WITTER DEAN EUROPEAN GROWTH FUND INC, 485BPOS, 1996-12-23

WITTER DEAN EUROPEAN GROWTH FUND INC
485BPOS, 1996-12-23

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996

FILE NOS.: 33-35530
811-6044

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/

POST-EFFECTIVE AMENDMENT NO. 7 /X/

AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/

AMENDMENT NO. 8 /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
WEITZEN 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 December 26, 1996 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, 1996,
WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 19, 1996.

AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS

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<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; Risk Considerations; 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; Financial Statements
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
DECEMBER 26, 1996

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 December 26, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.

DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS

Prospectus Summary/2
Summary of Fund Expenses/3
Financial Highlights/4
The Fund and its Management/5
Investment Objective and Policies/5
Risk Considerations/7
Investment Restrictions/15
Purchase of Fund Shares/16
Shareholder Services/18
Redemptions and Repurchases/21
Dividends, Distributions and Taxes/23
Performance Information/24
Additional Information/24

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 European
Growth Fund Inc.
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)

<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
The The Fund is an open-end, diversified management investment company investing primarily in securities issued by
Fund issuers located in Europe.
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Shares Offered Shares of common stock with $0.01 par value (see page 24).
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Offering Price At net asset value without sales charge (see page 16). Shares redeemed within six years of purchase are subject
to a contingent deferred sales charge under most circumstances (see page 21).
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Minimum Minimum initial investment, $1,000 ($100 if the account is opened through EasyInvest-SM-); minimum subsequent
Purchase investments, $100 (see page 16).
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Investment The investment objective of the Fund is to maximize the capital appreciation of its investments (see page 5).
Objective
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Investment Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned subsidiary, Dean Witter
Manager and Services Company Inc., serve in various investment management, advisory, management and administrative
Sub-Adviser capacities to 100 investment companies and other portfolios with net assets under management of approximately
$91 billion at November 30, 1996. Morgan Grenfell Investment Services Ltd. has been retained by the Investment
Manager as Sub-Adviser to provide investment advice and manage the Fund's portfolio. Morgan Grenfell Investment
Services Ltd. currently serves as investment adviser for U.S. corporate and public employee benefit plans,
investment companies, endowments and foundations with assets of approximately $14.7 billion at September 30,
1996 (see page 5).
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Management The Investment Manager receives a monthly fee from the Fund at the annual rate of 1.0% of daily net assets on
Fee assets not exceeding $500 million; and 0.95% of the daily net assets on assets exceeding $500 million. The
Sub-Adviser 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.
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Dividends and Dividends from net investment income and distributions from net capital gains are paid at least once each year.
Distributions Dividends and capital gains distributions are automatically reinvested in additional shares at net asset value
unless the shareholder elects to receive cash (see page 23).
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Distributor Dean Witter Distributors Inc. (the "Distributor"). For its services as Distributor, which include payment of
sales commissions to account executives and various other promotional and sales related expenses, 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 Fund's 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 16 and 21).
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Redemption-- At net asset value; redeemable involuntarily if total value of the account is less than $100 or, if the account
Contingent was opened through EasyInvest, if after twelve months the shareholder has invested less than $1,000 in the
Deferred Sales account. Although no commission or sales load is imposed upon the purchase of shares, a contingent deferred
Charge sales charge (scaled down from 5% to 1%) is imposed on any redemption of shares if, after such redemption, the
aggregate current value of an account with the Fund is less than the aggregate amount 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 18-23).
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Risk The net asset value of the Fund's shares will fluctuate with changes in the market value of its portfolio
Considerations securities. It should be recognized that the foreign securities and markets in which the 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
is 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, repurchase agreements, when-issued and delayed delivery securities and forward
commitments, when, as and if issued securities and lending of portfolio securities (see pages 7-14). 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.
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</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
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended October 31, 1996.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
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<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
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<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>

<TABLE>
<S> <C>
Redemption Fees........................................................................ none
Exchange Fee........................................................................... none
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
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Management Fees........................................................................ 0.97%
12b-1 Fees*............................................................................ 0.91%
Other Expenses......................................................................... 0.25%
Total Fund Operating Expenses.......................................................... 2.13%
<FN>
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* 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 (SEE "PURCHASE OF
FUND SHARES").
</TABLE>

<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:.............................................................. $ 72 $ 97 $ 134 $ 246
You would pay the following expenses on the same investment, assuming
no redemption:....................................................... $ 22 $ 67 $ 114 $ 246
</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
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The following data and ratios for a share of capital stock outstanding
throughout each period have been audited by Price Waterhouse LLP, 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 Shareholders, which may be obtained without charge upon request of the
Fund.

<TABLE>
<CAPTION>
FOR THE
PERIOD
MAY 31,
1990*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
----------------------------------------------------- OCTOBER
1996 1995 1994 1993 1992 1991 31, 1990
------- ------ ------ ------- ------- ------ ---------

<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 14.44 $13.49 $11.86 $ 8.57 $ 9.22 $ 9.23 $10.00
------- ------ ------ ------- ------- ------ ---------
Net investment income (loss)............ 0.02 0.02 0.02 (0.01) 0.01 0.05 0.05
Net realized and unrealized gain
(loss)................................. 3.03 2.00 1.84 3.30 (0.23) 0.07 (0.82)
------- ------ ------ ------- ------- ------ ---------
Total from investment operations........ 3.05 2.02 1.86 3.29 (0.22) 0.12 (0.77)
------- ------ ------ ------- ------- ------ ---------
Less dividends and distributions from:
Net investment income................. -- -- -- -- (0.03) (0.07) --
Net realized gain..................... (0.73) (1.07) (0.23) -- (0.40) (0.06) --
------- ------ ------ ------- ------- ------ ---------
Total dividends and distributions....... (0.73) (1.07) (0.23) -- (0.43) (0.13) --
------- ------ ------ ------- ------- ------ ---------
Net asset value, end of period.......... $ 16.76 $14.44 $13.49 $ 11.86 $ 8.57 $ 9.22 $9.23
------- ------ ------ ------- ------- ------ ---------
------- ------ ------ ------- ------- ------ ---------
TOTAL INVESTMENT RETURN+................ 22.27% 16.83% 15.61% 38.74% (2.39)% 1.33% (7.70)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.13% 2.23% 2.27% 2.38% 2.40% 2.44% 2.45%(2)
Net investment income (loss)............ 0.14% 0.13% 0.21% (0.09)% 0.11% 0.51% 1.52%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
millions............................... $1,228 $868 $759 $459 $297 $316 $304
Portfolio turnover rate................. 49% 61% 72% 120% 116% 111% 36%(1)
Average commission rate paid............ $0.0448 -- -- -- -- -- --
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>

4
<PAGE>
THE FUND AND ITS MANAGEMENT
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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, Discover & Co. ("DWDC"), a
balanced financial services organization providing a broad range of nationally
marketed credit and investment products.

InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 100 investment companies (the "Dean Witter Funds"),
thirty of which are listed on the New York Stock Exchange, with combined assets
of approximately $87.9 billion at November 30, 1996. The Investment Manager also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $3.1 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-Adviser") and the Investment Manager, the Sub-Adviser 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-Adviser 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-Adviser, whose address is 20 Finsbury Circus, London, England, as of
September 30, 1996, manages assets of approximately $14.7 billion for U.S.
corporate and public employee benefit plans, investment companies, endowments
and foundations. The Sub-Adviser 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% of the portion of the Fund's daily net assets not exceeding
$500 million; and 0.95% of the portion of daily net assets exceeding $500
million. As compensation for its services provided pursuant to the Sub-Advisory
Agreement, the Investment Manager pays the Sub-Adviser monthly compensation
equal to 40% of its monthly compensation.

For the fiscal year ended October 31, 1996, the Fund accrued total
compensation to the Investment Manager amounting to 0.97% of the Fund's average
daily net assets (of which 40% was accrued to the Sub-Adviser by the Investment
Manager) and the Fund's total expenses amounted to 2.13% 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. This objective is
fundamental and may

5
<PAGE>

not be changed without shareholder approval. 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 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-Adviser 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-Adviser 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-Adviser 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-Adviser,
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, 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

6
<PAGE>
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.

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 value 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
further 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

7
<PAGE>
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 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. The Fund may, however, close out
the forward contract without purchasing the security which was the subject of
the "anticipatory" hedge.

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").

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<PAGE>
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-Adviser.

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. To the extent that the Fund enters into forward foreign
currency contracts to hedge against a decline in the value of portfolio holdings
denominated in a particular foreign currency resulting from currency
fluctuations, there is a risk that the Fund may nevertheless realize a gain or
loss as a result of currency fluctuations after such portfolio holdings are sold
if the Fund is unable to enter into an "offsetting" forward foreign currency
contract with the same party or another party. 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").

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

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<PAGE>
$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.

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

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<PAGE>
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.

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-Adviser
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 or Sub-Adviser seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, provide

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<PAGE>
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. 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 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."

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<PAGE>
tract 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 at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
and maintaining adequate collateralization.

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

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

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,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. 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

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<PAGE>
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-Adviser 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-Adviser 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-Adviser's own analysis of factors they deem relevant. The Fund's primary
portfolio manager is Jeremy G. Lodwick, a Director of the Sub-Adviser. Mr.
Lodwick has been the Fund's primary portfolio manager since April 1, 1994 and
has been managing portfolios consisting of equity securities issued by European
issuers for the Sub-Adviser since January, 1992; prior thereto, he was employed
by the Sub-Adviser in another capacity.

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.
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.

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 in foreign
markets are generally higher than in the United States.

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<PAGE>
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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<PAGE>
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. The minimum initial purchase, in the case of
investments through EasyInvest, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
In the case of investments pursuant to Systematic Payroll Deduction Plans
(including Individual Retirement Plans), the Fund, in its discretion, may accept
investments without regard to any minimum amounts which would otherwise be
required, if the Fund has reason to believe that additional investments will
increase the investment in all accounts under such Plans to at least $1,000.
Certificates for shares purchased will not be issued unless 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 three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. 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. Investors will be entitled to receive income dividends
and capital gain distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. 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"). Sales personnel are compensated for selling
shares of the Fund at the time of their sale by the Distributor or any of its
affiliates and/or the Selected Broker-Dealer. In addition, some sales personnel
of the Selected Broker-Dealer will receive various types of non-cash
compensation as special sales incentives, including trips, educational and/or
business seminars and merchandise. The Fund and the Distributor reserve the
right to reject any purchase orders.

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.
A portion of the fee payable pursuant to the Plan equal to 0.25% of the Fund's
average daily net assets, is characterized as a service fee within the meaning
of NASD guidelines. The service fee is

16
<PAGE>
a payment made for personal service and/or the maintenance of shareholder
accounts.

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 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, 1996, the Fund accrued payments under
the Plan amounting to $9,213,394, which amount is equal to 0.91% of the Fund's
average daily net assets for the fiscal year. The payments accrued under the
Plan were calculated pursuant to clause (a) of the compensation formula under
the Plan.

At any given time, the Distributor 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 $25,872,741 at October 31, 1996, which equalled 2.11%
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 (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time), on each day that the New York Stock
Exchange is open 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

17
<PAGE>
exchange designated as the primary market pursuant to procedures adopted 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-Adviser 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 prior to the close of the New York Stock
Exchange. 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 sixty 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' market 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 the Fund's Directors. The pricing service may
utilize 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 (see "Purchase of Fund Shares" and "Redemptions and
Repurchases--Involuntary Redemption").

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

18
<PAGE>

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
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, Dean Witter Balanced Growth Fund, Dean
Witter Balanced Income Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter Funds which are money market funds (the foregoing eleven
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 business 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

19
<PAGE>
(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.

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
Broker-Dealer are referred to their account executive regarding restrictions on
exchange of shares of the Fund pledged in the margin account.

The current prospectus for each 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, shareholders 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) 869-NEWS (toll-free).

The Fund will employ reasonable procedures to confirm that exchange
instructions communi-

20
<PAGE>
cated 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 without a share
certificate, a written request for redemption sent 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 will, 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 following table:

<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.

21
<PAGE>
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:

(1)
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 ("IRA") or Custodial Account under Section
403(b)(7) of the Internal Revenue Code ("403(b) Custodial Account"), provided in
either case that the redemption is requested within one year of the death or
initial determination of disability;

(2)
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 IRA or 403(b) Custodial Account
following attainment of age 59 1/2; or (C) a tax-free return of an excess
contribution to an IRA; and

(3)
all redemptions of shares held for the
benefit of a participant in a corporate or self-employed retirement plan
qualified under Section 401(k) of the Internal Revenue Code which offers
investment companies managed by the Investment Manager or its subsidiary, Dean
Witter Services Company Inc., as self-directed investment alternatives and for
which Dean Witter Trust Company or Dean Witter Trust FSB, each of which is an
affiliate of the Investment Manager, serves as Trustee ("Eligible 401(k) Plan"),
provided that either: (A) the plan continues to be an Eligible 401(k) Plan after
the redemption; or (B) the redemption is in connection with the complete
termination of the plan involving the distribution of all plan assets to
participants.

With reference to (1) above, 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. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder'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 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, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check (including a government, certified or bank cashier's 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

22
<PAGE>
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 or, in the case of an account opened through EasyInvest, if
after twelve months the shareholder has invested less than $1,000 in the
account. However, before the Fund redeems such shares and sends the proceeds to
the shareholder, it will notify the shareholder that the value of the shares is
less than the applicable amount and allow the shareholder sixty days to make an
additional investment in an amount which will increase the value of the account
to at least the applicable amount before the redemption is processed. 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 continue to distribute all of its net
investment income and any net short-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 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

23
<PAGE>
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.

The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources will, in effect, represent a return of
a portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to 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 and five years, as well as over 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 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.

24
<PAGE>
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Directors may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Fund's By-Laws.

CODE OF ETHICS. Directors, officers and employees of InterCapital, Dean
Witter Services Company Inc. and the Distributor are subject to a strict Code of
Ethics adopted by those companies. The Code of Ethics is intended to ensure that
the interests of shareholders and other clients are placed ahead of any personal
interest, that no undue personal benefit is obtained from a person's employment
activities and that actual and potential conflicts of interest are avoided. To
achieve these goals and comply with regulatory requirements, the Code of Ethics
requires, among other things, that personal securities transactions by employees
of the companies be subject to an advance clearance process to monitor that no
Dean Witter Fund is engaged at the same time in a purchase or sale of the same
security. The Code of Ethics bans the purchase of securities in an initial
public offering, and also prohibits engaging in futures and options transactions
and profiting on short-term trading (that is, a purchase within sixty days of a
sale or a sale within sixty days of a purchase) of a security. In addition,
investment personnel may not purchase or sell a security for their personal
account within thirty days before or after any transaction in any Dean Witter
Fund managed by them. Any violations of the Code of Ethics are subject to
sanctions, including reprimand, demotion or suspension or termination of
employment. The Code of Ethics comports with regulatory requirements and the
recommendations in the 1994 report by the Investment Company Institute Advisory
Group on Personal Investing.

The Fund's Sub-Adviser also has a Code of Ethics which complies with
regulatory requirements and, insofar as it relates to persons associated with
the Fund, the 1994 report by the Investment Company Institute Advisory Group on
Personal Investing.

SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.

25
<PAGE>

Dean Witter
European Growth Fund Inc.
Two World Trade Center
New York, New York 10048
DIRECTORS
Michael Bozic Dean Witter
Charles A. Fiumefreddo European
Edwin J. Garn Growth Fund
John R. Haire
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive
Officer
Sheldon Curtis
Vice President, Secretary and
General Counsel
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 LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISER
Morgan Grenfell Investment Services
Limited
PROSPECTUS -- DECEMBER 26, 1996

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
DEAN WITTER
EUROPEAN
GROWTH
DECEMBER 26, 1996

FUND INC.

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

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 December 26, 1996, 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 numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.

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

<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
The Fund and its Management............................................................ 3

Directors and Officers................................................................. 7

Investment Practices and Policies...................................................... 13

Investment Restrictions................................................................ 26

Portfolio Transactions and Brokerage................................................... 27

The Distributor........................................................................ 29

Determination of Net Asset Value....................................................... 32

Shareholder Services................................................................... 33

Redemptions and Repurchases............................................................ 37

Dividends, Distributions and Taxes..................................................... 39

Performance Information................................................................ 40

Description of Common Stock............................................................ 41

Custodian and Transfer Agent........................................................... 42

Independent Accountants................................................................ 42

Reports to Shareholders................................................................ 42

Legal Counsel.......................................................................... 42

Experts................................................................................ 42

Registration Statement................................................................. 42

Financial Statements -- October 31, 1996............................................... 43

Report of Independent Accountants...................................................... 58
</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 Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of InterCapital. (As hereinafter used in this
Statement of Additional Information, the terms "InterCapital" and "Investment
Manager" refer to DWR's InterCapital Division prior to the internal
reorganization and 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-Adviser, subject to review by the
Fund's Board of Directors. 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 American Value Fund, Dean Witter Dividend Growth
Securities Inc., Dean Witter Natural Resource Development Securities Inc., Dean
Witter U.S. Government Money Market Trust, Dean Witter California Tax-Free
Income Fund, 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 New York Tax-Free Income Fund,
Dean Witter Convertible Securities Trust, Dean Witter Federal Securities Trust,
Dean Witter Value-Added Market Series, High Income Advantage Trust, High Income
Advantage Trust II, High Income Advantage Trust III, Dean Witter Government
Income Trust, Dean Witter California Tax-Free Daily Income Trust, Dean Witter
Utilities Fund, Dean Witter Strategist Fund, Dean Witter World Wide Income
Trust, Dean Witter Intermediate Income Securities, Dean Witter Capital Growth
Securities, Dean Witter European Growth Fund Inc., Dean Witter Pacific Growth
Fund Inc., Dean Witter Precious Metals and Minerals Trust, Dean Witter Global
Short-Term Income Fund Inc., Dean Witter Multi-State Municipal Series Trust,
Dean Witter New York Municipal Money Market Trust, InterCapital Quality
Municipal Investment Trust, Dean Witter Premier Income Trust, Dean Witter
Short-Term U.S. Treasury Trust, InterCapital Insured Municipal Bond Trust,
InterCapital Insured Municipal Trust, InterCapital Quality Municipal Income
Trust, Dean Witter Diversified Income Trust, Dean Witter Health Sciences Trust,
Dean Witter Retirement Series, InterCapital Quality Municipal Securities,
InterCapital California Quality Municipal Securities, InterCapital New York
Quality Municipal Securities, Dean Witter Global Dividend Growth Securities,
Dean Witter Global Utilities Fund, Dean Witter High Income Securities, Dean
Witter Limited Term Municipal Trust, Dean Witter Short-Term Bond Fund, Dean
Witter International SmallCap Fund, Dean Witter Mid-Cap Growth Fund, Dean Witter
Select Dimensions Series, Dean Witter Balanced Growth Fund, Dean Witter Balanced
Income Fund, Dean Witter Hawaii Municipal Trust, Dean Witter Capital
Appreciation Fund, Dean Witter Intermediate Term U.S. Treasury Trust, Dean
Witter Information Fund, Dean Witter Japan Fund, Dean Witter Income Builder
Fund, Dean Witter Special Value Fund, InterCapital Insured Municipal Securities,
InterCapital Insured California Municipal Securities, InterCapital Insured
Municipal Income Trust, InterCapital California Insured Municipal Income Trust,
Active Assets Money Trust, Active Assets California Tax-Free Trust, Active
Assets Tax-Free Trust, Active Assets Government Securities Trust, Municipal
Income Trust, Municipal Income Trust II, Municipal Income Trust III, Municipal
Income Opportunities Trust, Municipal Income Opportunities Trust II, Municipal
Income Opportunities Trust III, Municipal Premium Income Trust and Prime Income
Trust. The foregoing investment companies, together with the Fund, are
collectively referred to as the Dean Witter Funds.

3
<PAGE>

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

Pursuant to an Investment Management Agreement (the "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 Morgan Grenfell Investment Services Limited (the
"Sub-Adviser") 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. On April 17,
1995, DWSC was reorganized in the State of Delaware, necessitating the entry
into a new Services Agreement by InterCapital on that date. The foregoing
internal reorganizations did not result in any change in the nature or scope of
the administrative services being provided to the Fund or any of the fees being
paid by the Fund for the overall services being performed under the terms of the
existing Management Agreement.

Expenses not expressly assumed by the Investment Manager under the
Management Agreement, by the Sub-Adviser 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-Adviser or any
corporate affiliate of the Investment Manager or Sub-Adviser; 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-Adviser (not
including compensation or expenses of attorneys who are employees of the
Investment Manager) and

4
<PAGE>
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 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
rates of 1.0% of the portion of daily net assets not exceeding $500 million; and
0.95% of the portion of daily net assets exceeding $500 million. For the fiscal
years ended October 31, 1994, 1995 and 1996 the Fund accrued to the Investment
Manager total compensation under the Management Agreement in the amounts of
$6,274,989, $7,653,283 and $9,903,670, respectively.

Pursuant to a Sub-Advisory Agreement between the Investment Manager and
Sub-Adviser, the Sub-Adviser 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-Adviser 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 manages, as of September 30, 1996, assets of
approximately $14.7 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 managing, as of September 30, 1996,
approximately $111.6 billion worldwide.

Both the Investment Manager and the Sub-Adviser 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-Adviser may be furnished by
directors, officers and employees of the Investment Manager and the Sub-Adviser.
In connection with the services rendered by the Sub-Adviser, the Sub-Adviser
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-Adviser, 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-Adviser, the Investment Manager pays the Sub-Adviser monthly
compensation equal to 40% of the Investment Manager's monthly compensation
payable under the Management Agreement. For the fiscal years ended October 31,
1994,

5
<PAGE>

1995 and 1996, the Investment Manager informed the Fund that it accrued to the
Sub-Adviser total compensation under the Sub-Advisory Agreement of $2,509,996,
$3,061,313 and $3,961,468, respectively.

The Management Agreement and the Sub-Advisory Agreement (the "Agreements")
were initially approved by the Board of Directors of the Fund on October 30,
1992 and by the shareholders at a Special Meeting of Shareholders held on
January 12, 1993. The Agreements are substantially identical to the prior
investment management agreement and sub-advisory agreement which were entered
into on March 16, 1990 and originally approved by DWR, as the then sole
shareholder, on March 28, 1990. The Agreements took effect on June 30, 1993 upon
the spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC. The
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 Act, of the Fund's shares, or by the Investment Manager. The Agreements will
automatically terminate in the event of its assignment (as defined in the Act
and the rules thereunder).

Under their terms, the Agreements had an initial term ended April 30, 1994,
and provide that each 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 Board of Directors of the Fund; provided that in either event
such continuance is approved annually by the vote of a majority of the Directors
of the Fund who are not parties to the Agreements 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. At a meeting held on April 8, 1994, the Fund's Board of Directors,
including all of the Independent Directors, approved an amendment to the terms
of the Investment Management Agreement to lower management fees charged on
average daily net assets of the Fund to 1.0% of the portion of daily net assets
not exceeding $500 million; and 0.95% of the portion of daily net assets
exceeding $500 million. At their meeting held on April 17, 1996, the Fund's
Board of Directors, including all of the Independent Directors, approved the
continuation of these Agreements until April 30, 1997.

The Fund has acknowledged that the name "Dean Witter" is a property right of
DWR. The Fund has agreed that DWR or its parent company may use, or at any time
permit others to use, the name "Dean Witter." The Fund has also agreed that in
the event the investment management contract between InterCapital and the Fund
is terminated, or if the affiliation between InterCapital and its parent company
is terminated, the Fund will eliminate the name "Dean Witter" from its name if
DWR or its parent company 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 82 Dean Witter Funds and the 14 TCW/DW Funds are shown
below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------
<S> <C>
Michael Bozic (55) Chairman and Chief Executive Officer of Levitz Furniture
Director Corporation (since November, 1995); Director or Trustee of
c/o Levitz Furniture Corporation the Dean Witter Funds; formerly President and Chief Execu-
6111 Broken Sound Parkway, N.W. tive Officer of Hills Department Stores (May, 1991-July,
Boca Raton, Florida 1995); formerly variously Chairman, Chief Executive Officer,
President and Chief Operating Officer (1987-1991) of the
Sears Merchandise Group of Sears, Roebuck and Co.; Director
of Eaglemark Financial Services, Inc., the United Negro
College Fund and Weirton Steel Corporation.

Charles A. Fiumefreddo* (63) 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; Chairman, Director or Trustee, Presi-
Two World Trade Center dent and Chief Executive Officer of the Dean Witter Funds;
New York, New York Chairman, Chief Executive Officer and Trustee of the TCW/DW
Funds; Chairman and Director of Dean Witter Trust Company
("DWTC"); Director and/or officer of various DWDC
subsidiaries; formerly Executive Vice President and Director
of DWDC (until February, 1993).

Edwin J. Garn (64) Director or Trustee of the Dean Witter Funds; formerly
Director United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Chemical Corporation Senate Banking Committee (1980-1986); formerly Mayor of Salt
500 Huntsman Way Lake City, Utah (1971-1974); formerly Astronaut, Space
Salt Lake City, Utah Shuttle Discovery (April 12-19, 1985); Vice Chairman,
Huntsman Chemical Corporation (since January, 1993);
Director of Franklin Quest (time management systems) and
John Alden Financial Corp.; member of the board of various
civic and charitable organizations.
</TABLE>

7
<PAGE>

Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a
Director consulting firm (since June, 1985); Koch Professor of
c/o Johnson Smick International, Inc. International Economics and Director of the Center for
1133 Connecticut Avenue, N.W. Global Market Studies at George Mason University; Co-
Washington, DC Chairman and a founder of the Group of Seven Council (G7C),
an international economic commission; Director or Trustee of
the Dean Witter Funds; Trustee of the TCW/DW Funds; Director
of NASDAQ (since June, 1995); Director of Greenwich Capital
Markets, Inc. (broker-dealer); formerly Vice Chairman of the
Board of Governors of the Federal Reserve System (1986-1990)
and Assistant Secretary of the U.S. Treasury (1982-1986).

Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private investment
Director partnership; Director or Trustee of the Dean Witter Funds;
c/o Triumph Capital, L.P. Trustee of the TCW/DW Funds; formerly Vice President,
237 Park Avenue Bankers Trust Company and BT Capital Corporation
New York, New York (1984-1988); director of various business organizations.

Philip J. Purcell* (53) Chairman of the Board of Directors and Chief Executive
Director Officer of DWDC, DWR and Novus Credit Services Inc.;
Two World Trade Center Director of InterCapital, DWSC and Distributors; Director or
New York, New York Trustee of the Dean Witter Funds; Director and/or officer of
various DWDC subsidiaries.
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------------------
<S> <C>
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds;
Director Trustee of the TCW/DW Funds; Director of Citizens Utilities
c/o Gordon Altman Butowsky Company; formerly Executive Vice President and Chief Invest-
Weitzen Shalov & Wein ment Officer of the Home Insurance Company (August,
Counsel to the Independent Directors 1991-September, 1995) and Chairman and Chief Investment
114 West 47th Street Officer of Axe-Houghton Management and the Axe-Houghton
New York, New York Funds (1983-1991).
Sheldon Curtis (64) 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 DWTC; Senior Vice President, Assistant Secretary and
New York, New York Assistant General Counsel of Distributors; Assistant
Secretary of DWR; Vice President, Secretary and General
Counsel of the Dean Witter Funds and the TCW/DW Funds.
Thomas F. Caloia (50) First Vice President and Assistant Treasurer of InterCapital
Treasurer and DWSC; Treasurer of the Dean Witter Funds and the TCW/DW
Two World Trade Center Funds.
New York, New York
- ---------
*Denotes Directors who are "interested persons" of the Fund, as defined in the Act.
</TABLE>

In addition, Robert M. Scanlan, President and Chief Operating Officer, of
InterCapital and DWSC, Executive Vice President of Distributors and DWTC and
Director of DWTC, Robert S. Giambrone, Executive Vice President and Chief
Administrative Officer of InterCapital, DWSC, Distributors and DWTC and Director
of DWTC and Joseph J. McAlinden, Executive Vice President and Chief Investment
Officer of InterCapital and Director of DWTC, are Vice Presidents of the Fund.
Marilyn K. Cranney and Barry Fink, First Vice Presidents and Assistant General
Counsels of InterCapital and DWSC, and Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of InterCapital and DWSC, and Carsten
Otto and Frank Bruttomesso, Staff Attorneys with InterCapital, are Assistant
Secretaries of the Fund.

THE BOARD OF DIRECTORS, THE INDEPENDENT DIRECTORS, AND THE COMMITTEES

The Board of Directors consists of eight (8) directors. These same
individuals also serve as directors or trustees for all of the Dean Witter
Funds, and are referred to in this section as Directors. As of the date of this
Statement of Additional Information, there are a total of 82 Dean Witter Funds,
comprised of 122 portfolios. As of November 30, 1996, the Dean Witter Funds had
total net assets of approximately $82.2 billion and more than five million
shareholders.

Six Directors (75% of the total number) have no affiliation or business
connection with InterCapital or any of its affiliated persons and do not own any
stock or other securities issued by InterCapital's parent company, DWDC. These
are the "disinterested" or "independent" Directors. The other two Directors (the
"management Directors") are affiliated with InterCapital. Four of the six
independent Directors are also Independent Directors of the TCW/DW Funds.

Law and regulation establish both general guidelines and specific duties for
the Independent Directors. The Dean Witter Funds seek as Independent Directors
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make

9
<PAGE>

substantial demands on their time. Indeed, by serving on the Funds' Boards,
certain Directors who would otherwise be qualified and in demand to serve on
bank boards would be prohibited by law from doing so.

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

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

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

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

DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT DIRECTORS AND AUDIT COMMITTEE

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

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

The Chairman of the Committee of the Independent Directors and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Director of the Dean Witter Funds and as an Independent Director and, since July
1, 1996, as Chairman of the Committee of the Independent Trustees and the

10
<PAGE>

Audit Committee of the TCW/DW Funds. The current Committee Chairman has had more
than 35 years experience as a senior executive in the investment company
industry.

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

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

COMPENSATION OF INDEPENDENT DIRECTORS

The Fund pays each Independent Director an annual fee of $1,000 plus a per
meeting fee of $50 for meetings of the Board of Directors or committees of the
Board of Directors attended by the Director (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Directors an additional annual fee of $1,200). The Fund also
reimburses such Directors for travel and other out-of-pocket expenses incurred
by them in connection with attending such meetings. Directors and officers of
the Fund who are or have been employed by the Investment Manager or an
affiliated company receive no compensation or expense reimbursement from the
Fund.

The following table illustrates the compensation paid to the Fund's
Independent Directors by the Fund for the fiscal year ended October 31, 1996.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
FROM THE
NAME OF INDEPENDENT DIRECTOR FUND
- -------------------------------------------------------------- -----------
<S> <C>
Michael Bozic................................................. $1,750
Edwin J. Garn................................................. 1,850
John R. Haire................................................. 3,900
Dr. Manuel H. Johnson......................................... 1,800
Michael E. Nugent............................................. 1,750
John L. Schroeder............................................. 1,800
</TABLE>

11
<PAGE>

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

COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
TOTAL
FOR SERVICE AS COMPENSATION
FOR SERVICE CHAIRMAN OF PAID
AS DIRECTOR OR COMMITTEES OF FOR SERVICES
TRUSTEE AND FOR SERVICE AS INDEPENDENT TO
COMMITTEE MEMBER TRUSTEE AND DIRECTORS/ 79 DEAN
OF 79 DEAN COMMITTEE MEMBER DIRECTORS AND WITTER
NAME OF INDEPENDENT WITTER OF 11 TCW/DW AUDIT FUNDS AND 11
DIRECTOR FUNDS FUNDS COMMITTEES TCW/DW FUNDS
- --------------------------- ---------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael Bozic.............. $126,050 -- -- $126,050
Edwin J. Garn.............. 136,450 -- -- 136,450
John R. Haire.............. 98,450 $82,038 $217,350(1) 397,838
Dr. Manuel H. Johnson...... 136,450 82,038 -- 218,488
Michael E. Nugent.......... 124,200 75,038 -- 199,238
John L. Schroeder.......... 136,450 46,964 -- 183,414
</TABLE>

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

(1) For the 79 Dean Witter Funds in operation at December 31, 1995. As noted
above, on July 1, 1996, Mr. Haire became Chairman of the Committee of the
Independent Trustees and the Audit Committee of the TCW/DW Funds in addition
to continuing to serve in such positions for the Dean Witter Funds.

As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds, including the Fund, have adopted a retirement program under which
an Independent Director who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent Director
or Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Director referred to
as an "Eligible Director") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Director
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her Eligible
Compensation plus 0.4166666% of such Eligible Compensation for each full month
of service as an Independent Director or Trustee of any Adopting Fund in excess
of five years up to a maximum of 50.0% after ten years of service. The foregoing
percentages may be changed by the Board.(2) "Eligible Compensation" is one-fifth
of the total compensation earned by such Eligible Director for service to the
Adopting Fund in the five year period prior to the date of the Eligible
Director's retirement. Benefits under the retirement program are not secured or
funded by the Adopting Funds.

12
<PAGE>

The following table illustrates the retirement benefits accrued to the
Fund's Independent Directors by the Fund for the fiscal year ended October 31,
1996 and by the 57 Dean Witter Funds (including the Fund) as of December 31,
1995, and the estimated retirement benefits for the Fund's Independent Directors
from the Fund as of October 31, 1996 and from the 57 Dean Witter Funds as of
December 31, 1995.

RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS ESTIMATED ANNUAL
-------------------------------------- ACCRUED AS EXPENSES BENEFITS
ESTIMATED UPON RETIREMENT(3)
CREDITED YEARS ESTIMATED ---------------------- ----------------------
OF SERVICE AT PERCENTAGE OF BY ALL FROM FROM ALL
RETIREMENT ELIGIBLE BY THE ADOPTING THE ADOPTING
NAME OF INDEPENDENT DIRECTOR (MAXIMUM 10) COMPENSATION FUND FUNDS FUND FUNDS
- -------------------------------- ------------------- ----------------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Michael Bozic................... 10 50.0% $ 393 $ 26,359 $ 950 $ 51,550
Edwin J. Garn................... 10 50.0 577 41,901 950 51,550
John R. Haire................... 10 50.0 372 261,763 2,343 130,404
Dr. Manuel H. Johnson........... 10 50.0 240 16,748 950 51,550
Michael E. Nugent............... 10 50.0 413 30,370 950 51,550
John L. Schroeder............... 8 41.7 763 51,812 792 42,958
</TABLE>

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

(2) An Eligible Director may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Director
and his or her spouse on the date of such Eligible Director's retirement.
The amount estimated to be payable under this method, through the remainder
of the later of the lives of such Eligible Director and spouse, will be the
actuarial equivalent of the Regular Benefit. In addition, the Eligible
Director may elect that the surviving spouse's periodic payment of benefits
will be equal to either 50% or 100% of the previous periodic amount, an
election that, respectively, increases or decreases the previous periodic
amount so that the resulting payments will be the actuarial equivalent of
the Regular Benefit.

(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (2)
above.

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

13
<PAGE>

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 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 objective.

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-Adviser 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

14
<PAGE>
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.

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
Standard & Poor's (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

15
<PAGE>

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 investment 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 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 portfolio
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.

16
<PAGE>

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
liquid portfolio securities 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.

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.

17
<PAGE>
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.

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 liquid portfolio securities 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

18
<PAGE>
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.

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. The successful use of options depends on the
ability of the Investment Manager to forecast correctly interest rates and
market movements. If the market value of the portfolio securities 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. In writing puts, the Fund assumes
the risk of loss should the market value of the underlying securities decline
below the exercise price of the option (any loss being decreased by the receipt
of the premium on the option written). During the option period, the 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.

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<PAGE>
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 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 exchange 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

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<PAGE>
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 liquid portfolio
securities 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.
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. 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

21
<PAGE>
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. The
successful use of futures and related options depends on the ability of the
Investment Manager to accurately predict market and interest rate movements. 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 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 on 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 liquid portfolio securities 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.

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<PAGE>

In addition, if the Fund holds a long position in a futures contract it will
hold cash, U.S. Government securities or other liquid portfolio securities 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.

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

23
<PAGE>
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 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

24
<PAGE>
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 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 liquid 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 liquid 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.

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<PAGE>
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.

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.

26
<PAGE>
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 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.

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-Adviser 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,
1994,

27
<PAGE>

1995 and 1996, the Fund paid $1,844,101, $1,887,191 and $2,545,689,
respectively, in brokerage commissions.

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

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Investment Manager and the Sub-Adviser 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-Adviser rely upon their experience and knowledge regarding
commissions generally charged by various brokers and on their 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-Adviser effect transactions with those brokers and dealers who the
Investment Manager and the Sub-Adviser believe provide the most favorable prices
and are capable of providing efficient executions. If the Investment Manager
and/or the Sub-Adviser 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-Adviser. 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-Adviser from brokers and dealers may be of benefit to the Investment Manager
and the Sub-Adviser in the management of accounts of some of their 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-Adviser and thereby reduce their expenses, it is of indeterminable
value and the fees paid to the Investment Manager and the Sub-Adviser 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

28
<PAGE>
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. 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.

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 of the
Fund, including a majority of the Trustees who are not, and were not at the time
they voted, interested persons of the Fund, as defined in the Act (the
"Independent Directors"), approved, at their meeting held on October 30, 1992,
the current 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. The present Distribution Agreement
took effect on June 30, 1993 upon the spin-off by Sears, Roebuck and Co. of its
remaining shares of DWDC. The present Distribution Agreement is substantively
identical to the Fund's previous 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. At their
meeting held on April 17, 1996, the Directors, including all of the Independent
Directors, approved the continuation of the Distribution Agreement until April
30, 1997.

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

29
<PAGE>

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). The Distributor has informed the Fund that it received
approximately $883,430, $1,628,209 and $1,047,000, in contingent deferred sales
charges for the fiscal years ended October 31, 1994, 1995 and 1996,
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 most
recently submitted to and approved for continuance by the Directors of the Fund,
including a majority of the Independent 12b-1 Directors, at their meeting held
on April 17, 1996, after evaluating all the information they deemed necessary to
make an informed determination of whether the Plan should be continued. 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 to
the Fund and its shareholders. 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
shareholders. 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, had 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 by 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. At their meeting held on
April 28, 1993, the Directors, including a majority of the independent 12b-1
Directors, had also approved certain technical amendments to the Plan in
connection with amendments adopted by the National Association of Securities
Dealers, Inc. to its Rules of Fair Practice. At their meeting held on October
26, 1995, the Directors of the Fund, including all of the Independent 12b-1
Directors, approved an amendment to the Plan to permit payments to be made under
the Plan with respect to certain distribution expenses incurred in connection
with the distribution of shares, including personal services to shareholders
with respect to holdings of such shares, of an investment company whose assets
are acquired by the Fund in a tax-free reorganization.

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

30
<PAGE>

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, 1996 of $9,213,394. This amount is equal to
payments required to be paid monthly by the Fund which were computed at the
annual rate of 0.91% of 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. 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, 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 $9,213,394 accrued under the Plan for the fiscal
year ended October 31, 1996 to the Distributor. The Distributor and DWR estimate
that they have spent, pursuant to the Plan, $66,429,507 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) 5.72% ($3,800,879) -- advertising and
promotional expenses; (ii) 0.54% ($357,384) -- printing of prospectuses for
distribution to other than current shareholders; and (iii) 93.74% ($62,271,245)
- -- other expenses, including the gross sales credit and the carrying charge, of
which 8.51% ($5,298,634) represents carrying charges, 35.98% ($22,407,328)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 55.51% ($34,565,283) 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 $25,872,741 as of October 31, 1996. Because there is no
requirement under the Plan that the Distributor 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

31
<PAGE>
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 (or, on days when the New York Stock Exchange closes prior
to 4:00 p.m., at such earlier time) on each day that the New York Stock Exchange
is open by taking the value of all assets of the Fund, subtracting its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The New York Stock Exchange currently observes the following
holidays: New Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.

Short-term debt securities with remaining maturities of sixty days or less
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.

32
<PAGE>
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 DIVIDENDSSM. In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of an open-end Dean Witter Fund other than Dean
Witter 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.

EASYINVESTSM. 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.

33
<PAGE>
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 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, Dean
Witter Balanced Growth Fund, Dean Witter Balanced Income Fund, Dean Witter
Intermediate Term U.S. Treasury Trust and for shares of five Dean Witter Funds
which are money market funds (the foregoing eleven 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.

34
<PAGE>
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.

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

35
<PAGE>

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.

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 negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer.

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

Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000 for
Dean Witter Liquid Asset Fund Inc., Dean Witter 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
investment is $5,000 for Dean Witter Special Value Fund. 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

36
<PAGE>
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 broker-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 received after such computation will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. If redemption is
requested by a corporation, partnership, trust or fiduciary, the Transfer Agent
may require that written evidence of authority acceptable to the Transfer Agent
be submitted before such request is accepted.

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

37
<PAGE>
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 a 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 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 (including a certified or bank cashier's
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

38
<PAGE>

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.

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 or all of the proceeds of such
redemption or repurchase in shares of the Fund at the net asset value next
determined after a reinstatement request, together with 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.

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.

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 remain qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986 (the "Code"). As such, 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 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

39
<PAGE>
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.

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
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

40
<PAGE>

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 one year and five
year period ended October 31, 1996 and the period from June 1, 1990
(commencement of operations) through October 31, 1996 was 17.27%, 17.26% and
12.19%, 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 one year and five year
period ended October 31, 1996 and the period from June 1, 1990 (commencement of
operations) through October 31, 1996 was 22.27%, 17.47% and 12.19%,
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 one year and five year period ended
October 31, 1996 and the period from June 1, 1990 (commencement of operations)
through October 31, 1996 was 22.27%, 123.65% and 109.18%, respectively.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking into
account the effect of any applicable CDSC) and multiplying by $10,000, $50,000
or $100,000, as the case may be. Investments of $10,000, $50,000 and $100,000 in
the Fund at inception would have grown to $20,918, $104,590 and $209,180,
respectively, at October 31, 1996.

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 shareholders holding a majority of the outstanding shares entitled to
vote for the election of Directors. A special meeting of the shareholders of

41
<PAGE>
the Fund will be called by the Fund's Secretary upon the written request of
shareholders entitled to vote at least 25% of the Fund's outstanding shares.

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 07311 is the Transfer Agent of the Fund's shares and Dividend
Disbursing Agent for payment of dividends and distributions on Fund shares and
Agent for shareholders under various investment plans described herein. Dean
Witter Trust Company is an affiliate of Dean Witter InterCapital Inc., the
Fund's Investment Manager and Dean Witter Distributors Inc., the Fund's
Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust
Company's responsibilities include maintaining shareholder accounts, 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 LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.

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

The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent 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 for the year ended October 31, 1996
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 LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

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

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

42
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED STOCKS, BONDS AND
WARRANTS (97.5%)
AUSTRIA (0.4%)
TRANSPORTATION
108,000 Flughafen Wien AG.......... $ 5,314,495
-----------------
BELGIUM (1.1%)
RETAIL
330,154 G.I.B. Holdings Ltd........ 13,895,886
-----------------
DENMARK (2.1%)
PHARMACEUTICALS
81,900 Novo-Nordisk AS (Series
B)......................... 13,597,324
-----------------
TRANSPORTATION
119,900 Kobenhavns Lufthavne AS.... 12,441,386
-----------------

TOTAL DENMARK.............. 26,038,710
-----------------

FRANCE (14.0%)
BUILDING MATERIALS
89,400 IMETAL..................... 13,905,503
-----------------
ENERGY
208,500 Societe National Elf
Aquitaine.................. 16,634,426
-----------------
FINANCIAL SERVICES
63,475 Cetelem Group.............. 13,515,071
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
55,835 LVMH Moet-Hennessy Louis
Vuitton.................... 12,760,106
427,500 SEITA...................... 17,178,425
56,250 Societe BIC S.A............ 8,419,936
-----------------
38,358,467
-----------------
INSURANCE
160,000 AXA........................ 9,970,336
160,326 Scor S.A................... 6,148,333
-----------------
16,118,669
-----------------
PHARMACEUTICALS
158,437 Sanofi S.A................. 14,319,316
FRF 12,850K Sanofi S.A. 4.00% due
01/01/00 (Conv.)*.......... 1,286,505
-----------------
15,605,821
-----------------

<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
RETAIL
34,541 Carrefour Supermarche...... $ 19,124,281
89,731 Castorama Dubois
Investissement............. 15,322,917
FRF 2,331K Castorama Dubois
Investissement 3.15% due
01/01/03 (Conv.)*.......... 539,533
-----------------
34,986,731
-----------------
STEEL & IRON
899,000 Usinor Sacilor............. 13,307,797
-----------------
TEXTILES
32,666 Christian Dior S.A......... 4,335,066
4,666 Christian Dior S.A.
(Warrants due 06/30/98)*... 96,981
18,734 Hermes International....... 4,745,654
-----------------
9,177,701
-----------------

TOTAL FRANCE............... 171,610,186
-----------------

GERMANY (8.7%)
AUTOMOTIVE
18,500 Bayerische Motoren Werke
(BMW) AG................... 10,797,760
50,560 Volkswagen AG.............. 19,859,289
-----------------
30,657,049
-----------------
CHEMICALS
489,000 BASF AG.................... 15,591,304
464,950 Bayer AG................... 17,525,981
99,000 SGL Carbon AG.............. 11,119,565
-----------------
44,236,850
-----------------
HEALTH & PERSONAL CARE
60,000 Rhoen-Klinikum AG.......... 7,193,676
34,596 Rhoen-Klinikum AG
(Pref.).................... 4,056,711
-----------------
11,250,387
-----------------
MANUFACTURING
113,450 Adidas AG.................. 9,700,797
-----------------
MERCHANDISING
168,750 Gehe AG.................... 11,338,933
-----------------

TOTAL GERMANY.............. 107,184,016
-----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
ITALY (4.0%)
APPLIANCES & HOUSEHOLD DURABLES
204,000 Industrie Natuzzi SpA
(ADR)...................... $ 9,256,500
-----------------
FOOD MANUFACTURER
9,692,800 Parmalat Finanzeria SpA.... 13,882,418
-----------------
OIL & GAS PRODUCTS
3,120,700 Ente Nazionale Idrocarburi
SpA........................ 14,929,465
-----------------
TELECOMMUNICATIONS
5,426,850 Telecom Italia Mobile
SpA........................ 11,203,197
-----------------
TOTAL ITALY................ 49,271,580
-----------------

NETHERLANDS (13.1%)
BANKING
204,196 ABN-AMRO Holding NV........ 11,514,993
-----------------
CHEMICALS
115,000 Akzo Nobel................. 14,457,838
-----------------
FOOD PROCESSING
85,506 Nutricia Vereenigde
Bedrijven NV............... 11,966,616
-----------------
INSURANCE
224,799 Aegon NV................... 11,407,829
485,572 ING Groep NV............... 15,104,527
-----------------
26,512,356
-----------------
MANUFACTURING
176,000 ASM Lithography Holding
NV*........................ 6,313,066
-----------------
MERCHANDISING
140,000 Gucci Group NV............. 9,566,036
-----------------
MULTI-INDUSTRY
148,163 Hunter Douglas NV.......... 10,454,875
-----------------
PUBLISHING
1,130,000 Elsevier NV................ 18,738,092
820,000 Ver Ned Uitgev Ver Bezit
NV......................... 14,851,229
82,419 Wegener NV................. 6,881,982
123,615 Wolters Kluwer NV.......... 15,853,482
-----------------
56,324,785
-----------------
RETAIL
242,071 Koninklijke Ahold NV....... 14,092,102
-----------------

TOTAL NETHERLANDS.......... 161,202,667
-----------------

<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>

NORWAY (0.5%)
INSURANCE
1,075,000 UNI Storebrand AS (A
Shares)*................... $ 6,283,504
-----------------

SPAIN (6.7%)
BANKS
334,401 Banco Bilbao Vizcaya....... 16,214,016
60,388 Banco Popular Espanol
S.A........................ 11,518,443
-----------------
27,732,459
-----------------
FINANCIAL SERVICES
133,080 Corporacion Financiera
Alba....................... 11,240,041
-----------------
OIL RELATED
54,309 Gas Natural SDG S.A.
(Series E)................. 9,479,760
-----------------
TELECOMMUNICATIONS
851,000 Telefonica de Espana....... 17,037,303
-----------------
UTILITIES
1,590,300 Iberdrola S.A.............. 16,851,932
-----------------

TOTAL SPAIN................ 82,341,495
-----------------

SWEDEN (7.7%)
BUSINESS & PUBLIC SERVICES
500,000 Assa Abloy AB (Series B)... 7,673,722
-----------------
BUSINESS SERVICES
599,650 Securitas AB (Series "B"
Free)...................... 15,490,359
-----------------
HEALTH & PERSONAL CARE
443,655 Getinge Industrier AB (B
Shares).................... 8,089,866
-----------------
INSURANCE
456,992 Scandia Forsakrings AB..... 12,812,081
-----------------
PHARMACEUTICALS
345,000 Astra AB (B Shares)........ 15,727,332
-----------------
RETAIL
159,860 Hennes & Mauritz AB (B
Shares).................... 20,672,075
-----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATION EQUIPMENT
506,480 Ericsson (L.M.) Telephone
Co. AB (Series "B" Free)... $ 13,699,257
-----------------
TOTAL SWEDEN............... 94,164,692
-----------------
SWITZERLAND (5.5%)
INSURANCE
15,000 Schweizerische
Rueckversicherungs-
Gesellschaft............... 16,041,009
-----------------
MULTI-INDUSTRY
8,091 ABB AG - Bearer............ 9,966,989
-----------------
PHARMACEUTICALS
6,095 Ciba-Geigy AG.............. 7,484,160
2,026 Roche Holdings AG.......... 15,274,890
9,780 Sandoz AG.................. 11,268,596
6,000 Sandoz AG (Series B)....... 6,927,445
-----------------
40,955,091
-----------------
TOTAL SWITZERLAND.......... 66,963,089
-----------------
UNITED KINGDOM (33.7%)
AEROSPACE & DEFENSE
572,222 British Aerospace PLC...... 10,863,495
1,950,000 Rolls-Royce PLC*........... 8,073,402
-----------------
18,936,897
-----------------
AUTOMOTIVE
1,910,000 BBA Group PLC.............. 11,123,733
1,300,000 LucasVarity PLC*........... 5,255,377
-----------------
16,379,110
-----------------
BANKING
1,050,000 Abbey National PLC......... 10,897,933
925,000 Lloyds TSB Group PLC....... 5,861,157
475,000 National Westminster Bank
PLC........................ 5,416,837
-----------------
22,175,927
-----------------
BREWERS
815,000 Scottish & Newcastle
Breweries PLC.............. 8,465,501
-----------------
BROADCAST MEDIA
608,274 Flextech PLC*.............. 6,085,672
-----------------

<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
BUILDING & CONSTRUCTION
1,626,000 Blue Circle Industries
PLC........................ $ 10,509,287
-----------------
BUILDING MATERIALS
1,250,000 Redland PLC................ 8,540,700
-----------------
BUSINESS SERVICES
648,000 Reuters Holdings PLC....... 8,064,373
-----------------
CHEMICALS
1,326,000 Albright & Wilson PLC...... 4,184,845
850,000 Courtaulds PLC............. 6,291,649
-----------------
10,476,494
-----------------
COMPUTER SOFTWARE & SERVICES
1,000,000 Sage Group (The) PLC....... 7,792,372
-----------------
COMPUTERS
750,000 Amstrad PLC................ 1,830,150
568,090 SEMA Group PLC............. 8,234,344
-----------------
10,064,494
-----------------
CONGLOMERATES
1,871,857 BTR PLC.................... 7,841,228
2,020,000 Tomkins PLC................ 8,445,369
1,130,200 Williams Holdings PLC...... 6,692,538
-----------------
22,979,135
-----------------
CONSTRUCTION PLANT & EQUIPMENT
1,320,000 CRH PLC.................... 13,592,890
-----------------
ELECTRICAL EQUIPMENT
1,481,818 The BICC Group PLC......... 7,051,068
-----------------
ELECTRONICS
498,000 Smiths Industries PLC...... 6,651,302
-----------------
FOOD PROCESSING
950,000 Associated British Foods
PLC........................ 6,537,296
-----------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
663,153 B.A.T. Industries PLC...... 4,595,762
869,600 Grand Metropolitan PLC..... 6,535,754
900,000 Guinness PLC............... 6,442,128
836,000 Tate & Lyle PLC............ 6,500,823
1,565,000 Vaux Group PLC............. 6,415,774
-----------------
30,490,241
-----------------
FOREST PRODUCTS, PAPER & PACKAGING
650,000 De La Rue PLC.............. 6,196,481
-----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1996, CONTINUED

<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- -----------------------------------------------------------------
<C> <S> <C>
INSURANCE
319,000 Britannic Assurance PLC.... $ 3,793,519
619,884 Commercial Union PLC....... 6,554,777
1,262,800 Prudential Corp. PLC....... 9,552,602
1,526,246 Royal & Sun Alliance
Insurance Group PLC........ 10,428,167
-----------------
30,329,065
-----------------
LEISURE
872,000 Granada Group PLC.......... 12,554,341
-----------------
MISCELLANEOUS
622,000 Vendome Luxury Group PLC
(Units)++.................. 5,868,844
-----------------
OIL RELATED
2,627,000 Lasmo PLC.................. 9,102,776
1,250,000 Shell Transport & Trading
Co. PLC.................... 20,477,345
-----------------
29,580,121
-----------------
PHARMACEUTICALS
959,620 British Biotech PLC*....... 3,528,108
1,354,325 Glaxo Wellcome PLC......... 21,261,034
2,759,166 Medeva PLC................. 11,849,934
-----------------
36,639,076
-----------------
REAL ESTATE
1,000,000 Hammerson PLC.............. 6,214,376
-----------------
RETAIL
370,000 Boots Co. PLC.............. 3,749,937
518,000 Great Universal Stores
PLC........................ 5,174,070
2,211,000 Morrison (W.M.)
Supermarkets PLC........... 5,754,968
1,030,000 Next PLC................... 9,349,870
771,500 W.H. Smith Group PLC....... 5,748,249
-----------------
29,777,094
-----------------
TELECOMMUNICATIONS
3,262,000 British Telecommunications
PLC........................ 18,891,573
1,776,330 Securicor PLC.............. 8,004,562
-----------------
26,896,135
-----------------
TRANSPORTATION
1,032,800 British Airways PLC........ 9,291,279
-----------------
UTILITIES
964,250 Scottish Power PLC......... 4,925,536
-----------------
TOTAL UNITED KINGDOM....... 413,065,107
-----------------

TOTAL COMMON AND PREFERRED
STOCKS, BONDS AND WARRANTS
(IDENTIFIED COST
$927,196,477).............. 1,197,335,427
-----------------
</TABLE>

<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<C> <S> <C>

PURCHASED PUT OPTION ON FOREIGN CURRENCY
(0.0%)
FRF 74,000 November 5, 1996/
FRF 5.192 (Identified
Cost $1,494,800)........... $ 44,400
-----------------
</TABLE>

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<C> <S> <C>

SHORT-TERM INVESTMENT (a) (2.9%)
U.S. GOVERNMENT AGENCY
$ 35,000 Federal Home Loan Mortgage
Corp. 5.53% due 11/01/96
(Amortized Cost
$35,000,000)............... 35,000,000
-----------------

TOTAL INVESTMENTS
(IDENTIFIED COST
$963,691,277) (B).......... 100.4% 1,232,379,827

LIABILITIES IN EXCESS OF
CASH AND OTHER ASSETS...... (0.4) (4,529,867)
----- -------------

NET ASSETS................. 100.0% $1,227,849,960
----- -------------
----- -------------

<FN>
- ---------------------
ADR American Depositary Receipt.
* Non-income producing security.
++ Consists of one or more class of securities traded together as a unit;
generally stocks with attached warrants.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $969,666,680; the
aggregate gross unrealized appreciation was $274,847,596 and the aggregate
gross unrealized depreciation was $12,134,449, resulting in net unrealized
appreciation of $262,713,147.
</TABLE>

FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1996:

<TABLE>
<CAPTION>
CONTRACT TO IN DELIVERY UNREALIZED
RECEIVE EXCHANGE FOR DATE APPRECIATION
- ----------------------------------------------------
<S> <C> <C> <C>
$22,423 NLG 38,133 11/01/96 $ 141
-----
-----
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.

SUMMARY OF INVESTMENTS OCTOBER 31, 1996

<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Aerospace & Defense.......................................................... $ 18,936,897 1.5%
Appliances & Household Durables.............................................. 9,256,500 0.8
Automotive................................................................... 47,036,159 3.8
Banking...................................................................... 33,690,920 2.7
Banks........................................................................ 27,732,459 2.3
Brewers...................................................................... 8,465,501 0.7
Broadcast Media.............................................................. 6,085,672 0.5
Building & Construction...................................................... 10,509,287 0.9
Building Materials........................................................... 22,446,204 1.8
Business & Public Services................................................... 7,673,722 0.6
Business Services............................................................ 23,554,731 1.9
Chemicals.................................................................... 69,171,183 5.6
Computer Software & Services................................................. 7,792,372 0.6
Computers.................................................................... 10,064,494 0.8
Conglomerates................................................................ 22,979,135 1.9
Construction Plant & Equipment............................................... 13,592,890 1.1
Electrical Equipment......................................................... 7,051,068 0.6
Electronics.................................................................. 6,651,302 0.5
Energy....................................................................... 16,634,426 1.4
Financial Services........................................................... 24,755,112 2.0
Food, Beverage, Tobacco & Household Products................................. 68,848,708 5.6
Food Manufacturer............................................................ 13,882,418 1.1
Food Processing.............................................................. 18,503,912 1.5
Foreign Currency Put Option.................................................. 44,400 0.0
Forest Products, Paper & Packaging........................................... 6,196,481 0.5
Health & Personal Care....................................................... 19,340,254 1.6
Insurance.................................................................... 108,096,685 8.9
Leisure...................................................................... 12,554,341 1.0
Manufacturing................................................................ 16,013,863 1.3
Merchandising................................................................ 20,904,968 1.7
Miscellaneous................................................................ 5,868,844 0.5
Multi-Industry............................................................... 20,421,864 1.7
Oil & Gas Products........................................................... 14,929,465 1.2
Oil Related.................................................................. 39,059,880 3.2
Pharmaceuticals.............................................................. 122,524,643 10.0
Publishing................................................................... 56,324,785 4.6
Real Estate.................................................................. 6,214,376 0.5
Retail....................................................................... 113,423,888 9.2
Steel & Iron................................................................. 13,307,797 1.1
Telecommunication Equipment.................................................. 13,699,257 1.1
Telecommunications........................................................... 55,136,636 4.5
Textiles..................................................................... 9,177,701 0.7
Transportation............................................................... 27,047,160 2.2
U.S. Government Agency....................................................... 35,000,000 2.9
Utilities.................................................................... 21,777,467 1.8
-------------------------- ------
$ 1,232,379,827 100.4%
-------------------------- ------
-------------------------- ------
</TABLE>

<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks................................................................ 1,191,355,697 97.1%
Convertible Bonds............................................................ 1,826,038 0.1
Foreign Currency Put Option.................................................. 44,400 0.0
Preferred Stocks............................................................. 4,056,711 0.3
Short-Term Investment........................................................ 35,000,000 2.9
Warrants..................................................................... 96,981 0.0
-------------------------- ------
$ 1,232,379,827 100.4%
-------------------------- ------
-------------------------- ------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $963,691,277)............................ $1,232,379,827
Cash (including $9,331,541 in foreign currency)............. 10,183,725
Receivable for:
Investments sold........................................ 5,273,748
Capital stock sold...................................... 3,381,628
Dividends............................................... 1,835,708
Foreign withholding taxes reclaimed..................... 1,634,306
Prepaid expenses and other assets........................... 48,794
--------------
TOTAL ASSETS........................................... 1,254,737,736
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 24,129,370
Investment management fee............................... 994,328
Plan of distribution fee................................ 893,180
Capital stock repurchased............................... 462,752
Accrued expenses and other payables......................... 408,146
--------------
TOTAL LIABILITIES...................................... 26,887,776
--------------
NET ASSETS:
Paid-in-capital............................................. 860,072,771
Net unrealized appreciation................................. 268,682,630
Accumulated undistributed net investment income............. 1,933,547
Accumulated undistributed net realized gain................. 97,161,012
--------------
NET ASSETS............................................. $1,227,849,960
--------------
--------------
NET ASSET VALUE PER SHARE,
73,246,986 SHARES OUTSTANDING (200,000,000 SHARES
AUTHORIZED OF $.01 PAR VALUE).............................
$16.76
--------------
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

48
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1996

<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $3,625,117 foreign withholding tax)....... $ 20,698,341
Interest.................................................... 2,332,257
------------
TOTAL INCOME........................................... 23,030,598
------------
EXPENSES
Investment management fee................................... 9,903,670
Plan of distribution fee.................................... 9,213,394
Transfer agent fees and expenses............................ 1,347,660
Custodian fees.............................................. 731,558
Registration fees........................................... 144,553
Shareholder reports and notices............................. 120,391
Professional fees........................................... 84,050
Directors' fees and expenses................................ 18,339
Other....................................................... 51,882
------------
TOTAL EXPENSES......................................... 21,615,497
------------
NET INVESTMENT INCOME.................................. 1,415,101
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on:
Investments............................................. 97,683,962
Foreign exchange transactions........................... 758,999
------------
NET GAIN............................................... 98,442,961
------------
Net change in unrealized appreciation on:
Investments............................................. 106,414,452
Translation of forward foreign exchange contracts, other
assets and liabilities denominated in foreign
currencies............................................ 417,811
------------
NET APPRECIATION....................................... 106,832,263
------------
NET GAIN............................................... 205,275,224
------------
NET INCREASE................................................ $206,690,325
------------
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

49
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 1,415,101 $ 1,002,440
Net realized gain........................................... 98,442,961 41,187,148
Net change in unrealized appreciation....................... 106,832,263 79,053,572
---------------- ----------------
NET INCREASE........................................... 206,690,325 121,243,160
Distributions from net realized gain........................ (44,251,712) (60,625,845)
Net increase from capital stock transactions................ 197,680,851 48,611,356
---------------- ----------------
NET INCREASE........................................... 360,119,464 109,228,671
---------------- ----------------
NET ASSETS:
Beginning of period......................................... 867,730,496 758,501,825
---------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$1,933,547 AND ACCUMULATED NET INVESTMENT LOSS OF
$240,553, RESPECTIVELY)................................. $ 1,227,849,960 $867,730,496
---------------- ----------------
---------------- ----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

50
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996

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. The Fund's investment objective is to
maximize the capital appreciation of its investments. The Fund was incorporated
in Maryland on February 13, 1990 and commenced operations on May 31, 1990.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates. The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic 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); (2)
listed options are valued at the latest sale price on the exchange on which they
are listed unless no sales of such options have taken place that day, in which
case they will be valued at the mean between their latest bid and asked price;
(3) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (4) when market quotations are not readily available,
including circumstances under which it is determined by the Investment Manager
that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
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 (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the

51
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED

ex-dividend date except for certain dividends on foreign securities which are
recorded as soon as the Fund is informed after the ex-dividend date. Discounts
are accreted over the life of the respective securities. Interest income is
accrued daily.
C. OPTION ACCOUNTING PRINCIPLES -- When the Fund writes a call option, an amount
equal to the premium received is included in the Fund's Statement of Assets and
Liabilities as a liability which is subsequently marked-to-market to reflect the
current market value of the option written. If a written option either expires
or the Fund enters into a closing purchase transaction, the Fund realizes a gain
or loss without regard to any unrealized gain or loss on the underlying security
or currency and the liability related to such option is extinguished. If a
written call option is exercised, the Fund realizes a gain or loss from the sale
of the underlying security or currency and the proceeds from such sale are
increased by the premium originally received.
When the Fund purchases a call or put option, the premium paid is recorded as an
investment and is subsequently marked-to-market to reflect the current market
value. If a purchased option expires, the Fund will realize a loss to the extent
of the premium paid. If the Fund enters into a closing sale transaction, a gain
or loss is realized for the difference between the proceeds from the sale and
the cost of the option. If a put option is exercised, the cost of the security
or currency sold upon exercise will be increased by the premium originally paid.
If a call option is exercised, the cost of the security purchased upon exercise
will be increased by the premium originally paid.
D. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward contracts are
translated at the exchange rates prevailing at the end of the period; and (2)
purchases, sales, income and expenses are translated at the exchange rates
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 foreign exchange gains/losses included
in realized and unrealized gain/loss are included in or are a reduction of
ordinary income for federal income tax purposes. The Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts which are valued daily at the appropriate exchange rates. The
resultant unrealized exchange gains and losses are included in the Statement of
Operations as unrealized gain/loss on

52
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED

foreign exchange transactions. The Fund records realized gains or losses on
delivery of the currency or at the time the forward contract is extinguished
(compensated) by entering into a closing transaction prior to delivery.
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 ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 1.0% of the portion of net assets not exceeding $500
million and 0.95% of the portion of daily net assets exceeding $500 million.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
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

53
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED

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 the Sub-Advisory Agreement, the Investment
Manager pays the Sub-Advisor 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 an annual rate of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's shares since the Fund's inception (not
including reinvestment of dividend or capital gain 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, the
account executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Investment Manager and Distributor, and other employees or selected
broker-dealers who engage in or support distribution of the Fund's 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 and 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 incurred by the
Distributor.
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.
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

54
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED

the investors upon redemption of shares, if for any reason the Plan is
terminated, the Trustees will consider at that time the manner in which to treat
such expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $25,872,741 at October 31, 1996.
The Distributor has informed the Fund that for the year ended October 31, 1996,
it received approximately $1,047,000 in contingent deferred sales charges from
certain redemptions of the Fund's shares.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended October 31, 1996 aggregated
$656,461,382 and $473,648,972, respectively.
Dean Witter Trust Company, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At October 31, 1996, the Fund had
transfer agent fees and expenses payable of approximately $139,000.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Directors of the Fund who will have served as independent
Directors 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 costs for the year ended October 31, 1996 included
in Directors' fees and expenses in the Statement of Operations amounted to
$2,820. At October 31, 1996, the Fund had an accrued pension liability of
$47,866 which is included in accrued expenses in the Statement of Assets and
Liabilities.

55
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1996, CONTINUED

5. CAPITAL STOCK
Transactions in capital stock were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sold............................................................. 24,444,448 $ 371,386,556 15,721,889 $ 209,149,980
Reinvestment of distributions.................................... 3,030,461 41,577,920 4,855,138 56,984,815
------------ ------------- ------------ -------------
27,474,909 412,964,476 20,577,027 266,134,795
Repurchased...................................................... (14,340,465) (215,283,625) (16,689,142) (217,523,439)
------------ ------------- ------------ -------------
Net increase..................................................... 13,134,444 $ 197,680,851 3,887,885 $ 48,611,356
------------ ------------- ------------ -------------
------------ ------------- ------------ -------------
</TABLE>

6. FEDERAL INCOME TAX STATUS
As of October 31, 1996, the Fund had temporary book/tax differences primarily
attributable to income from the mark-to-market of passive foreign investment
companies and permanent book/tax differences attributable to foreign currency
gains. To reflect reclassifications arising from permanent
book/tax differences for the year ended October 31, 1996, accumulated
undistributed net realized gain was charged $591,974, paid-in-capital was
charged $167,025 and accumulated undistributed net investment income was
credited $758,999.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
At October 31, 1996, there were no outstanding forward contracts other than that
used to facilitate settlement of foreign currency denominated portfolio
transactions.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.

56
<PAGE>
DEAN WITTER EUROPEAN GROWTH FUND INC.
FINANCIAL HIGHLIGHTS

Selected ratios and per share data 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
1996 1995 1994 1993 1992 1991 OCTOBER 31, 1990
- --------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of
period............................ $ 14.44 $ 13.49 $ 11.86 $ 8.57 $ 9.22 $ 9.23 $ 10.00
--------- --------- --------- ---------- ---------- ---------- ------

Net investment income (loss)....... 0.02 0.02 0.02 (0.01) 0.01 0.05 0.05
Net realized and unrealized gain
(loss)............................ 3.03 2.00 1.84 3.30 (0.23) 0.07 (0.82)
--------- --------- --------- ---------- ---------- ---------- ------

Total from investment operations... 3.05 2.02 1.86 3.29 (0.22) 0.12 (0.77)
--------- --------- --------- ---------- ---------- ---------- ------

Less dividends and distributions
from:
Net investment income........... -- -- -- -- (0.03) (0.07) --
Net realized gain............... (0.73) (1.07) (0.23) -- (0.40) (0.06) --
--------- --------- --------- ---------- ---------- ---------- ------

Total dividends and
distributions..................... (0.73) (1.07) (0.23) -- (0.43) (0.13) --
--------- --------- --------- ---------- ---------- ---------- ------

Net asset value, end of period..... $ 16.76 $ 14.44 $ 13.49 $ 11.86 $ 8.57 $ 9.22 $ 9.23
--------- --------- --------- ---------- ---------- ---------- ------
--------- --------- --------- ---------- ---------- ---------- ------

TOTAL INVESTMENT RETURN+........... 22.27% 16.83% 15.61% 38.74% (2.39)% 1.33% (7.70)%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.13% 2.23% 2.27% 2.38% 2.40% 2.44% 2.45%(2)

Net investment income (loss)....... 0.14% 0.13% 0.21% (0.09)% 0.11% 0.51% 1.52%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in
millions.......................... $1,228 $868 $759 $459 $297 $316 $304

Portfolio turnover rate............ 49% 61% 72% 120% 116% 111% 36%(1)

Average commission rate paid....... $0.0448 -- -- -- -- -- --
<FN>

- ---------------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

57
<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, 1996, 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 six 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 at October 31, 1996 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 LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
DECEMBER 17, 1996

- --------------------------------------------------------------------------------
1996 FEDERAL TAX NOTICE (UNAUDITED)
During the year ended October 31, 1996, Fund paid to shareholders
$0.73 per share from long-term capital gains.

58
<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 for the period June 1, 1990 4
through October 31, 1991 and for the fiscal years
ended October 31, 1992, 1993, 1994, 1995 and 1996.....

(2) Financial statements included in the Statement of Additional
Information (Part B):
Page
in
SAI
---
Portfolio of Investments at October 31, 1996................... 43
Statement of assets and liabilities at
October 31, 1996............................................... 48

Statement of operations for the year ended
October 31, 1996............................................... 49

Statement of changes in net assets for the
years ended October 31, 1995 and 1996.......................... 50

Notes to Financial Statements.................................. 51

Financial highlights for the period June 1, 1990
through October 31, 1991 and for the fiscal years
ended October 31, 1992, 1993, 1994, 1995 and 1996.............. 57

(3) Financial statements included in Part C:

None

(b) EXHIBITS

2. -- Amended and Restated By-Laws

11. -- Consent of Independent Accountants

16. -- Schedule for Computation of Performance Quotations

27. -- Financial Data Schedule
- --------------------------------
All other exhibits previously filed and incorporated by
reference.

<PAGE>

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 NOVEMBER 30, 1996
-------------- ------------------------

Shares of Common Stock 122,237

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 directors, 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 director, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such director, 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

2
<PAGE>

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. 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 "Dean Witter Funds" used below refers to the following
registered investment companies:
CLOSED-END INVESTMENT COMPANIES
-------------------------------
(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 Securities
(22) InterCapital California Quality Municipal Securities
(23) InterCapital Insured California Municipal Securities
(24) InterCapital Insured Municipal Securities

OPEN-END INVESTMENT COMPANIES:
- ------------------------------
(1) Dean Witter Short-Term Bond Fund
(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

3
<PAGE>

(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 Global Asset Allocation Fund
(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
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Mid-Cap Growth Fund
(49) Dean Witter Select Dimensions Investment Series
(50) Dean Witter Balanced Growth Fund
(51) Dean Witter Balanced Income Fund
(52) Dean Witter Hawaii Municipal Trust
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund

The term "TCW/DW Funds" refers to the following registered investment companies:
OPEN-END INVESTMENT COMPANIES
- -----------------------------
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust

4
<PAGE>

(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
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust

CLOSED-END INVESTMENT COMPANIES
- -------------------------------
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
(4) TCW/DW Emerging Markets Opportunities Trust

NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION, VOCATION
WITH DEAN WITTER OR EMPLOYMENT, INCLUDING NAME, PRINCIPAL ADDRESS
INTERCAPITAL INC. AND NATURE OF CONNECTION
- ----------------- -------------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Witter Reynolds Inc. ("DWR"); Chairman, Chief
Executive Officer and Executive Officer and Director of Dean Witter
Director Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC"); Chairman and
Director of Dean Witter Trust Company ("DWTC");
Chairman, Director or Trustee, President and Chief
Executive Officer of the Dean Witter Funds and
Chairman, Chief Executive Officer and Trustee of the
TCW/DW Funds; Formerly Executive Vice President and
Director of Dean Witter, Discover & Co. ("DWDC");
Director and/or officer of various DWDC subsidiaries.

Philip J. Purcell Chairman, Chief Executive Officer and Director of of
Director DWDC and DWR; Director of DWSC and Distributors;
Director or Trustee of the Dean Witter Funds; Director
and/or officer of various DWDC subsidiaries.

Richard M. DeMartini Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Capital;Director
of DWR, DWSC, Distributors and DWTC; Trustee of the
TCW/DW Funds; Member (since January, 1993) and Chairman
(since January, 1995) of the Board of Directors of
NASDAQ.

James F. Higgins Executive Vice President of DWDC; President and
Director Chief Operating Officer of Dean Witter Financial;
Director of DWR, DWSC, Distributors and DWTC.

Thomas C. Schneider Executive Vice President and Chief Financial
Executive Vice Officer of DWDC, DWR, DWSC and Distributors;
President, Chief Director of DWR, DWSC and Distributors.
Financial Officer and
Director

5
<PAGE>

Robert M. Scanlan President and Chief Operating Officer of DWSC,
President and Chief Executive Vice President of Distributors;
Operating Officer Executive Vice President and Director of DWTC; Vice
President of the Dean Witter Funds and the TCW/DW
Funds.

John Van Heuvelen President, Chief Operating Officer and Director
Executive Vice of DWTC.
President

Joseph J. McAlinden
Executive Vice President
and Chief Investment Vice President of the Dean Witter Funds and
Officer Director of DWTC.

Sheldon Curtis Assistant Secretary of DWR; Senior Vice President,
Senior Vice President, Secretary and General Counsel of DWSC; Senior Vice
General Counsel and President, Assistant General Counsel and Assistant
Secretary Secretary of Distributors; Senior Vice President
and Secretary of DWTC; Vice President, Secretary and
General Counsel of the Dean Witter Funds and the
TCW/DW Funds.
Peter M. Avelar
Senior Vice President Vice President of various Dean Witter Funds.

Mark Bavoso
Senior Vice President Vice President of various Dean Witter Funds.

Richard Felegy
Senior Vice President

Edward Gaylor
Senior Vice President Vice President of various Dean Witter Funds.

Robert S. Giambrone
Senior Vice President Senior Vice President of DWSC, Distributors
and DWTC and Director of DWTC; Vice President
of the Dean Witter Funds and the TCW/DW Funds.

Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.

Kenton J. Hinchcliffe
Senior Vice President Vice President of various Dean Witter Funds.

6
<PAGE>

Jenny B. Jones
Senior Vice President Vice President of Dean Witter Special Value Fund.

John B. Kemp, III Director of the Provident Savings Bank, Jersey
Senior Vice President City, New Jersey.

Anita Kolleeny
Senior Vice President Vice President of various Dean Witter Funds.

Jonathan R. Page
Senior Vice President Vice President of various Dean Witter Funds.

Ira N. Ross
Senior Vice President Vice President of various Dean Witter Funds.

Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.

Paul D. Vance
Senior Vice President Vice President of various Dean Witter Funds.

Elizabeth A. Vetell
Senior Vice President

James F. Willison
Senior Vice President Vice President of various Dean Witter Funds.

Ronald J. Worobel
Senior Vice President Vice President of various Dean Witter Funds.

Thomas F. Caloia First Vice President and Assistant Treasurer of
First Vice President DWSC, Assistant Treasurer of Distributors;
and Assistant Treasurer and Chief Financial Officer of the
Treasurer Dean Witter Funds and the TCW/DW Funds.

Marilyn K. Cranney Assistant Secretary of DWR; First Vice President
First Vice President and Assistant Secretary of DWSC; Assistant
and Assistant Secretary Secretary of the Dean Witter Funds and the TCW/DW
Funds.

Barry Fink First Vice President and Assistant Secretary of
First Vice President DWSC; Assistant Secretary of the Dean Witter
and Assistant Secretary Funds and the TCW/DW Funds.

Michael Interrante First Vice President and Controller of DWSC;
First Vice President Assistant Treasurer of Distributors;First Vice
and Controller President and Treasurer of DWTC.

7
<PAGE>

Joan Allman
Vice President

Joseph Arcieri
Vice President Vice President of various Dean Witter Funds

Kirk Balzer
Vice President Vice President of various Dean Witter Funds

Douglas Brown
Vice President

Philip Casparius
Vice President

Thomas Chronert
Vice President

Rosalie Clough
Vice President

Patricia A. Cuddy
Vice President Vice President of various Dean Witter Funds.

B. Catherine Connelly
Vice President

Salvatore DeSteno
Vice President Vice President of DWSC.

Frank J. DeVito
Vice President Vice President of DWSC.

Bruce Dunn
Vice President

Jeffrey D. Geffen
Vice President

Deborah Genovese
Vice President

Peter W. Gurman
Vice President

8
<PAGE>

John Hechtlinger
Vice President

Peter Hermann
Vice President Vice President of various Dean Witter Funds

Elizabeth Hinchman
Vice President

David Hoffman
Vice President

David Johnson
Vice President

Christopher Jones
Vice President

James Kastberg
Vice President

Stanley Kapica
Vice President

Michael Knox
Vice President Vice President of various Dean Witter Funds

Konrad J. Krill
Vice President Vice President of various Dean Witter Funds.

Paula LaCosta
Vice President Vice President of various Dean Witter Funds.

Thomas Lawlor
Vice President

Gerard Lian
Vice President Vice President of various Dean Witter Funds.

LouAnne D. McInnis Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.

Sharon K. Milligan
Vice President

Julie Morrone
Vice President

9
<PAGE>

David Myers
Vice President

James Nash
Vice President

Richard Norris
Vice President

Anne Pickrell
Vice President Vice President of Dean Witter Global Short-
Term Income Fund Inc.
Hugh Rose
Vice President

Robert Rossetti
Vice President

Ruth Rossi Vice President and Assistant Secretary of DWSC;
Vice President and Assistant Secretary of the Dean Witter Funds and
Assistant Secretary the TCW/DW Funds.

Carl F. Sadler
Vice President

Rafael Scolari
Vice President Vice President of Prime Income Trust

Peter Seeley Vice President of Dean Witter World
Vice President Wide Income Trust

Jayne M. Stevlingson
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.

Katherine Wickham
Vice President

Alice Weiss
Vice President Vice President of various Dean Witter Funds.

10
<PAGE>

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 Global Asset Allocation
(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 Short-Term Bond Fund
(15) Dean Witter Mid-Cap Growth Fund
(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 Limited Term Municipal Trust
(22) Dean Witter Natural Resource Development Securities Inc.
(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 Federal Securities 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 Premier Income Trust
(43) Dean Witter Value-Added Market Series
(44) Dean Witter Global Utilities Fund
(45) Dean Witter High Income Securities
(46) Dean Witter National Municipal Trust
(47) Dean Witter International SmallCap Fund
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund

11
<PAGE>

(50) Dean Witter Hawaii Municipal Trust
(51) Dean Witter Variable Investment Series
(52) Dean Witter Capital Appreciation Fund
(53) Dean Witter Intermediate Term U.S. Treasury Trust
(54) Dean Witter Information Fund
(55) Dean Witter Japan Fund
(56) Dean Witter Income Builder Fund
(57) Dean Witter Special Value 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
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust

(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.

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
stockholders, upon request and without charge.

<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 23rd day of December, 1996.

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. 7 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,
Director and Chairman
By /s/ Charles A. Fiumefreddo 12/23/96
----------------------------
Charles A. Fiumefreddo

(2) Principal Financial Officer Treasurer and Principal
Accounting Officer

By /s/ Thomas F. Caloia 12/23/96
----------------------------
Thomas F. Caloia

(3) Majority of the Directors

Charles A. Fiumefreddo (Chairman)
Philip J. Purcell

By /s/ Sheldon Curtis 12/23/96
-----------------------------
Sheldon Curtis
Attorney-in-Fact

Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder

By /s/ David M. Butowsky 12/23/96
----------------------------
David M. Butowsky
Attorney-in-Fact

<PAGE>

DEAN WITTER EUROPEAN GROWTH FUND INC.

EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- ------------

2. -- By-Laws of the Registrant, Amended and Restated
as of October 25, 1996

11. -- Consent of Independent Accountants

16. -- Schedules for Computation of Performance Quotations

27. -- Financial Data Schedule

<PAGE>

BY-LAWS

DEAN WITTER EUROPEAN GROWTH FUND INC.

AMENDED AND RESTATED AS OF OCTOBER 25, 1996

ARTICLE I

OFFICES

SECTION 1.1. PRINCIPAL OFFICE. The principal office of the Corporation in
the State of Maryland shall be in the City of Baltimore.

SECTION 1.2. OTHER OFFICES. In addition to its principal office in the
State of Maryland, the Corporation may have an office or offices in the City
of New York, State of New York, and at such other places as the Board of
Directors may from time to time designate or the business of the Corporation
may require.

ARTICLE II

STOCKHOLDERS' MEETINGS

SECTION 2.1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
such place, within or without the State of Maryland, as may be designated
from time to time by the Board of Directors.

SECTION 2.2. ANNUAL MEETINGS. Annual or other meetings of the
stockholders, unless required by the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law shall not be required to be
held but may, in the discretion of the Directors, be held notwithstanding the
absence of a requirement under the Investment Company Act of 1940, as
amended, or the Maryland General Corporation Law to hold such a meeting.

SECTION 2.3. SPECIAL MEETINGS. Special meetings of stockholders of the
Corporation shall be held whenever called by the Board of Directors or the
President of the Corporation. Special meetings of stockholders shall also be
called by the Secretary upon the written request of the holders of shares
entitled to vote not less than twenty-five percent (25%) of all the votes
entitled to be cast at such meeting. Such request shall state the purpose or
purposes of such meeting and the matters proposed to be acted on thereat. The
Secretary shall inform such stockholders of the reasonable estimated cost of
preparing and mailing such notice of the meeting, and upon payment to the
Corporation of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to a vote at such meeting.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at the meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted upon at
any special meeting of stockholders held during the preceding twelve months.

SECTION 2.4. NOTICE OF MEETINGS. Written or printed notice of every
stockholders' meeting stating the place, date and time, and in the case of a
special meeting the purpose or purposes thereof, shall be given by the
Secretary not less than ten (10) nor more than ninety (90) days before such
meeting to each stockholder entitled to vote at such meeting, either by mail
or by presenting it to him personally, or by leaving it at his residence or
usual place of business. If mailed, such notice shall be deemed to be given
when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.

SECTION 2.5. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Charter of the Corporation, or by these By-Laws, at
all meetings of stockholders the holders of a majority of the shares issued
and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for
the transaction of business. In the absence of a quorum, the stockholders
present or represented by proxy and entitled to vote thereat shall have power

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<PAGE>

to adjourn the meeting from time to time (but in no event to a date more than
120 days after the original record date) without notice other than
announcement at the meeting, until a quorum shall be present. At any
adjourned meeting at which a quorum shall be present, any business may be
transacted if the meeting had been held as originally called.

SECTION 2.6. VOTING RIGHTS, PROXIES. At each meeting of the stockholders
at which a quorum is present, each holder of stock entitled to vote thereat
shall be entitled to one vote (with fractional votes for fractional shares)
in person or by proxy, executed in writing by the stockholder or his duly
authorized attorney-in-fact, for each share of stock of the Corporation
entitled to vote so registered in his name on the books of the Corporation on
the date fixed as the record date for the determination of stockholders
entitled to vote at such meeting. In all elections of directors, each share
of stock may be voted once for each individual to be elected and for whose
election such share is entitled to be voted. No proxy shall be valid after
eleven months from its date, unless otherwise provided in the proxy. At all
meetings of stockholders, unless the voting is conducted by inspectors, all
questions relating to the qualification of voters and the validity of proxies
and the acceptance or rejection of votes shall be decided by the chairman of
the meeting.

SECTION 2.7. VOTE REQUIRED. Except as otherwise provided by law, by the
Charter of the Corporation, or by these By-Laws, at each meeting of
stockholders at which a quorum is present, all matters shall be decided by a
majority of the votes cast by the stockholders present in person or
represented by proxy and entitled to vote with respect to any such matter.

SECTION 2.8. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the Directors may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of stockholders may, and on the
request of any stockholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Directors in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of shares of stock outstanding, the shares of stock represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, shall receive votes, ballots or consents, shall hear and determine
all challenges and questions in any way arising in connection with the right
to vote, shall count and tabulate all votes or consents, determine the
results, and do such other acts as may be proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting or of any stockholder or his proxy, the Inspectors of Election shall
make a report in writing of any challenge or question or matter determined by
them and shall execute a certificate of any facts found by them.

SECTION 2.9. ACTION BY STOCKHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of stockholders may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all the
stockholders entitled to vote upon the action and such consent shall be filed
with the records of the Corporation.

SECTION 2.10. PRESENCE AT MEETINGS. Presence at meetings of stockholders
requires physical attendance by the stockholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.

ARTICLE III

DIRECTORS

SECTION 3.1. NUMBER AND TERM. The Board of Directors shall consist of not
less than three (3) and not more than fifteen (15) directors, the number of
directors to be fixed from time to time within the above-specified limits by
the affirmative vote of a majority of the whole Board of Directors. At the
first annual meeting of stockholders and at each meeting thereafter called
for the purpose of electing directors, the stockholders shall elect directors
to hold office until their successors are elected and qualify. Directors need
not be stockholders of the Corporation.

2
<PAGE>

SECTION 3.2. POWERS. The business of the Corporation shall be managed by
the Board of Directors which may exercise all powers of the Corporation and
do all lawful acts and things which are not by law or by the Charter of the
Corporation, or by these By-Laws, directed or required to be exercised or
done exclusively by the stockholders.

SECTION 3.3. ORGANIZATIONAL MEETINGS. The first meeting of each newly
elected Board of Directors for the purposes of organization and the election
of officers and otherwise shall be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of
the Board of Directors, or as shall be specified in a written waiver signed
by all directors.

SECTION 3.4. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held at such time and place as shall be determined from time to time
by the Board of Directors without further notice.

SECTION 3.5. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called at any time by the President and shall be called by such
President or the Secretary upon the written request of any two (2) directors.

SECTION 3.6. NOTICE OF SPECIAL MEETINGS. Written notice of special
meetings of the Board of Directors, stating the place, date and time thereof,
shall be given not less than two (2) days before such meeting to each
director, personally, by telegram, by mail, or by leaving such notice at his
place of residence or usual place of business. If mailed, such notice shall
be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the director at his address as it appears on the records
of the Corporation.

SECTION 3.7. TELEPHONE MEETINGS. Any member or members of the Board of
Directors or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
a conference telephone or similar communications equipment if all persons
participating in the meeting can hear each other at the same time.
Participation in a meeting by these means constitutes presence in person at
the meeting. This Section 3.7 shall not be applicable to meetings held for
the purpose of voting in respect of approval of contracts or agreements
whereby a person undertakes to serve or act as investment adviser of, or
principal underwriter for, the Corporation, or in respect of other matters as
to which the Investment Company Act of 1940 requires a vote cast in person.

SECTION 3.8. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings
of the Board of Directors, a majority of the whole Board shall be requisite
to and shall constitute a quorum for the transaction of business. If a quorum
is present, the affirmative vote of a majority of the directors present shall
be the act of the Board of Directors, unless the concurrence of a greater
proportion is expressly required for such action by law, the Charter of the
Corporation or these By-Laws. If at any meeting of the Board there be less
than a quorum present, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting
until a quorum shall have been obtained.

SECTION 3.9. REMOVAL. Any one or more of the directors may be removed,
either with or without cause, at any time, by the affirmative vote of the
stockholders holding a majority of the outstanding shares entitled to vote
for the election of directors. (For purposes of determining the circumstances
and procedures under which such removal of directors may take place, the
provisions of Section 16(c) of the Investment Company Act of 1940 shall be
applicable to the same extent as if the Corporation were subject to the
provisions of that Section.) The successor or successors of any director or
directors so removed may be elected by the stockholders entitled to vote
thereon at the same meeting to fill any resulting vacancies for the unexpired
term of removed directors. Except as provided by law, pending, or in the
absence of, such an election, the successor or successors of any director or
directors so removed may be chosen by the Board of Directors.

SECTION 3.10. VACANCIES. Except as otherwise provided by law, any vacancy
occurring in the Board of Directors and newly created directorships resulting
from an increase in the authorized number of directors may be filled by the
vote of a majority of the directors then in office or, if only one director
shall then be in office, by such director. A director elected by the Board of
Directors to fill a vacancy shall be elected to hold office until the next
annual meeting of stockholders or until his successor is elected and
qualifies.

3
<PAGE>

SECTION 3.11. ACTION BY DIRECTORS WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Board of Directors may be taken without a meeting if a
consent in writing setting forth the action shall be signed by all of the
directors entitled to vote upon the action and such written consent is filed
with the minutes of proceedings of the Board of Directors.

SECTION 3.12. EXPENSES AND FEES. Each director may be allowed expenses, if
any, for attendance at each regular or special meeting of the Board of
Directors and shall receive for services rendered as a director of the
Corporation such compensation as may be fixed by the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.

SECTION 3.13. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other
papers shall be executed in the name and on behalf of the Corporation and all
checks, notes, drafts and other obligations for the payment of money by the
Corporation shall be signed, and all transfer of securities standing in the
name of the Corporation shall be executed, by the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Corporation as shall be designated for that purpose by vote of the Board of
Directors; notwithstanding the above, nothing in this Section 3.13 shall be
deemed to preclude the electronic authorization, by designated persons, of
the Corporation's Custodian (as described herein in Section 10.1) to transfer
assets of the Corporation, as provided for herein in Section 10.1.

SECTION 3.14. CONTRACTS. Except as otherwise provided by law or by the
Charter of the Corporation, no contract or transaction between the
Corporation and any partnership or corporation, and no act of the
Corporation, shall in any way be affected or invalidated by the fact that any
officer or director of the Corporation is pecuniarily or otherwise interested
therein or is a member, officer or director of such interest shall be known
to the Board of Directors of the Corporation. Specifically, but without
limitation of the foregoing, the Corporation may enter into one or more
contracts appointing Dean Witter InterCapital Inc. investment manager of the
Corporation, and may otherwise do business with Dean Witter InterCapital
Inc., notwithstanding the fact that one or more of the directors of the
Corporation and some or all of its officers are, have been or may become
directors, officers, members, employees, or stockholders of Dean Witter
InterCapital Inc.; and in the absence of fraud, the Corporation and Dean
Witter InterCapital Inc. may deal freely with each other, and neither such
contract appointing Dean Witter InterCapital Inc. investment manager to the
Corporation nor any other contract or transaction between the Corporation and
Dean Witter InterCapital Inc. shall be invalidated or in any wise affected
thereby, nor shall any director or officer of the Corporation by reason
thereof be liable to the Corporation or to any stockholder or creditor of the
Corporation or to any other person for any loss incurred under or by reason
of any such contract or transaction. For purposes of this paragraph, any
reference to "Dean Witter InterCapital Inc." shall be deemed to include said
company and any parent, subsidiary or affiliate of said company and any
successor (by merger, consolidation or otherwise) to said company or any such
parent, subsidiary or affiliate.

SECTION 3.15. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent
of the Corporation. The indemnification shall be against judgments,
penalties, fines, settlements and reasonable expenses, including attorneys'
fees, actually incurred in connection with the proceeding, unless it is
established that: (i) the act or omission of the director was material to the
matter giving rise to the proceeding; and (A) was committed in bad faith, or
(B) was the result of active and deliberate dishonesty; or (ii) the director
actually received an improper personal benefit in money, property, or
services, or (iii) in the case of any criminal proceeding, the director had
reasonable cause to believe that the act or omission was unlawful. Officers,
employees, and agents of the Corporation are entitled to indemnification and
the advancement of expenses to the same extent as directors. The termination
of any action, suit, or proceeding by judgment, order or settlement, shall
not,

4
<PAGE>

of itself, create a presumption that the person did not meet the requisite
standard of conduct set forth above. The termination of any proceeding by
conviction, a plea of nolo contendere or its equivalent, or an entry of an
order of probation prior to judgment, creates a rebuttable presumption that
the person did not meet the requisite standard of conduct.

(b) The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Corporation to obtain a judgment or decree in
its favor by reason of the fact that he is or was a director, officer,
employee, or agent of the Corporation. The indemnification shall be against
judgments, penalties, fines, settlements and reasonable expenses, including
attorney's fees, actually incurred in connection with the proceeding, if he
met the standard of conduct set forth in paragraph (a) above, except that no
indemnification shall be made in respect of any proceeding as to which the
person has been adjudged to be liable to the Corporation, except to the
extent that a court of appropriate jurisdiction determines upon application
of that person that, despite the failure to meet the requisite standard of
conduct or an actual adjudication of liability, but in view of all relevant
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for those expenses which the court shall deem proper, provided such
director or officer is not adjudged to be liable by reason of his willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.

(c) To the extent that a director, officer, employee, or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsection (a) or (b) or in defense
of any claim, issue or matter therein, he shall be indemnified against
expenses, including attorneys' fees, actually and reasonably incurred by him
in connection therewith.

(d)(1) Unless a court orders otherwise, any indemnification under
subsection (a) or (b) of this section may be made by the Corporation only as
authorized in the specific case after a determination that indemnification of
the director, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in subsection
(a) or (b).

(2) The determination shall be made:

(i) By the Board of Directors, by a majority vote of a quorum which
consists of directors who were not parties to the action ("non-party
directors"), suit or proceeding; or if a quorum of non-party directors
is not obtainable, by a majority vote of a committee of at least two
non-party directors; or

(ii) If the required quorum is not obtainable, or if a quorum of
disinterested directors so directs, by independent legal counsel in a
written opinion; or

(iii) By the stockholders.

(3) Notwithstanding the provisions of paragraphs (1) and (2) of this
subsection (d), no person shall be entitled to indemnification for any
liability, whether or not there is an adjudication of liability, arising by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties as described in Sections 17(h) and (i) of the Investment
Company Act of 1940, as amended ("disabling conduct"). A person shall be
deemed not liable by reason of disabling conduct if, either:

(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or

(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--

(A) a majority of a quorum of directors who are neither "interested
persons" of the Corporation, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, as amended, nor parties to the
action, suit or proceeding, or

(B) an independent legal counsel in a written opinion.

5
<PAGE>

(e) Expenses, including attorneys' fees, incurred by a director, officer,
employee or agent of the Corporation in defending a civil or criminal action,
suit or proceeding may be paid by the Corporation in advance of the final
disposition thereof if:

(1) authorized in the specific case by the Board of Directors; and

(2) the Corporation receives an undertaking by or on behalf of the
director, officer, employee or agent of the Corporation to repay the
advance if it is not ultimately determined that such person is entitled to
be indemnified by the Corporation; and

(3) either

(i) such person provides a security for his undertaking, or

(ii) the Corporation is insured against losses by reason of any
lawful advances, or

(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either--

(A) a majority of a quorum which consists of directors who are
neither "interested persons" of the Corporation, as defined in
Section 2(a)(19) of the Investment Company Act of 1940, as
amended, nor parties to the action, suit or proceeding, or

(B) an independent legal counsel in a written opinion.

(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person.

(g) The Corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the
Corporation, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such. However, in no
event will the Corporation pay for that portion of the premium, if any, for
insurance to indemnify any officer or director against liability for any act
for which the Corporation itself is not permitted to indemnify him.

(h) Nothing contained in this Section shall be construed to protect any
director or officer of the Corporation against any liability to the
Corporation or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

(i) Any indemnification of, or advance of expenses to, a director in
accordance with this Section, if arising out of a proceeding by or in the
right of the Corporation, shall be reported in writing to the shareholders
with the notice of the next stockholders' meeting or prior to the meeting.

ARTICLE IV

COMMITTEES

SECTION 4.1. EXECUTIVE AND OTHER COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the whole Board, may designate an
Executive Committee and/or other committees, each committee to consist of two
(2) or more of the directors of the Corporation and may delegate to such
committees, in the intervals between meetings of the Board of Directors, any
or all of the powers of the Board of Directors in the management of the
business and affairs of the Corporation, except the power to: declare
dividends or distributions of stock; issue stock; recommend to stockholders
any action requiring stockholder approval; amend the By-Laws of the
Corporation; or approve any merger or share exchange which does not require
shareholder approval. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a
quorum, may appoint a member of the Board of Directors to act in place of
such absent member. Each such committee shall keep a record of its
proceedings.

6
<PAGE>

The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.

All actions of the Executive Committee shall be reported to the Board of
Directors at the meeting thereof next succeeding to the taking of such
action.

SECTION 4.2. ADVISORY COMMITTEE. The Board of Directors may appoint an
advisory committee which shall be composed of persons who do not serve the
Corporation in any other capacity and which shall have advisory functions
with respect to the investments, business or activities of the Corporation as
may be delegated to it, but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed
of by the Corporation, or to take action by or in the name of the
Corporation. The number of persons constituting any such advisory committee
shall be determined from time to time by the Board of Directors. The members
of any such advisory committee may receive compensation for their services
and may be allowed such fees and expenses for the attendance at meetings as
the Board of Directors may from time to time determine to be appropriate.

SECTION 4.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Board appointed pursuant to Section 4.1
of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.

ARTICLE V

OFFICERS

SECTION 5.1. EXECUTIVE OFFICERS. The executive officers of the Corporation
shall be a Chairman of the Board, a President, one or more Vice Presidents, a
Secretary and a Treasurer. The Board of Directors may also elect one or more
Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers and
may elect, or may delegate to the President the power to appoint, such other
officers and agents as the Board of Directors shall at any time or from time
to time deem advisable. The Chairman of the Board shall be selected from
among the directors but none of the other executive officers need be a member
of the Board of Directors. Two or more offices, except those of President and
any Vice President, may be held by the same person, but no officer shall
execute, acknowledge or verify any instrument in more than one capacity. The
executive officers of the Corporation shall be elected by the Board of
Directors.

SECTION 5.2. TERM, REMOVAL AND VACANCIES. Each officer of the Corporation
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Corporation may be removed by the Board of Directors
whenever, in its judgment, the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.

SECTION 5.3. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Corporation shall be fixed by the Board of Directors, or by the
President to the extent provided by the Board of Directors with respect to
officers appointed by the President.

SECTION 5.4. POWER AND DUTIES. All officers and agents of the Corporation,
as between themselves and the Corporation, shall have such authority and
perform such duties in the management of the Corporation as may be provided
in or pursuant to these By-Laws, or, to the extent not so provided, as may be
prescribed by the Board of Directors; provided, that no rights of any third
party shall be affected or impaired by any such By-Law or resolution of the
Board unless he has knowledge thereof.

SECTION 5.5. THE CHAIRMAN. The Chairman, if any, or in his absence the
President, shall preside at all meetings of the stockholders and of the Board
of Directors; and he shall perform such other duties as the Board of
Directors may from time to time prescribe.

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<PAGE>

SECTION 5.6. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation; he shall have general and active management of
the business of the Corporation, shall see that all orders and resolutions of
the Board of Directors are carried into effect, and, in connection therewith,
shall be authorized to delegate to one or more Vice Presidents such of his
powers and duties at such times and in such manner as he may deem advisable.

In the absence of the Chairman, the President shall preside at all
meetings of the stockholders and the Board of Directors; and he shall perform
such other duties as the Board of Directors may, from time to time,
prescribe.

SECTION 5.7. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Board of Directors. The Vice President, or, if there be more than one,
the Vice Presidents in the order of their seniority as may be determined from
time to time by the Board of Directors shall, in the absence or disability of
the President, exercise the powers and perform the duties of those officers;
and he or they shall perform such other duties as the Board of Directors may
from time to time prescibe.

SECTION 5.8. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Board of Directors or the President.

SECTION 5.9. THE SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record all the
proceedings of the meetings of the stockholders and of the Board of Directors
in a book to be kept for that purpose, and shall perform like duties for the
standing committees when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and special meetings of the Board
of Directors, and shall perform such other duties and have such powers as the
Board of Directors, may from time to time prescribe. He shall keep in safe
custody the seal of the Corporation and affix or cause the same to be affixed
to any instrument requiring it, and, when so affixed, it shall be attested by
his signature.

SECTION 5.10. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors or the President, shall in the absence or disability
of the Secretary, perform the duties and exercise the powers of the Secretary
and shall perform such duties and have such other powers as the Board of
Directors or the President may from time to time prescribe.

SECTION 5.11. THE TREASURER. The Treasurer shall be the chief financial
officer of the Corporation. He shall keep or cause to be kept full and
accurate accounts or receipts and disbursements in books belonging to the
Corporation, and he shall render to the Board of Directors whenever any of
them require it, an account of his transactions as Treasurer and of the
financial condition of the Corporation; and he shall perform such other
duties as the Board of Directors may from time to time prescribe.

SECTION 5.12. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors or the President, shall, in the absence
or disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such powers as the
Board of Directors, or the President, may from time to time prescribe.

SECTION 5.13. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Board of Directors may deem it
desirable, the Board may delegate the powers and duties of an officer to any
other officer or officers or to any Director or Directors.

ARTICLE VI

CAPITAL STOCK

SECTION 6.1. ISSUANCE OF STOCK. The Corporation shall not issue its shares
of capital stock except as approved by the Board of Directors.

8
<PAGE>

SECTION 6.2. CERTIFICATES OF STOCK. Certificates for shares of each class
of the capital stock of the Corporation shall be in such form and of such
design as the Board of Directors shall approve, subject to the right of the
Board of Directors to change such form and design at any time or from time to
time, and shall be entered in the books of the Corporation as they are
issued. Each such certificate shall bear a distinguishing number; shall
exhibit the holder's name and certify the number of full shares owned by such
holder; shall be signed by or in the name of the Corporation by the
President, or a Vice President or an Assistant Vice President, and
countersigned by the Secretary or an Assistant Secretary or the Treasurer of
the Corporation; shall be sealed with the corporate seal; and shall contain
such recitals as may be required by law. Where any stock certificate is
signed by a Transfer Agent or by a Registrar, the signature of such corporate
officers and the corporate seal may be facsimile, printed or engraved. The
Corporation may, at its option, defer the issuance of a certificate or
certificates to evidence shares of capital stock owned of record by any
stockholder until such time as demand therefor shall be made upon the
Corporation or its Transfer Agent, but upon the making of such demand each
stockholder shall be entitled to such certificate or certificates.

In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Corporation, whether
because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the Corporation, such certificate
or certificates shall, nevertheless, be adopted by the Corporation and be
issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures shall
appear therein had not ceased to be such officer or officers of the
Corporation.

No certificate shall be issued for any share of stock until such share is
fully paid.

SECTION 6.3. TRANSFER OF STOCK. Transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof, or by his attorney thereunto duly authorized by a power of
attorney duly executed and filed with the Corporation or a Transfer Agent of
the Corporation, if any, upon written request in proper form if no share
certificate has been issued, or in the event such certificate has been
issued, upon presentation and surrender in proper form of said certificate.

SECTION 6.4. RECORD DATE. The Board of Directors may fix in advance a date
as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders
entitled to receive payment of any dividend or the allotment of any rights,
or in order to make a determination of stockholders for any other purpose.
Such date, in any case shall be not more than ninety (90) days, and in case
of a meeting of stockholders not less than ten (10) days prior to the date on
which particular action requiring such determination of stockholders is to be
taken. In lieu of fixing a record date the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, twenty (20) days. If the stock transfer books are closed
for the purpose of determining stockholders entitled to notice of a vote at a
meeting of stockholders, such books shall be closed for at least ten (10)
days immediately preceding such meeting.

SECTION 6.5. LOST, STOLEN, DESTROYED AND MULTILATED CERTIFICATES. The
Board of Directors may direct a new certificate or certificates to be issued
in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon satisfactory
proof of such loss, theft, or destruction; and the Board of Directors may, in
its discretion, require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give to the Corporation and to
such Registrar, Transfer Agent and/or Transfer Clerk as may be authorized or
required to countersign such new certificate or certificates, a bond in such
sum and of such type as they may direct, and with such surety or sureties, as
they may direct, as indemnity against any claim that may be against them or
any of them on account of or in connection with the alleged loss, theft or
destruction of any such certificate.

SECTION 6.6. REGISTERED OWNERS OF STOCK. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares of stock to receive dividends, and to vote as such owner, and
to hold liable for calls and assessments a person registered on its books as
the

9
<PAGE>

owner of shares of stock, and shall not be bound to recognize any equitable
or other claim to or interest in such share or shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by the laws of Maryland.

SECTION 6.7. FRACTIONAL DENOMINATIONS. Subject to any applicable
provisions of law and the Charter of the Corporation, the Corporation may
issue shares of its capital stock in fractional denominations, provided that
the transactions in which and the terms and conditions upon which shares in
fractional denominations may be issued may from time to time be limited or
determined by or under the authority of the Board of Directors.

ARTICLE VII

SALE OF STOCK

SECTION 7.1. SALE OF STOCK. Upon the sale of each share of its Common
Stock, except as otherwise permitted by applicable laws and regulations, the
Corporation shall receive in cash or in securities valued as provided in
Article VIII of these By-Laws, not less than the current net asset value
thereof, exclusive of any distributing commission or discount, and in no
event less than the par value thereof.

SECTION 7.2. REDEMPTION OF STOCK. Subject to and in accordance with any
applicable laws and regulations and any applicable provisions of the
Corporation's Articles of Incorporation, the Corporation shall redeem all
outstanding shares of its capital stock duly delivered or offered for
redemption by any registered stockholder in a manner prescribed by or under
authority of the Board of Directors. Any shares so delivered or offered for
redemption shall be redeemed at a redemption price prescribed by the Board of
Directors in accordance with applicable laws and regulations; provided that
in no event shall such price be less than the applicable net asset value of
such shares as determined in accordance with the provisions of Article VIII
of these By-Laws. The Corporation may redeem, at current net asset value,
shares not offered for redemption held by any shareholder whose shares have a
value of less than $100, or such lesser amount as may be fixed by the Board
of Directors; provided that before the Corporation redeems such shares it
must notify the shareholder that the value of his shares is less than $100
and allow him 60 days to make an additional investment in an amount which
will increase the value of his account to $100 or more. The Corporation shall
pay redemption prices in cash.

ARTICLE VIII

DETERMINATION OF NET ASSET VALUE; VALUATION OF
PORTFOLIO SECURITIES AND OTHER ASSETS

SECTION 8.1. NET ASSET VALUE. The net asset value of a share of Common
Stock of the Corporation shall be determined in accordance with applicable
laws and regulations under the supervision of such persons and at such time
or times as shall from time to time be prescribed by the Board of Directors.
Each such determination shall be made by subtracting from the value of the
assets of the Corporation (as determined pursuant to Section 8.2 of these
By-Laws) the amount of its liabilities, dividing the remainder by the number
of shares of Common Stock issued and outstanding, and adjusting the results
to the nearest full cent per share.

SECTION 8.2. VALUATION OF PORTFOLIO SECURITIES AND OTHER ASSETS. Except as
otherwise required by any applicable law or regulation of any regulatory
agency having jurisdiction over the activities of the Corporation, the
Corporation shall determine the value of its portfolio securities and other
assets as follows:

(a) securities for which market quotations are readily available shall
be valued at current market value determined in such manner as the Board
of Directors may from time to time prescribe;

(b) all other securities and assets shall be valued at amounts deemed
best to reflect their fair value as determined in good faith by or under
the supervision of such persons and at such time or times as shall from
time to time be prescribed by the Board of Directors.

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<PAGE>

All quotations, sale prices, bid and asked prices and other information
shall be obtained from such sources as the persons making such determination
believe to be reliable and any determination of net asset value based thereon
shall be conclusive.

ARTICLE IX

DIVIDENDS AND DISTRIBUTIONS

Subject to any applicable provisions of law and the Charter of the
Corporation, dividends and distributions upon the Common Stock of the
Corporation may be declared at such intervals as the Board of Directors may
determine, in cash, in securities or other property, or in shares of stock of
the Corporation, from any sources permitted by law, all as the Board of
Directors shall from time to time determine.

Inasmuch as the computation of net income and net profits from the sale of
securities or other properties for federal income tax purposes may vary from
the computation thereof on the books of the Corporation, the Board of
Directors shall have power, in its discretion, to distribute as income
dividends and as capital gain distributions, respectively, amounts sufficient
to enable the Corporation to avoid or reduce liability for federal income
taxes.

ARTICLE X

CUSTODIAN

SECTION 10.1. APPOINTMENT AND DUTIES. The Corporation shall at all times
employ a bank or trust company having the qualifications specified by the
Investment Company Act of 1940, as amended, as custodian with authority as
its agent, but subject to such restrictions, limitations and other
requirements, if any, as may be contained in these By-Laws and the Investment
Company Act of 1940, as amended:

(1) to receive and hold the securities owned by the Corporation and
deliver the same upon written or electronically transmitted order;

(2) to receive and receipt for any moneys due to the Corporation and
deposit the same in its own banking department or elsewhere as the
Directors may direct;

(3) to distribute such funds upon orders or vouchers;

(4) to keep the books and accounts of the Corporation and furnish
clerical and accounting services;

(5) to compute the net income of the Corporation and the net asset value
of the Corporation and its shares;

all upon such basis of compensation as may be agreed upon between the
Directors and the custodian. If so directed by a vote of a majority of the
shares of stock outstanding, the custodian shall deliver and pay over all
property of the Corporation held by it as specified in such vote.

The Board of Directors may also authorize the custodian to employ one or
more sub-custodians from time to time to perform such of the acts and
services of the custodian and upon such terms and conditions as may be agreed
upon between the custodian and such sub-custodian and approved by the Board
of Directors.

SECTION 10.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
regulations and orders as the Commission may adopt, the Directors may direct
the custodian to deposit all or any part of the securities owned by the
Corporation in a system for the central handling of securities established by
a national securities exchange or a national securities association
registered with the Commission under the Securities Exchange Act of 1934, or
such other person as may be permitted by the Securities and Exchange
Commission, or otherwise in accordance with the Investment Company Act of
1940, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Corporation.

11
<PAGE>

ARTICLE XI

BOOKS AND RECORDS

SECTION 11.1. LOCATION. The books and records of the Corporation may be
kept outside the State of Maryland at such place or places as the Board of
Directors may from time to time determine, except as otherwise required by
law.

SECTION 11.2. STOCK LEDGERS. The Corporation shall maintain at the office
of its Transfer Agent an original stock ledger containing the names and
addresses of all stockholders and the number of shares held by each
stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for
visual inspection.

SECTION 11.3. ANNUAL STATEMENT. The President or a Vice President or the
Treasurer shall prepare or cause to be prepared annually a full and correct
statement of the affairs of the Corporation, including a statement of assets
and liabilities and a statement of operations for the preceding fiscal year,
which shall be submitted at the annual meeting of stockholders if such
meeting be held, and shall be filed within twenty (20) days thereafter at the
principal office of the Corporation in the State of Maryland.

ARTICLE XII

WAIVER OF NOTICE

Whenever any notice of the time, place or purpose of any meeting of
stockholders, directors, or of any committee is required to be given under
the provisions of the statute or under the provisions of the Charter of the
Corporation or these By-Laws, a waiver thereof in writing, signed by the
person or persons entitled to such notice and filed with the records of the
meeting, whether before or after the holding thereof, or actual attendance at
the meeting of Directors or committee in person, shall be deemed equivalent
to the giving of such notice to such person.

ARTICLE XIII

MISCELLANEOUS

SECTION 13.1. SEAL. The Board of Directors shall adopt a corporate seal,
which shall be in the form of a circle, and shall have inscribed thereon the
name of the Corporation, the year of its incorporation, and the words
"Corporate Seal--Maryland." Said seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.

SECTION 13.2. FISCAL YEAR. The fiscal year of the Corporation shall end on
such date as the Board of Directors may by resolution specify, and the Board
of Directors may by resolution change such date for future fiscal years at
any time and from time to time.

SECTION 13.3. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Corporation, and all notes or other evidences of
indebtedness issued in the name of the Corporation, shall be signed by such
officer or officers or such other person or persons as the Board of Directors
may from time to time designate, or as may be specified in or pursuant to the
agreement between the Corporation and the bank or trust company appointed as
Custodian of the securities and funds of the Corporation.

ARTICLE XIV

COMPLIANCE WITH FEDERAL REGULATIONS

The Board of Directors is hereby empowered to take such action as they may
deem to be necessary, desirable or appropriate so that the Corporation is or
shall be in compliance with any federal or state statute, rule or regulation
with which compliance by the Corporation is required.

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<PAGE>

ARTICLE XV

AMENDMENTS

These By-Laws may be amended, altered, or repealed at any annual or
special meeting of the stockholders by the affirmative vote of the holders of
a majority of the shares of capital stock of the Corporation issued and
outstanding and entitled to vote, provided notice of the general purpose of
the proposed amendment, alteration or repeal is given in the notice of said
meeting; or, at any meeting of the Board of Directors, by a vote of a
majority of the whole Board of Directors, provided, however, that any By-Law
or amendment or alteration of the By-Laws adopted by the Board of Directors
may be amended, altered or repealed and any By-Law repealed by the Board of
Directors may be reinstated, by vote of the stockholders of the Corporation.

<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. 7 to the Registration
Statement on Form N-1A (the "Registration Statement") of our report dated
December 17, 1996, relating to the financial statements and financial highlights
of Dean Witter European Growth Fund, which appears in such Statement of
Additional Information, and to the incorporation by reference of our 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 such
Prospectus and to the references to us under the headings "Independent
Accountants" and "Experts" in the Statement of Additional Information.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 17, 1996

<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

(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-96 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ ---------- ----------------

31-Oct-95 $1,172.70 17.27% 1.00 17.27%

31-Oct-91 $2,216.50 121.65% 5.00 17.26%

01-Jun-90 $2,091.80 109.18% 6.42 12.19%

(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)

__
| ______________________ |
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)

(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-96 RETURN - TR YEARS - n TOTAL RETURN - t
------------ --------- ----------- --------- ----------------

31-Oct-95 $1,222.70 22.27% 1.00 22.27%

31-Oct-91 $2,236.50 123.65% 5.00 17.47%

01-Jun-90 $2,091.80 109.18% 6.42 12.19%

(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000

FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION

(D) (E) (F)
GROWTH OF GROWTH OF GROWTH OF
TOTAL $10,000 $50,000 $100,000
INVESTED - P RETURN - TR INVESTMENT -G INVESTMENT - G INVESTMENT - G
- ------------ ----------- ------------- -------------- --------------
01-Jun-90 109.18 $20,918 $104,590 $209,180

<PAGE>
<ARTICLE> 6

<S> <C>
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