... 2,870,315
95,000 Refuge Group................. 1,433,839
1,121,666 Royal Insurance, PLC......... 5,253,939
-------------
12,690,904
-------------
LEISURE
660,000 Granada Group................ 4,642,116
-------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- --------------- -------------
<C> <S> <C>
MANUFACTURING
785,000 Vickers, PLC................. $ 1,634,213
-------------
OIL & RELATED
430,000 Burmah Castrol, PLC.......... 4,949,033
514,000 Enterprise Oil............... 3,684,012
1,070,000 London and Scottish Marine
Oil, PLC................... 2,291,169
35,000,000 Dragon Oil*.................. 1,171,012
-------------
12,095,226
-------------
REAL ESTATE
645,000 Hammerson Prop Inv & Dev..... 3,500,769
400,000 MEPC, PLC.................... 3,176,232
-------------
6,677,001
-------------
RETAIL STORES
668,000 Great Universal Stores....... 5,304,307
360,000 Kingfisher, PLC.............. 3,506,346
1,850,000 Morrison Supermarkets........ 2,668,421
1,300,000 Next, PLC.................... 3,750,214
-------------
15,229,288
-------------
TELECOMMUNICATIONS
1,775,000 British Telecomm, PLC........ 12,194,143
-------------
TRANSPORTATION
995,000 British Airways, PLC......... 5,563,163
-------------
TOTAL UNITED KINGDOM......... 157,429,925
-------------
TOTAL COMMON AND
PREFERRED STOCKS,
WARRANTS AND BONDS
(IDENTIFIED COST
$374,982,707).............. 427,233,207
-------------
COMMERCIAL PAPER (A) (5.8%)
UNITED STATES (5.8%)
AUTOMOTIVE FINANCE
US $13,450 M Ford Motor Credit Corp.
3.032% due 11/5/93......... 13,445,472
-------------
FINANCE ENERGY
13,300 M Exxon Credit Corp. 2.951% due
11/1/93.................... 13,300,000
-------------
TOTAL COMMERCIAL PAPER
(AMORTIZED COST
$26,745,472)............... 26,745,472
-------------
</TABLE>
42
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1993 (CONTINUED)
- --------------------------------------------------------------------------------
PURCHASED PUT OPTIONS ON FOREIGN CURRENCY (1.5%)
<TABLE>
<CAPTION>
EXPIRATION MONTH/
SHARES EXERCISE PRICE VALUE
- --------- ------------------------------------ -------------
<C> <S> <C>
30,000 November 93/DKR 6.797............... $ 6,600
50,000 November 93/DKR 6.797............... 11,000
120,000 December 93/NGIr 1.787.............. 666,000
50,000 December 93/BFr 34.62............... 278,000
380,000 December 93/DEM 1.617............... 1,634,000
200,000 December 93/NKR 7.077............... 718,000
380,000 December 93/FFr 5.5475.............. 2,344,600
270,000 December 93/SFr 1.415............... 1,314,900
-------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
TOTAL PURCHASED PUT OPTIONS ON FOREIGN CURRENCY
(IDENTIFIED COST $3,713,700)................... 6,973,100
-------------
TOTAL INVESTMENTS
(IDENTIFIED COST $405,441,879)(B)... 100.3% 460,951,779
LIABILITIES IN EXCESS OF
OTHER ASSETS....................... (0.3) (1,751,193)
--------- -------------
NET ASSETS .......................... 100.0% $ 459,200,586
---------
--------- -------------
-------------
<FN>
- ------------------------------
* Non-income producing security.
+ American Depository Receipt.
(a) Commercial paper was purchased on a discount basis. The interest rate shown has been adjusted to reflect a bond
equivalent yield.
(b) The aggregate cost for federal income tax purposes is $405,441,879; the aggregate gross unrealized appreciation is
$69,854,243 and the aggregate gross unrealized depreciation is $14,344,343, resulting in net unrealized appreciation
of $55,509,900.
</TABLE>
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1993:
<TABLE>
<CAPTION>
IN UNREALIZED
CONTRACTS EXCHANGE DELIVERY APPRECIATION/
TO RECEIVE FOR DATE (DEPRECIATION)
- -------------- ----------------- --------- -------------
<S> <C> <C> <C>
NKR 1,190,000 US$ 162,568 11/02/93 $ -0-
US$ 1,455,383 DEM 2,458,390 11/02/93 (10,737)
US$ 1,095,940 FMK 6,323,572 11/02/93 (1,788)
US$ 494,033 ITL 807,126,512 11/02/93 (2,721)
US$ 814,467 SKr 6,636,700 11/02/93 (1,231)
US$ 1,453,748 L 982,030 11/08/93 (6,531)
US$ 2,834,877 L 1,919,998 11/08/93 (20,160)
L 643,178 US$ 956,535 11/08/93 (129)
L 520,118 US$ 772,088 11/08/93 1,326
L 883,049 US$ 1,310,975 11/08/93 2,119
L 3,427,094 US$ 5,056,677 11/08/93 39,412
L 1,330,609 US$ 1,969,767 11/08/93 8,849
L 3,912,625 US$ 5,776,991 11/08/93 41,083
L 588,367 US$ 874,548 11/08/93 353
-------------
Net Unrealized
Appreciation................ $ 49,845
-------------
-------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
SUMMARY OF INVESTMENTS BY INDUSTRY CLASSIFICATION OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------- ------------ -----------
<S> <C> <C>
Aerospace & Defense............................... $ 20,227,613 4.4%
Automotive........................................ 19,054,723 4.1
Banking........................................... 46,851,214 10.2
Building & Construction........................... 7,970,692 1.7
Business Services................................. 8,710,620 1.9
Conglomerates..................................... 10,408,698 2.3
Construction Plant & Equipment.................... 4,265,072 0.9
Electric Utilities................................ 10,867,273 2.4
Electronics....................................... 6,550,393 1.4
Financial Services................................ 31,328,625 6.8
Food, Beverage, Tobacco & Household Products...... 48,701,943 10.6
Foreign Government Obligations.................... 4,963,849 1.1
Foreign Government Obligations (Put Options)...... 6,973,100 1.5
Forest Products, Paper, & Packing................. 3,929,397 0.9
Health & Personal Care............................ 41,203,145 9.0
Industrials....................................... 4,589,942 1.0
Insurance......................................... 24,181,339 5.3
International Trade............................... 9,352,449 2.0
Leisure........................................... 7,912,517 1.7
Machinery......................................... 11,501,856 2.5
Manufacturing..................................... 3,146,713 0.7
Merchandising..................................... 885,936 0.2
Multi-Industry.................................... 2,066,878 0.5
Oil & Related..................................... 15,035,630 3.3
Publishing........................................ 5,534,654 1.2
Real Estate....................................... 6,677,001 1.5
Retail............................................ 17,485,206 3.8
Retail Stores..................................... 15,229,288 3.3
Telecommunications................................ 30,541,429 6.6
Textiles.......................................... 7,980,427 1.7
Transportation.................................... 26,824,157 5.8
------------ -----------
$460,951,779 100.3%
------------ -----------
------------ -----------
</TABLE>
SUMMARY OF INVESTMENTS BY TYPE OCTOBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TYPE OF INVESTMENT
- --------------------------------------------------
<S> <C> <C>
Bonds............................................. $ 10,902,960 2.4%
Commercial Paper.................................. 26,745,472 5.8
Common Stocks..................................... 386,501,958 84.2
Preferred Stocks.................................. 21,383,927 4.6
Put Options....................................... 6,973,100 1.5
Warrants.......................................... 8,444,362 1.8
------------ -----------
$460,951,779 100.3%
------------ -----------
------------ -----------
</TABLE>
44
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1993
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(Identified cost $405,441,879)(Note 1)......... $ 460,951,779
Receivable for:
Investments sold............................... 12,546,043
Capital stock sold............................. 5,104,551
Dividends...................................... 705,222
Foreign withholding tax reclaimed.............. 665,958
Interest....................................... 760,606
Deferred organizational expenses (Note 1)........ 47,401
Prepaid expenses and other assets................ 4,899
---------------
TOTAL ASSETS............................... 480,786,459
---------------
LIABILITIES:
Payable for:
Investments purchased.......................... 19,990,856
Capital stock repurchased...................... 458,244
Interest purchased............................. 44,603
Bank overdraft................................... 117,968
Investment management fees payable (Note 2)...... 371,475
Plan of distribution fee payable (Note 3)........ 371,585
Accrued expenses and other payables (Note 4)..... 231,142
---------------
TOTAL LIABILITIES.......................... 21,585,873
---------------
NET ASSETS:
Paid in capital.................................. 400,190,922
Accumulated undistributed realized gain - net.... 3,324,951
Unrealized appreciation - net.................... 55,658,485
Accumulated undistributed investment income -
net............................................ 26,228
---------------
NET ASSETS............................... $ 459,200,586
---------------
---------------
NET ASSET VALUE PER SHARE, 38,714,842 shares
outstanding (200,000,000 shares authorized of
$.01 par value)................................ $11.86
---------------
---------------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1993
<TABLE>
<S> <C>
INVESTMENT INCOME:
INCOME
Dividends (net of $866,142 foreign
withholding tax)........................... $ 7,043,276
Interest (net of $33,309 foreign withholding
tax)....................................... 539,282
---------------
TOTAL INCOME.............................. 7,582,558
---------------
EXPENSES
Investment management fees (Note 2)......... 3,309,245
Plan of distribution fee (Note 3)........... 3,309,245
Transfer agent fees and expenses (Note 4)... 583,363
Custodian fees.............................. 394,018
Professional fees........................... 83,683
Shareholder reports and notices............. 67,649
Registration fees........................... 67,341
Directors' fees and expenses (Note 4)....... 35,330
Organizational expenses (Note 1)............ 29,985
Other expenses.............................. 8,465
---------------
TOTAL EXPENSES............................ 7,888,324
---------------
INVESTMENT LOSS - NET................... (305,766)
---------------
REALIZED AND UNREALIZED GAIN (LOSS)--NET (Note 1):
Realized gain (loss) on:
Investments - net........................... 26,410,730
Expiration and closing of option contracts
written - net.............................. (742,027)
Foreign exchange transactions - net......... 8,321,411
---------------
33,990,114
---------------
Change in unrealized appreciation or
depreciation on:
Investments - net........................... 76,446,636
Written options............................. (74,793)
Translation of other assets and liabilities
denominated in foreign currencies - net.... 310,199
---------------
76,682,042
---------------
NET GAIN.................................. 110,672,156
---------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS.............. $ 110,366,390
---------------
---------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1993 OCTOBER 31, 1992
------------------- -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Investment (loss) income - net...... $ (305,766) $ 348,910
Realized gain - net................. 33,990,114 6,090,748
Change in unrealized appreciation or
depreciation - net................. 76,682,042 (14,273,930)
------------------- -------------------
Net increase (decrease) in net
assets resulting from
operations........................ 110,366,390 (7,834,272)
------------------- -------------------
Dividends and distributions to
shareholders from:
Investment income - net............. -0- (1,022,468)
Realized gain on investments and
foreign exchange transactions -
net................................ -0- (13,643,031)
------------------- -------------------
-0- (14,665,499)
------------------- -------------------
Capital stock transactions - net
increase (Note 5).................... 52,286,155 3,103,789
------------------- -------------------
Total increase (decrease)....... 162,652,545 (19,395,982)
NET ASSETS:
Beginning of period................... 296,548,041 315,944,023
------------------- -------------------
END OF PERIOD (including undistributed
net investment income of $26,228 and
$331,994, respectively).............. $ 459,200,586 $ 296,548,041
------------------- -------------------
------------------- -------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- Dean Witter European Growth Fund Inc.
(the "Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, open-end management investment company. It was
incorporated in Maryland on February 13, 1990 and on March 27, 1990 issued
10,000 shares of capital stock for $100,000 to Dean Witter Reynolds Inc. to
effect the Fund's initial capitalization. The Fund commenced operations on May
31, 1990.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity portfolio security listed or
traded on the New York or American Stock Exchange or other domestic or
foreign stock exchange is valued at its latest sale price on that exchange
prior to the time when assets are valued; if there were no sales that day,
the security is valued at the latest bid price (in cases where securities
are traded on more than one exchange, the securities are valued on the
exchange designated as the primary market by the Board of Directors); (2)
all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to
the time of valuation; (3) when market quotations are not readily available,
portfolio securities are valued at their fair value as determined in good
faith under procedures established by and under the general supervision of
the Board of Directors (valuation of debt securities for which market
quotations are not readily available may be based upon current market prices
of securities which are comparable in coupon, rating and maturity or an
appropriate matrix utilizing similar factors); and (4) the fair value of
short-term debt securities which mature at a date less than sixty days
subsequent to the valuation date is determined on an amortized cost or
amortized value basis.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on
the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions are recorded on the ex-dividend date, except for certain
dividends from foreign securities which are recorded as soon as the Fund is
informed after the ex-dividend date. Interest income is accrued daily.
C. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option, an
amount equal to the premium received by the Fund is included in the Fund's
Statement of Assets and Liabilities as an asset and as an equivalent
liability. The amount of the liability is subsequently marked-to-market to
reflect the current market value of the option written. Listed options are
valued at the latest sale price on the exchange on which they are listed (if
there were no sales that day, the option is valued at the mean between the
closing bid and asked prices). If an option which the Fund has written
either expires on its stipulated expiration date, or if the Fund enters into
a closing purchase transaction, the Fund realizes a gain (or loss if the
cost of a closing purchase transaction exceeds the premium received when the
option was written) without regard to any unrealized gain or loss on the
underlying security or currency, and the liability related to such option is
extinguished. If a call option which the Fund has written is exercised, the
Fund realizes a capital gain or loss from the sale of the underlying
security or currency and the proceeds from such sale are increased by the
premium originally received. If a put option which the Fund has written is
exercised, the amount of the premium originally received reduces the cost of
the security or currency which the Fund purchases upon exercise of the
option.
46
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
The premium paid by the Fund for the purchase of a call or a put option
is included in the Fund's Statement of Assets and Liabilities as an
investment and is subsequently marked-to-market to reflect the current
market value of the option.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
values of investment securities, other assets and liabilities and forward
contracts stated in foreign currencies are translated at the exchange rates
at the end of the period; and (2) purchases, sales, income and expenses are
translated at the rate of exchange prevailing on the respective dates of
such transactions. The resultant exchange gains and losses are included in
the Statement of Operations. Pursuant to U.S. Federal income tax
regulations, certain net foreign exchange gains/losses included in realized
and unrealized gain/loss in the Statement of Operations for the year ended
October 31, 1993 are included in or are a reduction of ordinary income for
federal income tax purposes.
E. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Fund may enter into
forward foreign currency contracts as a hedge against fluctuations in future
foreign exchange rates. All forward contracts are valued daily at the
appropriate exchange rates and any resulting unrealized currency gains or
losses are reflected in the Fund's accounts. The Fund records realized gains
or losses on delivery of the currency.
F. 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.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date.
H. ORGANIZATIONAL EXPENSES -- The Fund's Investment Manager paid the
organizational expenses of the Fund in the amount of approximately $150,000.
The Fund has reimbursed the Investment Manager for these costs. These
reimbursed expenses have been deferred and are being amortized by the Fund
on the straight line method over a period not to exceed five years from the
commencement of operations.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS -- Pursuant to an
Investment Management Agreement (the "Agreement") with Dean Witter InterCapital
Inc., (the "Investment Manager"), formerly the InterCapital Division of Dean
Witter Reynolds Inc. ("DWR"), the Fund pays its Investment Manager a management
fee, accrued daily and payable monthly by applying the annual rate of 1.0% to
the net assets of the Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes office space and facilities, equipment, clerical,
bookkeeping and certain legal services, and pays the salaries of all personnel,
including officers of the Fund who are employees of the Investment Manager. The
Investment Manager also bears the cost of telephone services, heat, light, power
and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities, subject to the overall supervision of the Investment
Manager. As compensation for its services provided pursuant to
47
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
the Sub-Advisory Agreement, the Investment Manager pays the Sub-Advisor monthly
compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Investment Manager.
The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1
under the Act pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 1.0% of the lesser of:
(a) the average daily aggregate gross sales of the Fund's shares since the
inception of the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or (b)
the Fund's average daily net assets. Amounts paid under the Plan are paid to the
Distributor to compensate it for the services provided and the expenses borne by
it and others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR's account executives and others who engage in or support
distribution of the Fund's shares or who service shareholders' accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares, and preparation, printing and distribution of sales literature and
advertising materials. In addition, the Distributor may be compensated under the
Plan for its opportunity costs in advancing such amounts, which compensation
would be in the form of a carrying charge on any unreimbursed expenses.
Provided that the Plan continues in effect, any cumulative expenses incurred
but not yet recovered, may be recovered through future distribution fees from
the Fund and contingent deferred sales charges from the Fund's shareholders.
The Distributor has informed the Fund that for the year ended October 31,
1993, it received approximately $861,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay such
charges which are not expenses of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and the proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1993 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------------- -----------------
<S> <C> <C>
Common and Preferred Stocks, Warrants, Rights and Bonds.................... $ 436,192,547 $ 377,111,061
Equity Call Options........................................................ -0- 937,594
Currency Put Options....................................................... 29,242,470 37,713,590
</TABLE>
Transactions in written options were as follows:
<TABLE>
<CAPTION>
# OF CONTRACTS PREMIUMS
----------------- -----------------
<S> <C> <C>
Options written: outstanding at beginning of period........................ 4,500 $ 201,412
Options written............................................................ 4,500 61,192
Options closed............................................................. (4,500) (61,192)
Options expired............................................................ (4,500) (201,412)
----------------- -----------------
Options written: outstanding at end of period.............................. -0- $ -0-
----------------- -----------------
----------------- -----------------
</TABLE>
48
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
On April 1, 1991, the Fund established an unfunded noncontributory defined
benefit pension plan covering all independent Directors of the Fund who will
have served as an independent Director for at least five years at the time of
retirement. Benefits under this plan are based on years of service and
compensation during the last five years of service. Aggregate pension cost for
the year ended October 31, 1993, included in Directors' fees and expenses in the
Statement of Operations, amounted to $12,771. At October 31, 1993, the Fund had
an accrued pension liability of $37,261 which is included in accrued expenses in
the Statement of Assets and Liabilities.
Dean Witter Trust Company, an affiliate of the Investment Manager, is the
Fund's transfer agent. For the year ended October 31, 1993, the Fund incurred
transfer agent fees and expenses of approximately $583,000 of which
approximately $62,000 was payable at October 31, 1993.
5. CAPITAL STOCK -- Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1993 OCTOBER 31, 1992
---------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold......................................................... 13,094,625 $ 138,741,550 8,301,601 $ 76,137,137
Reinvestment of dividends and distributions.................. -0- -0- 1,612,730 13,982,371
------------ -------------- ----------- --------------
13,094,625 138,741,550 9,914,331 90,119,508
Repurchased.................................................. (8,986,819) (86,455,395) (9,562,021) (87,015,719)
------------ -------------- ----------- --------------
Net increase................................................. 4,107,806 $ 52,286,155 352,310 $ 3,103,789
------------ -------------- ----------- --------------
------------ -------------- ----------- --------------
</TABLE>
6. FEDERAL INCOME TAX STATUS -- During the year ended October 31, 1993, the Fund
utilized approximately $26,582,000 of its net capital loss carryovers. At
October 31, 1993, the Fund had a net capital loss carryovers of approximately
$207,000 which will be available through October 31, 1999 to offset future
capital gains, to the extent provided by regulations. To the extent that these
capital loss carryovers are used to offset future capital gains, it is probable
that the gains so offset will not be distributed to shareholders.
7. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK -- As of October 31, 1993,
the Fund had outstanding forward foreign currency exchange contracts ("forward
contracts") as a hedge against changes in future foreign exchange rates. Forward
contracts involve elements of market risk in excess of the amount reflected in
the Statement of Assets and Liabilities. The Fund bears the risk of an
unfavorable change in the foreign exchange rate underlying the forward contract.
49
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected data and ratios for a share of capital stock outstanding throughout
each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED OCTOBER 31, MAY 31, 1990*
------------------------------------------------ THROUGH
1993 1992 1991 OCTOBER 31, 1990
------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period......... $ 8.57 $ 9.22 $ 9.23 $ 10.00
------------ ------------ ------------ ----------
Net investment (loss) income............... (0.01) 0.01 0.05 0.05
Net realized and unrealized gain (loss) on
investments............................... 3.30 (0.23) 0.07 (0.82)
------------ ------------ ------------ ----------
Total from investment operations............. 3.29 (0.22) 0.12 (0.77)
------------ ------------ ------------ ----------
Less dividends and distributions:
Dividends from net investment income....... -0- (0.03) (0.07) -0-
Distributions from net realized capital
gains..................................... -0- (0.40) (0.06) -0-
------------ ------------ ------------ ----------
Total dividends and distributions............ -0- (0.43) (0.13) -0-
------------ ------------ ------------ ----------
Net asset value, end of period............... $ 11.86 $ 8.57 $ 9.22 $ 9.23
------------ ------------ ------------ ----------
------------ ------------ ------------ ----------
TOTAL INVESTMENT RETURN +.................... 38.74% (2.39)% 1.33% (7.70)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)..... $ 459,201 $ 296,548 $ 315,944 $ 303,872
Ratio of expenses to average net assets...... 2.38% 2.40% 2.44% 2.45%(2)
Ratio of net investment (loss) income to
average net assets.......................... (.09)% .11% .51% 1.52%(2)
Portfolio turnover rate...................... 120% 116% 111% 36%
<FN>
- ------------
* DATE OF COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of Dean Witter European Growth Fund
Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Dean Witter European Growth Fund
Inc. (the "Fund") at October 31, 1993, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the three years in
the period then ended and for the period May 31, 1990 (commencement of
operations) through October 31, 1990, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities owned at October 31, 1993 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE
New York, New York
December 13, 1993
51
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included
in Prospectus (Part A): Page in
Prospectus
----------
Financial highlights from the period
May 31, 1990 through October 31, 1990, and
for the years ended October 31, 1991, 1992 and
1993.................................................4
(2) Financial statements included in the Statement of
Additional Information (Part B): Page in
SAI
---
Portfolio of Investments at October 31, 1993.........40
Statement of assets and liabilities at
October 31, 1993.....................................45
Statement of operations for the year
ended October 31, 1993...............................45
Statement of changes in net assets for the years
ended October 31, 1992 and 1993......................45
Notes to Financial Statements .......................46
(3) Financial statements included in Part C:
None
(b) EXHIBITS:
5. (a) - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
(b) - Form of Sub-Advisory Agreement between Dean Witter
InterCapital Inc. and Morgan Grenfell Investment
Services Limited
1
<PAGE>
6. (a) - Form of Distribution Agreement between Registrant
and Dean Witter Distributors Inc.
(b) - Form of Selected Dealers Agreement
8. - Form of Amended and Restated Transfer Agency and
Service Agreement
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services Company
Inc.
11. - Consent of Independent Accountants
15. - Amended and Restated Plan of Distribution Pursuant
to Rule 12b-1
16. - Schedules for Computation of Performance
Quotations
All other exhibits previously filed and incorporated
by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None
Item 26. NUMBER OF HOLDERS OF SECURITIES.
(1) (2)
Number of Record Holders
Title of Class at January 25, 1994
-------------- ------------------------
Shares of Common Stock 70,268
Item 27. INDEMNIFICATION.
Reference is made to Section 3.15 of the Registrant's By-
Laws and Section 2-418 of the Maryland General Corporation Law.
Insofar as indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
trustees, officers and controlling persons of the Registrant
pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer, or controlling person of the
2
<PAGE>
Registrant in connection with the successful defense of any
action, suit or proceeding) is asserted against the Registrant by
such trustee, officer or controlling person in connection with
the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent
with Release 11330 of the Securities and Exchange Commission
under the Investment Company Act of 1940, so long as the
interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager,
Registrant's Directors, and other registered investment
management companies managed by the Investment Manager, maintains
insurance on behalf of any person who is or was a Director,
officer, employee, or agent of Registrant, or who is or was
serving at the request of Registrant as a trustee, director,
officer, employee or agent of another trust or corporation,
against any liability asserted against him and incurred by him or
arising out of his position. However, in no event will
Registrant maintain insurance to indemnify any such person for
any act for which Registrant itself is not permitted to indemnify
him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
See "The Fund and Its Management" in the Prospectus regarding the
business of the investment adviser. The following information is
given regarding officers of Dean Witter InterCapital Inc.
Information regarding the other officers of InterCapital is
included in Item 29(b) below. The term "Dean Witter Funds" used
below refers to the following Funds: (1) InterCapital Income
Securities Inc., (2) High Income Advantage Trust, (3) High Income
Advantage Trust II, (4) High Income Advantage Trust III, (5)
Municipal Income Trust, (6) Municipal Income Trust II, (7)
Municipal Income Trust III, (8) Dean Witter Government Income
Trust, (9) Municipal Premium Income Trust, (10) Municipal Income
Opportunities Trust, (11) Municipal Income Opportunities Trust
II, (12) Municipal Income Opportunities Trust III, (13) Prime
Income Trust, (14) InterCapital Insured Municipal Bond Trust,
(15) InterCapital Quality Municipal Income Trust, (16)
InterCapital Quality Municipal Investment Trust, (17)
InterCapital Insured Municipal Income Trust, (18) InterCapital
California Insured Municipal Income Trust, (19) InterCapital
Insured Municipal Trust, (20) InterCapital Quality Municipal
Securities (21) InterCapital New York Quality Municipal
3
<PAGE>
Securities, and (22) InterCapital California Municipal
Securities, registered closed-end investment companies, and (1)
Dean Witter Equity Income Trust, (2) Dean Witter Tax-Exempt
Securities Trust, (3) Dean Witter Tax-Free Daily Income Trust,
(4) Dean Witter Dividend Growth Securities Inc., (5) Dean Witter
Convertible Securities Trust, (6) Dean Witter Liquid Asset Fund
Inc., (7) Dean Witter Developing Growth Securities Trust, (8)
Dean Witter Retirement Series, (9) Dean Witter Federal Securities
Trust, (10) Dean Witter World Wide Investment Trust, (11) Dean
Witter U.S. Government Securities Trust, (12) Dean Witter Select
Municipal Reinvestment Fund, (13) Dean Witter High Yield
Securities Inc., (14) Dean Witter Intermediate Income Securities,
(15) Dean Witter New York Tax-Free Income Fund, (16) Dean Witter
California Tax-Free Income Fund, (17) Dean Witter Health Sciences
Trust, (18) Dean Witter California Tax-Free Daily Income Trust,
(19) Dean Witter Managed Assets Trust, (20) Dean Witter American
Value Fund, (21) Dean Witter Strategist Fund, (22) Dean Witter
Utilities Fund, (23) Dean Witter World Wide Income Trust, (24)
Dean Witter New York Municipal Money Market Trust, (25) Dean
Witter Capital Growth Securities, (26) Dean Witter Precious
Metals and Minerals Trust, (27) Dean Witter European Growth Fund
Inc., (28) Dean Witter Global Short-Term Income Fund Inc., (29)
Dean Witter Pacific Growth Fund Inc., (30) Dean Witter Multi-
State Municipal Series Trust, (31) Dean Witter Premier Income
Trust, (32) Dean Witter Short-Term U.S. Treasury Trust, (33) Dean
Witter Diversified Income Trust, (34) Dean Witter U.S. Government
Money Market Trust, (35) Dean Witter Global Dividend Growth
Securities, (36) Active Assets California Tax-Free Trust, (37)
Dean Witter Natural Resource Development Securities Inc., (38)
Active Assets Government Securities Trust, (39) Active Assets
Money Trust, (40) Active Assets Tax-Free Trust, (41) Dean Witter
Limited Term Municipal Trust, (42) Dean Witter Variable
Investment Series, (43) Dean Witter Value-Added Market Series and
(44) Dean Witter Short-Term Bond Fund, registered open-end
investment companies. InterCapital is a wholly-owned subsidiary
of Dean Witter, Discover & Co. The principal address of the Dean
Witter Funds is Two World Trade Center, New York, New York 10048.
The term "TCW/DW Funds" refers to the following Funds: (1) TCW/DW
Core Equity Trust, (2) TCW/DW North American Government Income
Trust, (3) TCW/DW Latin American Growth Fund, (4) TCW/DW Income
and Growth Fund, (5) TCW/DW Small Cap Growth Fund, (6) TCW/DW
Balanced Fund, registered open-end investment companies and (7)
TCW/DW Term Trust 2000, (8) TCW/DW Term Trust 2002 and (9)
TCW/DW Term Trust 2003, registered closed-end investment
companies.
4
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
Charles A. Chairman, Chief Executive Vice
Fiumefreddo Executive Officer President and Director
and Director of Dean Witter
Reynolds Inc.
("DWR"); Chairman,
Director or Trustee,
President and Chief
Executive Officer of
the Dean Witter Funds;
Chairman, Chief
Executive Officer and
Trustee of the TCW/DW
Funds; Chairman and
Director of Dean
Witter Trust Company
("DWTC"); Chairman,
Chief Executive
Officer and Director
of Dean Witter
Distributors Inc.
("Distributors") and
Dean Witter Services
Company Inc. ("DWSC");
Formerly Executive
Vice President and
Director of Dean
Witter, Discover & Co.
("DWDC"); Director
and/or officer of DWDC
subsidiaries.
Philip J. Director Chairman, Chief
Purcell Executive Officer and
Director of DWDC and
DWR; Director of
DWSC and Distributors.
Richard M. Director President and Chief
DeMartini Operating Officer of
Dean Witter Capital
and Director of DWDC,
DWR, DWSC and
Distributors Inc.
("DWD")
5
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
James F. Director President and Chief
Higgins Operating Officer of
Dean Witter Financial;
Director of DWDC, DWR,
DWSC and Distributors.
Thomas C. Executive Vice Executive Vice
Schneider President, Chief President, Chief
Financial Officer Financial Officer
and Director and Director of
DWDC, DWR, DWSC
and Distributors.
Christine A. Director Executive Vice
Edwards President, Secretary,
General Counsel and
Director of DWDC, DWR,
DWSC and Distributors.
Robert M. Scanlan President and Vice President of
Chief Operating the Dean Witter Funds
Officer and the TCW/DW Funds;
President of DWSC;
Executive Vice
President of
Distributors;
Executive Vice
President and
Director of DWTC.
David A. Hughey Executive Vice Vice President of the
President and Dean Witter Funds and
Chief Administrative the TCW/DW Funds;
Officer Executive Vice
President, Chief
Administrative Officer
and Director of DWTC;
Executive Vice
President and Chief
Administrative Officer
of DWSC and
Distributors.
Edmund C. Executive Vice Vice President of the
Puckhaber President Dean Witter Funds.
6
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
John Van Heuvelen Executive Vice President and Chief
President Executive Officer of
DWTC.
Sheldon Curtis Senior Vice Vice President,
President, Secretary and
General Counsel General Counsel of the
and Secretary Dean Witter Funds and
the TCW/DW Funds;
Senior Vice President
and Secretary of
DWTC; Assistant
Secretary of DWR and
DWDC; Senior Vice
President, General
Counsel and Secretary
of DWSC; Senior Vice
President, Assistant
General Counsel and
Assistant Secretary of
Distributors.
Peter M. Avelar Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas H. Connelly Senior Vice Vice President of
President various Dean Witter
Funds.
Edward Gaylor Senior Vice Vice President of
President various Dean Witter
Funds.
Rajesh K. Gupta Senior Vice Vice President of
President various Dean Witter
Funds.
Kenton J. Senior Vice Vice President of
Hinchliffe President various Dean Witter
Funds.
John B. Kemp, III Senior Vice Director of the
President Provident Savings
Bank, Jersey City,
New Jersey.
Anita Kolleeny Senior Vice Vice President of
President various Dean Witter
Funds.
7
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
Jonathan R. Page Senior Vice Vice President of
President various Dean Witter
Funds.
Ira Ross Senior Vice Vice President of
President various Dean Witter
Funds.
Rochelle G. Siegel Senior Vice Vice President of
President various Dean Witter
Funds.
Paul D. Vance Senior Vice Vice President of
President various Dean Witter
Funds.
Elizabeth A. Senior Vice
Vetell President
James F. Willison Senior Vice Vice President of
President various Dean Witter
Funds.
Ronald Worobel Senior Vice Vice President of
President various Dean Witter
Funds.
Thomas F. Caloia First Vice Treasurer of the
President and Dean Witter Funds
Assistant Treasurer and the TCW/DW Funds;
First Vice President
and Assistant Treasury
of DWSC; Assistant
Treasurer of
Distributors.
Barry Fink First Vice Assistant Secretary
President of the Dean Witter
Funds and TCW/DW
Funds; First Vice
President and
Assistant Secretary of
DWSC.
Michael First Vice First Vice President
Interrante President and and Controller of
Controller DWSC; Assistant
Treasurer of
Distributors.
Robert Zimmerman First Vice
President
8
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
Joseph Arcieri Vice President
Douglas Brown Vice President
Rosalie Clough Vice President
B. Catherine Vice President
Connelly
Marilyn K. Cranney Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC;
Assistant
Secretary of DWR and
DWDC.
Salvatore DeSteno Vice President Vice President of
DWSC.
Dwight Doolan Vice President
Bruce Dunn Vice President
Geoffrey D. Flynn Vice President Vice President of
DWSC.
Bette Freedman Vice President
Deborah Genovese Vice President
Peter W. Gurman Vice President
Shant Harootunian Vice President
John Hechtlinger Vice President
David Johnson Vice President
Christopher Jones Vice President
Stanley Kapica Vice President
Paula LaCosta Vice President Vice President of
various Dean Witter
Funds.
9
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
Lawrence S. Lafer Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Thomas Lawlor Vice President
Lou Anne D. McInnis Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
James Mulcahy Vice President
James Nash Vice President
Hugh Rose Vice President
Ruth Rossi Vice President Assistant Secretary
and Assistant of the Dean Witter
Secretary Funds and the TCW/DW
Funds; Vice President
and Assistant
Secretary of DWSC.
Howard A. Schloss Vice President
Rose Simpson Vice President
Diane Lisa Sobin Vice President Vice President of
various Dean Witter
Funds.
Kathleen Stromberg Vice President Vice President of
various Dean Witter
Funds.
Vinh Q. Tran Vice President Vice President of
various Dean Witter
Funds.
Alice Weiss Vice President Vice President of
various Dean Witter
Funds.
10
<PAGE>
Other Substantial
Business, Profession,
Position with Vocation or Employment,
Dean Witter including Name, Prin-
InterCapital cipal Address and
Name Inc. Nature of Connection
---- ---------------- ---------------------
Marianne Zalys Vice President
Item 29. PRINCIPAL UNDERWRITERS
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant.
Distributors is also the principal underwriter of the following
investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Variable Investment Series
(43) Dean Witter Value-Added Market Series
11
<PAGE>
(44) Dean Witter Short-Term Bond Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(b) The following information is given regarding directors and officers
of Distributors not listed in Item 28 above. The principal address of
Distributors is Two World Trade Center, New York, New York 10048. None
of the following persons has any position or office with the Registrant.
Positions and
Office with
Name Distributors
- ---- -------------
Fredrick K. Kubler Senior Vice President, Assistant
Secretary and Chief Compliance
Officer.
Michael T. Gregg Vice President and Assistant
Secretary.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained by the Investment Manager at its offices,
except records relating to holders of shares issued by the Registrant,
which are maintained by the Registrant's Transfer Agent, at its place of
business as shown in the prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service
contract.
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
cc\eurogro\partc.94
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this Post-
Effective Amendment to the Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and State of
New York on the 16 day of February, 1994.
DEAN WITTER EUROPEAN GROWTH FUND INC.
By /s/ Sheldon Curtis
----------------------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 4 has been signed below by the following persons in the capacities
and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 02/16/94
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 02/16/94
--------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Edward R. Telling
By /s/ Sheldon Curtis 02/16/94
--------------------------
Sheldon Curtis
Attorney-in-Fact
Jack F. Bennett Paul Kolton
John R. Haire Michael E. Nugent
John E. Jeuck Albert T. Sommers
Manuel H. Johnson Edwin J. Garn
By /s/ David M. Butowsky 02/16/94
---------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
EXHIBIT INDEX
5. (a) - Form of Investment Management Agreement between
Registrant and Dean Witter InterCapital Inc.
(b) - Form of Sub-Advisory Agreement between Dean
Witter InterCapital Inc. and Morgan Grenfell
Investment Services Limited
6. (a) - Form of Distribution Agreement between
Registrant and Dean Witter Distributors Inc.
(b) - Form of Selected Dealers Agreement
8. - Form of Amended and Restated Transfer Agency and
Service Agreement
9. - Form of Services Agreement between Dean Witter
InterCapital Inc. and Dean Witter Services
Company Inc.
11. - Consent of Independent Accountants
15. - Amended and Restated Plan of Distribution
Pursuant to Rule 12b-1
16. - Schedules for Computation of Performance
Quotations
<PAGE>
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean
Witter European Growth Fund Inc., a Maryland corporation (hereinafter called
the ""Fund''), and Dean Witter InterCapital Inc., a Delaware corporation
(hereinafter called the ""Investment Manager''):
WHEREAS, The Fund is engaged in business as an open-end management
investment company and is registered as such under the Investment Company
Act of 1940, as amended (the ""Act''); and
WHEREAS, The Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, and engages in the business of
acting as investment adviser; and
WHEREAS, The Fund desires to retain the Investment Manager to render
management and investment advisory services in the manner and on the terms and
conditions hereinafter set forth; and
WHEREAS, The Investment Manager desires to be retained to perform
services on said terms and conditions:
Now, Therefore, this Agreement
W I T N E S S E T H:
that in consideration of the premises and the mutual covenants hereinafter
contained, the Fund and the Investment Manager agree as follows:
1. The Fund hereby retains the Investment Manager to act as investment
manager of the Fund and, subject to the supervision of the Directors, to
supervise the investment activities of the Fund as hereinafter set forth.
Without limiting the generality of the foregoing, the Investment Manager shall
obtain and evaluate such information and advice relating to the economy,
securities and commodities markets and securities and commodities as it deems
necessary or useful to discharge its duties hereunder; shall continuously
supervise the management of the assets of the Fund in a manner consistent with
the investment objectives and policies of the Fund and subject to such other
limitations and directions as the Directors of the Fund may from time to time
prescribe; and shall take such further action as the Investment Manager shall
deem necessary or appropriate. The Investment Manager shall also furnish to
or place at the disposal of the Fund such of the information, evaluations,
analyses and opinions formulated or obtained by the Investment Manager in the
discharge of its duties as the Fund may, from time to time, reasonably request.
2. The Investment Manager shall, at its own expense, enter into a
Sub-Advisory Agreement with a Sub-Advisor to make determinations as to the
securities and commodities to be purchased, sold or otherwise disposed of by
the Fund and the timing of such purchases, sales and dispositions and to take
such further action, including the placing of purchase and sale orders on behalf
of the Fund, as the Sub-Advisor, in consultation with the Investment Manager,
shall deem necessary or appropriate; provided that the Investment Manager shall
be responsible for monitoring compliance by such Sub-Advisor with the investment
policies and restrictions of the Fund and with such other limitations or
directions as the Directors of the Fund may from time to time prescribe.
3. The Investment Manager shall, at its own expense, maintain such
staff and employ or retain such personnel and consult with such other persons
as it shall from time to time determine to be necessary or useful to the
performance of its obligations under this Agreement. Without limiting the
generality of the foregoing, the staff and personnel of the Investment Manager
shall be deemed to include persons employed or otherwise retained by the
Investment Manager to furnish statistical and other factual data, advice
regarding economic factors and trends, information with respect to technical
and scientific developments, and such other information, advice and assistance
as the Investment Manager may desire. The Investment Manager shall, as agent
for the Fund, maintain the Fund's records and books of account (other than
those maintained by the Fund's transfer agent, registrar, custodian and other
agencies). All such books and records so maintained shall be the property of
the Fund and, upon request therefor, the Investment Manager shall surrender
to the Fund such of the books and records so requested.
<PAGE>
4. The Fund will, from time to time, furnish or otherwise make
available to the Investment Manager such financial reports, proxy statements
and other information relating to the business and affairs of the Fund as the
Investment Manager may reasonably require in order to discharge its duties and
obligations hereunder.
5. The Investment Manager shall bear the cost of rendering the
investment management and supervisory services to be performed by it under this
Agreement, and shall, at its own expense, pay the compensation of the officers
and employees, if any, of the Fund, and provide such office space, facilities
and equipment and such clerical help and bookkeeping services as the Fund shall
reasonably require in the conduct of its business. The Investment Manager shall
also bear the cost of telephone service, heat, light, power and other utilities
provided to the Fund.
6. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including without limitation: fees pursuant to any plan
of distribution that the Fund may adopt; the charges and expenses of any
registrar, any custodian or depository appointed by the Fund for the safekeeping
of its cash, portfolio securities or commodities and other property, and any
stock transfer or dividend agent or agents appointed by the Fund; brokers'
commissions chargeable to the Fund in connection with portfolio transactions
to which the Fund is a party; all taxes, including securities or commodities
issuance and transfer taxes, and fees payable by the Fund to federal, state or
other governmental agencies; the cost and expense of engraving or printing
certificates representing shares of the Fund; all costs and expenses in
connection with the registration and maintenance of registration of the Fund
and its shares with the Securities and Exchange Commission and various states
and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); the cost and expense of printing (including
typesetting) and distributing prospectuses and statements of additional
information of the Fund and supplements thereto to the Fund's shareholders;
all expenses of shareholders' and Directors' meetings and of preparing,
printing and mailing proxy statements and reports to shareholders; fees and
travel expenses of Directors or members of any advisory board or committee
who are not employees of the Investment Manager or any corporate affiliate
of the Investment Manager; all expenses incident to the payment of any
dividend, distribution, withdrawal or redemption, whether in shares or in
cash; charges and expenses of any outside service used for pricing of the
Fund's shares; charges and expenses of legal counsel, including counsel to the
Directors of the Fund who are not interested persons (as defined in the Act)
of the Fund or the Investment Manager, and of independent accountants, in
connection with any matter relating to the Fund; membership dues of industry
associations; interest payable on Fund borrowings; postage; insurance premiums
on property or personnel (including officers and Directors) of the Fund which
inure to its benefit; extraordinary expenses (including, but not limited to,
legal claims and liabilities and litigation costs and any indemnification
related thereto); and all other charges and costs of the Fund's operation
unless otherwise explicitly provided herein.
7. For the services to be rendered, the facilities furnished,
and the expenses assumed by the Investment Manager, the Fund shall
pay to the Investment Manager monthly compensation determined by
applying the annual rate of 1.0% to the Fund's daily
net assets. Except as hereinafter set forth, compensation under
this Agreement shall be calculated and accrued daily and the amounts
of the daily accruals shall be paid monthly. Such calculations
shall be made by applying 1/365ths of the annual rates to the Fund's
net assets each day determined as of the close of business on that
day or the last previous business day. If this Agreement becomes
effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for that part of the
month this Agreement is in effect shall be prorated in a manner
consistent with the calculation of the fees as set forth above.
Subject to the provisions of paragraph 8 hereof, payment
of the Investment Manager's compensation for the preceding month
shall be made as promptly as possible after completion of the computations
contemplated by paragraph 8 hereof.
8. In the event the operating expenses of the Fund, including
amounts payable to the Investment Manager pursuant to paragraph 7
hereof, for any fiscal year ending on a date on which this Agreement
is in effect, exceed the expense limitations applicable to the
Fund imposed by state securities laws or regulations thereunder,
as such limitations may be raised or lowered from time to time,
the Investment Manager shall
2
<PAGE>
reduce its management fee to the extent
of such excess and, if required, pursuant to any such laws or regulations,
will reimburse the Fund for annual operating expenses in excess
of any expense limitation that may be applicable; provided, however,
there shall be excluded from such expenses the amount of any interest,
taxes, brokerage commissions, distribution fees and extraordinary
expenses (including but not limited to legal claims and liabilities
and litigation costs and any indemnification related thereto)
paid or payable by the Fund. Such reduction, if any, shall be computed
and accrued daily, shall be settled on a monthly basis, and shall
be based upon the expense limitation applicable to the Fund as
at the end of the last business day of the month. Should two or
more such expense limitations be applicable as at the end of the
last business day of the month, that expense limitation which results
in the largest reduction in the Investment Manager's fee shall
be applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of the Fund, such gross
income shall include, but not be limited to, interest on debt securities
in the Fund's portfolio accrued to and including the last day of
the Fund's fiscal year, and dividends declared on equity securities
in the Fund's portfolio, the record dates for which fall on or
prior to the last day of such fiscal year, but shall not include
gains from the sale of securities.
9. The Investment Manager will use its best efforts in
the supervision and management of the investment activities of
the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations hereunder,
the Investment Manager shall not be liable to the Fund or any of
its investors for any error of judgment or mistake of law or for
any act or omission by the Investment Manager or for any losses
sustained by the Fund or its investors.
10. Nothing contained in this Agreement shall prevent the
Investment Manager or any affiliated person of the Investment Manager
from acting as investment adviser or manager for any other person,
firm or corporation and shall not in any way bind or restrict the
Investment Manager or any such affiliated person from buying, selling
or trading any securities or commodities for their own accounts
or for the account of others for whom they may be acting. Nothing
in this Agreement shall limit or restrict the right of any Director,
officer or employee of the Investment Manager to engage in any
other business or to devote his or her time and attention in part to the
management or other aspects of any other business whether of a
similar or dissimilar nature.
11. This Agreement shall remain in effect until April 30,
1994 and from year to year thereafter provided such continuance
is approved at least annually by the vote of holders of a majority,
as defined in the Investment Company Act (the ""Act''), of the
outstanding voting securities of the Fund or by the Directors of
the Fund; provided that in either event such continuance is also
approved annually by the vote of a majority of the Directors of
the Fund who are not parties to this Agreement or ""interested persons''
(as defined in the Act) of any such party, which vote must be cast
in person at a meeting called for the purpose of voting on such
approval; provided, however, that (a) the Fund may, at any time
and without the payment of any penalty, terminate this Agreement
upon thirty days' written notice to the Investment Manager, either
by majority vote of the Directors of the Fund or by the vote of
a majority of the outstanding voting securities of the Fund; (b) this
Agreement shall immediately terminate in the event of its assignment
(to the extent required by the Act and the rules thereunder) unless
such automatic terminations shall be prevented by an exemptive
order of the Securities and Exchange Commission; and (c) the
Investment Manager may terminate this Agreement without payment
of penalty on thirty days' written notice to the Fund. Any notice
under this Agreement shall be given in writing, addressed and delivered,
or mailed post-paid, to the other party at the principal office
of such party.
12. This Agreement may be amended by the parties without
the vote or consent of the shareholders of the Fund to supply
any omission, to cure, correct or supplement any ambiguous, defective
or inconsistent provision hereof, or if they deem it necessary
to conform this Agreement to the requirements of applicable federal
laws or regulations, but neither the Fund nor the Investment Manager shall
be liable for failing to do so.
3
<PAGE>
13. This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable provisions
of the Act. To the extent the applicable law of the State of New
York, or any of the provisions herein, conflicts with the applicable
provisions of the Act, the latter shall control.
14. The Investment Manager and the Fund each agree that
the name ""Dean Witter'', which comprises a component of the Fund's
name, is a property right of Dean Witter Reynolds Inc. The Fund agrees
and consents that (i) it will only use the name ""Dean Witter''
as a component of its name and for no other purpose, (ii) it
will not purport to grant to any third party the right to use the
name ""Dean Witter'' for any purpose, (iii) the Investment Manager
or its parent, Dean Witter Reynolds Inc., or any corporate
affiliate of the Investment Manager's parent, may use or grant
to others the right to use the name ""Dean Witter'', or any combination
or abbreviation thereof, as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of
such right to any other investment company, (iv) at the request
of the Investment Manager or its parent, the Fund will take such
action as may be required to provide its consent to the use of the
name ""Dean Witter'', or any combination or abbreviation thereof, by
the Investment Manager or its parent or any corporate affiliate
of the Investment Manager's parent, or by any person to whom the
Investment Manager or its parent or any corporate affiliate of the Investment
Manager's parent shall have granted the right to such use, and
(v) upon the termination of any investment advisory agreement
into which the Investment Manager and the Fund may enter, or upon
termination of affiliation of the Investment Manager with its parent,
the Fund shall, upon request by the Investment Manager or its parent,
cease to use the name ""Dean Witter'' as a component of its name,
and shall not use the name, or any combination or abbreviation thereof,
as a part of its name or for any other commercial
purpose, and shall cause its officers, Directors and shareholders
to take any and all actions which the Investment Manager or its
parent may request to effect the foregoing and to reconvey to the
Investment Manager or its parent any and all rights to such name.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement on the day and year first above written
in New York, New York.
DEAN WITTER EUROPEAN GROWTH
FUND INC.
By ________________________________
Attest:
___________________________________
DEAN WITTER INTERCAPITAL INC.
By ________________________________
Attest:
___________________________________
4
<PAGE>
SUB-ADVISORY AGREEMENT
AGREEMENT made as of the 30th day of June, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as the
"Investment Manager"), and Morgan Grenfell Investment Services Limited, a
British corporation (herein referred to as the "Sub-Advisor").
WHEREAS, Dean Witter European Growth Fund Inc. (herein referred to as
the "Fund") is engaged in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (the "Act"); and
WHEREAS, the Investment Manager has entered into an Investment
Management Agreement with the Fund (the "Investment Management Agreement")
wherein the Investment Manager has agreed to provide investment management
services to the Fund; and
WHEREAS, the Sub-Advisor is registered as an investment advisor as
under the Investment Advisers Act of 1940, and is a member of the Investment
Management Regulatory Organization (IMRO), and, as such, is regulated by IMRO
in the conduct of its investment business in the U.K., and engages in the
business of acting as an investment advisor; and
WHEREAS, the Investment Manager desires to retain the services of the
Sub-Advisor to render investment advisory services for the Fund in the manner
and on the terms and conditions hereinafter set forth; and
WHEREAS, the Sub-Advisor desires to be retained by the Investment
Manager to perform services on said terms and conditions:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements of the parties hereto as herein set forth, the parties covenant and
agree as follows:
1. Subject to the supervision of the Fund, its officers and
Directors, and the Investment Manager, and in accordance with the investment
objectives, policies and restrictions set forth in the then-current
Registration Statement relating to the Fund, and such investment objectives,
policies and restrictions from time to time prescribed by the Directors of the
Fund and communicated by the Investment Manager to the Sub-Advisor, the
Sub-Advisor agrees to provide the Fund with investment advisory services with
respect to investments in issuers located in the British Isles, continental
Europe and Scandinavia and, at the direction of the Investment Manager,
provide investment advisory services with respect to investments in issuers
located outside of the British Isles, continental Europe and Scandinavia, to
obtain and evaluate such information and advice relating to the economy,
securities markets and securities as it deems necessary or useful to discharge
its duties hereunder; to continuously manage the assets of the Fund in a
manner consistent with the investment objective and policies of the Fund; to
make decisions as to foreign currency matters and make determinations as to
forward foreign exchange contracts and options and futures contracts in
foreign currencies; shall determine the securities to be purchased, sold
or otherwise disposed of by the Fund and the timing of such purchases, sales
and dispositions; to take such further action, including the placing of
purchase and sale orders on behalf of the Fund, as it shall deem necessary or
appropriate; to furnish to or place at the disposal of the Fund and the
Investment Manager such of the information, evaluations, analyses and opinions
formulated or obtained by it in the discharge of its duties as the Fund and
the Investment Manager may, from time to time, reasonably request.
Notwithstanding the foregoing, the Sub-Advisor must obtain the Investment
Manager's prior approval to the initial allocation by the Sub-Advisor of the
assets of the Fund among the British Isles, continental Europe and Scandinavia
and among the particular countries of those regions; PROVIDED,
FURTHER, that the Sub-Advisor must also obtain the prior approval of the
Investment Manager to: (a) any investment of the assets of the Fund in the
countries in the British Isles, continental Europe and Scandinavia which
countries were not specifically approved of for investment at the time of the
approval of the initial investment; (b) any investment of the assets of the
Fund in any country outside of the British Isles, continental
Europe or Scandinavia; and (c) any subsequent investment by the Sub-Advisor
which would result in the reallocation of in excess of five (5%) percent of
the Fund's total assets. The Investment Manager and the Sub-Advisor shall each
make its officers and employees available to the other from time to time at
reasonable times to review investment policies of the Fund and to consult with
each other.
<PAGE>
2. The Sub-Advisor shall, at its own expense, maintain such staff and
employ or retain such personnel and consult with such other persons as it
shall from time to time determine to be necessary or useful to the performance
of its obligations under this Agreement. Without limiting the generality of
the foregoing, the staff and personnel of the Sub-Advisor shall be deemed to
include persons employed or otherwise retained by the Sub-Advisor to furnish
statistical and other factual data, advice regarding economic factors and
trends, information with respect to technical and scientific developments, and
such other information, advice and assistance as the Investment Manager may
desire. The Sub-Advisor shall maintain whatever records as may be required to
be maintained by it under the Act. All such records so maintained shall be
made available to the Fund, upon the request of the Investment Manager or the
Fund.
3. The Fund will, from time to time, furnish or otherwise make
available to the Sub-Advisor such financial reports, proxy statements and
other information relating to the business and affairs of the Fund as the
Sub-Advisor may reasonably require in order to discharge its duties and
obligations hereunder or to comply with any applicable law and regulations and
the investment objectives, policies and restrictions from time to time
prescribed by the Directors of the Fund.
4. The Sub-Advisor shall bear the cost of rendering the investment
advisory services to be performed by it under this Agreement, and shall, at
its own expense, pay the compensation of the officers and employees, if any,
of the Fund, employed by the Sub-Advisor, and such clerical help and
bookkeeping services as the Sub-Advisor shall reasonably require in performing
its duties hereunder.
5. The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: any fees paid to the
Investment Manager; fees pursuant to any plan of distribution that the Fund
may adopt; the charges and expenses of any registrar, any custodian,
sub-custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock transfer or
dividend agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and
transfer taxes, and fees payable by the Fund to federal, state or other
governmental agencies or pursuant to any foreign laws; the cost and expense of
engraving or printing certificates representing shares of the Fund; all costs
and expenses in connection with the registration and maintenance of
registration of the Fund and its shares with the Securities and Exchange
Commission and various states and other jurisdictions or pursuant to any
foreign laws (including filing fees and legal fees and disbursements of
counsel); the cost and expense of printing (including
typesetting) and distributing prospectuses of the Fund and supplements thereto
to the Fund's shareholders; all expenses of shareholders' and Directors'
meetings and of preparing, printing and mailing proxy statements and reports
to shareholders; fees and travel expenses of Directors or members of any
advisory board or committee who are not employees of the Investment Manager or
Sub-Advisor; all expenses incident to the payment of any dividend,
distribution, withdrawal or redemption whether
in shares or in cash; charges and expenses of any outside service used for
pricing of the Fund's shares; charges and expenses of legal counsel, including
counsel to the Directors of the Fund who are not interested persons (as
defined in the Act) of the Fund, the Investment Manager or the Sub-Advisor,
and of independent accountants, in connection with any matter relating to the
Fund; membership dues of industry associations; interest payable on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and Directors) of the Fund which inure to its benefit; extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto); and all other
charges and costs of the Fund's operation unless otherwise explicitly provided
herein.
6. For the services to be rendered, the facilities furnished, and the
expenses assumed by the Sub-Advisor, the Investment Manager shall pay to the
Sub-Advisor monthly compensation equal to 40% of its monthly compensation
receivable pursuant to the Investment Management Agreement. Any subsequent
change in the Investment Management Agreement which has the effect of raising
or lowering the compensation of the Investment Manager will have the
concomitant effect of raising or lowering the fee payable to the Sub-Advisor
under this Agreement. In addition, if the Investment Manager has undertaken in
the Fund's Registration Statement as filed under the Act or elsewhere to waive
all or part of its fee under the Investment Management Agreement, the
Sub-Advisor's fee payable under this Agreement will be proportionately waived
in whole or in part. The calculation of the fee payable to the
2
<PAGE>
Sub-Advisor pursuant to this Agreement will be made, each month, at the time
designated for the monthly calculation of the fee payable to the Investment
Manager pursuant to the Investment Management Agreement. If this Agreement
becomes effective subsequent to the first day of a month or shall terminate
before the last day of a month, compensation for the part of the month this
Agreement is in effect shall be prorated in a manner consistent with the
calculation of the fee as set forth above. Subject to the provisions of
paragraph 7 hereof, payment of the Sub-Advisor's compensation for the
preceding month shall be made as promptly as possible after completion of the
computations contemplated by paragraph 7 hereof.
7. In the event the operating expenses of the Fund, including amounts
payable to the Investment Manager pursuant to the Investment Management
Agreement, for any fiscal year ending on a date on which this Agreement is in
effect, exceed the expense limitations applicable to the Fund imposed by state
securities laws or regulations thereunder, as such limitations may be raised
or lowered from time to time, the Sub-Advisor shall reduce its advisory fee to
the extent of 40% of such excess and, if required, pursuant to any such laws
or regulations, will reimburse the Investment Manager for annual operating
expenses in the amount of 40% of such excess of any expense limitation that
may be applicable, it being understood that the Investment Manager has agreed
to effect a reduction and reimbursement of 100% of such excess in accordance
with the terms of the Investment Management Agreement; provided, however,
there shall be excluded from such expenses the amount of any
interest, taxes, brokerage commissions, distribution fees and extraordinary
expenses (including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid or payable by
the Fund. Such reduction, if any, shall be computed and accrued daily, shall
be settled on a monthly basis, and shall be based upon the expense limitation
applicable to the Fund as at the end of the last business day of the month.
Should two or more such expense limitations be applicable as at the end of the
last business day of the month, that expense limitation which results in the
largest reduction in the Investment Manager's fee or the largest expense
reimbursement shall be applicable.
For purposes of this provision, should any applicable expense
limitation be based upon the gross income of the Fund, such gross income shall
include, but not be limited to, interest on debt securities in the Fund's
portfolio accrued to and including the last day of the Fund's fiscal year, and
dividends declared on equity securities in the Fund's portfolio, the record
dates for which fall on or prior to the last day of such fiscal year, but
shall not include gains from the sale of securities.
8. The Sub-Advisor will use its best efforts in the performance of
investment activities on behalf of the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations hereunder, the Sub-Advisor shall not be liable to the Investment
Manager or the Fund or any of its investors for any error of judgment or
mistake of law or for any act or omission by the Sub-Advisor or for any losses
sustained by the Fund or its investors.
9. It is understood that any of the shareholders, Directors, officers
and employees of the Fund may be a shareholder, director, officer or employee
of, or be otherwise interested in, the Sub-Advisor, and in any person
controlled by or under common control with the Sub-Advisor, and that the
Sub-Advisor and any person controlled by or under common control with the
Sub-Advisor may have an interest in the Fund. It is also understood that the
Sub-Advisor and any affiliated persons thereof or any persons controlled by or
under common control with the Sub-Advisor have and may have advisory,
management service or other contracts with other organizations and persons,
and may have other interests and businesses, and further may purchase,
sell or trade any securities or commodities for their own accounts or for the
account of others for whom they may be acting; PROVIDED, HOWEVER,
that neither the Sub-Advisor nor any of its affiliates organized with a
corporate name or other name under which it is performing its business
activities which contains the names "Morgan Grenfell", with the exception of
C.J. Lawrence, Morgan Grenfell, Inc., shall undertake to act as investment
advisor or sub-advisor for any other U.S. registered investment company, sold
primarily to retail investors, whose investment policy is to invest primarily
in equity securities of issuers located in Europe and which is sponsored,
distributed or managed by a U.S. registered broker-dealer or one of its
affiliates.
10. This Agreement shall remain in effect until April 30, 1994 and
from year to year thereafter provided such continuance is approved at least
annually by the vote of holders of a majority, as defined in the Act, of the
outstanding voting securities of the Fund or by the Directors of the Fund;
provided, that in either event such continuance is also approved annually by
the vote of a majority of the Directors of the Fund who
3
<PAGE>
are not parties to
this Agreement or "interested persons" (as defined in the Act) of any such
party, which vote must be cast in person at a meeting called for the purpose
of voting on such approval; provided, however, that (a) the Fund may, at any
time and without the payment of any penalty, terminate this Agreement upon
thirty days' written notice to the Investment Manager and the Sub-Advisor,
either by majority vote of the Directors of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund; (b) this Agreement
shall immediately terminate in the event of its assignment (within the meaning
of the Act) unless such automatic termination shall be prevented by an
exemptive order of the Securities and Exchange Commission; (c) this Agreement
shall immediately terminate in the event of the termination of the Investment
Management Agreement; (d) the Investment Manager may terminate this Agreement
without payment of penalty on thirty days' written notice to the Fund and the
Sub-Advisor and; (e) the Sub-Advisor may terminate this Agreement without the
payment of penalty on thirty days' written notice to the Fund and the
Investment Manager. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed post-paid, to the other party at the
principal office of such party.
11. This Agreement may be amended by the parties without the vote or
consent of the shareholders of the Fund to supply any omission, to cure,
correct or supplement any ambiguous, defective or inconsistent provision
hereof, or if they deem it necessary to conform this Agreement to the
requirements of applicable federal laws or regulations, but neither the Fund,
the Investment Manager nor the Sub-Advisor shall be liable for failing to do
so.
12. This Agreement shall be construed in accordance with the law of
the State of New York and the applicable provisions of the Act. To the extent
the applicable law of the State of New York, or any of the provisions herein,
conflict with the applicable provisions of the Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement on the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By ________________________________
Attest:____________________________
MORGAN GRENFELL INVESTMENT
SERVICES LIMITED
By _________________________________
Attest:_____________________________
Accepted and agreed to as of
the day and year first above written:
DEAN WITTER EUROPEAN GROWTH
FUND INC.
By _____________________________________
Attest:_________________________________
4
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 30th day of June, 1993, by and between Dean Witter
European Growth Fund Inc., a Maryland corporation (the "Fund"), and Dean Witter
Distributors Inc., a Delaware corporation (the "Distributor");
WITNESSETH:
WHEREAS, the Fund is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as a diversified open-end investment company and it is
in the interest of the Fund to offer its shares for sale continuously, and
WHEREAS, the Fund and the Distributor wish to enter into an agreement with
each other with respect to the continuous offering of the Fund's shares of
Common Stock, of $.01 par value ("Shares"), in order to promote the growth of
the Fund and facilitate the distribution of its shares.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. APPOINTMENT OF THE DISTRIBUTOR. (a) The Fund hereby appoints
the Distributor as the principal underwriter of the Fund to sell Shares to the
public on the terms set forth in this Agreement and the Fund's Prospectus
(defined below) and the Distributor hereby accepts such appointment and agrees
to act hereunder. The Fund, during the term of this Agreement, shall sell Shares
to the Distributor upon the terms and conditions set forth herein.
(b) The Distributor agrees to purchase Shares, as principal for its own
account, from the Fund and to sell Shares as principal to investors and
securities dealers, including Dean Witter Reynolds Inc. ("DWR"), an affiliate of
the Distributor, upon the terms described herein and in the Fund's prospectus
and statement of additional information (both hereinafter referred to as the
"Prospectus") included in the Fund's registration statement (the "Registration
Statement") most recently filed from time to time with the Securities and
Exchange Commission (the "SEC") and effective under the Securities Act of 1933,
as amended (the "1933 Act"), and 1940 Act or as said Prospectus may be otherwise
amended or supplemented and filed with the SEC pursuant to Rule 497 under the
1933 Act.
SECTION 2. EXCLUSIVE NATURE OF DUTIES. The Distributor shall be the
exclusive principal underwriter and distributor of the Fund, except that the
exclusive rights granted to the Distributor to sell the Shares shall not apply
to Shares issued by the Fund: (i) in connection with the merger or consolidation
of any other investment company or personal holding company with the Fund or the
acquisition by purchase or otherwise of all (or substantially all) the assets or
the outstanding shares of any such company by the Fund; or (ii) pursuant to
reinvestment of dividends or capital gains distributions; or (iii) pursuant to
the reinstatement privilege afforded redeeming shareholders.
SECTION 3. PURCHASE OF SHARES FROM THE FUND. (a) The Distributor shall
have the right to buy from the Fund the Shares needed, but not more than the
Shares needed (except for clerical errors in transmission), to fill
unconditional orders for Shares placed with the Distributor by investors. The
price which the Distributor shall pay for the Shares so purchased from the Fund
shall be their net asset value per share, determined as set forth in the
Prospectus, used in determining the public offering price on which such orders
are based.
(b) The shares are to be resold by the Distributor to investors at the net
asset value per share, as set forth in the Prospectus or to securities dealers
(including DWR) having selected dealer agreements with the Distributor pursuant
to Section 7 ("Selected Dealers").
(c) The Fund shall have the right to suspend the sale of the Shares at times
when redemption is suspended pursuant to the conditions set forth in Section
4(d) hereof. The Fund shall also have the right to suspend the sale of the
Shares if trading on the New York Stock Exchange shall have been
1
<PAGE>
suspended, if a banking moratorium shall have been declared by federal or New
York authorities, or if there shall have been some extraordinary event which, in
the judgment of the Fund, makes it impracticable to sell the Shares.
(d) The Fund, or any agent of the Fund designated in writing by the Fund,
shall be promptly advised of all purchase orders for Shares received by the
Distributor. Any order may be rejected by the Fund; provided, however, that the
Fund will not arbitrarily or without reasonable cause, refuse to accept orders
for the purchase of Shares. The Distributor will confirm orders upon their
receipt, and the Fund (or its agent) upon receipt of payment therefor and
instructions will deliver share certificates for such Shares or a statement
confirming the issuance of Shares. Payment shall be made to the Fund in New York
Clearing House funds. The Distributor agrees to cause such payment and such
instructions to be delivered promptly to the Fund (or its agent).
With respect to Shares sold by any Selected Dealer, the Distributor is
authorized to direct the Fund's transfer agent to receive instructions directly
from the Selected Dealer on behalf of the Distributor as to registration of
Shares in the names of investors and to confirm issuance of the Shares to such
investors. The Distributor is also authorized to instruct the transfer agent to
receive payment directly from the Selected Dealer on behalf of the Distributor,
for prompt transmittal to the Fund's custodian, of the purchase price of the
Shares. In such event the Distributor shall obtain from the Selected Dealer and
maintain a record of such registration instructions and payments.
SECTION 4. REPURCHASE OR REDEMPTION OF SHARES. (a) Any of the outstanding
Shares may be tendered for redemption at any time, and the Fund agrees to redeem
the Shares so tendered in accordance with the applicable provisions set forth in
the Prospectus. The price to be paid upon the redemption of Shares shall be
equal to the net asset value determined as set forth in the Prospectus. All
payments by the Fund hereunder shall be made in the manner set forth below.
The proceeds of any redemption of Shares shall be paid by the Fund as
follows: (i) any applicable contingent deferred sales charge shall be paid to
the Distributor or to the Selected Dealer, or, when applicable, pursuant to the
Rules of Fair Practice of the National Association of Securities Dealers, Inc.
("NASD"), retained by the Fund and (ii) the balance shall be paid to the
redeeming shareholders, in each case in accordance with applicable provisions of
the Prospectus in New York Clearing House funds.
(b) The Distributor is authorized, as agent for the Fund, to repurchase
Shares, represented by a share certificate which is delivered to any office of
the Distributor in accordance with applicable provisions set forth in the
Prospectus. The Distributor shall promptly transmit to the transfer agent of the
Fund for redemption all Shares so delivered. The Distributor shall be
responsible for the accuracy of instructions transmitted to the Fund's transfer
agent in connection with all such repurchases.
(c) The Distributor is authorized, as agent for the Fund, to repurchase
Shares held in a shareholder's account with the Fund for which no share
certificate has been issued, upon the telephonic or telegraphic request of the
shareholder, or at the discretion of the Distributor. The Distributor shall
promptly transmit to the transfer agent of the Fund, for redemption, all such
orders for repurchase of shares. Payment for shares repurchased may be made by
the Fund to the Distributor for the account of the shareholder. The Distributor
shall be responsible for the accuracy of instructions transmitted to the Fund's
transfer agent in connection with all such repurchases.
With respect to Shares tendered for redemption or repurchase by any Selected
Dealer on behalf of its customers, the Distributor is authorized to instruct the
transfer agent of the Fund to accept orders for redemption or repurchase
directly from the Selected Dealer on behalf of the Distributor and to instruct
the Fund to transmit payments for such redemptions and repurchases directly to
the Selected Dealer on behalf of the Distributor for the account of the
shareholder. The Distributor shall obtain
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<PAGE>
from the Selected Dealer and maintain a record of such orders. The Distributor
is further authorized to obtain from the Fund and shall maintain, a record of
payments made directly to the Selected Dealer on behalf of the Distributor.
(d) Redemption of Shares or payment by the Fund may be suspended at times
when the New York Stock Exchange is closed, when trading on said Exchange is
restricted, when an emergency exists as a result of which disposal by the Fund
of securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
during any other period when the Securities and Exchange Commission, by order,
so permits.
SECTION 5. DUTIES OF THE FUND. (a) The Fund shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of the Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared by the Fund and examined by
independent accountants. The Fund shall, at the expense of the Distributor, make
available to the Distributor such number of copies of the Prospectus as the
Distributor shall reasonably request.
(b) The Fund shall take, from time to time, but subject to the necessary
approval of its shareholders, all necessary action to fix the number of its
authorized Shares and to register Shares under the 1933 Act, to the end that
there will be available for sale such number of Shares as investors may
reasonably be expected to purchase.
(c) The Fund shall use its best efforts to qualify and maintain the
qualification of an appropriate number of the Shares for sale under the
securities laws of such states as the Distributor and the Fund may approve. Any
such qualification may be withheld, terminated or withdrawn by the Fund at any
time in its discretion. As provided in Section 7(c) hereof, the expense of
qualification and maintenance of qualification shall be borne by the Fund. The
Distributor shall furnish such information and other material relating to its
affairs and activities as may be required by the Fund in connection with such
qualification.
(d) The Fund shall, at the expense of the Distributor, furnish, in
reasonable quantities upon request by the Distributor, copies of annual and
interim reports of the Fund.
SECTION 6. DUTIES OF THE DISTRIBUTOR. (a) The Distributor shall sell
shares of the Fund through DWR, and may sell shares through other securities
dealers and its own Account Executives, if any, and devote reasonable time and
effort to effect sales of the Shares, but shall not be obligated to sell any
specific number of Shares. The services of the Distributor hereunder are not
exclusive and it is understood that the Distributor acts as principal
underwriter for other registered investment companies and intends to do so in
the future.
(b) The Distributor shall not give any information or make any
representations, other than those contained in the Registration Statement or
related Prospectus and any sales literature specifically approved by the Fund.
(c) The Distributor agrees that it will comply with the terms and
limitations of the Rules of Fair Practice of the NASD.
SECTION 7. SELECTED DEALERS AGREEMENTS. (a) The Distributor shall have the
right to enter into selected dealers agreements with Selected Dealers for the
sale of Shares. In making agreements with Selected Dealers, the Distributor
shall act only as principal and not as agent for the Fund. Shares sold to
Selected Dealers shall be for resale by such dealers only at the public offering
price set forth in the Prospectus.
(b) Within the United States, the Distributor shall offer and sell Shares
only to Selected Dealers that are members in good standing of the NASD.
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<PAGE>
(c) The Distributor shall adopt and follow procedures, as approved by the
Fund, for the confirmation of sales of Shares to investors and Selected Dealers,
the collection of amounts payable by investors and Selected Dealers on such
sales, and the cancellation of unsettled transactions, as may be necessary to
comply with the requirements of the NASD, as such requirements may from time to
time exist.
SECTION 8. PAYMENT OF EXPENSES. (a) The Distributor shall bear all
expenses incurred by it in connection with its duties and activities under this
Agreement including the payment of any sales commissions for sales of the Fund's
shares (except such expenses as are specifically undertaken herein by the Fund).
It is understood and agreed that, so long as the Fund's Plan of Distribution
pursuant to Rule 12b-1 (the "Rule 12b-1 Plan") continues in effect, any expenses
incurred by the Distributor hereunder may be paid from amounts received by it
from the Fund under such Plan.
(b) The Fund shall bear all costs and expenses of the Fund, including fees
and disbursements of legal counsel including counsel to the Directors of the
Fund who are not interested persons (as defined in the 1940 Act) of the Fund or
the Distributor, and independent accountants, in connection with the preparation
and filing of any required Registration Statements and Prospectuses and all
amendments and supplements thereto, and the expenses of preparing, printing,
mailing and otherwise distributing Prospectuses, annual or interim reports or
proxy materials to shareholders.
(c) The Fund shall bear the cost and expenses of qualification of the Shares
for sale, and, if necessary or advisable in connection therewith, of qualifying
the Fund as a broker or dealer, in such states of the United States or other
jurisdictions as shall be selected by the Fund and the Distributor pursuant to
Section 5(c) hereof and the cost and expenses payable to each such state for
continuing qualification therein until the Fund decides to discontinue such
qualification pursuant to Section 5(c) hereof.
SECTION 9. INDEMNIFICATION. (a) The Fund shall indemnify and hold harmless
the Distributor and each person, if any, who controls the Distributor against
any loss, liability, claim, damage or expense (including the reasonable cost of
investigating or defending any alleged loss, liability, claim, damage or expense
and reasonable counsel fees incurred in connection therewith) arising by reason
of any person acquiring any Shares, which may be based upon the 1933 Act, or on
any other statute or at common law, on the ground that the Registration
Statement or related Prospectus, as from time to time amended and supplemented,
or the annual or interim reports to stockholders of the Fund, includes an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, unless such statement or omission was made in reliance upon, and in
conformity with, information furnished to the Fund in connection therewith by or
on behalf of the Distributor; provided, however, that in no case (i) is the
indemnity of the Fund in favor of the Distributor and any such controlling
persons to be deemed to protect the Distributor or any such controlling persons
thereof against any liability to the Fund or its security holders to which the
Distributor or any such controlling persons would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties or by reason of reckless disregard of its obligations and duties under
this Agreement; or (ii) is the Fund to be liable under its indemnity agreement
contained in this paragraph with respect to any claim made against the
Distributor or any such controlling persons, unless the Distributor or any such
controlling persons, as the case may be, shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon the
Distributor or such controlling persons (or after the Distributor or such
controlling persons shall have received notice of such service on any designated
agent), but failure to notify the Fund of any such claim shall not relieve it
from any liability which it may have to the person against whom such action is
brought otherwise than on account of its indemnity agreement contained in this
paragraph. The Fund will be entitled to participate at its own expense in the
defense, or, if it so elects, to assume the defense, of any suit brought to
enforce any such liability, but if the Fund elects to assume the defense, such
defense shall be conducted by counsel chosen by it and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event the Fund elects to assume the defense of any such suit
and retain such counsel, the Distributor or such
4
<PAGE>
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
the Fund does not elect to assume the defense of any such suit, it will
reimburse the Distributor or such controlling person or persons, defendant or
defendants in the suit, for the reasonable fees and expenses of any counsel
retained by them, the Fund shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or trustees in connection with the issuance or sale of the Shares.
(b)(i) The Distributor shall indemnify and hold harmless the Fund and each
of its directors and officers and each person, if any, who controls the Fund
against any loss, liability, claim, damage, or expense described in the
foregoing indemnity contained in subsection (a) of this Section, but only with
respect to statements or omissions made in reliance upon, and in conformity
with, information furnished to the Fund in writing by or on behalf of the
Distributor for use in connection with the Registration Statement or related
Prospectus, as from time to time amended, or the annual or interim reports to
shareholders.
(ii) The Distributor shall indemnify and hold harmless the Fund and the
Fund's transfer agent, individually and in its capacity as the Fund's transfer
agent, from and against any claims, damages and liabilities which arise as a
result of actions taken pursuant to instructions from the Distributor to: (1)
redeem all or a part of shareholder accounts in the Fund pursuant to subsection
4(c) hereof; and (2) pay the proceeds to the Distributor for the account of each
shareholder whose Shares are so redeemed.
(iii) In case any action shall be brought against the Fund or any person so
indemnified by this subsection 9(b) in respect of which indemnity may be sought
against the Distributor, the Distributor shall have the rights and duties given
to the Fund, and the Fund and each person so indemnified shall have the rights
and duties given to the Distributor by the provisions of subsection (a) of this
Section 9.
(c) If the indemnification provided for in this Section 9 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then each indemnifying party
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Fund on the one hand and the Distributor on the other
from the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the Fund on the one hand and
the Distributor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Fund on the one hand and
the Distributor on the other shall be deemed to be in the same proportion as the
total net proceeds from the offering (before deducting expenses) received by the
Fund bear to the total compensation received by the Distributor, in each case
set forth in the Prospectus. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Fund or the Distributor and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Fund and the Distributor agree that it
would not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
expenses (or actions in respect thereof) referred to above shall be deemed to
include any legal other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any such claim. Notwithstanding
the provisions of this subsection (c), the Distributor shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Shares distributed by it to the public were offered to the public exceeds
the amount of any damages
5
<PAGE>
which it has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
SECTION 10. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement
shall become effective as of the date first above written and shall remain in
force until April 30, 1993, and thereafter, but only so long as such continuance
is specifically approved at least annually by (i) the Board of Directors of the
Fund, or by the vote of a majority of the outstanding voting securities of the
Fund, cast in person or by proxy, and (ii) a majority of those Directors who are
not parties to this Agreement or interested persons of any such party and who
have no direct or indirect financial interest in this Agreement or in the
operation of the Fund's Rule 12b-1 Plan or in any agreement related thereto,
cast in person at a meeting called for the purpose of voting upon such approval.
This Agreement may be terminated at any time without the payment of any
penalty, by the Directors of the Fund, by a majority of the Directors of the
Fund who are not interested persons of the Fund and who have no direct or
indirect financial interest in this Agreement, or by vote of a majority of the
outstanding voting securities of the Fund, or by the Distributor, on sixty days'
written notice to the other party. This Agreement shall automatically terminate
in the event of its assignment.
The terms "vote of a majority of the outstanding voting securities,"
"assignment" and "interested person," when used in this Agreement, shall have
the respective meanings specified in the 1940 Act.
SECTION 11. AMENDMENTS OF THIS AGREEMENT. This Agreement may be amended by
the parties only if such amendment is specifically approved by (i) the Directors
of the Fund, or by the vote of a majority of outstanding voting securities of
the Fund, and (ii) a majority of those Directors of the Fund who are not parties
to this Agreement or interested persons of any such party and who have no direct
or indirect financial interest in this Agreement or in any agreement related to
the Fund's Rule 12b-1 Plan, cast in person at a meeting called for the purpose
of voting on such approval.
SECTION 12. GOVERNING LAW. This Agreement shall be construed in accordance
with the law of the State of New York and the applicable provisions of the 1940
Act. To the extent the applicable law of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER EUROPEAN GROWTH FUND INC.
By: __________________________________
DEAN WITTER DISTRIBUTORS INC.
By: __________________________________
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<PAGE>
DEAN WITTER DISTRIBUTORS INC.
Gentlemen:
Dean Witter Distributors Inc. (the "Distributor") has a distribution
agreement (the "Distribution Agreement") with Dean Witter Dividend Growth
Securities Inc., a Maryland corporation (the "Fund"), pursuant to which it
acts as the Distributor for the sale of the Fund's shares of common stock, par
value $0.01 per share (the "Shares"). Under the Distribution Agreement, the
Distributor has the right to distribute Shares for resale.
The Fund is an open-end management investment company registered under the
Investment Company Act of 1940, as amended, and the Shares being offered to
the public are registered under the Securities Act of 1933, as amended. You
have received a copy of the Distribution Agreement between us and the Fund and
reference is made herein to certain provisions of such Distribution Agreement.
The terms used herein, including "Prospectus" and "Registration Statement" of
the Fund and "Selected Dealer" shall have the same meaning in this Agreement
as in the Distribution Agreement. As principal, we offer to sell shares to
your customers, upon the following terms and conditions:
1. In all sales of Shares to the public you shall act on behalf of your
customers, and in no transaction shall you have any authority to act as agent
for the Fund, for us or for any Selected Dealer.
2. Orders received from you will be accepted through us or on our behalf
only at the net asset value applicable to each order, as set forth in the
current Prospectus. The procedure relating to the handling of orders shall be
subject to instructions which we or the Fund shall forward from time to time
to you. All orders are subject to acceptance or rejection by the Distributor
or the Fund in the sole discretion of either.
3. You shall not place orders for any Shares unless you have already
received purchase orders for such Shares at the applicable net asset values
and subject to the terms hereof and of the Distribution Agreement and the
Prospectus. You agree that you will not offer or sell any of the Shares except
under circumstances that will result in compliance with the applicable Federal
and state securities laws and that in connection with sales and offers to sell
Shares you will furnish to each person to whom any such sale or offer is made
a copy of the Prospectus (as then amended or supplemented) and will not
furnish to any person any information relating to the Shares, which is
inconsistent in any respect with the information contained
in the Prospectus (as then amended or supplemented) or cause any advertisement
to be published by radio or television or in any newspaper or posted in any
public place or use any sales promotional material without our consent and the
consent of the Fund.
4. The Distributor will compensate you for sales of shares of the Fund and
personal services to Fund shareholders by paying you a sales charge and/or
other commission (which may be in the form of a gross sales credit and/or an
annual residual commission) and/or a service fee, under the terms as are set
forth in the Fund's Prospectus.
5. If any Shares sold to your customers under the terms of this Agreement
are repurchased by us for the account of the Fund or are tendered for
redemption within seven business days after the date of the confirmation of
the original purchase by you, it is agreed that you shall forfeit your right
to, and refund to us, any commission received by you with respect to such
Shares.
6. No person is authorized to make any representations concerning the
Shares or the Fund except those contained in the current Prospectus and in
such printed information subsequently issued by us or the Fund as information
supplemental to such Prospectus. In selling Shares, you shall rely solely on
the representations contained in the Prospectus and supplemental information
mentioned above. Any printed information which we furnish you other than the
Prospectus and the Fund's periodic reports and proxy solicitation material are
our sole responsibility and not the responsibility of the Fund, and you agree
that the Fund shall have no liability or responsibility to you in these
respects unless expressly assumed in connection therewith.
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<PAGE>
7. You agree to deliver to each of the purchasers making purchases
a copy of the then current Prospectus at or prior to the time of offering or
sale, and you agree thereafter to deliver to such purchasers copies of the
annual and interim reports and proxy solicitation materials of the Fund. You
further agree to endeavor to obtain proxies from such purchasers. Additional
copies of the Prospectus, annual or interim reports and proxy solicitation
materials of the Fund will be supplied to you in reasonable quantities upon
request.
8. You are hereby authorized (i) to place orders directly with the
Fund or its agent for shares of the Fund to be sold by us subject to the
applicable terms and conditions governing the placement of orders for the
purchase of Fund shares, as set forth in the Distribution Agreement, and (ii)
to tender shares directly to the Fund or its agent for redemption subject to
the applicable terms and conditions set forth in the Distribution Agreement.
9. We reserve the right in our discretion, without notice, to suspend
sales or withdraw the offering of Shares entirely. Each party hereto has the
right to cancel this agreement upon notice to the other party.
10. I. You shall indemnify and hold harmless the Distributor, from and
against any claims, damages and liabilities which arise as a result of action
taken pursuant to instructions from you, or on your behalf to: a)(i) place
orders for Shares of the Fund with the Fund's transfer agent or direct the
transfer agent to receive instructions for the order of Shares, and (ii)
accept monies or direct that the transfer agent accept monies as payment for
the order of such Shares, all as contemplated by and in accordance with
Section 3 of the Distribution Agreement; b)(i) place orders for the redemption
of Shares of the Fund with the Fund's transfer agent or direct the transfer
agent to receive instruction for the redemption of Shares and (ii) to pay
redemption proceeds or to direct that the transfer agent pay redemption
proceeds in connection with orders for the redemption of Shares, all as
contemplated by and in accordance with Section 4 of the Distribution
Agreement; provided, however, that in no case, (i) is this indemnity in favor
of the Distributor and any such controlling persons to be deemed to protect
the Distributor or any such controlling persons thereof against any liability
to which the Distributor or any such controlling persons would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its
obligations and duties under this Agreement or the Distribution Agreement; or
(ii) are you to be liable under the indemnity agreement contained in this
paragraph with respect to any claim made against the Distributor or any such
controlling persons, unless the Distributor or any such controlling persons,
as the case may be, shall have notified you in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon the Distributor or such
controlling persons (or after the Distributor or such controlling persons
shall have received notice of such service on any designated agent), but
failure to notify you of any such claim shall not relieve you from any
liability which you may have to the person against whom such action is brought
otherwise than on account of the indemnity agreement contained in this
paragraph. You will be entitled to participate at your own expense in the
defense, or, if you so elect, to assume the defense, of any suit brought to
enforce any such liability, but if you elect to assume the defense, such
defense shall be conducted by counsel chosen by you and satisfactory to the
Distributor or such controlling person or persons, defendant or defendants in
the suit. In the event you elect to assume the defense of any such suit and
retain such counsel, the Distributor or such
controlling person or persons, defendant or defendants in the suit, shall bear
the fees and expenses of any additional counsel retained by them, but, in case
you do not elect to assume the defense of any such suit, you will reimburse
the Distributor or such controlling person or persons, defendant or defendants
in the suit, for the reasonable fees and expenses of any counsel retained by
them. You shall promptly notify the Distributor of the commencement of any
litigation or proceedings against it or any of its officers or directors in
connection with the issuance or sale of the Shares.
II. If the indemnification provided for in this Section 10 is
unavailable or insufficient to hold harmless the Distributor, as provided
above in respect of any losses, claims, damages, liabilities or expenses (or
actions in respect thereof) referred to herein, then you shall contribute to
the amount paid or payable by the Distributor as a result of such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative benefits received by
you on the one hand and the
2
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Distributor on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then you shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also your relative fault on the one hand and
the relative fault of the Distributor on the other, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses (or actions in respect thereof), as well as any other
relevant equitable considerations. You and the Distributor agree that it would
not be just and equitable if contribution were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to above. The amount paid or
payable by the Distributor as a result of the losses, claims, damages,
liabilities or expenses (or actions in respect thereof) referred to above
shall be deemed to include any legal or other expenses reasonably incurred by
the Distributor in connection with investigating or defending any such claim.
Notwithstanding the provisions of this subsection (II), you shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Shares distributed by it to the public were offered to the
public exceeds the amount of any damages which it has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act of 1933 Act) shall be entitled
to contribution from any person who was not guilty of such fraudulent
misrepresentation.
11. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the distribution and
redemption of Fund shares. We shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us herein. Nothing
contained in this paragraph is intended to operate as, and the provisions of
this paragraph shall not in any way whatsoever constitute, a waiver by you of
compliance with any provision of the Securities Act of 1933, as amended, or of
the rules and regulations of the Securities and Exchange Commission issued
thereunder.
12. You represent that you are a member of the National Association of
Securities Dealers, Inc. and, with respect to any sales in the United States,
we both hereby agree to abide by the Rules of Fair Practice of such
Association.
13. Upon application to us, we will inform you as to the states in
which we believe the Shares have been qualified for sale under, or are exempt
from the requirements of, the respective securities laws of such states, but
we assume no responsibility or obligation as to your right to sell Shares in
any jurisdiction.
14. All communications to us should be sent to the address shown
below. Any notice to you shall be duly given if mailed or telegraphed to you
at the address specified by you below.
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<PAGE>
15. This Agreement shall become effective as of the date of your
acceptance hereof, provided that you return to us promptly a signed and dated
copy.
DEAN WITTER DISTRIBUTORS INC.
By ______________________________
(Authorized Signature)
Please return one signed copy
of this agreement to:
Dean Witter Distributors Inc.
Two World Trade Center
New York, New York 10048
Accepted:
Firm Name:_____________________________
By: ___________________________________
Address:_______________________________
Date:__________________________________
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
DEAN WITTER TRUST COMPANY
DWR
[open-end]
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1 Terms of Appointment; Duties of DWTC . . . . . . . . . . . . 2
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 6
Article 3 Representations and Warranties of DWTC . . . . . . . . . . . 7
Article 4 Representations and Warranties of the
Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Article 5 Duty of Care and Indemnification . . . . . . . . . . . . . . 9
Article 6 Documents and Covenants of the Fund and
DWTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Article 7 Duration and Termination of Agreement . . . . . . . . . . . 16
Article 8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . 16
Article 9 Affiliations . . . . . . . . . . . . . . . . . . . . . . . . 17
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 18
Article 11 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . 18
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 18
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . 20
Article 14 Personal Liability . . . . . . . . . . . . . . . . . . . . . 21
-i-
<PAGE>
AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 1st day of August, 1993
by and between each of the Dean Witter Funds listed on the signature pages
hereof, each of such Funds acting severally on its own behalf and not jointly
with any of such other Funds (each such Fund hereinafter referred to as the
"Fund"), each such Fund having its principal office and place of business at Two
World Trade Center, New York, New York, 10048, and DEAN WITTER TRUST COMPANY, a
trust company organized under the laws of New Jersey, having its principal
office and place of business at Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 ("DWTC").
WHEREAS, the Fund desires to appoint DWTC as its transfer agent,
dividend disbursing agent and shareholder servicing agent and DWTC desires to
accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
-1-
<PAGE>
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTC
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints DWTC to act as, and DWTC agrees
to act as, the transfer agent for each series and class of shares of the Fund,
whether now or hereafter authorized or issued ("Shares"), dividend disbursing
agent and shareholder servicing agent in connection with any accumulation, open-
account or similar plans provided to the holders of such Shares ("Shareholders")
and set out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTC agrees that it will perform the following services:
(a) In accordance with procedures established from time to time
by agreement between the Fund and DWTC, DWTC shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
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<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate number
of Shares and issue certificates therefor or hold such Shares in book form in
the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the Custodian;
(iv) At the appropriate time as and when it receives monies paid
to it by the Custodian with respect to any redemption, pay over or cause to be
paid over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) Effect transfers of Shares by the registered owners thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and
its Shareholders as to the foregoing; and
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<PAGE>
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. DWTC
shall also provide to the Fund on a regular basis the total number of Shares
which are authorized, issued and outstanding and shall notify the Fund in case
any proposed issue of Shares by the Fund would result in an overissue. In case
any issue of Shares would result in an overissue, DWTC shall refuse to issue
such Shares and shall not countersign and issue any certificates requested for
such Shares. When recording the issuance of Shares, DWTC shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue of sale
of such Shares, which functions shall be the sole responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in
the above paragraph (a), DWTC shall: (i) perform all of the customary services
of a transfer agent, dividend disbursing agent and, as relevant, shareholder
servicing agent in connection with dividend reinvestment, accumulation, open-
account or similar plans (including without limitation any periodic investment
plan or periodic withdrawal program), including but not limited to, maintaining
all Shareholder accounts, preparing Shareholder meeting lists,
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<PAGE>
mailing proxies, receiving and tabulating proxies, mailing shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S. resident and
non-resident alien accounts, preparing and filing appropriate forms required
with respect to dividends and distributions by federal tax authorities for all
Shareholders, preparing and mailing confirmation forms and statements of account
to Shareholders for all purchases and redemptions of Shares and other confirm-
able transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account information; (ii)
open any and all bank accounts which may be necessary or appropriate in order to
provide the foregoing services; and (iii) provide a system which will enable the
Fund to monitor the total number of Shares sold in each State or other
jurisdiction.
(c) In addition, the Fund shall (i) identify to DWTC in writing
those transactions and assets to be treated as exempt from Blue Sky reporting
for each State and (ii) verify the establishment of transactions for each State
on the system prior to activation and thereafter monitor the daily activity for
each State. The responsibility of DWTC for the Fund's registration status under
the Blue Sky or securities laws of any State or other jurisdiction is solely
limited to the initial establishment of transactions subject to Blue Sky
compliance by the Fund and the reporting of such transactions
-5-
<PAGE>
to the Fund as provided above and as agreed from time to time by the Fund and
DWTC.
(d) DWTC shall provide such additional services and functions
not specifically described herein as may be mutually agreed between DWTC and
the Fund. Procedures applicable to such services may be established from time
to time by agreement between the Fund and DWTC.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTC pursuant to this Agreement, each
Fund agrees to pay DWTC an annual maintenance fee for each Shareholder account
and certain transactional fees, if applicable, as set out in the respective fee
schedule attached hereto as Schedule A. Such fees and out-of-pocket expenses
and advances identified under Section 2.2 below may be changed from time to time
subject to mutual written agreement between the Fund and DWTC.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse DWTC in connection with the services rendered by DWTC
hereunder. In addition, any other expenses incurred by DWTC at the request or
with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time
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<PAGE>
following the mailing of the respective billing notice. Postage for mailing of
dividends, proxies, Fund reports and other mailings to all Shareholder accounts
shall be advanced to DWTC by the Fund upon request prior to the mailing date of
such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTC
DWTC represents and warrants to the Fund that:
3.1 It is a trust company duly organized and existing and in
good standing under the laws of New Jersey and it is duly qualified to carry on
its business in New Jersey.
3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the requirements
of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and
By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
-7-
<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTC that:
4.1 It is a corporation duly organized and existing and in good
standing under the laws of Delaware or Maryland or a trust duly organized and
existing and in good standing under the laws of Massachusetts, as the case may
be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
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<PAGE>
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTC shall not be responsible for, and the Fund shall
indemnify and hold DWTC harmless from and against, any and all losses, damages,
costs, charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTC or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence or
willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTC or its agents or subcontractors of
information, records and documents which (i) are received by DWTC or its agents
or subcontractors and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other person or firm on
behalf of the Fund.
(d) The reliance on, or the carrying out by DWTC or its agents or
subcontractors of, any instructions or requests
-9-
<PAGE>
of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky laws of
any State or other jurisdiction that such Shares be registered in such State or
other jurisdiction or in violation of any stop order or other determination or
ruling by any federal agency or any State or other jurisdiction with respect to
the offer or sale of such Shares in such State or other jurisdiction.
5.2 DWTC shall indemnify and hold the Fund harmless from or
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to any action or failure
or omission to act by DWTC as a result of the lack of good faith, negligence or
willful misconduct of DWTC, its officers, employees or agents.
5.3 At any time, DWTC may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTC under
this Agreement, and DWTC and its agents or subcontractors shall not be liable
and shall be indemnified by the Fund for any action taken or omitted by it in
reliance upon such instructions or upon the opinion of such counsel. DWTC, its
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<PAGE>
agents and subcontractors shall be protected and indemnified in acting upon any
paper or document furnished by or on behalf of the Fund, reasonably believed to
be genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records or documents provided to DWTC or its
agents or subcontractors by machine readable input, telex, CRT data entry or
other similar means authorized by the Fund, and shall not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from the Fund. DWTC, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signature of the officers of the
Fund, and the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
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<PAGE>
5.5 Neither party to this Agreement shall be liable to the other
party for consequential damages under any provision of this Agreement or for any
act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTC
6.1 The Fund shall promptly furnish to DWTC the following:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
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<PAGE>
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary of the
Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTC and the execution and delivery of
this Agreement;
(ii) A certified copy of the Declaration of Trust and By-laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
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<PAGE>
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of the
Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the 1933
Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered or
to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTC deems to
be appropriate or necessary for the proper performance of its duties.
6.2 DWTC hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.3 DWTC shall prepare and keep records relating to the services
to be performed hereunder, in the form and manner as it may deem advisable and
as required by applicable laws and regulations. To the extent required by
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<PAGE>
Section 31 of the 1940 Act, and the rules and regulations thereunder, DWTC
agrees that all such records prepared or maintained by DWTC relating to the
services performed by DWTC hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTC and the Fund agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential and shall not be voluntarily disclosed to any other person
except as may be required by law or with the prior consent of DWTC and the Fund.
6.5 In case of any request or demands for the inspection of the
Shareholder records of the Fund, DWTC will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. DWTC reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person.
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<PAGE>
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until
July 31, 1996 and from year-to-year thereafter unless terminated by either party
as provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by DWTC on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and other materials will
be borne by the Fund. Additionally, DWTC reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and assigns.
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<PAGE>
8.3 DWTC may, in its sole discretion and without further consent
by the Fund, subcontract, in whole or in part, for the performance of its
obligations and duties hereunder with any person or entity including but not
limited to companies which are affiliated with DWTC; PROVIDED, HOWEVER, that
such person or entity has and maintains the qualifications, if any, required to
perform such obligations and duties, and that DWTC shall be as fully responsible
to the Fund for the acts and omissions of any agent or subcontractor as it is
for its own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTC may now or hereafter, without the consent of or notice
to the Fund, function as transfer agent and/or shareholder servicing agent for
any other investment company registered with the SEC under the 1940 Act and for
any other issuer, including without limitation any investment company whose
adviser, administrator, sponsor or principal underwriter is or may become
affiliated with Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees
(as the case may be), officers, employees, agents and shareholders of the Fund,
and the directors, officers, employees, agents and shareholders of the
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<PAGE>
Fund's investment adviser and/or distributor, are or may be interested in DWTC
as directors, officers, employees, agents and shareholders or otherwise, and
that the directors, officers, employees, agents and shareholders of DWTC may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution of
the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment
companies managed or administered by Dean Witter InterCapital Inc. or any of its
affiliates ("Additional Funds") desires to retain DWTC to act as transfer agent,
dividend disbursing agent and/or shareholder servicing agent,
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<PAGE>
and DWTC desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between DWTC and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTC an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTC and the Fund issued by a
surety company satisfactory to DWTC, except that DWTC may accept an affidavit of
loss and indemnity agreement executed by the registered holder (or legal
representative) without surety in such form as DWTC deems appropriate
indemnifying DWTC and the Fund for the issuance of a replacement certificate, in
cases where the alleged loss is in the amount of $1000 or less.
12.3 In the event that any check or other order for payment of
money on the account of any Shareholder or new investor is returned unpaid for
any reason, DWTC will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTC
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may, in its sole discretion, deem appropriate or as the Fund and, if applicable,
the Distributor may instruct DWTC.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to DWTC shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTC:
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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<PAGE>
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business
trust, a copy of the Declaration of Trust of the Fund is on file with the
Secretary of The Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Agreement to be executed in their names and on their behalf by and
through their duly authorized officers, as of the day and year first above
written.
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Equity Income Trust
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Managed Assets Trust
(22) Dean Witter Limited Term Municipal Trust
(23) Dean Witter World Wide Income Trust
(24) Dean Witter Utilities Fund
(25) Dean Witter Strategist Fund
(26) Dean Witter New York Municipal Money Market Trust
(27) Dean Witter Intermediate Income Securities
(28) Prime Income Trust
(29) Dean Witter European Growth Fund Inc.
(30) Dean Witter Developing Growth Securities Trust
(31) Dean Witter Precious Metals and Minerals Trust
(32) Dean Witter Pacific Growth Fund Inc.
(33) Dean Witter Multi-State Municipal Series Trust
(34) Dean Witter Premier Income Trust
(35) Dean Witter Short-Term U.S. Treasury Trust
(36) Dean Witter Diversified Income Trust
(37) Dean Witter Health Sciences Trust
(38) Dean Witter Global Dividend Growth Securities
(39) Dean Witter American Value Fund
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<PAGE>
(40) Dean Witter U.S. Government Money Market Trust
(41) Dean Witter Global Short-Term Income Fund Inc.
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Select Municipal Reinvestment Fund
(44) Dean Witter Variable Investment Series
By: /s/ Sheldon Curtis
-------------------------------------
Sheldon Curtis
Vice President and General Counsel
ATTEST:
/s/ Barry Fink
- ----------------------------
Barry Fink
Assistant Secretary
DEAN WITTER TRUST COMPANY
By: /s/ Charles A. Fiumefreddo
-------------------------------------
Charles A. Fiumefreddo
Chairman
ATTEST:
/s/ David A. Hughey
- -------------------------
David A. Hughey
Executive Vice President
f:\transfer.dw
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<PAGE>
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (THE FUND NAME) a (Massachusetts business
trust/Maryland corporation) (the "Fund"), desires to employ and appoint Dean
Witter Trust Company ("DWTC") to act as transfer agent for each series and class
of shares of the Fund, whether now or hereafter authorized or issued ("Shares"),
dividend disbursing agent and shareholder servicing agent, registrar and agent
in connection with any accumulation, open-account or similar plan provided to
the holders of Shares, including without limitation any periodic investment plan
or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the
Fund to DWTC of fees as set out in the fee schedule attached hereto as Schedule
A, DWTC shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
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<PAGE>
Please indicate DWTC's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(NAME OF THE FUND)
By:__________________________________
Sheldon Curtis
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST COMPANY
By:_______________________
Its:______________________
Date:_____________________
f:\transfer.dw
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<PAGE>
SCHEDULE A
Fund: Dean Witter European Growth Fund Inc.
Fees: (1) Annual maintenance fee of $11.00 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
f:\schedA\34
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<PAGE>
SERVICES AGREEMENT
AGREEMENT made as of the 31st day of December, 1993 by and between Dean
Witter InterCapital Inc., a Delaware corporation (herein referred to as
"InterCapital"), and Dean Witter Services Company Inc., a New Jersey corporation
(herein referred to as "DWS").
WHEREAS, InterCapital has entered into separate agreements (each such
agreement being herein referred to as an "Investment Management Agreement") with
certain investment companies as set forth on Schedule A (each such investment
company being herein referred to as a "Fund" and, collectively, as the "Funds")
pursuant to which InterCapital is to perform, or supervise the performance of,
among other services, administrative services for the Funds (and, in the case of
Funds with multiple portfolios, the Series or Portfolios of the Funds (such
Series and Portfolio being herein individually referred to as "a Series" and,
collectively, as "the Series"));
WHEREAS, InterCapital desires to retain DWS to perform the administrative
services as described below; and
WHEREAS, DWS desires to be retained by InterCapital to perform such
administrative services:
Now, therefore, in consideration of the mutual covenants and agreements of
the parties hereto as herein set forth, the parties covenant and agree as
follows:
1. DWS agrees to provide administrative services to each Fund as
hereinafter set forth. Without limiting the generality of the foregoing, DWS
shall (i) administer the Fund's business affairs and supervise the overall
day-to-day operations of the Fund (other than rendering investment advice); (ii)
provide the Fund with full administrative services, including the maintenance of
certain books and records, such as journals, ledger accounts and other records
required under the Investment Company Act of 1940, as amended (the"Act"), the
notification to the Fund and InterCapital of available funds for investment, the
reconciliation of account information and balances among the Fund's custodian,
transfer agent and dividend disbursing agent and InterCapital, and the
calculation of the net asset value of the Fund's shares; (iii) provide the Fund
with the services of persons competent to perform such supervisory,
administrative and clerical functions as are necessary to provide effective
operation of the Fund; (iv) oversee the performance of administrative and
professional services rendered to the Fund by others, including its custodian,
transfer agent and dividend disbursing agent, as well as accounting, auditing
and other services; (v) provide the Fund with adequate general office space and
facilities; (vi) assist in the preparation and the printing of the periodic
updating of the Fund's registration statement and prospectus (and, in the case
of an open-end Fund, the statement of additional information), tax returns,
proxy statements, and reports to its shareholders and the Securities and
Exchange Commission; and (vii) monitor the compliance of the Fund's investment
policies and restrictions.
In the event that InterCapital enters into an Investment Management
Agreement with another investment company, and wishes to retain DWS to perform
administrative services hereunder, it shall notify DWS in writing. If DWS is
willing to render such services, it shall notify InterCapital in writing,
whereupon such other Fund shall become a Fund as defined herein.
2. DWS shall, at its own expense, maintain such staff and employ or retain
such personnel and consult with such other persons as it shall from time to time
determine to be necessary or useful to the performance of its obligations under
this Agreement. Without limiting the generality of the foregoing, the staff and
personnel of DWS shall be deemed to include officers of DWS and persons employed
or otherwise retained by DWS (including officers and employees of InterCapital,
with the consent of InterCapital) to furnish services, statistical and other
factual data, information with respect to technical and scientific developments,
and such other information, advice and assistance as DWS may desire. DWS shall
maintain each Fund's records and books of account (other than those maintained
by the Fund's transfer agent, registrar, custodian and other agencies). All such
books and records so maintained shall be the property of the Fund and, upon
request therefor, DWS shall surrender to InterCapital or to the Fund such of the
books and records so requested.
3. InterCapital will, from time to time, furnish or otherwise make
available to DWS such financial reports, proxy statements and other information
relating to the business and affairs of the Fund as DWS may
1
<PAGE>
reasonably require in order to discharge its duties and obligations to the Fund
under this Agreement or to comply with any applicable law and regulation or
request of the Board of Directors/Trustees of the Fund.
4. For the services to be rendered, the facilities furnished, and the
expenses assumed by DWS, InterCapital shall pay to DWS monthly compensation
calculated daily (in the case of an open-end Fund) or weekly (in the case of
a closed-end Fund) by applying the annual rate or rates set forth on Schedule B
to the net assets of each Fund. Except as hereinafter set forth, (i) in the
case of an open-end Fund, compensation under this Agreement shall be calculated
by applying 1/365th of the annual rate or rates to the Fund's or the Series'
daily net assets determined as of the close of business on that day or the last
previous business day and (ii) in the case of a closed-end Fund, compensation
under this Agreement shall be calculated by applying the annual rate or rates
to the Fund's average weekly net assets determined as of the close of the last
business day of each week. If this Agreement becomes effective subsequent to
the first day of a month or shall terminate before the last day of a month,
compensation for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculation of the fees as set forth
on Schedule B. Subject to the provisions of paragraph 5 hereof, payment of DWS'
compensation for the preceding month shall be made as promptly as possible
after completion of the computations contemplated by paragraph 5 hereof.
5. In the event the operating expenses of any open-end Fund and/or any
Series thereof, or of InterCapital Income Securities Inc., including amounts
payable to InterCapital pursuant to the Investment Management Agreement, for any
fiscal year ending on a date on which this Agreement is in effect, exceed the
expense limitations applicable to the Fund and/or any Series thereof imposed by
state securities laws or regulations thereunder, as such limitations may be
raised or lowered from time to time, or, in the case of InterCapital Income
Securities Inc. or Dean Witter Variable Investment Series or any Series thereof,
the expense limitation specified in the Fund's Investment Management Agreement,
the fee payable hereunder shall be reduced on a pro rata basis in the same
proportion as the fee payable by the Fund under the Investment Management
Agreement is reduced.
6. DWS shall bear the cost of rendering the administrative services to be
performed by it under this Agreement, and shall, at its own expense, pay the
compensation of the officers and employees, if any, of the Fund employed by DWS,
and such clerical help and bookkeeping services as DWS shall reasonably require
in performing its duties hereunder.
7. DWS will use its best efforts in the performance of administrative
activitives on behalf of each Fund, but in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations hereunder,
DWS shall not be liable to the Fund or any of its investors for any error of
judgment or mistake of law or for any act or omission by DWS or for any losses
sustained by the Fund or its investors. It is understood that, subject to the
terms and conditions of the Investment Management Agreement between each Fund
and InterCapital, InterCapital shall retain ultimate responsibility for all
services to be performed hereunder by DWS. DWS shall indemnify InterCapital and
hold it harmless from any liability that InterCapital may incur arising out of
any act or failure to act by DWS in carrying out its responsibilities hereunder.
8. It is understood that any of the shareholders, Directors/Trustees,
officers and employees of the Fund may be a shareholder, director, officer or
employee of, or be otherwise interested in, DWS, and in any person controlling,
controlled by or under common control with DWS, and that DWS and any person
controlling, controlled by or under common control with DWS may have an interest
in the Fund. It is also understood that DWS and any affiliated persons thereof
or any persons controlling, controlled by or under common control with DWS have
and may have advisory, management, administration service or other contracts
with other organizations and persons, and may have other interests and
businesses, and further may purchase, sell or trade any securities or
commodities for their own accounts or for the account of others for whom they
may be acting.
9. This Agreement shall continue until April 30, 1994, and thereafter shall
continue automatically for successive periods of one year unless terminated by
either party by written notice delivered to the other party within 30 days of
the expiration of the then-existing period. Notwithstanding the foregoing, this
Agreement may be terminated at any time, by either party on 30 days' written
notice delivered to the other party. In the
2
<PAGE>
event that the Investment Management Agreement between any Fund and InterCapital
is terminated, this Agreement will automatically terminate with respect to such
Fund.
10. This Agreement may be amended or modified by the parties in any manner
by mutual written agreement executed by each of the parties hereto.
11. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written in New York, New York.
DEAN WITTER INTERCAPITAL INC.
By: ____________________________
Attest:
__________________________
DEAN WITTER SERVICES COMPANY INC.
By: _____________________________
Attest:
__________________________
3
<PAGE>
SCHEDULE A
DEAN WITTER FUNDS
at December 31, 1993
Open-End Funds
1. Active Assets California Tax-Free Trust
2. Active Assets Government Securities Trust
3. Active Assets Money Trust
4. Active Assets Tax-Free Trust
5. Dean Witter American Value Fund
6. Dean Witter California Tax-Free Daily Income Trust
7. Dean Witter California Tax-Free Income Fund
8. Dean Witter Capital Growth Securities
9. Dean Witter Convertible Securities Trust
10. Dean Witter Developing Growth Securities Trust
11. Dean Witter Diversified Income Trust
12. Dean Witter Dividend Growth Securities Inc.
13. Dean Witter Equity Income Trust
14. Dean Witter European Growth Fund Inc.
15. Dean Witter Federal Securities Trust
16. Dean Witter Global Dividend Growth Securities
17. Dean Witter Global Short-Term Income Fund Inc.
18. Dean Witter Health Sciences Trust
19. Dean Witter High Yield Securities Inc.
20. Dean Witter Intermediate Income Securities
21. Dean Witter Limited Term Municipal Trust
22. Dean Witter Liquid Asset Fund Inc.
23. Dean Witter Managed Assets Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter Natural Resource Development Securities Inc.
26. Dean Witter New York Municipal Money Market Trust
27. Dean Witter New York Tax-Free Income Fund
28. Dean Witter Pacific Growth Fund Inc.
29. Dean Witter Precious Metals and Minerals Trust
30. Dean Witter Premier Income Trust
31. Dean Witter Retirement Series
32. Dean Witter Select Municipal Reinvestment Fund
33. Dean Witter Short-Term U.S. Treasury Trust
34. Dean Witter Strategist Fund
35. Dean Witter Tax-Exempt Securities Trust
36. Dean Witter Tax-Free Daily Income Trust
37. Dean Witter U.S. Government Money Market Trust
38. Dean Witter U.S. Government Securities Trust
39. Dean Witter Utilities Fund
40. Dean Witter Value-Added Market Series
41. Dean Witter Variable Investment Series
42. Dean Witter World Wide Income Trust
43. Dean Witter World Wide Investment Trust
Closed-End Funds
44. High Income Advantage Trust
45. High Income Advantage Trust II
46. High Income Advantage Trust III
47. InterCapital Income Securities Inc.
48. Dean Witter Government Income Trust
49. InterCapital Insured Municipal Bond Trust
50. InterCapital Insured Municipal Trust
51. InterCapital Insured Municipal Income Trust
52. InterCapital California Insured Municipal Income Trust
53. InterCapital Quality Municipal Investment Trust
54. InterCapital Quality Municipal Income Trust
55. InterCapital Quality Municipal Securities
56. InterCapital California Quality Municipal Securities
57. InterCapital New York Quality Municipal Securities
4
<PAGE>
DEAN WITTER SERVICES COMPANY
SCHEDULE OF ADMINISTRATIVE FEES - JANUARY 1, 1994
MONTHLY COMPENSATION CALCULATED DAILY BY APPLYING THE FOLLOWING ANNUAL
RATES TO THE FUND'S NET ASSETS.
Dean Witter European Growth 0.06% to the daily net assets.
Fund
5
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 4 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 13, 1993 relating to the financial statements and financial highlights
of Dean Witter European Growth Fund Inc., which appears in such Statement of
Additional Information, and to the incorporation by reference of such report
into the Prospectus which constitutes part of this Registration Statement. We
also consent to the reference to us under the heading "Financial Highlights" in
the Prospectus and to the references to us under the headings "Independent
Accountants" and "Experts" in the Statement of Additional Information.
/s/ Price Waterhouse
PRICE WATERHOUSE
1177 Avenue of the Americas
New York, New York
February 3, 1994
<PAGE>
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
DEAN WITTER EUROPEAN GROWTH FUND INC.
WHEREAS, Dean Witter European Growth Fund Inc. (the "Fund") is
engaged in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended
(the "Act"); and
WHEREAS, on March 22, 1990, the Fund adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act, and the Directors then determined that
there was a reasonable likelihood that adoption of the Plan of Distribution
would benefit the Fund and its shareholders; and
WHEREAS, the Directors believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, on March 28, 1990, the Fund and Dean Witter Reynolds Inc.
("DWR") entered into a Distribution Agreement pursuant to which the Fund
employed DWR as distributor of the Fund's shares; and
WHEREAS, on January 4, 1993, the Fund and DWR substituted Dean Witter
Distributors Inc. (the "Distributor") in the place of DWR as distributor of
the Fund's shares; and
WHEREAS, the Fund, DWR and the Distributor intend that DWR will
continue to promote the sale of Fund shares and provide personal services to
Fund shareholders with respect to their holdings of Fund shares; and
WHEREAS, the Fund and the Distributor have entered into a separate
Distribution Agreement dated as of January 4, 1993, pursuant to which the Fund
has employed the Distributor in such capacity during the continuous offering
of shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution
previously adopted and amended and restated, and the Distributor hereby agrees
to the terms of said Plan of Distribution (the "Plan"), as amended herein,
in accordance with Rule 12b-1 under the Act on the following terms and
conditions:
1. The Fund shall pay to the Distributor, as the distributor of
securities of which the Fund is the issuer, compensation for distribution of
its shares at the rate of the lesser of (i) 1.0% per annum of the average daily
aggregate sales of the shares of the Fund since its inception (not including
reinvestment of dividends and capital gains distributions from the Fund) less
the average daily aggregate net asset value of the shares of the Fund redeemed
since the Fund's inception upon which a contingent deferred sales charge has
been imposed or upon which such charge has been waived, or (ii) 1.0% per annum
of the Fund's average daily net assets. Such compensation shall be calculated
and accrued daily and paid monthly or at such other intervals as the Directors
shall determine. The Distributor may direct that all or any part of the amounts
receivable by it under this Plan be paid directly to DWR, its affiliates or
other broker-dealers who provide distribution and shareholder services. All
payments made pursuant to the Plan shall be made in accordance with the terms
and limitations of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other broker-dealers it
may select in connection with the distribution of the Fund's shares, including
personal services to shareholders with respect to their holdings of Fund shares,
and may be spent by the Distributor, DWR, its affiliates and such broker-dealers
on any activities or expenses related to the distribution of the Fund's shares
or services to shareholders, including, but not limited to: compensation to, and
expenses of, account executives or other employees of the Distributor, DWR, its
affiliates or other broker-dealers; overhead and other branch office
distribution-related expenses and telephone expenses of persons who engage in or
support distribution of shares or who provide personal services to shareholders;
printing of prospectuses and reports for other than existing shareholders;
preparation, printing and distribution of sales literature and advertising
materials and opportunity costs in incurring the foregoing expenses (which
may be calculated as a carrying charge on the excess of the distribution
expenses incurred by the Distributor, DWR, its affiliates or other
broker-dealers over distribution revenues received by them). The overhead and
other branch office distribution-related expenses referred to in this paragraph
2 may include: (a) the expenses of operating the branch offices of the
Distributor or other broker-dealers, including DWR, in connection with the sale
of Fund shares, including lease costs, the salaries and employee benefits of
operations and sales support personnel, utility costs, communications costs and
the costs of stationery and supplies; (b) the costs of client sales seminars;
(c) travel expenses of mutual fund sales coordinators to promote the sale of
Fund shares; and (d) other expenses relating to branch promotion of Fund sales.
2
<PAGE>
3. This Plan, as amended and restated, shall not take effect until it
has been approved, together with any related agreements, by votes of a majority
of the Board of Directors of the Fund and of the Directors who are not
"interested persons" of the Fund (as defined in the Act) and have no direct
or indirect financial interest in the operation of this Plan or any agreements
related to it (the "Rule 12b-1 Directors"), cast in person at a meeting (or
meetings) called for the purpose of voting on this Plan and such related
agreements.
4. This Plan shall continue in effect until April 30, 1993, and from
year to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 3
hereof.
5. The Distributor shall provide to the Directors of the Fund and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this regard,
the Directors shall request the Distributor to specify such items of expenses as
the Directors deem appropriate. The Directors shall consider such items as they
deem relevant in making the determinations required by paragraph 4 hereof.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Directors, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event
of nonrenewal, the Fund shall have no obligation to pay expenses which have
been incurred by the Distributor, DWR, its affiliates or other broker-dealers
in excess of payments made by the Fund pursuant to this Plan. However, this
shall not preclude consideration by the Directors of the manner in which such
excess expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the
Fund may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval
in paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the Directors who are not interested
persons.
9. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 5 hereof, for a period
of not less than six years from the date of this Plan, any such agreement or
any such report, as the case may be, the first two years in an easily
accessible place.
IN WITNESS WHEREOF, the Fund, the Distributor and DWR have executed
this amended and restated Plan of Distribution, as amended, as of the day
and year set forth below in New York, New York.
Date: March 22, 1990 DEAN WITTER EUROPEAN GROWTH FUND INC.
As amended on January 4, 1993 and
April 28, 1993
By _________________________________
Attest:
______________________________________
DEAN WITTER DISTRIBUTORS INC.
By _________________________________
Attest:
______________________________________
DEAN WITTER REYNOLDS INC.
By _________________________________
Attest:
______________________________________
2
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
EUROPEAN GROWTH SECURITIES
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-93 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ ---------- -------------- ----------------------------
<S> <C> <C> <C> <C>
31-Oct-92 $1,337.40 33.74% 1.00 33.74%
01-Jun-90 $1,246.60 24.66% 3.42 6.66%
<FN>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
</TABLE>
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = --------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-93 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ ---------- ----------- ------------ ----------------------
<S> <C> <C> <C> <C>
31-Oct-92 $1,387.40 38.74% 1.00 38.74%
01-Jun-90 $1,266.60 26.66% 3.42 7.16%
<FN>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
</TABLE>
FORMULA: G= (TR+1)*P
G= GROWTH OF $10,000 INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
(D) (E) (F)
TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------- -------------- ----------------------------------------------- ----------------------------
<S> <C> <C> <C> <C>
01-Jun-90 26.66 $12,666 $63,330 $126,660
</TABLE>
