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DEAN WITTER
PACIFIC GROWTH FUND INC.
PROSPECTUS--FEBRUARY 22, 1994
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DEAN WITTER PACIFIC 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
ASIA, AUSTRALIA AND NEW ZEALAND.
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 DISTRIBUTION FEE PURSUANT TO A PLAN OF
DISTRIBUTION AT THE ANNUAL RATE OF 1.0% OF THE LESSER OF THE (I) AVERAGE DAILY
AGGREGATE NET SALES OR (II) AVERAGE DAILY NET ASSETS OF THE FUND. (SEE "PURCHASE
OF FUND SHARES--PLAN OF DISTRIBUTION.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated February 22, 1993, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed below. The
Statement of Additional Information is incorporated herein by reference.
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TABLE OF CONTENTS
Prospectus Summary................................ 2
Summary of Fund Expenses.......................... 3
Financial Highlights.............................. 4
The Fund and its Management....................... 5
Investment Objective and Policies................. 6
Investment Restrictions........................... 12
Purchase of Fund Shares........................... 12
Shareholder Services.............................. 14
Redemptions and Repurchases....................... 16
Dividends, Distributions and Taxes................ 17
Performance Information........................... 18
Additional Information............................ 19
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SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
DEAN WITTER
PACIFIC GROWTH FUND INC.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(212) 392-2550 OR
(800) 526-3143
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DEAN WITTER DISTRIBUTORS INC. DISTRIBUTOR
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PROSPECTUS SUMMARY
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THE FUND The Fund is an open-end, diversified management investment company investing primarily in
securities issued by issuers located in Asia, Australia and New Zealand.
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SHARES OFFERED Shares of common stock with $.01 par value (see page 19).
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OFFERING PRICE At net asset value without sales charge (see page 12). Shares redeemed within six years of
purchase are subject to a contingent deferred sales charge under most circumstances (see page 16).
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MINIMUM Minimum initial investment, $1,000; minimum subsequent investments, $100 (see page 12).
PURCHASE
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INVESTMENT The investment objective of the Fund is to maximize the capital appreciation of its investments
OBJECTIVE (see page 6).
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INVESTMENT Dean Witter InterCapital Inc., the Investment Manager of the Fund, and its wholly-owned
MANAGER AND subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory,
SUB-ADVISOR management and administrative capacities to seventy-nine investment companies and other portfolios
with assets of approximately $71.2 billion at December 31, 1993. Morgan Grenfell Investment
Services Limited has been retained by the Investment Manager as Sub-Advisor to provide investment
advice and manage the Fund's portfolio. Morgan Grenfell Investment Services Limited currently
serves as investment advisor for U.S. corporate and public employee plans, endowments, investment
companies and foundations with assets of approximately $7.5 billion at December 31, 1993 (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
FEE net assets. The Sub-Advisor receives a monthly fee from the Investment Manager equal to 40% of the
Investment Manager's monthly fee (see page 5). Although the management fee is higher than that
paid by most other investment companies, the fee reflects the specialized nature of the Fund's
investment policies.
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DIVIDENDS AND Dividends from net investment income and distributions from net capital gains are paid at least
DISTRIBUTIONS once each year. Dividends and capital gains distributions are automatically reinvested in
additional shares at net asset value unless the shareholder elects to receive cash (see pages 14
and 17).
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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 1.0% per annum of the lesser of (i) the average daily aggregate net sales
or (ii) the Fund's average daily net assets. This fee compensates the Distributor for services
provided in distributing shares of the Fund and for sales related expenses. The Distributor also
receives the proceeds of any contingent deferred sales charges (see pages 12-13).
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REDEMPTION-- At net asset value; redeemable involuntarily if total value of the account is less than $100.
CONTINGENT Although no commission or sales load is imposed upon the purchase of shares, a contingent deferred
DEFERRED sales charge (scaled down from 5% to 1%) is imposed on any redemption of shares if after such
SALES redemption the aggregate current value of an account with the Fund falls below the aggregate
CHARGE 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 page 16).
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SPECIAL The net asset value of the Fund's shares will fluctuate with changes in the market value of its
RISK portfolio securities. It should be recognized that the foreign securities and markets in which the
CONSIDERATIONS Fund will invest pose different and greater risks than those customarily associated with domestic
securities and their markets. Furthermore, investors should consider other risks associated with a
portfolio of international securities, including fluctuations in foreign currency exchange rates
(i.e., if a substantial portion of the Fund's assets are denominated in foreign currencies which
decrease in value with respect to the U.S. dollar, the value of the investor's shares and the
distributions made on those shares will, likewise, decrease in value), foreign securities exchange
controls and foreign tax rates, as well as transactions in forward currency contracts, options and
futures contracts (see pages 7-11). The investor should also note that the Fund intends to invest
over 25% of its total assets in securities of Japanese and Hong Kong issuers (see page 6).
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS
AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The expenses and fees set forth in the table are for the
fiscal year ended October 31, 1993.
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<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Charge Imposed on Purchases....................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends............................................ None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds)............. 5.0 %
A contingent deferred sales charge is imposed at the following declining rates:
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<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
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First........................................................................................................ 5.0%
Second....................................................................................................... 4.0%
Third........................................................................................................ 3.0%
Fourth....................................................................................................... 2.0%
Fifth........................................................................................................ 2.0%
Sixth........................................................................................................ 1.0%
Seventh and thereafter....................................................................................... None
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Redemption Fees................................................................................. None
Exchange Fee.................................................................................... None
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<CAPTION>
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
<S> <C>
Management Fees................................................................................. 1.00%
12b-1 Fees*..................................................................................... 0.88%
Other Expenses.................................................................................. 0.50%
Total Fund Operating Expenses................................................................... 2.38%
<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.
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<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time
period:............................................................. $ 74 $ 104 $ 147 $ 271
You would pay the following expenses on the same investment, assuming
no redemption:...................................................... $ 24 $ 74 $ 127 $ 271
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE 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
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FINANCIAL HIGHLIGHTS
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The following per share data and ratios for a share of capital stock
outstanding throughout each period have been audited by Price Waterhouse,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto, and the unqualified report of
independent accountants which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Stockholders, which may be obtained without
charge upon request of the Fund.
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<CAPTION>
FOR THE
PERIOD
NOVEMBER
FOR THE YEAR ENDED 30, 1990*
OCTOBER 31, THROUGH
------------------------- OCTOBER 31,
1993 1992** 1991
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<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............ $ 12.69 $ 11.72 $ 10.00
----------- ----------- -----------
Net investment (loss) income.................. (0.04) (0.01) 0.06
Net realized and unrealized gain.............. 7.15 1.14 1.69
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Total from investment operations................ 7.11 1.13 1.75
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Less dividends and distributions:
Dividends from net investment income.......... -0- (0.01) (0.03)
Distributions from realized gains............. -0- (0.15) -0-
----------- ----------- -----------
Total dividends and distributions............... -0- (0.16) (0.03)
----------- ----------- -----------
Net asset value, end of period.................. $ 19.80 $ 12.69 $ 11.72
----------- ----------- -----------
----------- ----------- -----------
TOTAL INVESTMENT RETURN+.......................... 56.13% 9.86% 17.54%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands)........ $694,390 $176,791 $85,701
Ratio of expenses to average net assets......... 2.38% 2.77% 2.43%(2)(3)
Ratio of net investment (loss) income to average
net assets..................................... (0.46)% (0.30)% 0.61%(2)(3)
Portfolio turnover rate......................... 30% 73% 70%
<FN>
*DATE OF COMMENCEMENT OF OPERATIONS.
**INVESTMENT INCOME, TOTAL EXPENSES AND NET INVESTMENT LOSS WERE COMPUTED BASED
UPON MONTHLY AVERAGE SHARES OUTSTANDING.
+DOES NOT REFLECT THE DEDUCTION OF SALES LOAD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE RATIO WOULD HAVE BEEN 2.83%
AND THE ABOVE ANNUALIZED NET INVESTMENT INCOME RATIO WOULD HAVE BEEN 0.22%.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
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THE FUND AND ITS MANAGEMENT
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Dean Witter Pacific Growth Fund Inc. (the "Fund") is an open-end, diversified
management investment company incorporated in the state of Maryland on June 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 seventy-nine investment companies, twenty-seven of
which are listed on the New York Stock Exchange, with combined assets of
approximately $69.2 billion as of December 31, 1993. The Investment Manager also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.0 billion at such date.
The Fund has retained the Investment Manager to provide administrative
services, manage its business affairs and supervise the investment of the Fund's
assets. InterCapital has retained Dean Witter Services Company Inc. to perform
the aforementioned administrative services for the Fund.
Under a Sub-Advisory Agreement between Morgan Grenfell Investment Services
Limited (the "Sub-Advisor") and the Investment Manager, the Sub-Advisor provides
the Fund with investment advice and portfolio management relating to the Fund's
investments in securities issued by issuers located in Asia, Australia and New
Zealand and in countries located elsewhere around the world, subject to the
overall supervision of the Investment Manager. The Fund's Directors review the
various services provided by the Investment Manager and the Sub-Advisor to
ensure that the Fund's general investment policies and programs are being
properly carried out and that administrative services are being provided to the
Fund in a satisfactory manner.
The Sub-Advisor, whose address is 20 Finsbury Circus, London, England,
currently manages assets in excess of $7.5 billion for U.S. corporate and public
employee benefit plans, endowments, investment companies and foundations. The
Sub-Advisor is an indirect subsidiary of Deutsche Bank AG, the largest
commercial bank in Germany.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Investment Manager, the Fund pays
the Investment Manager monthly compensation calculated daily by applying the
annual rate of 1.0% to the Fund's net assets. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor monthly compensation equal to 40% of its monthly compensation.
For the fiscal year ended October 31, 1993, the Fund accrued total
compensation to the Investment Manager amounting to 1.0% of the Fund's average
daily net assets (of which 40% was accrued to the Sub-Advisor by the Investment
Manager) and the Fund's total expenses amounted to 2.38% of the Fund's average
daily net assets.
5
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INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to maximize the capital appreciation of
its investments. There is no assurance that the objective will be achieved. The
following policies may be changed by the Board of Directors without shareholder
approval.
The Fund seeks to achieve its investment objective by investing at least 65%
of its total assets in securities issued by issuers located in Asia, Australia
and New Zealand. Such issuers will include companies which are organized under
the laws of an Asian country, Australia or New Zealand and have a principal
office in an Asian country, Australia or New Zealand, or which derive 50% or
more of their total revenues from business in an Asian country, Australia or New
Zealand.
The principal countries in which such issuers will be located are Japan,
Australia, Malaysia, Singapore, Hong Kong, Thailand, the Philippines, Indonesia,
Taiwan and South Korea. The Fund intends to invest more than 25% of its total
assets in Japan, reflecting the dominance of the Japanese stock market in the
Pacific basin. The concentration of the Fund's assets in Japanese issuers will
subject the Fund to the risks of adverse social, political or economic events
which occur in Japan. Specifically, investments in the Japanese stock market may
entail a higher degree of risk than investments in other markets as, by
fundamental measures of corporate valuation, such as its high price-earnings
ratios and low dividend yields, the Japanese market as a whole may appear
expensive relative to other world stock markets (I.E., the prices of Japanese
stocks may be relatively high). In addition, the prices of securities traded on
the Japanese markets may be more volatile than many other markets.
The Fund also currently intends to invest over 25% of its total assets in
securities issued by issuers located in Hong Kong. In common with the other
stock markets of the Pacific Basin, the Hong Kong stock market is more volatile,
as measured by standard deviation, than the major equity markets of North
America and Europe. In 1997, Hong Kong will become a part of the People's
Republic of China, and will form a Special Economic Zone within that country.
The Government of China has indicated that it will not seek to alter the free
market-oriented economic management of Hong Kong for at least fifty years
following 1997.
The securities invested in will primarily consist of equity securities
issued by companies based in Asian countries, Australia and New Zealand which
the Investment Manager and/ or Sub-Advisor believe are most likely to help the
Fund meet its investment objective, but may also include fixed-income securities
issued or guaranteed by (are the direct obligations of) the governments of such
countries (including zero coupon treasury securities), when it is deemed by the
Investment Manager or Sub-Advisor that such investments are consistent with the
Fund's investment objective. For example, there may be times when the Investment
Manager or Sub-Advisor determines that the prices of government securities are
more likely to appreciate than those of equity securities. Such an occasion
might arise when inflation concerns have led to general increases in interest
rates. Such fixed-income securities which will be purchased by the Fund are
likely to be obligations of the treasuries of Australia or Japan. 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 an issuer, when the Investment Manager or the Sub-Advisor determines
that such securities are more likely to appreciate in value than the common
stock of such issuers or when the Investment Manager or Sub-Advisor wishes to
hedge the risk inherent in the direct purchase of the equity of a given issuer,
by receiving a steady stream of interest payments. The Fund will select
convertible securities of issuers whose common stock has, in the opinion of the
Investment Manager or Sub-Advisor, a potential to appreciate in price. 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 decisions of the Investment Manager and Sub-Advisor to invest in
securities for the Fund will be based on a general strategy of selecting those
issuers which they believe have shown a high rate of growth in earnings.
Moreover, securities will primarily be selected which possess, on both an
absolute basis and as compared with other securities in their region and around
the world, attractive price/earnings, price/cash flow and price/revenue ratios.
The Fund may also purchase securities issued by various agencies and
instrumentalities of the U.S. Government. These will include obligations backed
by the full faith and credit of the United States (such as those issued by the
Government National Mortgage Association); obligations whose issuing agency or
instrumentality has the right to borrow, to meet its obligations, from an
existing line of credit with the U.S. Treasury (such as those issued by the
Federal National Mortgage Association); and obligations backed by the credit of
the issuing agency or instrumentality (such as those issued by the Federal Farm
Credit System).
The Fund may be investing up to 10% of its total assets in securities issued
by other investment companies. Such
6
<PAGE>
investments are necessary in order to participate in certain foreign markets
where foreigners are prohibited from investing directly in the securities of
individual issuers. The Fund will incur any indirect expenses incurred through
investment in an investment company, such as the payment of a management fee
(which may result in the payment of an additional advisory 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.
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 fixed-income and
convertible securities issued by issuers located anywhere in the world (with the
exception of South Africa), including the United States, subject to the Fund's
investment objective. In addition, this portion of the Fund's portfolio will
consist of various other financial instruments such as forward foreign exchange
contracts, futures contracts and options (see below).
It is anticipated that the securities held by the Fund in its portfolio will
be denominated, principally, in the liquid Asian currencies and the Australian
dollar. Such currencies include the Japanese yen, Malaysian ringgit, Singapore
dollar, Hong Kong dollar, Thai baht, Philippine peso, Indonesia rupiah, Taiwan
dollar and South Korean won. 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) or other similar securities convertible into
securities of foreign issuers. These securities may not necessarily be
denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying securities. Generally, ADRs, in
registered form, are designed for use in United States 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, such as certificates of deposit; Eurodollar certificates of
deposit; obligations of American savings institutions; and commercial paper of
American issuers rated within the two highest grades by Moody's or S&P or, if
not rated, are issued by a company having an outstanding debt issue rated at
least AA by S&P or Aa by Moody's.
SPECIAL RISK CONSIDERATIONS
FOREIGN SECURITIES. Investors should carefully consider the risks of investing
in securities of foreign issuers and securities denominated in non-U.S.
currencies. Fluctuations in the relative rates of exchange between the
currencies of different nations will affect the value of the Fund's investments.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar 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 Asia may have profound
effects upon the value of a large segment of 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
settle-
7
<PAGE>
ments of Fund trades effected in such markets. Inability to dispose of portfolio
securities due to settlement delays could result in losses to the Fund due to
subsequent declines in value of such securities and the inability of the Fund to
make intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments.
The foreign securities in which the Fund will be investing may be issued by
issuers located in developing countries. Compared to the United States and other
developed countries, developing countries may have relatively unstable
governments, economies based on only a few industries, and securities markets
which trade a small number of securities. Prices on these securities tend to be
especially volatile and, in the past, securities in these countries have offered
greater potential for gain (as well as loss) than securities of companies
located in developed countries.
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, the Investment Manager or Sub-Advisor
believes 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 by the Investment Manager or Sub-Advisor that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or is
trading at a discount as compared with some other foreign currency with which it
tends to move in tandem.
In addition, when the Fund anticipates purchasing securities at some time in
the future, and wishes to lock in the current exchange rate of the currency in
which those securities are denominated against the U.S. dollar or some other
foreign currency, it may enter into a forward contract to purchase an amount of
currency equal to some or all of the value of the anticipated purchase, for a
fixed amount of U.S. dollars or other currency.
Lastly, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated and
on which options have been written (see "Options and Futures Transactions").
In all of the above circumstances, if the currency in which the Fund's
portfolio securities (or anticipated portfolio securities) are denominated rises
in value with respect to the currency which is being purchased (or sold), then
the Fund will have realized fewer gains than had the Fund not entered into the
forward contracts. Moreover, the precise matching of the forward contract
amounts and the value of the securities involved will not generally be possible,
since the future value
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of such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The Fund is not required to enter into
such transactions with regard to its foreign currency-denominated securities and
will not do so unless deemed appropriate by the Investment Manager and/or
Sub-Advisor.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. 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. 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.
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.
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. 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).
Given the Fund's objective of seeking capital appreciation, it should be
recognized that the writing of covered call options on portfolio securities will
reduce the potential for the Fund to realize capital appreciation on such
securities unless and until such time as the option expires unexercised or the
Fund enters into an "offsetting" transaction. For this reason, it is expected
that, under normal market conditions, the Fund will not write covered call
options on all or substantially all of its portfolio securities. The Fund,
however, may write covered call options on currencies in amounts representing
substantially all of the value of its foreign holdings if determined by the
Investment Manager to be appropriate to protect the Fund against the risks of
adverse fluctuations in the values of foreign currencies.
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 (see "Covered Call
Writing" above) 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 to protect itself against a decline
in the value of the security or may purchase put options on currencies in which
such securities are denominated or a different related foreign currency to
protect itself against a decline in the value of the currency in which the
securities are denominated. 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
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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 Nikkei 225 Stock Index ("index" futures).
As a futures contract purchaser, the Fund incurs an obligation to take delivery
of a specified amount of the obligation underlying the contract at a specified
time in the future for a specified price. As a seller of a futures contract, the
Fund incurs an obligation to deliver the specified amount of the underlying
obligation at a specified time in return for an agreed upon price.
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices.
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. 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.
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.
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 dis-
cussed above under the section entitled "Foreign Securities."
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.
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
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<PAGE>
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 purchase of securities on a "when, as and if issued" basis may
increase the volatility of its net asset value.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers and
other financial institutions, provided that such loans are callable at any time
by the Fund (subject to certain notice provisions described in the Statement of
Additional Information), and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are at least equal to the market value, determined daily,
of the loaned securities.
Except as specifically noted, all investment objectives, policies and
practices discussed above are not fundamental policies of the Fund and, as such,
may be changed without shareholder approval.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Investment Manager and the
Sub-Advisor with a view to achieving the Fund's investment objective. In
determining which securities to purchase for the Fund or hold in the Fund's
portfolio, the Investment Manager and the Sub-Advisor will rely on information
from various sources, including research, analysis and appraisals of brokers and
dealers, the views of Directors of the Fund and others regarding economic
developments and interest rate trends, and the Investment Manager's and
Sub-Advisor's own analysis of factors they deem relevant. The Fund's primary
portfolio manager is Graham D. Bamping, a Director of the Sub-Advisor. Mr.
Bamping is responsible for the Sub-Advisor's management of Pacific Basin equity
portfolios and has been managing equity portfolios based in the Pacific Basin,
for the Sub-Advisor, for over five years.
Personnel of the Investment Manager and Sub-Advisor have substantial
experience in the use of the investment techniques described above under the
heading "Options and Futures Transactions," which techniques require skills
different from those needed to select the portfolio securities underlying
various options and futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR and four
affiliated broker-dealers of the Sub-Advisor (Morgan Grenfell Asia and Partners
Securities Pte. Limited; Deutsche Bank AG; Deutsche Bank Capital Markets Ltd.;
and C.J. Lawrence, Morgan Grenfell Inc.). Pursuant to an order of the Securities
and Exchange Commission, the Fund may effect principal transactions in certain
money market instruments with Dean Witter Reynolds Inc. ("DWR"), a broker-dealer
affiliate of the Investment Manager. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR and the four above-mentioned
affiliated broker-dealers of the Sub-Advisor.
Although the Fund does not intend to engage in short-term trading, it may
sell portfolio securities without regard to the length of time that they have
been held when such sale will, in the opinion of the Investment Manager or
Sub-Advisor, contribute to the Fund's investment objective. It is not
anticipated that the Fund's portfolio turnover rate will exceed 100% in any one
year.
The expenses of the Fund relating to its portfolio management are likely to
be greater than those incurred by other investment companies investing primarily
in securities issued by domestic issuers as custodial costs, brokerage
commissions and other transaction charges related to investing on foreign
markets are generally higher than in the United States.
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<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 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 (e.g., the Fund may not invest in more than 3% of
the outstanding voting securities of any investment company).
6. Invest more than 10% of its total assets in illiquid
securities and repurchase agreements which have a maturity of longer than seven
days.
Generally, OTC options and the assets used as "cover" for written OTC
options are "illiquid securities" (securities for which no active and
substantial secondary market exists). 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.
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 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 Pacific Growth Fund Inc.,
directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040,
Jersey City, NJ 07303 or by contacting an account executive of DWR or other
Selected Broker-Dealer. In the case of investments pursuant to Systematic
Payroll Deduction Plans (including Individual Retirement Plans), the Fund, in
its discretion, may accept investments without regard to any minimum amounts
which would otherwise be required if the Fund has reason to believe that
additional investments will increase the investment in all accounts under such
Plans to at least $1,000. Certificates for shares purchased will not be issued
unless a request is made by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal five
business day settlement basis; that is, payment is due on the fifth business day
(settlement date) after the order
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<PAGE>
is placed with the Distributor. Since DWR and other Selected Broker-Dealers
forward investors' funds on settlement date, they will benefit from the
temporary use of the funds if payment is made prior thereto. As noted above,
orders placed directly with the Transfer Agent must be accompanied by payment.
Such investors will be entitled to receive income dividends and capital gains
distributions if their order is received by the close of business on the day
prior to the record date for such distributions (those investing through the
Distributor or other Selected Broker-Dealer will receive dividends declared the
next business day after the order is settled). The offering price will be the
net asset value per share next determined following receipt of an order (see
"Determination of Net Asset Value"). While no sales charge is imposed at the
time shares are purchased, a contingent deferred sales charge may be imposed at
the time of redemption (see "Redemptions and Repurchases"). The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan"), under which the Fund pays the Distributor a fee, which is accrued
daily and payable monthly, at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the inception of
the Fund (not including reinvestments of dividends or capital gains
distributions), less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the Fund's average daily net
assets. This fee is treated by the Fund as an expense in the year it is accrued.
Amounts paid under the Plan are paid to the Distributor to compensate it for the
services provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares, including the payment of commissions for
sales of the Fund's shares and incentive compensation to and expenses of DWR
account executives and others who engage in or support distribution of shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed distribution expenses incurred. For the
fiscal year ended October 31, 1993, the Fund accrued payments under the Plan
amounting to $2,734,555, which amount is equal to 0.88% 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 incur 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 the excess
distribution expenses, including the carrying charge described above, totalled
$16,658,002 at October 31, 1993, which was equal to 2.40% of the Fund's net
assets on 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, such excess amount, if any, 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 investors upon
redemption of shares, if for any reason the Plan is terminated, the Directors
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
contingent deferred sales charges, may or may not be recovered through future
distribution fees or contingent deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00 p.m.,
New York time on each day that the New York Stock Exchange is open by taking the
value of all assets of the Fund, subtracting all its liabilities, dividing by
the number of shares outstanding and adjusting to the nearest cent. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
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<PAGE>
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated as the primary market by the Directors); and (2) all other portfolio
securities for which over-the-counter market quotations are readily available
are valued at the latest available bid price prior to the time of valuation.
When market quotations are not readily available, including circumstances under
which it is determined by the Investment Manager or Sub-Advisor that sale or bid
prices are not reflective of a security's market value, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's Directors. For
valuation purposes, quotations of foreign portfolio securities, other assets and
liabilities and forward contracts stated in foreign currency are translated into
U.S. dollar equivalents at the prevailing market rates as of the morning of
valuation. Dividends receivable are accrued as of the ex-dividend date or as of
the time that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less to
maturity at the time of purchase are valued at amortized cost, unless the
Directors determine such does not reflect the securities' fair value, in which
case these securities will be valued at their fair value as determined by the
Directors.
Certain securities in the Fund's portfolio may be valued by an outside
pricing service approved by the Fund's Directors. The pricing service utilizes a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends and
capital gains distributions are automatically paid in full and fractional shares
of the Fund (or, if specified by the shareholder, any other open-end investment
company for which InterCapital serves as investment manager (collectively, with
the Fund, the "Dean Witter Funds")), unless the shareholder requests that they
be paid in cash. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Redemptions and
Repurchases").
EASYINVEST-SM- Shareholders may subscribe to EasyInvest, an automatic purchase
plan which provides for any amount from $100 to $5,000 to be transferred
automatically from a checking or savings account, on a semi-monthly, monthly or
quarterly basis, to the Transfer Agent for investment in shares of the Fund.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder who
receives a cash payment representing a dividend or capital gains distribution
may invest such dividend or distribution at the net asset value per share next
determined after receipt by the Transfer Agent, by returning the check or the
proceeds to the Transfer Agent within thirty days after the payment date. Shares
so acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "Redemptions and Repurchases").
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.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal Plan")
is available for shareholders who own or purchase shares of the Fund having a
minimum value of $10,000 based upon the then current net asset value. The
Withdrawal Plan provides for monthly or quarterly (March, June, September, and
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. 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
14
<PAGE>
charge) to the shareholder will be the designated monthly or quarterly amount.
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") and for shares of Dean
Witter Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust,
Dean Witter Short-Term Bond Fund and five Dean Witter Funds which are money
market funds (the foregoing eight non-CDSC funds are hereinafter collectively
referred to 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 an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently reexchanged for shares of a CDSC fund, the holding
period previously frozen when the first exchange was made resumes on the last
day of the month in which shares of 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 of the Fund exchanged into an
Exchange Fund, upon a redemption of shares which results in a CDSC being
imposed, a credit (not to exceed the amount of the CDSC) will be given in an
amount equal to the Exchange Fund 12b-1 distribution fees incurred on or after
that date which are attributable to those shares (Exchange Fund 12b-1
distribution fees are described in the prospectuses for those funds.)
In addition, shares of the Fund may be acquired in exchange for shares of
Dean Witter Funds sold with a front-end sales charge ("front-end sales charge
funds"), but shares of the Fund, however acquired, may not be exchanged for
shares of front-end sales charge funds. Shares of a CDSC fund acquired in
exchange for shares of a front-end sales charge fund (or in exchange for shares
of other Dean Witter Funds for which shares of a front-end sales charge fund
have been exchanged) are not subject to any CDSC upon their redemption.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Investment Manager to be
abusive and contrary to the best interests of the Fund's other shareholders and,
at the Investment Manager's discretion, may be limited by the Fund's refusal to
accept additional purchases and/or exchanges from the investor. Although the
Fund does not have any specific definition of what constitutes a pattern of
frequent exchanges, and will consider all relevant factors in determining
whether a particular situation is abusive and contrary to the best interests of
the Fund and its other shareholders, investors should be aware that the Fund and
each of the other Dean Witter Funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such restriction will be made by the Fund on a prospective basis
only, upon notice to the shareholder not later than ten days following such
shareholder's most recent exchange.
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.
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
15
<PAGE>
shares of the Fund for shares of any of the Dean Witter Funds (for which the
Exchange Privilege is available) pursuant to this Exchange Privilege by
contacting their account executive (no Exchange Privilege Authorization Form is
required). Other shareholders (and those shareholders who are clients of DWR or
another Selected Broker-Dealer but who wish to make exchanges directly by
writing or telephoning the Transfer Agent) must complete and forward to the
Transfer Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Distributor, to initiate an exchange. If the Authorization
Form is used, exchanges may be made in writing or by contacting the Transfer
Agent at (800) 526-3143 (toll free).
The Fund will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. Such procedures may
include requiring various forms of personal identification such as name, mailing
address, social security or other tax identification number and DWR or other
Selected Broker-Dealer account number (if any). Telephone instructions may also
be recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions. Telephone exchange
instructions will be accepted if received by the Transfer Agent between 9:00
a.m. and 4:00 p.m. New York time, on any day the New York Stock Exchange is
open. Any shareholder wishing to make an exchange who has previously filed an
Exchange Privilege Authorization Form and who is unable to reach the Fund by
telephone should contact his or her DWR or other Selected Broker-Dealer account
executive, if appropriate, or make a written exchange request. Shareholders are
advised that during periods of drastic economic or market changes, it is
possible that the telephone exchange procedures may be difficult to implement,
although this has not been the case with the Dean Witter Funds in the past.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REDEMPTIONS AND REPURCHASES
- --------------------------------------------------------------------------------
REDEMPTION. Shares of the Fund can be redeemed for cash at any time at the net
asset value per share next determined; however, such redemption proceeds may be
reduced by the amount of any applicable contingent deferred sales charges (see
below). If shares are held in a shareholder's account without a share
certificate, a written request for redemption to the Fund's Transfer Agent at
P.O. Box 983, Jersey City, N.J. 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption, along with any additional documentation
required by the Transfer Agent.
CONTINGENT DEFERRED SALES CHARGE. Shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any charge upon redemption.
Shares redeemed sooner than six years after purchase may, however, be subject to
a charge upon redemption. This charge is called a "contingent deferred sales
charge" ("CDSC"), and it will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------------------
<S> <C>
First................................... 5.0%
Second.................................. 4.0%
Third................................... 3.0%
Fourth.................................. 2.0%
Fifth................................... 2.0%
Sixth................................... 1.0%
Seventh and thereafter.................. None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption; (ii)
the current net asset value of shares purchased more than six years prior to the
redemption; and (iii) the current net asset value of shares purchased through
reinvestment of dividends or distributions and/or shares acquired in exchange
for shares of Dean Witter Funds sold with a front-end sales charge or of other
Dean Witter Funds acquired in exchange for such shares. Moreover, in determining
whether a CDSC is applicable it will be assumed that amounts described in (i),
(ii) and (iii) above (in that order) are redeemed first. In addition, no CDSC
will be imposed on redemptions of shares which were purchased by the employee
benefit plans established by DWR and SPS
16
<PAGE>
Transaction Services, Inc. (an affiliate of DWR) for their employees as
qualified under Section 401(k) of the Internal Revenue Code.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of: (i) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are (a) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship, or (b) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account or Custodial Account under Section 403(b)(7) of the Internal Revenue
Code, provided in either case that the redemption is requested within one year
of the death or initial determination of disability, and (ii) redemptions in
connection with the following retirement plan distributions: (a) lump-sum or
other distributions from a qualified corporate or self-employed retirement plan
following retirement (or in the case of a "key employee" of a "top heavy" plan,
following attainment of age 59 1/2); (b) distributions from an Individual
Retirement Account or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code following attainment of age 59 1/2; and (c) a tax-free return of an
excess contribution to an IRA. For the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. All waivers will be granted only following receipt by the
Distributor of confirmation of the investor's entitlement.
REPURCHASE. DWR and other Selected Broker-Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be 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, DWR or other Selected Broker-Dealer. The offers by DWR and
other Selected Broker-Dealers to repurchase shares may be suspended without
notice by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth above under "Redemption."
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. Payment for shares presented for
repurchase or redemption will be made by check within seven days after receipt
by the Transfer Agent of the certificate and/or written request in good order.
Such payment may be postponed or the right of redemption suspended under unusual
circumstances. If the shares to be redeemed have recently been purchased by
check (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 fifteen days from the time
of receipt of the check by the Transfer Agent). Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares redeemed or
repurchased and has not previously exercised this reinstatement privilege may,
within thirty days after the date of the redemption or repurchase, reinstate any
portion or all of the proceeds of such redemption or repurchase in shares of the
Fund at net asset value next determined after a reinstatement request, together
with the proceeds, is received by the Transfer Agent and receive a pro-rata
credit for any CDSC paid in connection with such redemption or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right to redeem, on sixty days'
notice and at net asset value, the shares of any shareholder (other than shares
held in an Individual Retirement Account or custodial account under Section
403(b)(7) of the Code) whose shares due to redemptions by the shareholder have a
value of less than $100 or such lesser amount as may be fixed by the Directors.
No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay dividends and to distribute
substantially all of the Fund's net investment income and net realized
short-term and long-term capital gains, if any, at least once each year. The
Fund may, however, determine either to distribute or to retain all or part of
any long-term capital gains in any year for reinvestment.
17
<PAGE>
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or distributions be paid in cash. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions".)
TAXES. Because the Fund intends to distribute all of its net investment income
and 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 traded on U.S. exchanges
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
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. It is not anticipated that any portion of the
Fund's distributions will be eligible for the dividends received deduction to
corporate shareholders.
After the end of the year, shareholders will receive full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income and the portion taxable
as long-term capital gains.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished and
certified as to their accuracy.
Dividends, interest and gains received by the Fund may give rise to
withholding and other taxes imposed by foreign countries. If it qualifies for
and has made the appropriate election with the Internal Revenue Service, the
Fund will report annually to its shareholders the amount per share of such
taxes, to enable shareholders to claim United States foreign tax credits or
deductions with respect to such taxes. In the absence of such an election, the
Fund would deduct foreign tax in computing the amount of its distributable
income.
The foregoing discussion relates solely to the federal income tax
consequences of an investment in the Fund. Distributions may also be subject to
state and local taxes; therefore, each shareholder is advised to consult his or
her own tax adviser.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements and
sales literature. The total return of the Fund is based on historical earnings
and is not intended to indicate future performance. The "average annual total
return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over a period of one year as well as 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
18
<PAGE>
hypothetical investments of $10,000, $50,000 and $100,000 in shares of the Fund.
Such calculations may or may not reflect the deduction of the contingent
deferred sales charge which, if reflected, would reduce the performance quoted.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations
(such as mutual fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of the Fund are of common stock of $0.01 par value and
are equal as to earnings, assets and voting privileges. There are no conversion,
pre-emptive or other subscription rights. In the event of liquidation, each
share of common stock of the Fund is entitled to its portion of all of the
Fund's assets after all debts and expenses have been paid. The shares do not
have cumulative voting rights.
In accordance with the Fund's By-Laws, the Directors of the Fund were
elected by a shareholder vote at the first meeting of stockholders held
following the initial offering of the shares of the Fund. The Fund is not
required to hold Annual Meetings of Stockholders and in ordinary circumstances
the Fund does not intend to hold such meetings. The Directors may call Special
Meetings of Stockholders for action by shareholder vote as may be required by
the Act or the Fund's By-Laws.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed to
the Fund at the telephone number or address set forth on the front cover of this
Prospectus.
19
<PAGE>
Dean Witter
Pacific Growth Fund Inc.
Two World Trade Center
New York, New York 10048
DIRECTORS
Jack F. Bennett
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Dr. John E. Jeuck
Dr. Manuel H. Johnson
Paul Kolton
Michael E. Nugent
Albert T. Sommers
Edward R. Telling
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Sheldon Curtis
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank N.A.
One Chase Plaza
New York, NY 10005
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISOR
Morgan Grenfell Investment Services Limited
