<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 30, 1998
FILE NOS.: 33-35541
811-6121
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 9 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 10 /X/
-------------------
DEAN WITTER PACIFIC 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
BARRY FINK, 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)
_X_ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<PAGE>
DEAN WITTER PACIFIC 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. ........................................ Purchase of Fund Shares; 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; Purchase of Fund Shares; 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
JANUARY 30, 1998
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.
The Fund offers four classes of shares (each, a "Class"), each
with a different combination of sales charges, ongoing fees and other features.
The different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. (See "Purchase of Fund
Shares--Alternative Purchase Arrangements.")
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 January 30, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
DEAN WITTER DISTRIBUTORS INC.
DISTRIBUTOR
TABLE OF CONTENTS
Prospectus Summary/2
Summary of Fund Expenses/4
Financial Highlights/6
The Fund and its Management/9
Investment Objective and Policies/10
Risk Considerations/12
Investment Restrictions/18
Purchase of Fund Shares/19
Shareholder Services/31
Redemptions and Repurchases/34
Dividends, Distributions and Taxes/35
Performance Information/36
Additional Information/37
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 Pacific
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 Asia, Australia and New Zealand.
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Shares Offered Shares of common stock with $0.01 par value (see page 37). The Fund offers four classes of shares, each with a
different combination of sales charges, ongoing fees and other features (see pages 19-30).
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Minimum The minimum initial investment for each Class is $1,000 ($100 if the account is opened through EasyInvest-SM-).
Purchase Class D shares are only available to persons investing $5 million ($25 million for certain qualified plans) or
more and to certain other limited categories of investors. For the purpose of meeting the minimum $5 million (or
$25 million) investment for Class D shares, and subject to the $1,000 minimum initial investment for each Class
of the Fund, an investor's existing holdings of Class A shares and shares of funds for which Dean Witter
InterCapital Inc. serves as investment manager ("Dean Witter Funds") that are sold with a front-end sales
charge, and concurrent investments in Class D shares of the Fund and other Dean Witter Funds that are multiple
class funds, will be aggregated. The minimum subsequent investment is $100 (see page 19).
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Investment The investment objective of the Fund is to maximize the capital appreciation of its investments (see page 10).
Objective
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Dean Witter InterCapital Inc. ("InterCapital"), the Investment Manager of the Fund, and its wholly-owned
Manager and subsidiary, Dean Witter Services Company Inc., serve in various investment management, advisory, management and
Sub-Adviser administrative capacities to 103 investment companies and other portfolios with assets of approximately $102.9
billion at December 31, 1997. Morgan Grenfell Investment Services Limited has been retained by the Investment
Manager as Sub-Adviser to provide investment advice and manage the Fund's portfolio. Morgan Grenfell Investment
Services Limited currently serves as investment adviser for U.S. corporate and public employee plans,
endowments, investment companies and foundations with assets of approximately $16.5 billion at September 30,
1997 (see page 9).
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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 not
Fee exceeding $1 billion; 0.95% of the daily net assets exceeding $1 billion but not exceeding $2 billion; and 0.90%
of the daily net assets exceeding $2 billion. The Sub-Adviser receives a monthly fee from the Investment Manager
equal to 40% of the Investment Manager's monthly fee (see page 9). 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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Distributor and Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant to Rule
Distribution Fee 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by the
Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee payable by Class A and
a portion of the 12b-1 fee payable by each of Class B and Class C equal to 0.25% of the average daily net assets
of the Class are currently each characterized as a service fee within the meaning of the National Association of
Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any, is characterized as an
asset-based sales charge (see pages 19 and 28).
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Alternative Four classes of shares are offered:
Purchase - Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger purchases.
Arrangements Investments of $1 million or more (and investments by certain other limited categories of investors) are not
subject to any sales charge at the time of purchase but a contingent deferred sales charge ("CDSC") of 1.0% may
be imposed on redemptions within one year of purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class A shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 0.25% of average daily net assets of the Class (see pages 19, 23 and 28).
</TABLE>
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2
<PAGE>
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<TABLE>
<S> <C>
- Class B shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to investments by certain qualified plans. Class B shares are also
subject to a 12b-1 fee assessed at the annual rate of 1.0% of the lesser of: (a) the average daily net sales of
the Fund's Class B shares or (b) the average daily net assets of Class B. All shares of the Fund held prior to
July 28, 1997 have been designated Class B shares. Shares held before May 1, 1997 will convert to Class A shares
in May, 2007. In all other instances, Class B shares convert to Class A shares approximately ten years after the
date of the original purchase (see pages 19, 25 and 28).
- Class C shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC of
1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at
an annual rate of 1.0% of average daily net assets of the Class (see pages 19 and 28).
- Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25 million
for certain qualified plans) and to certain other limited categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages 19 and 28).
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends and Dividends from net investment income and distributions from net capital gains are paid at least once each year.
Distributions The Fund may, however, determine to retain all or part of any net long-term capital gains in any year for
reinvestment. Dividends and capital gains distributions paid on shares of a Class are automatically reinvested
in additional shares of the same Class at net asset value unless the shareholder elects to receive cash. Shares
acquired by dividend and distribution reinvestment will not be subject to any sales charge or CDSC (see pages 31
and 35).
- ------------------------------------------------------------------------------------------------------------------------------------
Redemption Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed if the total value of the account is less than $100 or,
if the account was opened through EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account (see page 34).
- ------------------------------------------------------------------------------------------------------------------------------------
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 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
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 transactions in forward currency contracts,
options and futures contracts (see pages 12-17). The investor should also note that the Fund may invest over 25%
of its total assets in securities of Japanese, Hong Kong and Malaysian issuers (see page 8).
</TABLE>
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THE PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION.
3
<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 based on
the expenses and fees for the fiscal year ended October 31, 1997.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
--------- ------- --------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)... 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments.................................. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds)................................................. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees................................................................. None None None None
Exchange Fee.................................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------------
Management Fees................................................................. 0.99% 0.99% 0.99% 0.99%
12b-1 Fees (5) (6).............................................................. 0.25% 1.00% 1.00% None
Other Expenses.................................................................. 0.45% 0.45% 0.45% 0.45%
Total Fund Operating Expenses (7)............................................... 1.69% 2.44% 2.44% 1.44%
</TABLE>
- ------------
(1) REDUCED FOR PURCHASES OF $25,000 AND OVER (SEE "PURCHASE OF FUND
SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES").
(2) INVESTMENTS THAT ARE NOT SUBJECT TO ANY SALES CHARGE AT THE TIME OF PURCHASE
ARE SUBJECT TO A CDSC OF 1.00% THAT WILL BE IMPOSED ON REDEMPTIONS MADE
WITHIN ONE YEAR AFTER PURCHASE, EXCEPT FOR CERTAIN SPECIFIC CIRCUMSTANCES
(SEE "PURCHASE OF FUND SHARES--INITIAL SALES CHARGE ALTERNATIVE--CLASS A
SHARES").
(3) THE CDSC IS SCALED DOWN TO 1.00% DURING THE SIXTH YEAR, REACHING ZERO
THEREAFTER.
(4) ONLY APPLICABLE TO REDEMPTIONS MADE WITHIN ONE YEAR AFTER PURCHASE (SEE
"PURCHASE OF FUND SHARES-- LEVEL LOAD ALTERNATIVE--CLASS C SHARES").
(5) THE 12b-1 FEE IS ACCRUED DAILY AND PAYABLE MONTHLY. THE ENTIRE 12b-1 FEE
PAYABLE BY CLASS A AND A PORTION OF THE 12b-1 FEE PAYABLE BY EACH OF CLASS B
AND CLASS C EQUAL TO 0.25% OF THE AVERAGE DAILY NET ASSETS OF THE CLASS ARE
CURRENTLY EACH CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES AND ARE PAYMENTS
MADE FOR PERSONAL SERVICE AND/OR MAINTENANCE OF SHAREHOLDER ACCOUNTS. THE
REMAINDER OF THE 12B-1 FEE, IF ANY, IS AN ASSET-BASED SALES CHARGE, AND IS A
DISTRIBUTION FEE 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 (SEE "PURCHASE OF FUND SHARES--PLAN OF
DISTRIBUTION").
(6) UPON CONVERSION OF CLASS B SHARES TO CLASS A SHARES, SUCH SHARES WILL BE
SUBJECT TO THE LOWER 12b-1 FEE APPLICABLE TO CLASS A SHARES. NO SALES CHARGE
IS IMPOSED AT THE TIME OF CONVERSION OF CLASS B SHARES TO CLASS A SHARES.
CLASS C SHARES DO NOT HAVE A CONVERSION FEATURE AND, THEREFORE, ARE SUBJECT
TO AN ONGOING 1.00% DISTRIBUTION FEE (SEE "PURCHASE OF FUND
SHARES--ALTERNATIVE PURCHASE ARRANGEMENTS").
(7) THERE WERE NO OUTSTANDING SHARES OF CLASS A, CLASS C OR CLASS D PRIOR TO
JULY 28, 1997. ACCORDINGLY, "TOTAL FUND OPERATING EXPENSES," AS SHOWN ABOVE
WITH RESPECT TO THOSE CLASSES, ARE ESTIMATES BASED UPON THE SUM OF 12b-1
FEES, MANAGEMENT FEES AND ESTIMATED "OTHER EXPENSES."
4
<PAGE>
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<TABLE>
<CAPTION>
EXAMPLES 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) a 5% annual return and
(2) redemption at the end of each time period:
Class A....................................... $69 $103 $139 $241
Class B....................................... $75 $106 $150 $277
Class C....................................... $35 $76 $130 $277
Class D....................................... $15 $45 $79 $172
You would pay the following expenses on the same
$1,000 investment assuming no redemption at the
end of the period:
Class A....................................... $69 $103 $139 $241
Class B....................................... $25 $76 $130 $277
Class C....................................... $25 $76 $130 $277
Class D....................................... $15 $45 $79 $172
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS 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
"Purchase of Fund Shares--Plan of Distribution" and "Redemptions and
Repurchases."
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following per share data and ratios for a share of capital stock
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto, and the unqualified report of
independent accountants which are contained in 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
NOVEMBER
30,
1990*
FOR THE YEAR ENDED OCTOBER 31, THROUGH
----------------------------------------------------------- OCTOBER
CLASS B SHARES 1997***++ 1996 1995 1994 1993 1992** 31, 1991
---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning
of period................ $18.89 $18.77 $21.60 $19.80 $12.69 $11.72 $10.00
---------- -------- -------- -------- -------- -------- --------
Net investment income
(loss)................... 0.01 0.05 0.08 (0.10) (0.04) (0.01) 0.06
Net realized and
unrealized gain (loss)... (5.77) 0.50 (1.94) 2.22 7.15 1.14 1.69
---------- -------- -------- -------- -------- -------- --------
Total from investment
operations............... (5.76) 0.55 (1.86) 2.12 7.11 1.13 1.75
---------- -------- -------- -------- -------- -------- --------
Less dividends and
distributions from:
Net investment
income................. (0.30) (0.43) -- -- -- (0.01) (0.03)
Net realized gain...... -- -- (0.97) (0.32) -- (0.15) --
---------- -------- -------- -------- -------- -------- --------
Total dividends and
distributions............ (0.30) (0.43) (0.97) (0.32) -- (0.16) (0.03)
---------- -------- -------- -------- -------- -------- --------
Net asset value, end of
period................... $12.83 $18.89 $18.77 $21.60 $19.80 $12.69 $11.72
---------- -------- -------- -------- -------- -------- --------
---------- -------- -------- -------- -------- -------- --------
TOTAL INVESTMENT
RETURN+.................. (31.01)% 3.00% (8.65)% 10.69% 56.13% 9.86% 17.54% (1)
RATIOS TO AVERAGE NET
ASSETS:
Expenses.................. 2.44% 2.39% 2.45% 2.41% 2.38% 2.77% 2.43% (2)(3)
Net investment income
(loss)................... 0.03% 0.18% 0.35% (0.70)% (0.46)% (0.30)% 0.61% (2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period,
in millions.............. $744 $1,624 $1,442 $1,571 $694 $177 $86
Portfolio turnover rate... 42% 49% 50% 35% 30% 73% 70% (1)
Average commission rate
paid..................... $0.0075 $0.0095 -- -- -- -- --
</TABLE>
- -------------
* COMMENCEMENT OF OPERATIONS.
** NET INVESTMENT LOSS WAS COMPUTED BASED UPON THE MONTHLY AVERAGE SHARES
OUTSTANDING.
*** PRIOR TO JULY 28, 1997, THE FUND ISSUED ONE CLASS OF SHARES. ALL SHARES OF
THE FUND HELD PRIOR TO THAT DATE HAVE BEEN DESIGNATED CLASS B SHARES.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ 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.
(3) IF THE FUND HAD BORNE ALL EXPENSES THAT WERE ASSUMED OR WAIVED BY THE
INVESTMENT MANAGER, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT INCOME
RATIOS WOULD HAVE BEEN 2.83% AND 0.22%, RESPECTIVELY.
6
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
CLASS A SHARES 1997++
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 19.39
-------
Net realized and unrealized loss...................................... (6.53)
-------
Net asset value, end of period........................................ $ 12.86
-------
-------
TOTAL INVESTMENT RETURN+.............................................. (33.68)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.92%(2)
Net investment loss................................................... (0.03)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $622
Portfolio turnover rate............................................... 42%
Average commission rate paid.......................................... $0.0075
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 19.39
-------
Net investment loss................................................... (0.04)
Net realized and unrealized loss...................................... (6.52)
-------
Total from investment operations...................................... (6.56)
-------
Net asset value, end of period........................................ $ 12.83
-------
-------
TOTAL INVESTMENT RETURN+.............................................. (33.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.62%(2)
Net investment loss................................................... (0.77)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $819
Portfolio turnover rate............................................... 42%
Average commission rate paid.......................................... $0.0075
</TABLE>
- -------------
* THE DATE SHARES WERE FIRST ISSUED.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ 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.
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
CLASS D SHARES 1997++
----------------
<S> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 19.39
-------
Net investment income................... 0.02
Net realized and unrealized loss........ (6.55)
-------
Total from investment operations........ (6.53)
-------
Net asset value, end of period.......... $ 12.86
-------
-------
TOTAL INVESTMENT RETURN+................ (33.68)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 1.62%(2)
Net investment income................... 0.42%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $118
Portfolio turnover rate................. 42%
Average commission rate paid............ $0.0075
</TABLE>
- -------------
* THE DATE SHARES WERE FIRST ISSUED.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
8
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
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 Morgan Stanley, Dean Witter, Discover &
Co., a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.
InterCapital and its wholly-owned subsidiary, Dean Witter Services Company
Inc., serve in various investment management, advisory, management and
administrative capacities to 103 investment companies, 29 of which are listed on
the New York Stock Exchange, with combined assets of approximately $98.9 billion
as of December 31, 1997. The Investment Manager also manages and advises
portfolios of pension plans, other institutions and individuals which aggregated
approximately $4 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 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-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,
manages, as of September 30, 1997, assets of approximately $16.5 billion for
U.S. corporate and public employee benefit plans, endowments, investment
companies 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 daily net assets not exceeding $1 billion;
0.95% of the portion of daily net assets exceeding $1 billion but not exceeding
$2 billion; and 0.90% of the portion of daily net assets exceeding $2 billion.
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,
1997, the Fund accrued total compensation to the Investment Manager amounting to
0.99% of the Fund's average daily net assets (of which 40% was accrued to the
Sub-Adviser by the Investment Manager) and the total expenses of Class B
amounted to 2.44% of the average daily net assets of Class B. Shares of Class A,
Class C and Class D were first issued on July 28, 1997. The expenses of the Fund
include: the fee of the Investment Manager; the fee pursuant to the Plan of
Distribution (see "Purchase of Fund Shares"); taxes; transfer agent, custodian
and auditing fees; certain legal fees; and printing and other expenses relating
to the Fund's operations which are not expressly assumed by the Investment
Manager under its Investment Management Agreement with the Fund.
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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.
This objective is fundamental and may 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 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's investment portfolio will be invested in at
least three separate countries.
The Fund may 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 may 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.
At midnight on June 30, 1997, Hong Kong became part of the People's Republic of
China, and now forms a Special Administrative Region within that country. The
Government of China has indicated that it will not seek to alter the free
market-oriented economic system of Hong Kong for at least fifty years following
1997.
The Fund may also invest over 25% of its total assets in securities issued
by issuers located in Malaysia. The Malaysian stock market may also be more
volatile than many other markets and, as in the case of other international
equity markets, the value of equities can be impacted by unforeseen, adverse
developments in the macro-economy or currency, political and/or social
instability, government regulatory changes or individual corporate developments.
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-Adviser believe are most likely to help the
Fund meet its investment objective, but may also include fixed-income securities
issued or guaranteed by (or the direct obligations of) the governments of such
countries (including zero coupon treasury securities), when it is deemed by the
Investment Manager or Sub-Adviser that such investments are consistent with the
Fund's investment objective. For example, there may be times when the Investment
Manager or 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 Australia or
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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-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, 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-Adviser, 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-Adviser 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 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,
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
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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 Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("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 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
settlements of Fund trades effected in such markets. Inability to dispose of
portfolio securities due to settlement delays could result in losses to the Fund
due to subsequent declines in value of such securities and the inability of the
Fund to make intended security purchases due to settlement problems could result
in a failure of the Fund to make potentially advantageous investments.
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 of these securities tend to be
especially volatile and, in the past, securities in these countries
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have offered greater potential for gain (as well as loss) than securities of
companies located in developed countries.
YEAR 2000. The investment management and advisory services provided to the
Fund by the Investment Manager and the Sub-Adviser and the services provided to
shareholders by the Distributor and the Transfer Agent depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot recognize the year 2000, but revert to 1900 or some other date, due
to the manner in which dates were encoded and calculated. That failure could
have a negative impact on the handling of securities trades, pricing and account
services. The Investment Manager, the Sub-Adviser, the Distributor and the
Transfer Agent have been actively working on necessary changes to their own
computer systems to prepare for the year 2000 and expect that their systems will
be adapted before that date, but there can be no assurance that they will be
successful, or that interaction with other non-complying computer systems will
not impair their services at that time.
------------
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-Adviser
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-Adviser that the foreign currency in
which the
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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").
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. 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.
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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 appro priate 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
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
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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 discussed 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. 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,
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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 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, including Dean Witter Reynolds Inc. ("DWR"), Morgan Stanley & Co.
Incorporated and other broker-dealer affiliates of the Investment Manager, and
others regarding economic developments and interest rate
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trends, and the Investment Manager's and Sub-Adviser's own analysis of factors
they deem relevant. The Fund's primary portfolio manager is Graham D. Bamping, a
Director of the Sub-Adviser. Mr. Bamping is responsible for the Sub-Adviser's
management of Pacific Basin equity portfolios and has been managing equity
portfolios based in the Pacific Basin, for the Sub-Adviser, for over five years.
Personnel of the Investment Manager and Sub-Adviser have substantial
experience in the use of the investment techniques described above under the
heading "Options and Futures Transactions," which techniques require skills
different from those needed to select the portfolio securities underlying
various options and futures contracts.
Orders for transactions in portfolio securities and commodities may be
placed for the Fund with a number of brokers and dealers, including DWR, Morgan
Stanley & Co. Incorporated, other broker-dealer affiliates of the Investment
Manager and two affiliated broker-dealers of the Sub-Adviser (Deutsche Morgan
Grenfell & Partners Securities Pte. Limited and Deutsche Morgan Grenfell
Securities Hong Kong Limited). Pursuant to an order of the Securities and
Exchange Commission, the Fund may effect principal transactions in certain money
market instruments with DWR. In addition, the Fund may incur brokerage
commissions on transactions conducted through DWR, Morgan Stanley & Co.
Incorporated, other brokers and dealers that are affiliates of InterCapital and
the above-mentioned affiliated broker-dealers of the Sub-Adviser.
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-Adviser, 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 in foreign
markets are generally higher than in the United States.
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
18
<PAGE>
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each Class of 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 Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an initial sales charge are
subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are subject
to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years after
purchase.) Class C shares are sold without an initial sales charge but are
subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
categories of investors. At the discretion of the Board of Directors of the
Fund, Class A shares may be sold to categories of investors in addition to those
set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of investors,
in each case as may be
19
<PAGE>
described in the then current prospectus of the Fund. See "Alternative Purchase
Arrangements-- Selecting a Particular Class" for a discussion of factors to
consider in selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class
A shares of the Fund and other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") and shares of Dean Witter Funds sold with a
front-end sales charge ("FSC Funds") and concurrent investments in Class D
shares of the Fund and other Dean Witter Multi-Class Funds will be aggregated.
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 FSB (the
"Transfer Agent" or "DWT") at P.O. Box 1040, Jersey City, NJ 07303 or by
contacting a DWR or other Selected Broker-Dealer account executive. When
purchasing shares of the Fund, investors must specify whether the purchase is
for Class A, Class B, Class C or Class D shares. If no Class is specified, the
Transfer Agent will not process the transaction until the proper Class is
identified. 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. The minimum initial
purchase in the case of an "Education IRA" is $500, if the Distributor has
reason to believe that additional investments will increase the investment in
the account to $1,000 within three years. In the case of investments pursuant to
(i) Systematic Payroll Deduction Plans (including Individual Retirement Plans),
(ii) the InterCapital mutual fund asset allocation program and (iii) fee-based
programs approved by the Distributor, pursuant to which participants pay an
asset based fee for services in the nature of investment advisory or
administrative services, the Fund, in its discretion, may accept investments
without regard to any minimum amounts which would otherwise be required,
provided, in the case of Systematic Payroll Deduction Plans, that the
Distributor has reason to believe that additional investments will increase the
investment in all accounts under such Plans to at least $1,000. Certificates for
shares purchased will not be issued unless 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"). Sales personnel of a Selected Broker-Dealer 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
20
<PAGE>
the Distributor reserve the right to reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
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 Class B shares redeemed since the Fund's inception upon
which a CDSC has been imposed or waived, or (b) the average daily net assets of
Class B. The Class B shares' distribution fee will cause that Class to have
higher expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are
21
<PAGE>
subject to a CDSC of 1.0% on redemptions made within one year after purchase.
This CDSC may be waived for certain redemptions. They are subject to an annual
12b-1 fee of up to 1.0% of the average daily net assets of the Class C shares.
The Class C shares' distribution fee may cause that Class to have higher
expenses and pay lower dividends than Class A or Class D shares. See "Level Load
Alternative--Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares are
sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all Dean
Witter Multi-Class Funds, shares of FSC Funds and shares of Dean Witter Funds
for which such shares have been exchanged will be included together with the
current investment amount.
Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
22
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12b-1 FEE FEATURE
<C> <S> <C> <C>
- -----------------------------------------------------------
A Maximum 5.25% 0.25% No
initial sales
charge reduced for
purchases of
$25,000 and over;
shares sold
without an initial
sales charge
generally subject
to a 1.0% CDSC
during first year.
- -----------------------------------------------------------
B Maximum 5.0% CDSC 1.0% B shares convert
during the first to A shares
year decreasing to automatically
0 after six years after
approximately
ten years
- -----------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- -----------------------------------------------------------
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF PUBLIC OFFERING PERCENTAGE OF AMOUNT
SINGLE TRANSACTION PRICE INVESTED
- ------------------------- ------------------- ---------------------
<S> <C> <C>
Less than $25,000........ 5.25% 5.54%
$25,000 but less
than $50,000........ 4.75% 4.99%
$50,000 but less
than $100,000....... 4.00% 4.17%
$100,000 but less
than $250,000....... 3.00% 3.09%
$250,000 but less
than $1 million..... 2.00% 2.04%
$1 million and over...... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his, her or
their own
23
<PAGE>
accounts; (c) a trustee or other fiduciary purchasing shares for a single trust
estate or a single fiduciary account; (d) a pension, profit-sharing or other
employee benefit plan qualified or non-qualified under Section 401 of the
Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other Dean Witter Multi-Class Funds and shares of FSC Funds. The sales
charge payable on the purchase of the Class A shares of the Fund, the Class A
shares of the other Dean Witter Multi-Class Funds and the shares of the FSC
Funds will be at their respective rates applicable to the total amount of the
combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other Dean Witter Funds previously
purchased at a price including a front-end sales charge (including shares of the
Fund and other Dean Witter Funds acquired in exchange for those shares, and
including in each case shares acquired through reinvestment of dividends and
distributions), which are held at the time of such transaction, amounts to
$25,000 or more. If such investor has a cumulative net asset value of shares of
FSC Funds and Class A and Class D shares that, together with the current
investment amount, is equal to at least $5 million ($25 million for certain
qualified plans), such investor is eligible to purchase Class D shares subject
to the $1,000 minimum initial investment requirement of that Class of the Fund.
See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an order is
placed by mail. The reduced sales charge will not be granted if: (a) such
notification is not furnished at the time of the order; or (b) a review of the
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or shares of other Dean Witter Funds which were previously purchased at a
price including a front-end sales charge during the 90-day period prior to the
date of receipt by the Distributor of the Letter of Intent, or of Class A shares
of the Fund or shares of other Dean Witter Funds acquired in exchange for shares
of such funds purchased during such period at a price including a front-end
sales charge, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
24
<PAGE>
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:
(1) trusts for which DWT (an affiliate of the Investment Manager) provides
discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory or administrative services (such
investments are subject to all of the terms and conditions of such programs,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section 401(a)
of the Internal Revenue Code ("Qualified Retirement Plans") with at least 200
eligible employees and for which DWT serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement;
(4) Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;
(5) investors who are clients of a Dean Witter account executive who joined
Dean Witter from another investment firm within six months prior to the date of
purchase of Fund shares by such investors, if the shares are being purchased
with the proceeds from a redemption of shares of an open-end proprietary mutual
fund of the account executive's previous firm which imposed either a front-end
or deferred sales charge, provided such purchase was made within sixty days
after the redemption and the proceeds of the redemption had been maintained in
the interim in cash or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE
ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement Plans,
three years) preceding the redemption. In addition, Class B shares are subject
to an annual 12b-1 fee of 1.0% of the lesser of: (a) the average daily aggregate
gross sales of the Fund's Class B 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 Class B shares redeemed
since the Fund's inception upon which a CDSC has been imposed or waived, or (b)
the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the
25
<PAGE>
month in which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may, however,
be subject to a CDSC which 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>
YEAR SINCE PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF 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>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which DWT serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject to
any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------------------- ---------------------
<S> <C>
First................................. 2.0%
Second................................ 2.0%
Third................................. 1.0%
Fourth and thereafter................. None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three 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 FSC Funds 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, 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
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(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan 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 DWT serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (a)
the plan continues to be an Eligible 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.
CONVERSION TO CLASS A SHARES. All shares of the Fund held prior to July 28,
1997 have been designated Class B shares. Shares held before May 1, 1997 will
convert to Class A shares in May, 2007. In all other instances Class B shares
will convert automatically to Class A shares, based on the relative net asset
values of the shares of the two Classes on the conversion date, which will be
approximately ten (10) years after the date of the original purchase. The ten
year period is calculated from the last day of the month in which the shares
were purchased or, in the case of Class B shares acquired through an exchange or
a series of exchanges, from the last day of the month in which the original
Class B shares were purchased, provided that shares originally purchased before
May 1, 1997 will convert to Class A shares in May, 2007. The conversion of
shares purchased on or after May 1, 1997 will take place in the month following
the tenth anniversary of the purchase. There will also be converted at that time
such proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a Qualified Retirement Plan for which DWT serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to a
written Recordkeeping Services Agreement, the plan is treated as a single
investor and all Class B shares will convert to Class A shares on the conversion
date of the first shares of a Dean Witter Multi-Class Fund purchased by that
plan. In the case of Class B shares previously exchanged for shares of an
"Exchange Fund" (see "Shareholder Services--Exchange Privilege"), the period of
time the shares were held in the Exchange Fund (calculated from the last day of
the month in which the Exchange Fund shares were acquired) is excluded from the
holding period for conversion. If those shares are subsequently re-exchanged for
Class B shares of a Dean Witter Multi-Class Fund, the holding period resumes on
the last day of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that are
not received by the Transfer Agent at least one week prior to any conversion
date will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
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<PAGE>
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of that
section shall mean one year in the case of Class C shares. Class C shares are
subject to an annual 12b-1 fee of up to 1.0% of the average daily net assets of
the Class. Unlike Class B shares, Class C shares have no conversion feature and,
accordingly, an investor that purchases Class C shares will be subject to 12b-1
fees applicable to Class C shares for an indefinite period subject to annual
approval by the Fund's Board of Directors and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which DWT serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement) and the following categories of investors: (i) investors
participating in the InterCapital mutual fund asset allocation program pursuant
to which such persons pay an asset based fee; (ii) persons participating in a
fee-based program approved by the Distributor, pursuant to which such persons
pay an asset based fee for services in the nature of investment advisory or
administrative services (subject to all of the terms and conditions of such
programs referred to in (i) and (ii) above, which may include termination fees,
mandatory redemption upon termination and such other circumstances as specified
in the programs' agreements, and restrictions on transferability of Fund
shares); (iii) 401(k) plans established by DWR and SPS Transaction Services,
Inc. (an affiliate of DWR) for their employees; (iv) certain Unit Investment
Trusts sponsored by DWR; (v) certain other open-end investment companies whose
shares are distributed by the Distributor; and (vi) other categories of
investors, at the discretion of the Board, as disclosed in the then current
prospectus of the Fund. Investors who require a $5 million (or $25 million)
minimum initial investment to qualify to purchase Class D shares may satisfy
that requirement by investing that amount in a single transaction in Class D
shares of the Fund and other Dean Witter Multi-Class Funds, subject to the
$1,000 minimum initial investment required for that Class of the Fund. In
addition, for the purpose of meeting the $5 million (or $25 million) minimum
investment amount, holdings of Class A shares in all Dean Witter Multi-Class
Funds, shares of FSC Funds and shares of Dean Witter Funds for which such shares
have been exchanged will be included together with the current investment
amount. If a shareholder redeems Class A shares and purchases Class D shares,
such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and
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Class C shares, the Plan provides that the Fund will reimburse the Distributor
and others for the expenses of certain activities and services incurred by them
specifically on behalf of those shares. Reimbursements for these expenses will
be made in monthly payments by the Fund to the Distributor, which will in no
event exceed amounts equal to payments at the annual rates of 0.25% and 1.0% of
the average daily net assets of Class A and Class C, respectively. In the case
of Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Fund's Class B
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 Class B shares redeemed since the Fund's inception upon
which a CDSC has been imposed or waived, or (b) the average daily net assets of
Class B. The fee is treated by the Fund as an expense in the year it is accrued.
In the case of Class A shares, the entire amount of the fee currently represents
a service fee within the meaning of the NASD guidelines. In the case of Class B
and Class C shares, a portion of the fee payable pursuant to the Plan, equal to
0.25% of the average daily net assets of each of these Classes, is currently
characterized as a service fee. A service fee is a payment made for personal
service and/or the maintenance of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's 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 in the case of Class B
shares 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 expenses.
For the fiscal year ended October 31, 1997, Class B shares of the Fund
accrued payments under the Plan amounting to $14,155,635, which amount is equal
to 1.0% of the average daily net assets of Class B for the fiscal year. These
payments were calculated pursuant to clause (b) of the compensation formula
under the Plan. All shares held prior to July 28, 1997 have been designated
Class B shares. For the fiscal period July 28 through October 31, 1997, Class A
and Class C shares of the Fund accrued payments under the Plan amounting to $278
and $1,074, respectively, which amounts on an annualized basis are equal to
0.25% and 1.00% of the average daily net assets of Class A and Class C,
respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described 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
$41,117,586 at October 31, 1997, which was equal to 5.53% of the net assets of
Class B on such date. Because there is no requirement under the
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<PAGE>
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
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 CDSCs 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
CDSCs, may or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 1.0% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
account executives at the time of sale totalled $11,148 in the case of Class C
at December 31, 1997, which amount was equal to 1.67% of the net assets of Class
C on such date, and that there were no such expenses that may be reimbursed in
the subsequent year in the case of Class A on such date. No interest or other
financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share 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 the net assets of the Fund, dividing by the number
of shares outstanding and adjusting to the nearest cent. The assets belonging to
the Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange prior to the time when assets are valued; if there were no sales that
day, the security is valued at the latest bid price (in cases where securities
are traded on more than one exchange, the securities are valued on the exchange
designated as the primary market 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.
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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
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end Dean Witter Fund), unless the shareholder
requests that they be paid in cash. Shares so acquired are acquired at net asset
value and are not subject to the imposition of a front-end sales charge or a
CDSC (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 or following
redemption of shares of a Dean Witter money market fund, 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 in shares of the
applicable Class 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 acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (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.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
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 CDSC
will be imposed on shares redeemed under the Withdrawal Plan (see "Purchase of
Fund Shares"). 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 CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal
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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.
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
Shares of each Class may be exchanged for shares of the same Class of any
other Dean Witter Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and five Dean Witter funds which are money market funds (the "Exchange Funds").
Class A shares may also be exchanged for shares of Dean Witter Multi-State
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund
Inc. ("Global Short-Term"), which is a Dean Witter Fund offered with a CDSC.
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 Dean Witter Multi-Class Fund, any FSC Fund, Global
Short-Term 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
Dean Witter Multi-Class Funds, FSC Funds, Global Short-Term or any Exchange Fund
that is not a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains 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 re-exchanged for shares of a Dean Witter Multi-Class
Fund or shares of Global Short-Term, the holding period previously frozen when
the first exchange was made resumes on the last day of the month in which shares
of a Dean Witter Multi-Class Fund or shares of Global Short-Term are reacquired.
Thus, the CDSC is based upon the time (calculated as described above) the
shareholder was invested in shares of a Dean Witter Multi-Class Fund or in
shares of Global Short-Term (see "Purchase of Fund Shares"). In the case of
exchanges of Class A shares which are subject to a CDSC, the holding period also
includes the time (calculated as described above) the shareholder was invested
in shares of a FSC Fund. 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
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for those funds.) Class B shares of the Fund acquired in exchange for shares of
Global Short-Term or Class B shares of another Dean Witter Multi-Class Fund
having a different CDSC schedule than that of this Fund will be subject to the
higher CDSC schedule, even if such shares are subsequently re-exchanged for
shares of the fund with the lower CDSC schedule.
ADDITIONAL INFORMATION REGARDING EXCHANGES. 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. Also, 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 of
each Class of shares and any other conditions imposed by each fund. In the case
of a 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 Transfer Agent, 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 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
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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
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REDEMPTION. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). 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, 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.
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 by the Fund or the
Distributor. 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 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 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from
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which such shares were redeemed or repurchased, 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 declares dividends separately for
each Class of shares and 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
shares of the same Class 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. Shares acquired
by dividend and distribution reinvestments will not be subject to any front-end
sales charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. Distributions paid on Class A and Class D shares will be higher than
for Class B and Class C shares because distribution fees paid by Class B and
Class C shares are higher. (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 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.
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
35
<PAGE>
cash. Any dividends declared in the last quarter of any calendar year which are
paid in the following calendar year prior to February 1, will be deemed, for tax
purposes, to have been received by the shareholder in the prior calendar 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.
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. Shareholders
will also be notified of their proportionate share of long-term capital gains
distributions that are eligible for a reduced rate of tax under the Taxpayer
Relief Act of 1997.
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. These figures are computed separately for Class A, Class
B, Class C and Class D shares. 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 a Class of 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 applicable Class and all sales
charges which would be incurred by 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 for
each Class 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 each
Class of shares of the Fund. Such calculations may or may not reflect the
deduction of any 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.).
36
<PAGE>
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 except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.
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.
MASTER/FEEDER CONVERSION. The Fund reserves the right to seek to achieve
its investment objective by investing all of its investable assets in a
diversified, open-end management investment company having the same investment
objective and policies and substantially the same investment restrictions as
those applicable to the Fund.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
37
<PAGE>
THE DEAN WITTER FAMILY OF FUNDS
<TABLE>
<S> <C>
MONEY MARKET FUNDS FIXED-INCOME FUNDS
Dean Witter Liquid Asset Fund Inc. Dean Witter High Yield Securities Inc.
Dean Witter Tax-Free Daily Income Trust Dean Witter Tax-Exempt Securities Trust
Dean Witter U.S. Government Money Market Dean Witter U.S. Government Securities
Trust Trust
Dean Witter California Tax-Free Daily Dean Witter Federal Securities Trust
Income Trust Dean Witter Convertible Securities Trust
Dean Witter New York Municipal Money Dean Witter California Tax-Free Income
Market Trust Fund
EQUITY FUNDS Dean Witter New York Tax-Free Income
Dean Witter American Value Fund Fund
Dean Witter Natural Resource Development Dean Witter World Wide Income Trust
Securities Inc. Dean Witter Intermediate Income
Dean Witter Dividend Growth Securities Securities
Inc. Dean Witter Global Short-Term Income
Dean Witter Developing Growth Securities Fund Inc.
Trust Dean Witter Multi-State Municipal Series
Dean Witter World Wide Investment Trust Trust
Dean Witter Value-Added Market Series Dean Witter Short-Term U.S. Treasury
Dean Witter Utilities Fund Trust
Dean Witter Capital Growth Securities Dean Witter Diversified Income Trust
Dean Witter European Growth Fund Inc. Dean Witter Limited Term Municipal Trust
Dean Witter Pacific Growth Fund Inc. Dean Witter Short-Term Bond Fund
Dean Witter Precious Metals and Minerals Dean Witter Balanced Income Fund
Trust Dean Witter Hawaii Municipal Trust
Dean Witter Health Sciences Trust Dean Witter Intermediate Term U.S.
Dean Witter Global Dividend Growth Treasury Trust
Securities DEAN WITTER RETIREMENT SERIES
Dean Witter Global Utilities Fund Liquid Asset Series
Dean Witter International SmallCap Fund U.S. Government Money Market Series
Dean Witter Mid-Cap Growth Fund U.S. Government Securities Series
Dean Witter Balanced Growth Fund Intermediate Income Securities Series
Dean Witter Capital Appreciation Fund American Value Series
Dean Witter Information Fund Capital Growth Series
Dean Witter Japan Fund Dividend Growth Series
Dean Witter Income Builder Fund Strategist Series
Dean Witter Special Value Fund Utilities Series
Dean Witter Financial Services Trust Value-Added Market Series
Dean Witter Market Leader Trust Global Equity Series
Dean Witter S&P 500 Index Fund ACTIVE ASSETS ACCOUNT PROGRAM
Dean Witter Fund of Funds Active Assets Money Trust
Morgan Stanley Dean Witter Competitive Active Assets Tax-Free Trust
Edge Fund, Active Assets California Tax-Free Trust
"BEST IDEAS" PORTFOLIO Active Assets Government Securities
ASSET ALLOCATION FUNDS Trust
Dean Witter Strategist Fund
Dean Witter Global Asset Allocation Fund
</TABLE>
<PAGE>
Dean Witter
Pacific Growth Fund Inc.
Two World Trade Center
New York, New York 10048
DIRECTORS
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, NY 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Dean Witter InterCapital Inc.
SUB-ADVISER
Morgan Grenfell Investment Services Limited
DEAN WITTER
PACIFIC GROWTH
FUND
[PHOTO]
PROSPECTUS -- JANUARY 30, 1998
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 30, 1998 DEAN WITTER
PACIFIC GROWTH
FUND
- ------------------------------------------------------------
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
its investment objective by investing primarily in securities issued by issuers
located in Asia, Australia and New Zealand.
A Prospectus for the Fund dated January 30, 1998, 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
Pacific 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................................................................ 28
Portfolio Transactions and Brokerage................................................... 29
The Distributor........................................................................ 31
Determination of Net Asset Value....................................................... 36
Purchase of Fund Shares................................................................ 36
Shareholder Services................................................................... 39
Redemptions and Repurchases............................................................ 44
Dividends, Distributions and Taxes..................................................... 45
Performance Information................................................................ 47
Description of Common Stock............................................................ 48
Custodian and Transfer Agent........................................................... 49
Independent Accountants................................................................ 49
Reports to Shareholders................................................................ 49
Legal Counsel.......................................................................... 49
Experts................................................................................ 50
Registration Statement................................................................. 50
Financial Statements--October 31, 1997................................................. 51
Report of Independent Accountants...................................................... 75
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund was incorporated under the laws of the state of Maryland on June
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 Morgan Stanley, Dean Witter, Discover & Co. ("MSDWD"), 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."
InterCapital 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 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 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, Dean Witter
Financial Services Trust, Dean Witter Market Leader Trust, Dean Witter S&P 500
Index Fund, Dean Witter Fund of Funds, Morgan Stanley Dean Witter Competitive
Edge Fund -- "Best Ideas" Portfolio, 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
3
<PAGE>
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.
In addition, Dean Witter Services Company Inc. ("DWSC"), a wholly-owned
subsidiary of InterCapital, serves as manager for the following investment
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 Global Telecom
Trust, TCW/DW Strategic Income Trust, TCW/DW Emerging Markets Opportunities
Trust, TCW/ DW Mid-Cap Equity Trust, TCW/DW Term Trust 2000, TCW/DW Term Trust
2002, TCW/DW Term Trust 2003 (the "TCW/DW Funds"). InterCapital also serves as:
(i) administrator of The BlackRock Strategic Term Trust Inc., a closed-end
investment company; (ii) sub-administrator of MassMutual Participation Investors
and Templeton Global Governments Income Trust, closed-end investment companies;
and (iii) investment adviser of Offshore Dividend Growth Fund and Offshore Money
Market Fund, mutual funds established under the laws of the Cayman Islands and
available only to investors who are participants in DWR's International Active
Assets Account program and are neither citizens nor residents of the United
States.
Pursuant to an Investment Management Agreement (the "Management Agreement")
with the Investment Manager, the Fund has retained the Investment Manager to
supervise the investment of the Fund's assets. The Investment Manager, through
consultation with 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 that 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 such 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. These expenses will be allocated among the four
classes of shares of the Fund (each, a "Class") pro rata based on the net assets
of the Fund attributable to each Class, except as described below. Such expenses
include, but are not limited to: expenses of the Plan of Distribution pursuant
to Rule 12b-1 (the "12b-1 fee") (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
4
<PAGE>
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
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 12b-1 fees relating to a particular Class will be
allocated directly to that Class. In addition, other expenses associated with a
particular Class (except advisory or custodial fees) may be allocated directly
to that Class, provided that such expenses are reasonably identified as
specifically attributable to that Class and the direct allocation to that Class
is approved by the Directors.
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
following annual rates to the Fund's daily net assets: 1.00% of the portion of
the daily net assets not exceeding $1 billion; 0.95% of the portion of daily net
assets exceeding $1 billion but not exceeding $2 billion; and 0.90% of the
portion of daily net assets exceeding $2 billion. The management fee is
allocated among the Classes pro rata based on the net assets of the Fund
attributable to each Class. For the fiscal years ended October 31, 1995, 1996
and 1997, the Fund accrued to the Investment Manager total compensation under
the Management Agreement in the amounts of $14,008,538, $16,242,482 and
$13,946,846, 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
Pacific basin issuers and to manage the portion of the Fund's portfolio invested
in securities issued by issuers located in Asia, Australia and New Zealand,
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 Asia, Australia and New Zealand.
Morgan Grenfell Investment Services Limited ("MGIS") was organized as a
British corporation in 1972 and manages, as of September 30, 1997, assets of
approximately $16.5 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
5
<PAGE>
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, 1997, approximately
$146.5 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,
1995, 1996 and 1997, the Investment Manager informed the Fund that it accrued to
the Sub-Adviser total compensation under the Sub-Advisory Agreement of
$5,603,415, $6,496,993 and $5,578,738, respectively.
The Agreements were initially approved by the Board of Directors on February
21, 1997 and by the shareholders of the Fund at a Special Meeting of
Shareholders held on May 21, 1997. The Agreements are substantially identical to
prior investment management and sub-advisory agreements which were initially
approved by the Board of Directors on October 30, 1992, by the shareholders of
the Fund at a Special Meeting of Shareholders held on January 12, 1993 and
amended by the Board of Directors on April 24, 1997 to reduce the compensation
received by the Investment Manager under the Agreement for assets exceeding $1
billion, so that the compensation under the Agreement is calculated by applying
the following annual rates to the Fund's net assets determined as of the close
of each business day: 1.00% of the portion of daily net assets not exceeding $1
billion; 0.95% of the portion of daily net assets exceeding $1 billion but not
exceeding $2 billion; and 0.90% of the portion of daily net assets exceeding $2
billion. The Agreements took effect on May 31, 1997 upon the consummation of the
merger of Dean Witter, Discover & Co. with Morgan Stanley Group Inc. The
Agreements may be terminated at any time, without penalty, on thirty days'
notice by the Board of Directors of the Fund, by the holders of a majority, as
defined in the Investment Company Act of 1940 (the "Act"), of the outstanding
shares of the Fund, or by the Investment Manager. The Agreements will
automatically terminate in the event of their assignment (as defined in the
Act).
Under their terms, both Agreements had an initial term ending April 30,
1999, and provide that each will continue from year to year thereafter, provided
continuance of each Agreement is approved at least annually by the vote of the
holders of a majority, as defined in the Act, of the outstanding shares of the
Fund, or by the Directors of the Fund; provided that in either event such
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.
The following owned 5% or more of the outstanding shares of Class A on
December 31, 1997: Thomas P. Andriacchi as Trustee For the Benefit Of Thomas P.
Andriacchi Trust, DTD 11/24/87, 7 Natoma Drive, Oakbrook, IL 60523 -- 20.7%;
Dean Witter Trust FSB as Trustee For the Benefit Of Alban Charitable Remainder
Unitrust, P.O. Box 957, Jersey City, NJ 07303 -- 10.9%; and Roger J. Benjamin,
1145 Lilac Avenue, Owatonna, MN 55060 -- 5.6%.
The following owned 5% or more of the outstanding shares of Class C on
December 31, 1997: Donald P. Chandler, P.O. Box 1009, Rancho Sante Fe, CA 92067
- -- 12.2%.
6
<PAGE>
The following owned 5% or more of the outstanding shares of Class D on
December 31, 1997: Hare & Co., c/o The Bank of New York, P.O. Box 11203, New
York, NY 10286 -- 89.5%; and IAM & AW Local Lodge PM#2848, Multi-Emp Wage Reduc
401K PSP, 3/6/86 Trustee J. Winterhalter, P.O. Box 3039, Birmingham, MI 48012 --
9.3%.
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.
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 84 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 (57) 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
6111 Broken Sound Parkway, N.W. Executive Officer of Hills Department Stores (May,
Boca Raton, Florida 1991-July, 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 Cor-
poration.
Charles A. Fiumefreddo* (64) Chairman, Chief Executive Officer and Director of
Chairman of the Board, President, InterCapital, Distributors and DWSC; Director and
Chief Executive Officer and Director Executive Vice President of DWR; Chairman, Director or
Two World Trade Center Trustee, President and Chief Executive Officer of the Dean
New York, New York Witter Funds; Chairman, Chief Executive Officer and
Trustee of the TCW/DW Funds; Chairman and Director of Dean
Witter Trust FSB ("DWT"); Director and/or officer of
various MSDWD subsidiaries; formerly Executive Vice
President and Director of Dean Witter, Discover & Co.
(until February, 1993).
Edwin J. Garn (65) Director or Trustee of the Dean Witter Funds; formerly
Director United States Senator (R-Utah) (1974-1992) and Chairman,
c/o Huntsman Corporation Senate Banking Committee (1980-1986); formerly Mayor of
500 Huntsman Way Salt Lake City, Utah (1971-1974); formerly Astronaut,
Salt Lake City, Utah Space Shuttle Discovery (April 12-19, 1985); Vice
Chairman, Huntsman Corporation (since January, 1993);
Director of Franklin Covey (time management systems), John
Alden Financial Corp. (health insurance), United Space
Alliance (joint venture between Lockheed Martin and the
Boeing Company) and Nuskin Asia Pacific (multilevel
marketing); member of the board of various civic and
charitable organizations.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
John R. Haire (72) Chairman of the Audit Committee and Chairman of the
Director Committee of Independent Directors or Trustees and
Two World Trade Center Director or Trustee of the Dean Witter Funds; Chairman of
New York, New York the Audit Committee and Chairman of the Committee of the
Independent Trustees and Trustee of the TCW/DW Funds;
formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of
Anchor Corporation, an Investment Adviser (1964-1978).
Wayne E. Hedien (63) Retired, Director or Trustee of the Dean Witter Funds;
Director Director of The PMI Group, Inc. (private mortgage
c/o Gordon Altman Butowsky insurance); Trustee and Vice Chairman of The Field Museum
Weitzen Shalov & Wein of Natural History; formerly associated with the Allstate
Counsel to the Independent Directors Companies (1966-1994), most recently as Chairman of The
114 West 47th Street Allstate Corporation (March, 1993-December, 1994) and
New York, New York Chairman and Chief Executive Officer of its wholly-owned
subsidiary, Allstate Insurance Company (July,
1989-December, 1994); director of various other business
and charitable organizations.
Dr. Manuel H. Johnson (48) Senior Partner, Johnson Smick International, Inc., a
Director consulting firm; Co-Chairman and a founder of the Group of
c/o Johnson Smick International, Inc. Seven Council (G7C), an international economic commission;
1133 Connecticut Ave., N.W. Director or Trustee of the Dean Witter Funds; Trustee of
Washington, D.C. the TCW/DW Funds; Director of NASDAQ (since June, 1995);
Director of Greenwich Capital Markets Inc.
(broker-dealer); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the
Financial Accounting Standards Board) formerly Vice Chair-
man 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 (61) General Partner, Triumph Capital, L.P., a private
Director investment partnership; Director or Trustee of the Dean
c/o Triumph Capital, L.P. Witter Funds; Trustee of the TCW/DW Funds; formerly Vice
237 Park Avenue President, Bankers Trust Company and BT Capital
New York, New York Corporation (1984-1988); director of various business
organizations.
Philip J. Purcell* (54) Chairman of the Board of Directors and Chief Executive
Director Officer of MSDWD, DWR and Novus Credit Services Inc.;
1585 Broadway Director of InterCapital, DWSC and Distributors; Director
New York, New York or Trustee of the Dean Witter Funds; Director and/or
officer of various MSDWD subsidiaries.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
John L. Schroeder (67) Retired; Director or Trustee of the Dean Witter Funds;
Director Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President and
Weitzen Shalov & Wein Chief Investment Officer of the Home Insurance Company
Counsel to the Independent Directors (August, 1991-September, 1995).
114 West 47th Street
New York, New York
Barry Fink (43) Senior Vice President (since March, 1997) and Secretary
Vice President, Secretary and General Counsel (since February, 1997) of InterCapital
and General Counsel and DWSC; Senior Vice President (since March, 1997) and
Two World Trade Center Assistant Secretary and Assistant General Counsel (since
New York, New York February, 1997) of Distributors; Assistant Secretary of
DWR (since August, 1996); Vice President, Secretary and
General Counsel of the Dean Witter Funds and the TCW/ DW
Funds (since February, 1997); previously First Vice
President (June, 1993-February, 1997), Vice President
(until June, 1993) and Assistant Secretary and Assistant
General Counsel of InterCapital and DWSC and Assistant
Secretary of the Dean Witter Funds and the TCW/DW Funds.
Thomas F. Caloia (51) First Vice President and Assistant Treasurer of
Treasurer InterCapital and DWSC; Treasurer of the Dean Witter Funds
Two World Trade Center and TCW/DW Funds.
New York, New York
</TABLE>
- ------------------------
*Denotes Directors who are "interested persons" of the Fund, as defined in the
Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Mitchell M. Merin, President and Chief Strategic Officer of
InterCapital and DWSC, Executive Vice President of Distributors and DWT and
Director of DWT, Executive Vice President and Director of DWR, and Director of
SPS Transaction Services, Inc. and various other MSDWD subsidiaries, Robert S.
Giambrone, Executive Vice President of InterCapital, DWSC, Distributors and DWT
and Director of DWT, and Joseph J. McAlinden, Executive Vice President and Chief
Investment Officer of InterCapital and Director of DWT, are Vice Presidents of
the Fund. Marilyn K. Cranney, First Vice President and Assistant General Counsel
of InterCapital and DWSC, and Lou Anne D. McInnis, Ruth Rossi and Carsten Otto,
Vice Presidents and Assistant General Counsels of InterCapital and DWSC, and
Frank Bruttomesso and Todd Lebo, 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 nine (9) 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 84 Dean Witter Funds,
comprised of 128 portfolios. As of December 31, 1997, the Dean Witter Funds had
total net assets of approximately $93.7 billion and more than six million
shareholders.
Seven Directors (77% 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
9
<PAGE>
InterCapital's parent company, MSDWD. These are the "disinterested" or
"independent" Directors. The other two Directors (the "management Directors")
are affiliated with InterCapital. Four of the seven independent Directors are
also Independent Trustees 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 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, 1997,
the three Committees held a combined total of seventeen 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.
10
<PAGE>
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
Trustee/Director of the Dean Witter Funds and as an Independent Trustee and as
Chairman of the Committee of the Independent Trustees and the 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 $800 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). If a Board
meeting and a Committee meeting, or more than one Committee meeting, take place
on a single day, the Directors are paid a single meeting fee by the Fund. 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, 1997.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT DIRECTOR FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
Michael Bozic................................................. $1,700
Edwin J. Garn................................................. 1,900
John R. Haire................................................. 3,850
Wayne E. Hedien............................................... 482
Dr. Manuel H. Johnson......................................... 1,850
Michael E. Nugent............................................. 1,900
John L. Schroeder............................................. 1,900
</TABLE>
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Directors for the calendar year ended December 31, 1997 for services
to the 84 Dean Witter Funds and, in the case of Messrs. Haire, Johnson, Nugent
and Schroeder, the 14 TCW/DW Funds that were in operation at December 31, 1997.
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. Hedien's term as Director or
Trustee of each Dean Witter Fund commenced on September 1, 1997.
CASH COMPENSATION FROM DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
FOR SERVICE AS FOR SERVICE
CHAIRMAN OF AS TOTAL CASH
COMMITTEES OF CHAIRMAN OF COMPENSATION
FOR SERVICE INDEPENDENT COMMITTEES OF FOR SERVICES
AS DIRECTOR OR DIRECTORS/ INDEPENDENT TO
TRUSTEE AND FOR SERVICE AS TRUSTEES AND DIRECTORS AND 84 DEAN
COMMITTEE MEMBER DIRECTOR AND AUDIT AUDIT WITTER
OF 84 DEAN COMMITTEE MEMBER COMMITTEES OF COMMITTEES OF FUNDS AND
NAME OF WITTER OF 14 TCW/DW 84 DEAN WITTER 14 TCW/DW 14 TCW/DW
INDEPENDENT DIRECTOR FUNDS FUNDS FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------- ------------- -------------
Michael Bozic.............. $133,602 -- -- -- $133,602
<S> <C> <C> <C> <C> <C>
Edwin J. Garn.............. 149,702 -- -- -- 149,702
John R. Haire.............. 149,702 $73,725 $157,463 $ 25,350 406,240
Wayne E. Hedien............ 39,010 -- -- -- 39,010
Dr. Manuel H. Johnson...... 145,702 71,125 -- -- 216,827
Michael E. Nugent.......... 149,702 73,725 -- -- 223,427
John L. Schroeder.......... 149,702 73,725 -- -- 223,427
</TABLE>
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.(1)"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.
The following table illustrates the retirement benefits accrued to the
Fund's Independent Directors by the Fund for the fiscal year ended October 31,
1997 and by the 57 Dean Witter Funds (including the Fund) for the year ended
December 31, 1997, and the estimated retirement benefits for the Fund's
Independent Trustees, to commence upon their retirement, from the Fund as of
October 31, 1997 and from the 57 Dean Witter Funds as of December 31, 1997.
- ------------------------------
(1) 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.
12
<PAGE>
RETIREMENT BENEFITS FROM THE FUND AND ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
FOR ALL ADOPTING FUNDS RETIREMENT BENEFITS BENEFITS
---------------------------------- ACCRUED AS EXPENSES UPON
ESTIMATED RETIREMENT(2)
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% $ 372 $ 20,499 $ 925 $ 47,025
Edwin J. Garn...................... 10 50.0 620 30,878 925 47,025
John R. Haire...................... 10 50.0 228 (19,823)(3) 2,246 127,897
Wayne E. Hedien.................... 9 42.5 0 0 794 39,971
Dr. Manuel H. Johnson.............. 10 50.0 250 12,832 925 47,025
Michael E. Nugent.................. 10 50.0 468 22,546 925 47,025
John L. Schroeder.................. 8 41.7 714 39,350 771 39,504
</TABLE>
- ------------------------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Director's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until June 1, 1998.
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, the Fund may invest more than 25% of its total
assets in securities of issuers located in each of Japan, Hong Kong and
Malaysia. While it is not anticipated that the Fund will invest more than 25% of
its total assets in the securities of issuers located in each of Singapore,
Thailand and South Korea, the Fund's Registration Statement will be amended to
contain disclosure discussing the risks pertaining to a concentration of the
Fund's assets in any such country at such time as the 25% level is exceeded.
PRIVATE PLACEMENTS. The Fund may invest up to 10% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A of the Securities Act, and determined to be liquid
pursuant to the procedures discussed in the following paragraph, are not subject
to the foregoing restriction.) These securities are generally referred to as
private placements or restricted securities. Limitations on the resale of such
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may have
to bear the expense of registering such securities for resale and the risk of
substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Investment Manager,
pursuant to procedures adopted by the Directors of the Fund, will make a
determination as to the liquidity of each restricted security purchased by the
Fund. If a restricted security is determined to be "liquid," such security will
not be included within the category of "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).
13
<PAGE>
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 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
14
<PAGE>
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. As a
result, the Fund may be forced to liquidate portfolio securities at a time which
may be disadvantageous to the Fund, in order to have sufficient cash to make
requisite distributions.
Currently the only U.S. Treasury security issued without coupons is the
Treasury bill. However 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 Corporation ("S&P") or Moody's Investors Service, Inc.
("Moody's") or, if not rated, issued by a company having an outstanding debt
issue rated at least AA by S&P or Aa by Moody's.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial 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.
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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 (however, the ability of the Fund to terminate a
contract is contingent upon the willingness of the currency trader with whom the
contract has been entered into to permit an offsetting transaction). It is
impossible to forecast the market value of portfolio securities at the
expiration of the contract. Accordingly, it may be necessary for the Fund to
purchase additional foreign currency on the spot market (and bear the expense of
such purchase) if the market value of the security is less than the amount of
foreign currency the Fund is obligated to deliver and if a decision is made to
sell the security and make delivery of the foreign currency. Conversely, it may
be necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio securities if its market value exceeds the amount
of foreign currency the Fund is obligated to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the Fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell an amount of the relevant foreign currency equal to
some or all of the principal value of the security.
At times when the Fund has written a call option on a fixed-income security
or the currency in which it is denominated, it may wish to enter into a forward
contract to purchase or sell the foreign currency in which the security is
denominated. A forward contract would, for example, hedge the risk of the
security on which a call option has been written declining in value to a greater
extent than the value of the premium received for the option. The Fund will
maintain with its Custodian at all times, cash, U.S.
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Government securities, or other appropriate 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.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies 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.
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.
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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. While in the opinion of the management
of the Fund, the market for such options has developed sufficiently to ensure
that the risks in connection with such options are not greater than the risks in
connection with the underlying currency, there can be no assurance that a liquid
secondary market will exist for a particular option at any specific time. In
addition, options on foreign currencies are affected by all of those factors
which influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
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 the option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
COVERED CALL WRITING. 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.
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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. Furthermore, a premium received on a call
written or a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency. 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 OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise price on any calls it has written
(exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect a
closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on 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 and currencies (or related
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
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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.
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
exercisable 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
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event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
Each of the exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes" in the Prospectus).
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).
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) securities
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.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate
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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 2% 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 exercise 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 mark, Canadian dollar, 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 regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Investment Manager's opinion, the market for such options has
developed sufficiently that the risks in connection with such options are not
greater than the risks in connection with transactions in the underlying foreign
currency futures contracts.
INDEX FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by the Fund, as
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<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 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 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.
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 or sale of a put 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 Fund's
management 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, the Fund might write a call option on an interest rate futures
contract, the underlying security of which correlates with the portion of the
portfolio the Fund seeks to hedge. Any premiums received in the writing of
options on futures contracts may, of course, provide a further hedge against
losses resulting from price declines in portions of the Fund portfolio.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however, that in the case of an
option that is in-the-money (the exercise price of the call (put) option is less
(more) than the market price of the underlying security) at the time of
purchase, the in-the-money amount may be excluded in calculating the 5%.
However, there is no overall limitation on the percentage of the Fund's assets
which may be subject to a hedge position. In addition, in accordance with the
regulations of the Commodity Futures Trading Commission ("CFTC") under which the
Fund is exempted from registration as a commodity pool operator, the Fund may
only enter into futures contracts and options on futures contracts transactions
for purposes of hedging a part or all of its portfolio. If the CFTC changes its
regulations so that the Fund would be permitted to write options on futures
contracts for purposes other than hedging the Fund's investments without CFTC
registration, the Fund may engage in such transactions for those purposes.
Except as described above, there are no other limitations on the use of futures
and options thereon by the Fund.
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<PAGE>
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.
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.
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.
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<PAGE>
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted by the fact that the futures market is dominated by
short-term traders seeking to profit from the difference between a contract or
security price objective and their cost of borrowed funds. Such distortions are
generally minor and would diminish as the contract approached maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and the
movements in the prices of the securities (currencies) which are the subject of
the hedge. If participants in the futures market elect to close out their
contracts through offsetting transactions rather than meet margin deposit
requirements, distortions in the normal relationship between the debt securities
or currency markets and futures markets could result. Price distortions could
also result if investors in futures contracts opt to make or take delivery of
underlying securities rather than engage in closing transactions due to the
resultant reduction in the liquidity of the futures market. In addition, due to
the fact that, from the point of view of speculators, the deposit requirements
in the futures markets are less onerous than margin requirements in the cash
market, increased participation by speculators in the futures market could cause
temporary price distortions. Due to the possibility of price distortions in the
futures market and because of the imperfect correlation between movements in the
prices of securities and movements in the prices of futures contracts, a correct
forecast of interest rate trends may still not result in a successful hedging
transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities (currencies) at a time when it may
be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes" in the
Prospectus).
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
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<PAGE>
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 requested from the counterparty and when received, 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 does not presently
intend to enter into repurchase agreements so that more than 5% of the Fund's
net assets are subject to such agreements.
REVERSE REPURCHASE AGREEMENTS. The Fund may also use reverse repurchase
agreements for purposes of meeting redemptions or as part of its investment
strategy. Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the same assets
at a later date at a fixed price. Generally, the effect of such a transaction is
that the Fund can recover all or most of the cash invested in the portfolio
securities involved during the term of the reverse repurchase agreement, while
it will be able to keep the interest income associated with those portfolio
securities. Such transactions are only advantageous if the interest cost to the
Fund of the reverse repurchase transaction is less than the cost of obtaining
the cash otherwise. Opportunities to achieve this advantage may not always be
available, and the Fund intends to use the reverse repurchase technique only
when it will be to its advantage to do so. The Fund will establish a segregated
account with its custodian bank in which it will maintain cash, U.S. Government
securities or other appropriate liquid portfolio 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 of portfolio securities while it is still subject to a
reverse repurchase agreement. The Fund has not to date entered into any reverse
repurchase agreements and presently has no intention of entering into reverse
repurchase agreements during the coming year.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. As
discussed in the Prospectus, from time to time, in the ordinary course of
business, the Fund may purchase securities on a when-issued or delayed delivery
basis and may purchase or sell securities on a forward commitment basis. When
such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased are subject to market
fluctuation and no interest accrues to the purchaser during this period. While
the Fund will only purchase securities on a when-issued, delayed delivery or
forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase securities on a
when-issued or delayed delivery basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security in determining the net
asset value of the Fund. At the time of
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<PAGE>
delivery of the securities, the value may be more or less than the purchase
price. The Fund will also establish a segregated account with the Fund's
custodian bank in which it will continuously maintain cash or U.S. Government
securities or other 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.
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 day's notice, or by the Fund on two
business days' notice. If the borrower fails to deliver the loaned securities
within two days after receipt of notice, the Fund could use the collateral to
replace the securities while holding the borrower liable for any excess of
replacement cost over collateral. As with any extensions of credit, there are
risks of delay in recovery and in some cases even loss of rights in the
collateral should the borrower of the securities fail financially. However,
these loans of portfolio securities will only be made to firms deemed by the
Fund's management to be creditworthy and when the income which can be earned
from such loans justifies the attendant risks. Upon termination of the loan, the
borrower is required to return the securities to the Fund. Any gain or loss in
the market price during the loan period would inure to the Fund. The
creditworthiness of firms to which the Fund lends its portfolio securities will
be monitored on an ongoing basis by the Fund's management pursuant to procedures
adopted and reviewed, on an ongoing basis, by the Board of Directors of the
Fund.
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<PAGE>
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities. The Fund has
not, to date, lent any of its portfolio securities and it does not presently
intend to lend any of its portfolio securities in the foreseeable future.
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 (including real
estate limited partnerships), 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. Borrow money (except insofar as to the Fund may be deemed to have
borrowed by entrance into a reverse repurchase agreement up to an amount not
exceeding 10% of the Fund's total assets), except that the Fund may borrow
from a bank for temporary or emergency purposes in amounts not exceeding 5%
(taken at the lower of cost or current value) of its total assets (not
including the amount borrowed).
4. 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.
5. 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.
6. Make short sales of securities.
7. 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.
8. Invest for the purpose of exercising control or management of any
other issuer.
9. 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.
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<PAGE>
10. 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.)
11. 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.
In addition, as a nonfundamental policy, the Fund will not invest in other
investment companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or
12(d)(1)(J) of the Act.
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.
Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.
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. The Fund paid $7,683,917, $8,295,697 and
$6,754,100 in brokerage commissions during the fiscal years ended October 31,
1995, 1996 and 1997, respectively.
The Investment Manager and the Sub-Adviser currently serve as investment
advisers to a number of clients, including, in the case of the Investment
Manager, other investment companies, and may in the future act as investment
manager or adviser to others. It is the practice of the Investment Manager and
the Sub-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
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<PAGE>
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 its 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 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, Morgan Stanley & Co. Incorporated, other affiliated
brokers and dealers and/or affiliated broker-dealers of the Sub-
Adviser--Deutsche Morgan Grenfell & Partners Securities Pte. Limited and
Deutsche Morgan Grenfell Securities Hong Kong Limited. In order for an
affiliated broker-dealer to effect any portfolio transactions for the Fund, the
commissions, fees or other remuneration received by the affiliated broker or
dealer 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 the affiliated broker or
dealer 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 an affiliated broker or dealer
are consistent with the foregoing standard. The Fund does not reduce the
management fee it pays to the Investment Manager by any amount of the brokerage
commissions it may pay to an affiliated broker or dealer. During the period May
31 through
30
<PAGE>
October 31, 1997, the Fund paid a total of $119,132 in brokerage commissions to
Morgan Stanley & Co., Inc., which broker-dealer became an affiliate of the
Investment Manager on May 31, 1997 upon consummation of the merger of Dean
Witter, Discover & Co. with Morgan Stanley Group Inc. The brokerage commissions
paid to Morgan Stanley & Co., Inc. represented approximately 1.76% of the total
brokerage commissions paid by the Fund for the year and were paid on account of
transactions having an aggregate dollar value equal to approximately 1.83% of
the aggregate dollar value of all portfolio transactions of the Fund during the
period for which commissions were paid. The Fund paid brokerage commissions to
affiliates of the Sub-Adviser in the amounts of $750,676 and $177,930 for the
fiscal years ended October 31, 1995 and October 31, 1996, respectively. During
the fiscal year ended October 31, 1996 and 1997, the Fund paid affiliated
broker-dealers of the Sub-Adviser for transactions as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
AGGREGATE DOLLAR
AMOUNT OF
EXECUTED TRADES
BROKERAGE PERCENTAGE OF ON WHICH
COMMISSIONS PAID AGGREGATE BROKERAGE
TO AFFILIATED BROKERAGE COMMISSIONS
BROKER OF SUB-ADVISER COMMISSIONS FOR WERE PAID FOR
FOR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED ENDED ENDED
NAME OF BROKER 10/31/97 10/31/97 10/31/97
- ---------------------------------------- --------------------- ---------------- ----------------
<S> <C> <C> <C>
Deutsche Morgan Grenfell Securities Hong
Kong Ltd............................... $ 42,441 0.63% 0.90%
Deutsche Morgan Grenfell & Partners
Securities Pte. Ltd.................... 135,489 2.01 1.65
</TABLE>
PORTFOLIO TRADING
It is anticipated that the Fund's portfolio turnover rate will not exceed
100% in any one year. A 100% turnover rate would occur, for example, if 100% of
the securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year.
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 MSDWD. The Directors of
the Fund, including a majority of the Directors who are not, and were not at the
time they voted, interested persons of the Fund, as defined in the Act (the
"Independent Directors"), approved, at their meeting held on June 30, 1997, 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. By its terms, the Distribution
Agreement has an initial term ending April 30, 1998 and will remain in effect
from year to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
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
31
<PAGE>
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
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act (the "Plan") pursuant to which each Class, other than Class D, pays the
Distributor compensation accrued daily and payable monthly at the following
annual rates: 0.25% and 1.0% of the average daily net assets of Class A and
Class C, respectively, and, with respect to Class B, 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's Class B 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
Class B 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 of Class B. The Distributor
also receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus). The Distributor has informed the Fund that it and/or DWR
received (a) approximately $4,234,570, $3,770,779 and $4,821,220 in contingent
deferred sales charges from Class B for the fiscal years ended October 31, 1995,
1996 and 1997, respectively, (b) approximately $0 and $650 in contingent
deferred sales charges from Class A and Class C, respectively, for the fiscal
year ended October 31, 1997, and (c) approximately $11,000 in front-end sales
charges from Class A for the fiscal year ended October 31, 1997, none of which
was retained by the Distributor.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class's average daily net assets are
currently each characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers, Inc. (of which
the Distributor is a member). The "service fee" is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion of
the Plan fees payable by a Class, if any, is characterized as an "asset-based
sales charge" as defined in the aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Board of Directors, including
all of the Directors of the Fund 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"), cast in person at
a meeting called for the purpose of voting on the Plan, on July 19, 1990 and by
DWR, as the then sole stockholder of the Fund on September 27, 1990.
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 an internal reorganization 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 and DWR. The
amendments provide that payments under the Plan will be made to the Distributor
rather than to DWR as they had been before the amendment, and that the
Distributor in turn is authorized to make payments to DWR, its affiliates or
other selected broker-dealers (or direct that the Fund pay such entities
directly). The Distributor is also authorized to retain part of such fee as
compensation for its own distribution-related expenses. 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 the Association. 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
32
<PAGE>
reorganization. At their meeting held on June 30, 1997, the Directors, including
a majority of the Independent 12b-1 Directors, approved amendments to the Plan
to reflect the multiple-class structure for the Fund, which took effect on July
28, 1997.
Under the Plan and as required by Rule 12b-1, the Directors receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended by the Distributor under the Plan and
the purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended October 31, 1997 of $14,155,635. This amount is equal to payments
required to be paid monthly by the Fund which were computed at the annual rate
of 1.0% of the average daily aggregate gross sales of Class B 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 Class B
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. For the fiscal period July 28 through
October 31, 1997, Class A and Class C shares of the Fund accrued payments under
the Plan amounting to $278 and $1,074, respectively, which amounts are equal to
0.25% and 1.0% of the average daily net assets of Class A and Class C,
respectively, for such period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a different distribution arrangement as set forth
in the Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the account executives or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored 401(k) and other
plans qualified under Section 401(a) of the Internal Revenue Code ("Qualified
Retirement Plans") for which Dean Witter Trust FSB ("DWT" or "Transfer Agent")
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, the Investment Manager
compensates DWR's account executives by paying them, from its own funds, a gross
sales credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.25% of the current value (not including reinvested
dividends or distributions) of the amount sold in all cases. In the case of
Class B shares purchased on or after July 28, 1997 by Qualified Retirement Plans
for which DWT serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement, DWR
compensates its account executives by paying them, from its own funds, a gross
sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value of
the respective accounts for which they are the account executives of record.
With respect to Class D shares other than shares held by participants in
InterCapital's mutual fund asset allocation program, the Investment Manager
compensates DWR's account executives by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of up
to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid if
the Class D shares are redeemed in the first year and a chargeback of 50% of the
amount paid if the Class D shares are redeemed in the second year after
purchase. The Investment Manager also compensates DWR's account executives by
paying them, from its own funds, an annual residual commission, currently a
33
<PAGE>
residual of up to 0.10% of the current value of the respective accounts for
which they are the account executives of record (not including accounts of
participants in the InterCapital mutual fund asset allocation program).
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 sales. The distribution fee that
the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in the
case of Class B shares, opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of the distribution expenses to the Fund, in the case of Class B
shares, such assumed interest (computed at the "broker's call rate") has been
calculated on the gross 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 is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Directors, including
a majority of the Independent 12b-1 Directors. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(for Class C) may be reimbursed without prior determination. In the event that
the Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Directors will
review a quarterly budget of projected distribution expenses to be incurred on
behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Directors will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended October 31, 1997 to the Distributor. The
Distributor and DWR estimate that they have spent, pursuant to the Plan,
$117,676,867 on behalf of Class B since the inception of the Fund. It is
estimated that this amount was spent in approximately the following ways: (i)
3.09% ($3,631,997)--advertising and promotional expenses; (ii) 0.33%
($385,170)--printing of prospectuses for distribution to other than current
shareholders; and (iii) 96.58% ($113,659,700)--other expenses, including the
gross sales credit and the carrying charge, of which 7.75% ($8,809,628)
represents carrying charges, 37.06% ($42,118,274) represents commission credits
to DWR branch offices for payments of commissions to account executives and
55.19% ($62,731,798) represents overhead and other branch office
distribu-
34
<PAGE>
tion-related expenses. The amounts accrued by Class A and Class C for
distribution during the fiscal period July 28 through October 31, 1997 were for
expenses which relate to compensation of sales personnel and associated overhead
expenses.
In the case of Class B shares, 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.
The Distributor has advised the Fund that in the case of Class B shares the
excess distribution expenses, 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 Class B shares totalled $41,117,586 as of
October 31, 1997. Because there is no requirement under the Plan that the
Distributor be reimbursed for all its expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses in excess of payments made to the
Distributor under the Plan and the proceeds of contingent deferred sales charges
paid by investors upon redemption of shares, if for any reason the Plan is
terminated, the Directors will consider at that time the manner in which to
treat such expenses. Any cumulative expenses incurred, but not yet recovered
through 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, DWSC, DWR, DWSC 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.
Under its terms, the Plan had an initial term ending April 30, 1991, 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"). Prior to the Board's
approval of amendments to the Plan to reflect the multiple class structure for
the Fund, 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 24, 1997, 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 by DWR 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.
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
affected Class or Classes 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.
35
<PAGE>
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The net asset value per share for each Class of shares 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 and on each other day in which there is a
sufficient degree of trading in the Fund's investments to affect the net asset
value, except that the net asset value may not be computed on a day on which no
orders to purchase, or tenders to sell or redeem, Fund shares have been
received, 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; Reverend Dr. Martin Luther King, Jr.
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 sixty 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 may 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 that may affect the value of such securities occur during such
period, then these securities may be valued at their fair value as determined in
good faith under procedures established by and under the supervision of the
Directors.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other Dean Witter Funds that are multiple class funds
("Dean Witter Multi-Class Funds") or shares of other Dean
36
<PAGE>
Witter Funds sold with a front-end sales charge purchased at a price including a
front-end sales charge having a current value of $5,000, and purchases $20,000
of additional shares of the Fund, the sales charge applicable to the $20,000
purchase would be 4.75% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Dean Witter Trust FSB (the "Transfer Agent")
fails to confirm the investor's represented holdings.
LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other Dean Witter Funds
held by the shareholder which were previously purchased at a price including a
front-end sales charge (including shares of the Fund and other Dean Witter Funds
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") and the purchase of shares of other Dean Witter Funds will not be
included in determining whether the stated goal of a Letter of Intent has been
reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of
37
<PAGE>
the Fund is less than the dollar amount of all payments by the shareholder for
the purchase of Class B shares during the preceding six years (or, in the case
of shares held by certain Qualified Retirement Plans, three 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 (or, in the case of shares held by certain Qualified
Retirement Plans, three 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 (three) years. The CDSC will be paid to the Distributor.
In determining the applicability of the 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 (or, in the case of shares held by certain Qualified Retirement
Plans, three years) will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six (three) 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 (or, in the case of shares held by certain
Qualified Retirement Plans, three 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 Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment 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 applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF 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>
38
<PAGE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after July 28, 1997 by Qualified Retirement
Plans for which DWT serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------- --------------------
<S> <C>
First.................... 2.0%
Second................... 2.0%
Third.................... 1.0%
Fourth 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 or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
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 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 applicable Class 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 applicable Class 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 another selected
broker-dealer, and will be forwarded to the
39
<PAGE>
shareholder, upon the receipt of proper instructions. It has been and remains
the Fund's policy and practice that, if checks for dividends or distributions
paid in cash remain uncashed, no interest will accrue on amounts represented by
such uncashed checks.
TARGETED DIVIDENDS-SM-. In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end Dean Witter Fund
other than Dean Witter Pacific Growth Fund Inc. or in another Class of Dean
Witter Pacific Growth Fund Inc. Such investment will be made as described above
for automatic investment in shares of the applicable Class 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 selected Class of
the Dean Witter Fund targeted to receive investments from dividends at the time
they enter the Targeted Dividends program. Investors should review the
prospectus of the targeted Dean Witter Fund before entering the program.
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, 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 (subject to any applicable sales charges). Shares
of the Dean Witter money market funds redeemed in connection with EasyInvest are
redeemed on the business day preceding the transfer of funds. 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 in shares of
the applicable Class at the net asset value, without the imposition of a CDSC
upon redemption, by returning the check or the proceeds to the Transfer Agent
within 30 days after the payment date. If the shareholder returns the proceeds
of a dividend or distribution, such funds must be accompanied by a signed
statement indicating that the proceeds constitute a dividend or distribution to
be invested. Such investment will be made at the net asset value per share next
determined after receipt of the check or proceeds by the Transfer Agent.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a 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) check in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"). 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 CDSC) to the
shareholder will be the designated monthly or quarterly amount.
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.
40
<PAGE>
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 sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
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 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 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,
shareholders may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to Dean Witter Pacific Growth Fund Inc., and indicating the
selected Class, directly to the Fund's Transfer Agent. In the case of Class A
shares, after deduction of any applicable sales charge, the balance will be
applied to the purchase of Fund shares, and, in the case of shares of the other
Classes, the entire amount 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 each Class of the Fund may
exchange their shares for shares of the same Class of shares of any other Dean
Witter Multi-Class Fund without the imposition of any exchange fee. Shares may
also be exchanged for shares of any of the following funds: Dean Witter
Short-Term U.S. Treasury Trust, Dean Witter Limited Term Municipal Trust, Dean
Witter Short-Term Bond Fund, Dean Witter Intermediate Term U.S. Treasury Trust
and for shares of five Dean Witter Funds which are money market funds (the
foregoing nine non-CDSC funds are referred to hereinafter as "Exchange Funds").
Class A shares may also be exchanged for shares of Dean Witter Multi-State
Municipal Series Trust and Dean Witter Hawaii Municipal Trust, which are Dean
Witter Funds sold with a front-end sales charge ("FSC Funds"). Class B shares
may also be exchanged for shares of Dean Witter Global Short-Term Income Fund
Inc. ("Global Short-Term"), which is a Dean Witter Fund offered with a CDSC.
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 gain or loss.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
41
<PAGE>
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 caption "Purchase of
Fund Shares," a 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 a Dean Witter
Multi-Class Fund or Global Short-Term 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 investment
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 Dean Witter Multi-Class
Fund or in Global Short-Term. 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 which are attributable to those shares. Shareholders acquiring
shares of an Exchange Fund pursuant to this exchange privilege may exchange
those shares back into a Dean Witter Multi-Class Fund or Global Short-Term 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
Dean Witter Multi-Class Fund or of Global Short-Term are reacquired. Thus, a
CDSC is imposed only upon an ultimate redemption, based upon the time
(calculated as described above) the shareholder was invested in a Dean Witter
Multi-Class Fund or in Global Short-Term. In the case of exchanges of Class A
shares which are subject to a CDSC, the holding period also includes the time
(calculated as described above) the shareholder was invested in a FSC Fund.
When shares initially purchased in a Dean Witter Multi-Class Fund or in
Global Short-Term are exchanged for shares of a Dean Witter Multi-Class Fund,
shares of Global Short-Term, shares of a FSC Fund, or 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 one, three or six years (depending on the CDSC schedule
applicable to the shares) prior to the exchange, (ii) originally acquired
through reinvestment of dividends or distributions (of the Fund or another Dean
Witter Fund) and (iii) acquired in exchange for shares of FSC Funds, or for
shares of other Dean Witter Funds for which shares of FSC 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, with
respect to Class B shares, if shares held for identical periods of time but
subject to different CDSC schedules are held in a block in the same Exchange
Privilege account, the shares of that block that are subject to a lower CDSC
rate will be exchanged prior to the shares of that block that are subject to a
higher CDSC rate). Shares equal to any appreciation in the value of non-Free
Shares exchanged will be treated as Free Shares, and the amount of the purchase
payments for the non-Free Shares of the fund exchanged into will be equal to the
lesser of (a) the purchase payments for, or (b) the current net asset value of,
the exchanged non-Free Shares. If an exchange between funds would result in
exchange of only part of a particular block of non-Free Shares, then shares
equal to any appreciation in the value of the block (up to the amount of the
exchange) will be treated as Free Shares and exchanged first, and the purchase
payment for that block will be allocated on a pro-rata basis between the
non-Free Shares of
42
<PAGE>
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 "Purchase of Fund Shares," 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 for the
Exchange Privilege account of each Class 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 for the Exchange Privilege
account of each Class 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 for the Exchange Privilege account of each Class
is $5,000 for Dean Witter Special Value Fund. The minimum initial investment for
the Exchange Privilege account of each Class for all other Dean Witter Funds for
which the Exchange Privilege is available is $1,000.) Upon exchange into an
Exchange Fund, the shares of that fund will be held in a special Exchange
Privilege Account separately from accounts of those shareholders who have
acquired their shares directly from that fund. As a result, certain services
normally available to shareholders of money market funds, including the check
writing feature, will not be available for funds held in that account.
The Fund and each of the other Dean Witter Funds may limit the number of
times this Exchange Privilege may be exercised by any investor within a
specified period of time. Also, the Exchange Privilege may be terminated or
revised at any time by the Fund and/or any of the Dean Witter Funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months' prior written notice of termination will be
given to the shareholders who hold shares of Exchange Funds pursuant to the
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective(s), policies and restrictions.
43
<PAGE>
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. 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.
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 each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. 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.
REPURCHASE. As stated in the Prospectus, 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 after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
PAYMENT FOR SHARES REDEEMED OR REPURCHASED. As discussed in the Prospectus,
payment for shares of any Class 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 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
44
<PAGE>
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 check 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). It has been and remains the
Fund's policy and practice that, if checks for redemption proceeds remain
uncashed, no interest will accrue on amounts represented by such uncashed
checks. 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 CDSC 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 CDSC 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 35 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 in the same Class 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 capital gains or losses.
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. Capital gains distributions are not eligible for
the dividends received deduction. Treasury intends to issue regulations to
permit shareholders to take into account their proportionate share of the Fund's
capital gains distributions that will be subject to a reduced rate under the
Taxpayer Relief Act of 1997. The Taxpayer Relief Act reduces the maximum tax on
long-term capital gains from 28% to 20%; however, it also lengthens the required
holding period to
45
<PAGE>
obtain the lower rate from more than 12 months to more than 18 months. The lower
rates do not apply to collectibles and certain other assets. Additionally, the
maximum capital gain rate for assets that are held more than five years and that
are acquired after December 31, 2000 is 18%.
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. In addition, the Fund intends
to distribute to its shareholders each calendar year a sufficient amount of
ordinary income and capital gains to avoid the imposition of a 4% excise tax.
Shareholders will normally have to pay federal income taxes, and any 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 or short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior year.
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.
Any loss realized by shareholders upon a redemption of shares within six
months of the date of their purchase will be treated as a long-term capital loss
to the extent of any distributions of net long-term capital gains during the
six-month period.
Dividends, interest and capital gains received by the Fund may give rise to
withholding 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 or
deductions with respect to such taxes, subject to certain provisions and
limitations contained in the Code. If more than 50% of the Fund's total assets
at the close of its fiscal year consist of securities of foreign corporations,
the Fund would be eligible and would determine whether or not to file an
election with the Internal Revenue Service pursuant to which shareholders of the
Fund will be required to include their respective pro rata portions of such
withholding taxes in their United States income tax returns as gross income,
treat such respective pro rata portions as taxes paid by them, and deduct such
respective pro rata portions in computing their taxable income or,
alternatively, use them as foreign tax credits against their United States
income taxes. If the Fund does elect to file the election with the Internal
Revenue Service, the Fund will report annually to its shareholders the amount
per share of such withholding.
SPECIAL RULES FOR CERTAIN FOREIGN CURRENCY TRANSACTIONS. In general, gains
from foreign currencies and from foreign currency options, foreign currency
futures and forward foreign exchange contracts relating to investments in stock,
securities or foreign currencies are currently considered to be qualifying
income for purposes of determining whether the Fund qualifies as a regulated
investment company. It is currently unclear, however, who will be treated as the
issuer of certain foreign currency instruments or how foreign currency options,
futures, or forward foreign currency contracts will be valued for purposes of
the regulated investment company diversification requirements applicable to the
Fund.
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
46
<PAGE>
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 by the
Investment Manager 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
Taxpayer Relief Act of 1997 establishes a mark-to-market regime which allows
taxpayers 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. These figures are
computed separately for Class A, Class B, Class C and Class D shares. 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 CDSC 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 returns of Class B for the one year and five year period ended
October 31, 1997 and for the period from November 30, 1990 (commencement of
operations) through October 31, 1997 were -34.41%, 1.96% and 5.50%,
respectively.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class A, Class C and Class D 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 by the initial $1,000
investment and subtracting 1 from the result. The ending redeemable value is
reduced by any CDSC at the end of the period. Based on the foregoing
calculations, the total returns for the period July 28, 1997 through October 31,
1997 were -37.16%, -34.49% and -33.68% for Class A, Class C and Class D,
respectively.
47
<PAGE>
In addition to the foregoing, the Fund may advertise its total return for
each Class 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 imposition of the maximum front-end sales charge for Class A
or the deduction of the CDSC for each of Class B and Class C 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 sales charge. Based on this calculation,
the average annual total returns of Class B for the one year and five year
period ended October 31, 1997 and the period from November 30, 1990
(commencement of operations) through October 31, 1997 were -31.01%, 2.33% and
5.50%, respectively.
In addition, the Fund may compute its aggregate total return for each Class
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 sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based on the foregoing
calculation, the total returns for Class B for the one year and five year period
ended October 31, 1997 and the period from November 30, 1990 (commencement of
operations) through October 31, 1997 were -31.01%, 12.18% and 44.86%,
respectively. Based on the foregoing calculations, the total returns for Class
A, Class C and Class D for the period July 28 through October 31, 1997 were
- -33.68%, -33.83% and -33.68%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of 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
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 and $100,000 adjusted for the initial sales charge) or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as the
case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception of the Class would have grown (or declined) to the following amounts
at October 31, 1997:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------------------------------------------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
Class A.......................................................... 7/28/97 $ 6,284 $ 31,834 $ 64,330
Class B.......................................................... 11/30/90 14,486 72,430 144,860
Class C.......................................................... 7/28/97 6,617 33,085 66,170
Class D.......................................................... 7/28/97 6,632 33,160 66,320
</TABLE>
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 2 billion 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.
48
<PAGE>
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 the
Fund will be called by the Fund's Secretary upon the written request of
shareholders entitled to vote at least 10% of the Fund's outstanding shares. The
Fund will also comply with the provisions of Section 16(c) of the Act.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Chase Manhattan Bank, 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 FSB, 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 FSB is an affiliate of Dean Witter InterCapital Inc., the Fund's
Investment Manager and Dean Witter Distributor Inc., the Fund's Distributor. As
Transfer Agent and Dividend Disbursing Agent, Dean Witter Trust FSB'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
FSB 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
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Investment Manager, is an officer and the General Counsel of the Fund.
49
<PAGE>
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended October 31,
1997 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.
50
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS, WARRANTS, RIGHTS AND BONDS (95.2)
AUSTRALIA (6.3%)
BANKING
700,000 Australia & New Zealand Banking Group Ltd....................................... $ 4,867,050
1,500,000 Westpac Banking Corp., Ltd...................................................... 8,705,178
------------
13,572,228
------------
BUILDING & CONSTRUCTION
1,666,000 Boral Ltd....................................................................... 4,367,196
------------
ENERGY
500,000 Woodside Petroleum Ltd.......................................................... 4,208,904
------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
1,200,000 Foster's Brewing Group Ltd...................................................... 2,270,916
6,000,000 Goodman Fielder Ltd............................................................. 9,167,772
------------
11,438,688
------------
METALS & MINING
450,000 Broken Hill Proprietary Co., Ltd................................................ 4,447,211
------------
MULTI-INDUSTRY
1,750,000 Pacific Dunlop Ltd.............................................................. 3,725,108
------------
RETAIL STORES
1,000,000 Coles Myer Ltd.................................................................. 4,794,156
------------
TOTAL AUSTRALIA................................................................. 46,553,491
------------
CHINA (0.8%)
AUTOMOTIVE
2,200,000 Qingling Motors Co.............................................................. 1,437,537
------------
TRANSPORTATION
1,700,000 Jinhui Shipping and Transportation Ltd.......................................... 1,210,964
------------
UTILITIES - ELECTRIC
10,350,000 Zhejiang Southeast Electric Power Co., Ltd. (B Shares).......................... 3,332,700
------------
TOTAL CHINA..................................................................... 5,981,201
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HONG KONG (33.7%)
BANKING
750,400 Bank of East Asia, Ltd.......................................................... $ 1,679,746
450,200 Dah Sing Financial Group........................................................ 1,130,087
1,285,838 Dao Heng Bank Group Ltd......................................................... 2,961,495
504,000 Guoco Group Ltd................................................................. 1,102,103
1,600,000 Hang Seng Bank Ltd.............................................................. 13,922,495
230,000 HSBC Holdings PLC............................................................... 5,207,996
156,000 International Bank of Asia...................................................... 72,666
------------
26,076,588
------------
CONGLOMERATES
250,000 Citic Pacific Ltd............................................................... 1,196,869
6,568,000 Hutchison Whampoa, Ltd.......................................................... 45,466,520
514,800 Jardine Matheson Holdings Ltd................................................... 3,294,720
920,000 Shanghai Industrial Holdings Ltd................................................ 4,094,973
1,500,000 Swire Pacific Ltd. (Class A).................................................... 8,015,786
------------
62,068,868
------------
ELECTRONIC & ELECTRICAL EQUIPMENT
1,500,000 ASM Pacific Technology Ltd...................................................... 1,125,704
6,700,000 Elec & Eltek International Holdings Ltd......................................... 2,470,725
843,000 Johnson Electric Holdings Ltd................................................... 2,301,520
------------
5,897,949
------------
ENGINEERING & CONSTRUCTION
673,000 Cheung Kong Infrastructure Holdings............................................. 1,741,606
1,000,000 Road King Infrastructure Ltd.*.................................................. 646,956
------------
2,388,562
------------
HOTELS/MOTELS
6,000,000 CDL Hotels International, Ltd................................................... 1,727,373
------------
INVESTMENT COMPANIES
100,000 Investment Co. of China*** *.................................................... 494,000
------------
LIFE INSURANCE
999,000 National Mutual Asia Ltd........................................................ 904,833
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
PUBLISHING
3,000,000 South China Morning Post (Holdings) Ltd......................................... $ 2,600,763
------------
REAL ESTATE
1,500,000 Amoy Properties, Ltd............................................................ 1,290,677
4,215,000 Cheung Kong (Holdings) Ltd...................................................... 29,314,388
1,300,000 China Resources Enterprise Ltd.................................................. 3,566,022
1,260,000 Great Eagle Holdings Ltd........................................................ 1,923,789
600,000 Henderson Land Development Co., Ltd............................................. 3,322,766
2,100,000 Hong Kong Land Holdings Ltd..................................................... 4,788,000
400,200 Hysan Development Co., Ltd...................................................... 836,285
4,333,000 New World Development Co., Ltd.................................................. 15,249,738
3,222,500 Sun Hung Kai Properties Ltd..................................................... 23,766,902
3,074,000 Wharf (Holdings) Ltd............................................................ 6,284,428
------------
90,342,995
------------
RETAIL - SPECIALTY APPAREL
412,000 Dickson Concepts International Ltd. (New)....................................... 887,598
------------
TELECOMMUNICATIONS
11,500,400 Hong Kong Telecommunications Ltd................................................ 22,023,151
------------
TRANSPORTATION
3,450,000 Cosco Pacific Ltd............................................................... 4,017,597
------------
UTILITIES
2,209,000 China Light & Power Co., Ltd.................................................... 11,633,085
5,850,000 Hong Kong & China Gas Co., Ltd.................................................. 11,051,304
2,700,000 Hong Kong Electric Holdings Ltd................................................. 9,153,135
------------
31,837,524
------------
TOTAL HONG KONG................................................................. 251,267,801
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INDIA (1.3%)
ALUMINUM
91,000 Hindalco Industries Ltd. (GDR)*................................................. $ 2,502,500
------------
BANKS
213,000 State Bank of India (GDR)*...................................................... 3,780,750
------------
TEXTILES
70,000 Reliance Industries Ltd. (GDR).................................................. 1,426,250
$ 2,000 K Reliance Industries Ltd. 3.50% due 11/03/99 (Conv.)............................. 2,270,000
------------
3,696,250
------------
TOTAL INDIA..................................................................... 9,979,500
------------
INDONESIA (5.7%)
AUTO PARTS
16,000,000 PT Gajah Tunggal................................................................ 2,681,564
------------
BANKING
13,730,200 Pt Bank Bira.................................................................... 1,917,626
1,000,000 PT Bank Dagang Nasional Indonesia (Rights)*..................................... 30,447
906,730 PT Bank Internasional Indonesia (Warrants due 01/17/00)*........................ 51,668
6,997,500 PT Pan Indonesia Bank........................................................... 1,563,687
999,642 PT Pan Indonesia Bank (Warrants due 06/26/00)*.................................. 25,131
------------
3,588,559
------------
BUILDING MATERIALS
10,333,096 PT Mulia Industrindo*........................................................... 1,876,121
------------
CONGLOMERATES
2,500,000 PT Bimantara Citra.............................................................. 2,304,469
------------
CONSTRUCTION EQUIPMENT
1,900,000 PT United Tractors.............................................................. 1,326,816
------------
CONSTRUCTION PLANT & EQUIPMENT
11,000,000 PT Citra Marga Nusaphala Persada................................................ 3,149,441
------------
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
568,000 PT Hanjaya Mandala Sampoerna.................................................... 995,587
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FOREST PRODUCTS, PAPER & PACKING
34,874 PT Indah Kiat Pulp & Paper Corp................................................. $ 13,394
993,175 PT Pabrik Kertas Tjiwi Kimia.................................................... 367,586
310,300 PT Pabrik Kertas Tjiwi Kimia (Warrants due 07/15/02)*........................... 39,004
------------
419,984
------------
INVESTMENT COMPANIES
2,500,000 Peregrine Indonesia Fund Ltd. (Units)++**....................................... 2,387,750
------------
METALS
3,523,000 PT Tambang Timah................................................................ 4,231,536
------------
OIL & GAS EXPLORATION
100,000 Gulf Indonesia Resources Ltd.*.................................................. 2,100,000
------------
PHARMACEUTICALS
3,000,000 PT Kalbe Farma.................................................................. 1,843,576
------------
PLANTATION
3,530,100 PT London Sumatra Indonesia..................................................... 3,820,988
------------
PROPERTY
200,000 PT Kawasan Jababeka - 144A** (GDR)*............................................. 776,000
------------
RETAIL - DEPARTMENT STORES
2,710,000 PT Ramayana Lestari Sentosa*.................................................... 4,617,598
------------
TELECOMMUNICATIONS
7,058,000 PT Telekomunikasi Indonesia..................................................... 6,604,553
------------
TOTAL INDONESIA................................................................. 42,724,542
------------
JAPAN (22.0%)
AGRICULTURE
2,500 Hokuto Corp..................................................................... 70,865
------------
APPAREL
41,000 World Co., Ltd.................................................................. 1,516,625
------------
AUTO TRUCKS & PARTS
110,000 NGK Spark Plug Co., Ltd......................................................... 765,337
55,000 Yasunaga Corp................................................................... 457,190
------------
1,222,527
------------
AUTOMOTIVE
97,000 Honda Motor Co.................................................................. 3,265,586
112,000 Toyota Motor Corp............................................................... 3,118,870
------------
6,384,456
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
BANKING
217,000 Asahi Bank, Ltd................................................................. $ 1,125,586
246,000 Bank of Tokyo-Mitsubishi Ltd.................................................... 3,210,474
196,000 Mitsui Trust & Banking Co., Ltd................................................. 681,031
158,000 Sanwa Bank, Ltd................................................................. 1,589,194
157,000 Sumitomo Bank................................................................... 1,670,490
164,000 Sumitomo Trust & Banking........................................................ 1,250,108
------------
9,526,883
------------
BUILDING & CONSTRUCTION
55,000 Kaneshita Construction.......................................................... 368,038
------------
BUILDING MATERIALS
94,000 Ibiden Co., Ltd................................................................. 1,562,760
276,000 Sanwa Shutter................................................................... 1,734,464
------------
3,297,224
------------
BUSINESS SERVICES
185,000 Ricoh Co., Ltd.................................................................. 2,383,624
36,000 Secom Co........................................................................ 2,328,180
------------
4,711,804
------------
CHEMICALS
707,000 Mitsubishi Chemical Corp........................................................ 1,592,660
132,000 Mitsubishi Gas Chemical Co...................................................... 459,751
489,000 Nippon Zeon Co., Ltd............................................................ 1,772,269
104,000 Shin-Etsu Chemical Co........................................................... 2,541,646
225,000 Sumitomo Bakelite Co., Ltd...................................................... 1,569,202
------------
7,935,528
------------
COMMERCIAL SERVICES
30,000 Nichii Gakkan Co................................................................ 1,221,945
------------
COMPUTER SOFTWARE & SERVICES
84,000 Hitachi Software Engineering Co., Ltd........................................... 2,283,292
13,000 Ines Corp....................................................................... 184,788
53,000 Meitec Corp..................................................................... 1,564,007
16,000 Nintendo Co., Ltd............................................................... 1,383,209
62 NTT Data Corp................................................................... 2,963,425
34,000 Ricoh Elemex.................................................................... 276,974
------------
8,655,695
------------
COMPUTERS
21,000 Nidec Corp...................................................................... 820,449
------------
ELECTRIC
80,000 Tokyo Electric Power Co......................................................... 1,529,510
------------
ELECTRONIC & ELECTRICAL EQUIPMENT
27,000 Advantest Corp.................................................................. 2,233,167
130,000 Aiwa Co., Ltd................................................................... 2,906,899
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
Y 100,000 K Canon, Inc. 1.20% due 12/20/05 (Conv.).......................................... $ 1,828,761
Y 50,000 K Canon, Inc. 1.30% due 12/19/08 (Conv.).......................................... 813,383
224,000 Fujitsu, Ltd.................................................................... 2,457,855
176,000 Hitachi, Ltd.................................................................... 1,353,283
60,000 Mitsui High-Tec................................................................. 1,366,584
37,000 Murata Manufacturing Co., Ltd................................................... 1,500,914
33,600 Sony Corp....................................................................... 2,790,224
135,000 Sumitomo Electric Industries.................................................... 1,784,289
34,000 TDK Corp........................................................................ 2,820,615
------------
21,855,974
------------
ELECTRONIC COMPONENTS
155,000 Dainippon Screen Manufacturing Co., Ltd......................................... 1,257,523
70,000 Mitsumi Electric Co., Ltd....................................................... 1,373,234
2,000 Sunx Ltd........................................................................ 20,948
------------
2,651,705
------------
ELECTRONICS
29,000 Rohm Co., Ltd................................................................... 2,868,662
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
33,000 Shinko Electric Industries Co., Ltd............................................. 1,399,003
100,000 Toshiba Ceramics Co., Ltd....................................................... 642,560
------------
2,041,563
------------
ELECTRONICS - SPECIALTY
90,000 Taiyo Yuden Co., Ltd............................................................ 1,039,900
------------
ENGINEERING & CONSTRUCTION
364,000 Kajima Corp..................................................................... 1,630,889
55,500 Nitto Kohki Co., Ltd............................................................ 991,895
------------
2,622,784
------------
ENTERTAINMENT
33,000 H.I.S. Co., Ltd................................................................. 1,072,569
37,700 Sony Music Entertainment Inc.................................................... 1,325,611
------------
2,398,180
------------
FINANCIAL SERVICES
15,400 Nichiei Co., Ltd. (Kyoto)....................................................... 1,689,776
156,000 Nomura Securities Co., Ltd...................................................... 1,815,461
27,500 Orix Corp....................................................................... 1,879,052
------------
5,384,289
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FOOD, BEVERAGE, TOBACCO & HOUSEHOLD PRODUCTS
163,000 Nippon Meat Packers, Inc........................................................ $ 2,276,309
------------
HAND TOOLS
16,000 Disco Corp...................................................................... 514,713
------------
INDUSTRIALS
Y 43,000 K Nippon Densan Corp. 1.00% 09/30/03 (Conv.)...................................... 482,544
------------
INSURANCE
249,000 Tokio Marine & Fire Insurance Co................................................ 2,483,791
------------
MACHINERY
212,000 Daifuku Co., Ltd................................................................ 1,589,559
88,000 Fuji Machine Manufacturing Co., Ltd............................................. 2,552,951
16,500 Keyence Corp.................................................................... 2,468,828
250,000 Minebea Co., Ltd................................................................ 2,493,766
Y 21,000 K Minebea Co., Ltd. 0.80% due 03/31/03 (Conv.).................................... 247,880
356,000 Mitsubishi Heavy Industries, Ltd................................................ 1,748,928
171,000 Nippon Thompson Co.............................................................. 1,172,693
270,000 OSG Corp........................................................................ 1,571,072
100,000 Tsudakoma....................................................................... 332,502
------------
14,178,179
------------
MANUFACTURING
61,000 Nichiha Corp.................................................................... 689,609
------------
MERCHANDISING
50,000 Shimamura Co., Ltd.............................................................. 1,350,790
------------
METALS & MINING
919,000 Nippon Steel Co................................................................. 1,894,530
87,000 Sumitomo Sitix Corp............................................................. 1,533,167
80,000 Sumitomo Special Metals......................................................... 1,536,160
------------
4,963,857
------------
METALS NON-FERROUS
234,000 Fujikura Ltd.................................................................... 1,604,738
582,000 Mitsui Mining & Smelting........................................................ 2,568,928
------------
4,173,666
------------
NATURAL GAS
620,000 Tokyo Gas Co., Ltd.............................................................. 1,422,444
------------
OFFICE EQUIPMENT
13,000 Riso Kagaku..................................................................... 766,168
------------
PHARMACEUTICALS
103,000 Eisai Co., Ltd.................................................................. 1,618,204
79,000 Takeda Chemical Industries...................................................... 2,153,948
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
49,000 Terumo Corp..................................................................... $ 806,484
------------
4,578,636
------------
REAL ESTATE
43,700 Chubu Sekiwa Real Estate, Ltd................................................... 345,096
124,000 Mitsubishi Estate Co., Ltd...................................................... 1,566,750
223,000 Mitsui Fudosan Co............................................................... 2,521,031
------------
4,432,877
------------
RETAIL
45,300 Ministop Co., Ltd............................................................... 1,317,955
23,200 Otsuka Kagu Ltd................................................................. 1,523,525
29,000 Shimachu Co., Ltd............................................................... 617,124
203,000 Tokyo Style Co., Ltd............................................................ 2,143,059
------------
5,601,663
------------
RETAIL - DEPARTMENT STORES
183,000 Hankyu Department Stores........................................................ 1,461,870
------------
RETAIL - GENERAL MERCHANDISE
28,200 Circle K Japan Co., Ltd......................................................... 1,448,678
37,000 Seven - Eleven Japan............................................................ 2,768,080
------------
4,216,758
------------
RETAIL - SPECIALTY
60,000 Aderans Co., Ltd................................................................ 1,615,960
------------
STEEL
1,013,000 Sumitomo Metal Industries....................................................... 2,029,368
100,000 Yamato Kogyo Co., Ltd........................................................... 789,692
------------
2,819,060
------------
TELECOMMUNICATIONS
392 DDI Corp........................................................................ 1,309,925
127,000 Nippon Comsys Corp.............................................................. 1,541,313
358 Nippon Telegraph & Telephone Corp............................................... 3,035,411
------------
5,886,649
------------
TEXTILES
768,000 Mitsubishi Rayon Co., Ltd....................................................... 2,464,239
560,000 Nitto Boseki Co., Ltd........................................................... 1,526,850
------------
3,991,089
------------
TRANSPORTATION
19,000 Kanto Seino Transportation...................................................... 401,164
303,000 Tokyu Corp...................................................................... 1,259,352
------------
1,660,516
------------
UTILITIES - ELECTRIC
69,300 Hokkaido Electric Power......................................................... 1,134,838
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
WHOLESALE & INTERNATIONAL TRADE
359,000 Mitsui & Co..................................................................... $ 2,724,580
7,000 Satori Electric Co., Ltd........................................................ 124,522
------------
2,849,102
------------
WHOLESALE DISTRIBUTOR
31,200 Fujimi, Inc.*................................................................... 1,716,908
49,500 Misumi Corp..................................................................... 806,484
------------
2,523,392
------------
TOTAL JAPAN..................................................................... 164,199,086
------------
MALAYSIA (6.2%)
AUTOMOTIVE
370,000 Edaran Otomobil Nasional Berhad................................................. 1,159,701
455,000 Oriental Holdings Berhad........................................................ 923,582
99,000 UMW Holdings Berhad............................................................. 115,254
------------
2,198,537
------------
BANKING
1,100,000 Affin Holdings Berhad........................................................... 837,313
34,000 Hong Leong Credit Berhad........................................................ 47,296
701,000 Malayan Banking Berhad.......................................................... 2,699,373
2,200,333 Public Bank Berhad.............................................................. 1,372,745
------------
4,956,727
------------
BUILDING & CONSTRUCTION
60,000 Dialog Group Berhad............................................................. 240,000
700,000 Gamuda Berhad................................................................... 1,065,672
134,000 Gamuda Berhad (Warrants due 12/29/01)*.......................................... 33,600
1,500,000 Lingkaran Trans Kota Holdings Berhad*........................................... 1,432,836
1,750 Sungei Way Holdings Berhad (Warrants due 06/29/99)*............................. 345
956,968 United Engineers Malaysia Berhad................................................ 2,256,731
273,000 YTL Corp. Berhad................................................................ 301,522
------------
5,330,706
------------
CONGLOMERATES
650,000 Sime Darby Berhad............................................................... 931,343
------------
ELECTRONICS
475,000 Malaysian Pacific Industries Berhad............................................. 1,474,627
------------
INSURANCE
605,000 Malaysian Assurance Alliance Berhad............................................. 1,083,582
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
LEISURE
460,000 Berjaya Sports Toto Berhad...................................................... $ 1,249,552
2,332,800 Magnum Corporation Berhad....................................................... 1,817,495
3,161,000 Metroplex Berhad................................................................ 1,094,555
500,000 Resorts World Berhad............................................................ 888,060
------------
5,049,662
------------
PLANTATION
1,800,000 Highlands & Lowlands Berhad..................................................... 2,031,045
2,695,000 IOI Corporated Berhad........................................................... 2,284,716
900,000 Kuala Lumpur Kepong Berhad...................................................... 2,149,254
------------
6,465,015
------------
PUBLISHING
702,000 Star Publications............................................................... 1,299,224
------------
REAL ESTATE
1,200,000 Pelangi Berhad.................................................................. 576,716
900,000 Sime UEP Properties Berhad...................................................... 832,836
------------
1,409,552
------------
TELECOMMUNICATIONS
1,850,000 Telekom Malaysia Berhad......................................................... 4,776,866
------------
TOBACCO
600,000 RJ Reynolds Berhad.............................................................. 922,388
------------
UTILITIES
229,000 Prime Utilities Berhad.......................................................... 676,746
147,000 Prime Utilities Berhad (Warrants due 03/11/01)*................................. 71,964
294,000 Prime Utilities Berhad 1.00% due 03/01/01 (Loan Stock).......................... 52,657
2,650,000 Tenaga Nasional Berhad.......................................................... 5,695,522
------------
6,496,889
------------
WATER
2,207,000 Puncak Niaga Holdings Berhad.................................................... 2,595,696
------------
WIRE & CABLE
1,400,000 Leader Universal Holdings Berhad................................................ 852,537
------------
TOTAL MALAYSIA.................................................................. 45,843,351
------------
PHILIPPINES (1.2%)
BUILDING MATERIALS
341,400 Bacnotan Consolidated Industries................................................ 229,882
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONGLOMERATES
2,700,000 First Philippine Holdings Corp. (B Shares)...................................... $ 2,282,235
------------
ENGINEERING & CONSTRUCTION
14,334,000 DMCI Holdings, Inc.*............................................................ 1,150,006
------------
LEISURE
14,000,000 Belle Corp.*.................................................................... 1,283,668
2,800,000 Belle Corp. (Warrants due 10/06/00)*............................................ 521
------------
1,284,189
------------
TELECOMMUNICATIONS
80,000 Philippine Long Distance Telephone Co. (ADR).................................... 1,940,000
------------
UTILITIES
782,963 Manila Electric Co. (B Shares).................................................. 2,422,923
------------
TOTAL PHILIPPINES............................................................... 9,309,235
------------
SINGAPORE (8.1%)
BANKING
583,250 Development Bank of Singapore, Ltd.............................................. 5,450,588
1,198,200 Overseas Chinese Banking Corp., Ltd............................................. 6,665,130
600,000 Overseas Union Bank, Ltd........................................................ 2,002,543
1,028,000 United Overseas Bank, Ltd....................................................... 5,685,696
------------
19,803,957
------------
CONGLOMERATES
659,000 Jardine Strategic Holdings Ltd.................................................. 2,108,800
988,750 Keppel Corp., Ltd.*............................................................. 3,130,308
1,430,000 Natsteel Ltd.................................................................... 2,318,182
1,016,000 Sembawang Corp., Ltd............................................................ 3,126,154
------------
10,683,444
------------
ELECTRONIC & ELECTRICAL EQUIPMENT
260,000 Elec & Eltek International Co., Ltd............................................. 1,872,000
1,308,000 Venture Manufacturing Ltd....................................................... 4,490,273
------------
6,362,273
------------
ELECTRONICS
300,000 GP Batteries International Ltd.................................................. 877,305
------------
FINANCE
240,000 Hong Leong Finance Ltd. (Warrants due 09/15/98)*................................ 15,258
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
HEALTHCARE
326,000 Parkway Holdings Ltd............................................................ $ 824,844
------------
METALS - MISCELLANEOUS
2,000,500 Amtek Engineering Ltd........................................................... 1,576,999
------------
PUBLISHING
150,000 Singapore Press Holdings Ltd.................................................... 2,069,294
------------
REAL ESTATE
850,400 City Developments, Ltd.......................................................... 3,568,112
1,000,000 DBS Land Ltd.................................................................... 1,703,751
400,000 Singapore Land Ltd.............................................................. 1,139,224
1,700,000 United Overseas Land, Ltd....................................................... 1,469,803
240,000 United Overseas Land, Ltd. (Warrants due 05/28/01)*............................. 51,875
------------
7,932,765
------------
SHIPBUILDING
700,000 Keppel Fels Ltd................................................................. 1,886,841
------------
TRANSPORTATION
750,000 Singapore Airlines Ltd.......................................................... 5,626,192
------------
UTILITIES - TELECOMMUNICATIONS
1,600,000 Singapore Telecom............................................................... 2,542,912
------------
TOTAL SINGAPORE................................................................. 60,202,084
------------
SOUTH KOREA (2.4%)
AUTOMOTIVE
57,000 Hyundai Motor Co., Ltd.......................................................... 944,063
36,000 Hyundai Motor Co., Ltd. (GDR)................................................... 126,000
------------
1,070,063
------------
BANKING
7,003 Shinhan Bank.................................................................... 53,982
------------
COMMUNICATIONS - EQUIPMENT/MANUFACTURERS
27,249 LG Information & Communication Ltd.............................................. 1,566,818
------------
ELECTRONIC & ELECTRICAL EQUIPMENT
40,000 Samsung Display Devices Co...................................................... 1,229,167
80,118 Samsung Electronics Co. (GDR)................................................... 3,162,992
------------
4,392,159
------------
ENGINEERING & CONSTRUCTION
39,990 Hyundai Engineering & Construction Co........................................... 595,684
------------
INSURANCE
30,840 Oriental Fire & Marine Insurance................................................ 359,800
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANIES
234,000 Atlantis Korean Smaller Companies*.............................................. $ 760,500
65,000 Clemente Korea Emerging Growth Fund*............................................ 276,250
------------
1,036,750
------------
SHIPBUILDING
200,650 Daewoo Heavy Industries......................................................... 1,170,458
------------
STEEL & IRON
110,685 Pohang Iron & Steel Co., Ltd.................................................... 4,942,085
------------
UTILITIES
90,640 Korea Electric Power Corp....................................................... 1,293,508
46,838 Seoul City Gas Go Ltd........................................................... 1,122,160
------------
2,415,668
------------
TOTAL SOUTH KOREA............................................................... 17,603,467
------------
TAIWAN (5.4%)
BANKS
705,000 China Development Corp.......................................................... 2,015,931
846,400 China Trust Commercial Bank*.................................................... 1,178,321
372,960 International Commercial Bank of China.......................................... 688,635
614,900 United World Chinese Commercial Bank*........................................... 1,165,497
------------
5,048,384
------------
BUILDING & CONSTRUCTION
802,420 Cathay Construction Corp........................................................ 865,355
------------
BUILDING MATERIALS
307,491 Asia Cement Corp. (GDR)......................................................... 3,305,528
------------
CHEMICALS
56,000 Formosa Chemical & Fibre Corp................................................... 52,157
1,013,700 Formosa Plastic Corp............................................................ 1,629,871
$ 2,925 K Nan Ya Plastics Corp. 1.75% due 07/19/01 (Conv.)................................ 3,188,250
------------
4,870,278
------------
COMPUTERS
52,750 Acer Inc........................................................................ 73,092
$ 1,900 K Acer Peripherals Inc. 1.25% due 11/27/06 (Conv.)................................ 2,090,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
$ 2,100 K Compal Electronics 1.00% due 11/21/03 (Conv.)................................... $ 2,625,000
780,000 Microtek International, Inc.*................................................... 917,647
$ 1,000 K Yageo Corp. 1.25% due 07/24/03 (Conv.).......................................... 1,450,000
------------
7,155,739
------------
ELECTRONICS - SEMICONDUCTORS/ COMPONENTS
541,800 Siliconware Precision Industries Co.*........................................... 1,062,353
$ 230 K Siliconware Precision Industries Co. 0.50% due 07/21/04 (Conv.)................. 219,650
811,500 Taiwan Semiconductor Manufacturing Co.*......................................... 2,585,662
$ 1,800 K United Microelectronics Corp. - 144A** 0.25% due 05/16/04 (Conv.)............... 1,944,000
------------
5,811,665
------------
INVESTMENT COMPANIES
600 Taipei Fund*.................................................................... 5,100,000
------------
LIFE INSURANCE
509,350 Cathay Life Insurance Co., Ltd.................................................. 2,297,068
------------
MANUFACTURING
1,032,000 President Enterprises Corp.*.................................................... 1,197,254
------------
STEEL & IRON
2,548,000 China Steel Corp................................................................ 1,973,451
63,000 China Steel Corp. (GDR)......................................................... 913,500
------------
2,886,951
------------
TRANSPORTATION
$ 2,000 K U-Ming Marine Transport 1.50% due 02/07/01 (Conv.).............................. 1,625,000
------------
TOTAL TAIWAN.................................................................... 40,163,222
------------
THAILAND (2.1%)
BANKING
320,000 Bangkok Bank PCL................................................................ 1,092,683
------------
ENERGY
124,900 Ban Pu Coal Co., Ltd............................................................ 859,068
258,500 Lanna Lignite Public Co., Ltd................................................... 895,293
------------
1,754,361
------------
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INVESTMENT COMPANIES
7,896,100 Ruang Khao 2 Fund (Units)++..................................................... $ 1,117,009
------------
OIL RELATED
570,000 PTT Exploration & Production PCL................................................ 5,700,000
------------
TELECOMMUNICATIONS
270,000 Advanced Info Service Public Co., Ltd........................................... 1,422,439
------------
TELEVISION
250,000 BEC World Public Co., Ltd....................................................... 1,256,097
------------
TRANSPORTATION
3,300,000 Bangkok Expressway Public Co., Ltd.*............................................ 2,173,171
312,000 Regional Container Line Co., Ltd................................................ 502,244
------------
2,675,415
------------
UTILITIES - ELECTRIC
800,000 Cogeneration Public Co.*........................................................ 790,244
------------
TOTAL THAILAND.................................................................. 15,808,248
------------
TOTAL COMMON STOCKS, WARRANTS, RIGHTS AND BONDS
(IDENTIFIED COST $911,863,478).................................................. 709,635,228
------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS
- -----------
<C> <S> <C>
PURCHASED PUT OPTIONS ON FOREIGN CURRENCY (0.7%)
HKD 257,760 April 24, 1998/HKD 8.055............................................................. 947,200
HKD 290,520 April 24, 1998/HKD 8.07.............................................................. 1,058,400
Y 6,613,322 February 10, 1998/YEN 115.82......................................................... 2,192,640
Y 5,914,300 February 10, 1998/YEN 120.70......................................................... 877,100
------------
TOTAL PURCHASED PUT OPTIONS ON FOREIGN CURRENCY
(IDENTIFIED COST $5,029,510)......................................................... 5,075,340
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
58
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1997, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (a) (1.2%)
COMMERCIAL PAPER
AUTOMOTIVE - FINANCE
$ 350 Ford Motor Credit Co. 5.50% due 11/26/97............................................. $ 348,663
------------
U.S. GOVERNMENT AGENCY
9,000 Federal Home Loan Mortgage Corp. 5.65% due 11/03/97.................................. 8,997,175
------------
TOTAL SHORT-TERM INVESTMENTS
(AMORTIZED COST $9,345,838).......................................................... 9,345,838
------------
TOTAL INVESTMENTS
(IDENTIFIED COST $926,238,826)....................................................... 724,056,406
------------
</TABLE>
<TABLE>
<CAPTION>
CURRENCY
AMOUNT IN
THOUSANDS
- -----------
<C> <S> <C>
WRITTEN OPTIONS ON FOREIGN CURRENCY (0.4%)
HKD 290,520 April 24, 1998/HKD 8.07.............................................................. (1,420,200)
HKD 257,760 April 24, 1998/HKD 8.05.............................................................. (1,228,800)
------------
TOTAL WRITTEN OPTIONS ON FOREIGN CURRENCY
(PREMIUM RECEIVED $2,594,840)........................................................ (2,649,000)
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $926,238,826) (B)........................................................ 97.1 % 724,056,406
TOTAL WRITTEN OPTIONS OUTSTANDING......................................................... (0.4) (2,649,000)
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................ 3.3 24,284,164
------ -------------
NET ASSETS................................................................................ 100.0 % $ 745,691,570
------ -------------
------ -------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
K In thousands.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
*** Partially paid shares. Resale is restricted to qualified institutional
investors.
++ Consists of one or more class of securities traded together as a unit;
stocks with attached warrants.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $47,368,650 and the
aggregate gross unrealized depreciation is $249,551,070, resulting in net
unrealized depreciation of $202,182,420.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT OCTOBER 31, 1997
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN DELIVERY APPRECIATION
TO DELIVER EXCHANGE FOR DATE (DEPRECIATION)
- ----------------------------------------------------
<S> <C> <C> <C>
$ 3,870,634 HKD29,929,677 11/03/97 $2,003
MYR 4,283,151 $ 1,254,768 11/03/97 (23,784)
JPY 29,990,882 $ 249,238 11/04/97 (62)
SGD 2,883,450 $ 1,831,227 11/04/97 (1,863)
JPY 20,597,489 $ 171,246 11/05/97 28
MYR 6,850,446 $ 1,984,486 11/05/97 (60,423)
MYR 977,094 $ 288,654 11/05/97 (3,016)
SGD 4,295,384 $ 2,715,161 11/05/97 (15,535)
--------------
Net unrealized
depreciation........................ (10$2,652)
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
SUMMARY OF INVESTMENTS OCTOBER 31, 1997
<TABLE>
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Agriculture....................................................................... $ 70,864 0.0 %
Aluminum.......................................................................... 2,502,500 0.3
Apparel........................................................................... 1,516,625 0.2
Auto Parts........................................................................ 2,681,564 0.3
Auto Trucks & Parts............................................................... 1,222,527 0.2
Automotive........................................................................ 11,090,592 1.5
Automotive - Finance.............................................................. 348,663 0.1
Banking........................................................................... 78,671,607 10.6
Banks............................................................................. 8,829,134 1.2
Building & Construction........................................................... 10,931,294 1.5
Building Materials................................................................ 8,708,755 1.2
Business Services................................................................. 4,711,804 0.6
Chemicals......................................................................... 12,805,806 1.7
Commercial Services............................................................... 1,221,945 0.1
Communications - Equipment/Manufacturers.......................................... 1,566,818 0.2
Computer Software & Services...................................................... 8,655,694 1.2
Computers......................................................................... 7,976,188 1.1
Conglomerates..................................................................... 78,270,359 10.5
Construction Equipment............................................................ 1,326,816 0.2
Construction Plant & Equipment.................................................... 3,149,441 0.4
Currency Options.................................................................. 5,075,340 0.7
Electric.......................................................................... 1,529,510 0.2
Electronic & Electrical Equipment................................................. 38,508,358 5.2
Electronic Components............................................................. 2,651,704 0.3
Electronics....................................................................... 5,220,593 0.7
Electronics - Semiconductors/Components........................................... 7,853,228 1.0
Electronics - Specialty........................................................... 1,039,900 0.1
Energy............................................................................ 5,963,265 0.8
Engineering & Construction........................................................ 6,757,037 0.9
Entertainment..................................................................... 2,398,180 0.3
Finance........................................................................... 15,257 0.0
Financial Services................................................................ 5,384,289 0.7
Food, Beverage, Tobacco & Household Products...................................... 14,710,584 2.0
Forest Products, Paper & Packing.................................................. 419,984 0.1
Hand Tools........................................................................ 514,713 0.1
Healthcare........................................................................ 824,844 0.1
Hotels/Motels..................................................................... 1,727,373 0.2
Industrials....................................................................... 482,544 0.1
Insurance......................................................................... 3,927,173 0.5
Investment Companies.............................................................. 10,135,509 1.3
Leisure........................................................................... 6,333,851 0.9
Life Insurance.................................................................... 3,201,901 0.4
Machinery......................................................................... 14,178,180 1.9
Manufacturing..................................................................... 1,886,863 0.3
<CAPTION>
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Merchandising..................................................................... $ 1,350,790 0.2 %
Metals............................................................................ 4,231,536 0.6
Metals & Mining................................................................... 9,411,068 1.2
Metals - Miscellaneous............................................................ 1,576,999 0.2
Metals - Non-Ferrous.............................................................. 4,173,666 0.6
Multi-Industry.................................................................... 3,725,108 0.5
Natural Gas....................................................................... 1,422,444 0.2
Office Equipment.................................................................. 766,168 0.1
Oil & Gas Exploration............................................................. 2,100,000 0.3
Oil Related....................................................................... 5,700,000 0.8
Pharmaceuticals................................................................... 6,422,212 0.9
Plantation........................................................................ 10,286,003 1.4
Property.......................................................................... 776,000 0.1
Publishing........................................................................ 5,969,282 0.8
Real Estate....................................................................... 104,118,189 14.0
Retail............................................................................ 5,601,663 0.8
Retail - Department Stores........................................................ 6,079,468 0.8
Retail - General Merchandise...................................................... 4,216,758 0.6
Retail - Specialty................................................................ 1,615,960 0.2
Retail - Specialty Apparel........................................................ 887,598 0.1
Retail Stores..................................................................... 4,794,156 0.6
Shipbuilding...................................................................... 3,057,299 0.4
Steel............................................................................. 2,819,061 0.4
Steel & Iron...................................................................... 7,829,036 1.0
Telecommunications................................................................ 42,653,658 5.7
Television........................................................................ 1,256,098 0.2
Textiles.......................................................................... 7,687,339 1.0
Tobacco........................................................................... 922,388 0.1
Transportation.................................................................... 16,815,683 2.3
U.S. Government Agency............................................................ 8,997,175 1.2
Utilities......................................................................... 43,173,004 5.8
Utilities - Electric.............................................................. 5,257,782 0.7
Utilities - Telecommunications.................................................... 2,542,912 0.3
Water............................................................................. 2,595,696 0.3
Wholesale & International Trade................................................... 2,849,102 0.4
Wholesale Distributor............................................................. 2,523,392 0.3
Wire & Cable...................................................................... 852,537 0.1
------------ ---
$724,056,406 97.1 %
------------ ---
------------ ---
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Common Stocks..................................................................... $690,530,946 92.7 %
Convertible Bonds................................................................. 18,784,469 2.5
Foreign Currency Put Options...................................................... 5,075,340 0.7
Short-Term Investments............................................................ 9,345,838 1.2
Warrants & Rights................................................................. 319,813 0.0
------------ ---
$724,056,406 97.1 %
------------ ---
------------ ---
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $926,238,826)............................................................ $ 724,056,406
Cash (including $7,592,446 in foreign currency)............................................. 11,905,736
Receivable for:
Investments sold........................................................................ 17,570,446
Capital stock sold...................................................................... 2,506,157
Dividends............................................................................... 1,016,602
Interest................................................................................ 129,180
Prepaid expenses and other assets........................................................... 86,201
--------------
TOTAL ASSETS........................................................................... 757,270,728
--------------
LIABILITIES:
Written call options outstanding, at value
(premiums received $2,594,840)............................................................ 2,649,000
Payable for:
Investments purchased................................................................... 4,400,209
Capital stock repurchased............................................................... 1,837,702
Plan of distribution fee................................................................ 799,956
Investment management fee............................................................... 799,585
Accrued expenses and other payables......................................................... 1,092,706
--------------
TOTAL LIABILITIES...................................................................... 11,579,158
--------------
NET ASSETS............................................................................. $ 745,691,570
--------------
--------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................................................. $1,079,062,994
Net unrealized depreciation................................................................. (202,672,283)
Dividends in excess of net investment income................................................ (3,880,806)
Accumulated net realized loss............................................................... (126,818,335)
--------------
NET ASSETS............................................................................. $ 745,691,570
--------------
--------------
CLASS A SHARES:
Net Assets.................................................................................. $622,202
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 48,394
NET ASSET VALUE PER SHARE.............................................................. $12.86
--------------
--------------
Maximum Offering Price Per Share
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)......................................... $13.57
--------------
--------------
CLASS B SHARES:
Net Assets.................................................................................. $744,132,621
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 57,991,437
NET ASSET VALUE PER SHARE.............................................................. $12.83
--------------
--------------
CLASS C SHARES:
Net Assets.................................................................................. $819,243
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 63,853
NET ASSET VALUE PER SHARE.............................................................. $12.83
--------------
--------------
CLASS D SHARES:
Net Assets.................................................................................. $117,504
Shares Outstanding (500,000,000 AUTHORIZED, $.01 PAR VALUE)................................. 9,137
NET ASSET VALUE PER SHARE.............................................................. $12.86
--------------
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1997*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $2,126,874 foreign withholding tax)........................................ $ 33,599,748
Interest..................................................................................... 1,282,514
-------------
TOTAL INCOME............................................................................ 34,882,262
-------------
EXPENSES
Plan of distribution fee (Class A shares).................................................... 278
Plan of distribution fee (Class B shares).................................................... 14,155,635
Plan of distribution fee (Class C shares).................................................... 1,074
Investment management fee.................................................................... 13,946,846
Custodian fees............................................................................... 3,270,864
Transfer agent fees and expenses............................................................. 2,507,387
Professional fees............................................................................ 245,395
Shareholder reports and notices.............................................................. 223,412
Registration fees............................................................................ 92,743
Directors' fees and expenses................................................................. 6,994
Other........................................................................................ 44,740
-------------
TOTAL EXPENSES.......................................................................... 34,495,368
-------------
NET INVESTMENT INCOME................................................................... 386,894
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments.............................................................................. (79,085,850)
Options written.......................................................................... 718,720
Foreign exchange transactions............................................................ (2,636,120)
-------------
NET LOSS................................................................................ (81,003,250)
-------------
Net change in unrealized appreciation/depreciation on:
Investments.............................................................................. (280,418,627)
Translation of forward foreign currency contracts, other assets and liabilities
denominated in foreign currencies...................................................... (406,090)
-------------
NET DEPRECIATION........................................................................ (280,824,717)
-------------
NET LOSS................................................................................ (361,827,967)
-------------
NET DECREASE................................................................................. $(361,441,073)
-------------
-------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
62
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997* OCTOBER 31, 1996
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................. $ 386,894 $ 2,914,418
Net realized gain (loss)............................................... (81,003,250) 2,758,084
Net change in unrealized appreciation.................................. (280,824,717) 28,304,565
----------------- ----------------
NET INCREASE (DECREASE)........................................... (361,441,073) 33,977,067
Dividends to shareholders from net investment income - Class B
shares............................................................... (25,258,274) (33,521,569)
Net increase (decrease) from capital stock transactions................ (492,076,963) 182,463,571
----------------- ----------------
NET INCREASE (DECREASE)........................................... (878,776,310) 182,919,069
NET ASSETS:
Beginning of period.................................................... 1,624,467,880 1,441,548,811
----------------- ----------------
END OF PERIOD
(INCLUDING DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME OF
$3,880,806 AND UNDISTRIBUTED NET INVESTMENT INCOME OF $1,241,493,
RESPECTIVELY)...................................................... $ 745,691,570 $ 1,624,467,880
----------------- ----------------
----------------- ----------------
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
63
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
Dean Witter Pacific 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 capital appreciation of its investments. The Fund was incorporated in
Maryland on June 13, 1990 and commenced operations on November 30, 1990. On July
28, 1997, the Fund commenced offering three additional classes of shares, with
the then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect 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 pursuant to procedures
adopted 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 are 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 Dean Witter InterCapital Inc. (the "Investment Manager") or Morgan
Grenfell Investment Services Limited (the "Sub-Adviser") that sale and 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
64
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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 the 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 ex-dividend date
except for certain dividends from foreign securities which are recorded as soon
as the Fund is informed after the ex-dividend date. Discounts are accreted over
the life of the respective securities. Interest income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. 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 which 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.
65
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
E. 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 foreign currency
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
as realized and unrealized gain/loss on foreign exchange transactions. 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.
F. 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 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.
G. 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.
H. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the record date. The amount of dividends
and distributions from net investment income and net realized capital gains are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles. These "book/tax" differences are
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
66
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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% to the portion of daily net assets not exceeding $1
billion and 0.95% to the portion of daily net assets in excess of $1 billion.
Effective May 1, 1997, the Agreement was amended to reduce the annual rate to
0.90% to the portion of daily net assets in excess of $2 billion.
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 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, 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-Adviser monthly compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Investment Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class B
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets of
Class B; and (iii) Class C -- up to 1.0% of the average daily net assets of
Class C. In the case of Class A shares, amounts paid under the Plan are paid to
the Distributor for services provided. In the case of Class B and Class C
shares, amounts paid under the Plan are paid to the Distributor for services
provided and the expenses borne by it and others in the distribution of the
shares of these Classes, including
67
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
the payment of commissions for sales of these Classes 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 others who
engage in or support distribution of the 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 these 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, in the case of Class B shares, 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 expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. 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
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 $41,117,586 at October 31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the period ended October 31, 1997, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended October 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $4,821,220, and $650, respectively
and approximately $11,000 in front-end sales charges from sales of the Fund's
Class A shares. The respective shareholders pay such charges which are not an
expense of the Fund.
68
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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, 1997 aggregated
$576,215,868 and $1,113,880,798, respectively.
For the year ended October 31, 1997, the Fund incurred $177,930 in brokerage
commissions with affiliates of the Sub-Adviser for portfolio transactions
executed on behalf of the Fund.
For the period May 31, 1997 through October 31, 1997, the Fund incurred
brokerage commissions of $119,132 with Morgan Stanley & Co., Inc., an affiliate
of the Investment Manager since May 31, 1997, for portfolio transactions
executed on behalf of the Fund. At October 31, 1997, the Fund's receivable for
investments sold included unsettled trades with Morgan Stanley & Co., Inc., of
$385,903.
Dean Witter Trust FSB, an affiliate of the Investment Manager and Distributor,
is the Fund's transfer agent. At October 31, 1997, the Fund had transfer agent
fees and expenses payable of approximately $56,508.
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, 1997 included
in Directors' fees and expenses in the Statement of Operations, amounted to
$4,186. At October 31, 1997, the Fund had an accrued pension liability of
$39,918 which is included in accrued expenses in the Statement of Assets and
Liabilities.
69
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
5. CAPITAL STOCK
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 63,214 $ 998,769 -- --
Redeemed......................................................... (14,820) (235,608) -- --
----------- -------------- ----------- ------------
Net increase - Class A 48,394 763,161 -- --
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 28,630,560 521,923,627 38,199,038 $744,616,070
Reinvestment of dividends........................................ 1,228,090 23,456,516 1,685,192 31,243,453
Redeemed......................................................... (57,878,288) (1,039,376,437) (30,677,011) (593,395,952)
----------- -------------- ----------- ------------
Net increase (decrease) - Class B................................ (28,019,638) (493,996,294) 9,207,219 182,463,571
----------- -------------- ----------- ------------
CLASS C SHARES*
Sold............................................................. 76,313 1,169,997 -- --
Redeemed......................................................... (12,460) (171,011) -- --
----------- -------------- ----------- ------------
Net increase - Class C........................................... 63,853 998,986 -- --
----------- -------------- ----------- ------------
CLASS D SHARES*
Sold............................................................. 9,137 157,184 -- --
----------- -------------- ----------- ------------
Net increase (decrease) in Fund.................................. (27,898,254) $ (492,076,963) 9,207,219 $182,463,571
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
<TABLE>
<C> <S>
<FN>
- ---------------------
* For the period July 28, 1997 (issue date) through October 31, 1997.
</TABLE>
6. FEDERAL INCOME TAX STATUS
At October 31, 1997, the Fund had an approximate net capital loss carryover of
$116,663,000, which may be used to offset future capital gains to the extent
provided by regulations, which is available through October 31 of the following
years:
<TABLE>
<CAPTION>
AMOUNTS IN THOUSANDS
------------------------------
2003 2004 2005
-------- -------- --------
<S> <C> <C>
$ 3,193 $ 15,875 $ 97,595
-------- -------- --------
-------- -------- --------
</TABLE>
As of October 31, 1997, the Fund had temporary book/tax differences primarily
attributable to the mark-to-market of passive foreign investment companies
("PFICs") and capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to foreign currency losses and tax
adjustments on PFICs sold by the Fund. To reflect reclassifications arising from
the permanent differences, accumulated net realized loss was charged
$19,755,676, paid-in-capital was credited $6,595, and dividends in excess of net
investment income was credited $19,749,081.
70
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1997, CONTINUED
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.
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.
At October 31, 1997, there were outstanding forward contracts used to facilitate
settlement of foreign currency denominated portfolio transactions.
At October 31, 1997, the Fund's cash balance consisted principally of interest
bearing deposits with Chase Manhattan Bank N.A., the Fund's custodian.
8. COMMITMENTS
As of October 31, 1997, the Fund has purchased shares which are subject to
installment payments. At October 31, 1997, the Fund had outstanding commitments
as follows:
<TABLE>
<CAPTION>
TOTAL OUTSTANDING
ISSUER COMMITMENT INSTALLMENT PAYMENT TERMS
- ---------------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Investment Co. of China $158,000 Balance payable in one
installment upon notification
by the issuer.
</TABLE>
71
<PAGE>
DEAN WITTER PACIFIC 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
NOVEMBER
30, 1990*
FOR THE YEAR ENDED OCTOBER 31 THROUGH
------------------------------------------------------------------ OCTOBER
1997***++ 1996 1995 1994 1993 1992** 31, 1991
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE
OPERATING
PERFORMANCE:
Net asset value,
beginning of
period.......... $ 18.89 $ 18.77 $ 21.60 $ 19.80 $ 12.69 $ 11.72 $ 10.00
---------- --------- --------- ---------- --------- --------- ----------
Net investment
income (loss)... 0.01 0.05 0.08 (0.10) (0.04) (0.01) 0.06
Net realized and
unrealized gain
(loss).......... (5.77) 0.50 (1.94) 2.22 7.15 1.14 1.69
---------- --------- --------- ---------- --------- --------- ----------
Total from
investment
operations...... (5.76) 0.55 (1.86) 2.12 7.11 1.13 1.75
---------- --------- --------- ---------- --------- --------- ----------
Less dividends
and
distributions
from:
Net investment
income........ (0.30) (0.43) -- -- -- (0.01) (0.03)
Net realized
gain.......... -- -- (0.97) (0.32) -- (0.15) --
---------- --------- --------- ---------- --------- --------- ----------
Total dividends
and
distributions... (0.30) (0.43) (0.97) (0.32) -- (0.16) (0.03)
---------- --------- --------- ---------- --------- --------- ----------
Net asset value,
end of period... $ 12.83 $ 18.89 $ 18.77 $ 21.60 $ 19.80 $ 12.69 $ 11.72
---------- --------- --------- ---------- --------- --------- ----------
---------- --------- --------- ---------- --------- --------- ----------
TOTAL INVESTMENT
RETURN+.......... (31.01)% 3.00% (8.65)% 10.69% 56.13% 9.86% 17.54%(1)
RATIOS TO AVERAGE
NET ASSETS:
Expenses......... 2.44% 2.39% 2.45% 2.41% 2.38% 2.77% 2.43%(2)(3)
Net investment
income (loss)... 0.03% 0.18% 0.35% (0.70)% (0.46)% (0.30)% 0.61%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end
of period, in
millions........ $744 $1,624 $1,442 $1,571 $694 $177 $86
Portfolio
turnover rate... 42% 49% 50% 35% 30% 73% 70%(1)
Average
commission rate
paid............ $0.0075 $0.0095 -- -- -- -- --
- ---------------------
* Commencement of operations.
** Net investment loss was computed based upon the monthly average shares
outstanding.
*** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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.
(3) If the Fund had borne all expenses that were assumed or waived by the
Investment Manager, the above annualized expense and net investment income
ratios would have been 2.83% and 0.22%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
72
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
1997++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 19.39
Net realized and unrealized loss...................................... (6.53)
------
Net asset value, end of period........................................ $ 12.86
------
------
TOTAL INVESTMENT RETURN+.............................................. (33.68)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.92% (2)
Net investment loss................................................... (0.03)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $622
Portfolio turnover rate............................................... 42%
Average commission rate paid.......................................... $0.0075
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 19.39
------
Net investment loss................................................... (0.04)
Net realized and unrealized loss...................................... (6.52)
------
Total from investment operations...................................... (6.56)
------
Net asset value, end of period........................................ $ 12.83
------
------
TOTAL INVESTMENT RETURN+.............................................. (33.83)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.62% (2)
Net investment loss................................................... (0.77)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $819
Portfolio turnover rate............................................... 42%
Average commission rate paid.......................................... $0.0075
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
73
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
OCTOBER 31,
1997++
- ----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 19.39
------
Net investment income................................................. 0.02
Net realized and unrealized loss...................................... (6.55)
------
Total from investment operations...................................... (6.53)
------
Net asset value, end of period........................................ $ 12.86
------
------
TOTAL INVESTMENT RETURN+.............................................. (33.68)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.62% (2)
Net investment income................................................. 0.42% (2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $118
Portfolio turnover rate............................................... 42%
Average commission rate paid.......................................... $0.0075
- ---------------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ 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
74
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS
OF DEAN WITTER PACIFIC 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 Pacific Growth Fund
Inc. (the "Fund") at October 31, 1997, 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 periods
presented, 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, 1997 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, 1997
1997 FEDERAL TAX NOTICE (UNAUDITED)
For the year ended October 31, 1997, the Fund has elected,
pursuant to Section 853 of the Internal Revenue Code, to
pass-through foreign taxes of $0.04 per share to its shareholders.
The Fund generated net foreign source income of $0.04 per share
with respect to this election.
75
<PAGE>
DEAN WITTER PACIFIC 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 November 30, 1990
through October 31, 1991 and for the years ended
October 31, 1992, 1993, 1994, 1995, 1996, and 1997
(Class B). . . . . . . . . . . . . . . . . . . . . . . . . 6
Financial Highlights for the period July 28, 1997
through October 31, 1997 (Class A, C, and D) . . . . . . . 7
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page in
SAI
-------
Portfolio of Investments at October 31, 1997 . . . . . . . 51
Statement of Assets and Liabilities at October 31, 1997. . 61
Statement of Operations for the year ended
October 31, 1997 . . . . . . . . . . . . . . . . . . . . . 62
Statement of Changes in Net Assets for the years
ended October 31, 1996 and 1997. . . . . . . . . . . . . . 63
Notes to Financial Statements at October 31, 1997. . . . . 64
Financial Highlights for the period November 30, 1990
through October 31, 1991 and for the years ended
October 31, 1992, 1993, 1994, 1995, 1996, and 1997
(Class B). . . . . . . . . . . . . . . . . . . . . . . . . 72
Financial Highlights for the period July 28, 1997
through October 31, 1997 (Class A, C, and D) . . . . . . . 73
(3) Financial statements included in Part C:
None
<PAGE>
b) EXHIBITS
8. Form of Transfer Agency and Service Agreement between the
Registrant and Dean Witter Trust FSB.
11. Consent of Independent Accountants.
16. Schedules for Computations of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
- --------------------------------------------------------------------------------
All other exhibits were previously filed via EDGAR and are hereby
incorporated by reference.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
Item 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
Number of Record Holders
Title of Class at December 31, 1997
-------------- ------------------------
Class A 108
Class B 145,352
Class C 147
Class D 7
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
2
<PAGE>
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17 (h) and 17 (I) of such Act remains in
effect.
Registrant, in conjunction with the Investment Manager, Registrant's
Directors, and other registered investment management companies managed by the
Investment Manager, maintains insurance on behalf of any person who is or was a
Director, officer, employee, or agent of registrant, or who is or was serving at
the request of registrant as a trustee, director, officer, employee or agent of
another trust or corporation, against any liability asserted against him and
incurred by him or arising out of his position. However, in no event will
registrant maintain insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
See "The Fund and its Management" in the Prospectus regarding the business
of the investment adviser. The following information is given regarding
officers of Dean Witter InterCapital Inc. InterCapital is a wholly-owned
subsidiary of Morgan Stanley, 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
3
<PAGE>
(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
(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 Short-Term U.S. Treasury Trust
(32) Dean Witter Diversified Income Trust
(33) Dean Witter U.S. Government Money Market Trust
(34) Dean Witter Global Dividend Growth Securities
(35) Active Assets California Tax-Free Trust
(36) Dean Witter Natural Resource Development Securities Inc.
(37) Active Assets Government Securities Trust
(38) Active Assets Money Trust
(39) Active Assets Tax-Free Trust
(40) Dean Witter Limited Term Municipal Trust
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Global Utilities Fund
(44) Dean Witter International SmallCap Fund
(45) Dean Witter Mid-Cap Growth Fund
(46) Dean Witter Select Dimensions Investment Series
4
<PAGE>
(47) Dean Witter Balanced Growth Fund
(48) Dean Witter Balanced Income Fund
(49) Dean Witter Hawaii Municipal Trust
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Intermediate Term U.S. Treasury Trust
(52) Dean Witter Information Fund
(53) Dean Witter Japan Fund
(54) Dean Witter Income Builder Fund
(55) Dean Witter Special Value Fund
(56) Dean Witter Financial Services Trust
(57) Dean Witter Market Leader Trust
(58) Dean Witter S&P 500 Index Fund
(59) Dean Witter Fund of Funds
(60) Morgan Stanley Dean Witter Competitive Edge 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
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW SmallCap 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
(11) TCW/DW Emerging Markets Opportunities Trust
CLOSED-END INVESTMENT COMPANIES
(1) TCW/DW Term Trust 2000
(2) TCW/DW Term Trust 2002
(3) TCW/DW Term Trust 2003
5
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Charles A. Fiumefreddo Executive Vice President and Director of Dean
Chairman, Chief Executive Witter Reynolds Inc. ("DWR"); Chairman, Chief
Officer and Director Executive Officer and Director of Dean Witter
Distributors Inc. ("Distributors") and Dean
Witter Services Company Inc. ("DWSC");
Chairman and Director of Dean Witter Trust
FSB ("DWT"); 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; Director and/or officer of various
Morgan Stanley, Dean Witter, Discover & Co.
("MSDWD") subsidiaries; Formerly Executive
Vice President and Director of Dean Witter,
Discover & Co.
Philip J. Purcell Chairman, Chief Executive Officer and
Director Director of MSDWD and DWR; Director of DWSC
and Distributors; Director or Trustee of the
Dean Witter Funds; Director and/or officer of
various MSDWD subsidiaries.
Richard M. DeMartini President and Chief Operating Officer of Dean
Director Witter Capital, a division of DWR; Director
of DWR, DWSC, Distributors and DWT; Trustee
of the TCW/DW Funds.
James F. Higgins President and Chief Operating Officer of Dean
Director Witter Financial; Director of DWR, DWSC,
Distributors and DWT.
Thomas C. Schneider Executive Vice President and Chief Strategic
Executive Vice President and Administrative Officer of MSDWD;
Chief Financial Officer and Executive Vice President and Chief Financial
Director Officer of DWSC and Distributors; Director of
DWR, DWSC, Distributors and MSDWD.
Christine A. Edwards Executive Vice President, Chief Legal Officer
Director and Secretary of MSDWD; Executive Vice
President, Secretary and Chief Legal Officer
of Distributors; Director of DWR, DWSC and
Distributors.
6
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Robert M. Scanlan President and Chief Operating Officer of
President and Chief Operating DWSC; Executive Vice President of
Officer Distributors; Executive Vice President and
Director of DWT; Vice President of the Dean
Witter Funds and the TCW/DW Funds.
Mitchell M. Merin President and Chief Strategic Officer of
President and Chief Strategic DWSC; Executive Vice President of
Officer Distributors; Executive Vice President and
Director of DWT; Executive Vice President and
Director of DWR; Director of SPS Transaction
Services, Inc. and various other MSDWD
subsidiaries.
Joseph J. McAlinden Vice President of the Dean Witter Funds and
Executive Vice President and Director of DWT.
Chief Investment Officer
Edward C. Oelsner III
Executive Vice President
John B. Van Heuvelen President, Chief Operating Officer and
Executive Vice President Director of DWT.
Barry Fink Assistant Secretary of DWR; Senior Vice
Senior Vice President, Secretary President, Secretary and General Counsel of
and General Counsel DWSC; Senior Vice President, Assistant
Secretary and Assistant General Counsel of
Distributors; 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 F. Gaylor
Senior Vice President Vice President of various Dean Witter Funds.
Robert S. Giambrone Senior Vice President of DWSC, Distributors
Senior Vice President and DWT and Director of DWT; Vice President
of the Dean Witter Funds and the TCW/DW
Funds.
7
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Rajesh K. Gupta
Senior Vice President Vice President of various Dean Witter Funds.
Kenton J. Hinchliffe
Senior Vice President Vice President of various Dean Witter Funds.
Kevin Hurley
Senior Vice President Vice President of various Dean Witter Funds.
Margaret Iannuzzi
Senior Vice President
Jenny Beth Jones Vice President of Dean Witter Special Value
Senior Vice President Fund.
John B. Kemp, III Director of the Provident Savings Bank,
Senior Vice President Jersey City, New Jersey.
Anita H. 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.
Guy G. Rutherfurd, Jr. Vice President of Dean Witter Market Leader
Senior Vice President Trust.
Rafael Scolari
Senior Vice President Vice President of Prime Income Trust.
Rochelle G. Siegel
Senior Vice President Vice President of various Dean Witter Funds.
Jayne M. Stevlingson
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
8
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
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.
Douglas Brown
First Vice President
Thomas F. Caloia First Vice President and Assistant Treasurer
First Vice President of DWSC. Treasurer of the Dean Witter Funds
and Assistant Treasurer and the TCW/DW Funds.
Thomas Chronert
First Vice President
Rosalie Clough
First Vice President
Marilyn K. Cranney Assistant Secretary of DWR; First Vice
First Vice President President and Assistant Secretary of DWSC;
and Assistant Secretary Assistant Secretary of the Dean Witter Funds
and the TCW/DW Funds.
Michael Interrante First Vice President and Controller of DWSC;
First Vice President and Assistant Treasurer of Distributors; First
Controller Vice President and Treasurer of DWT.
David Johnson
First Vice President
Stanley Kapica
First Vice President
Robert Zimmerman
First Vice President
Dale Albright
Vice President
Joan G. Allman
Vice President
Andrew Arbenz
Vice President
9
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Joseph Arcieri
Vice President Vice President of various Dean Witter Funds.
Nancy Belza
Vice President
Dale Boettcher
Vice President
Joseph Cardwell
Vice President
Philip Casparius
Vice President
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
Michael Durbin
Vice President
Jeffrey D. Geffen
Vice President
Deborah Genovesse
Vice President
Michael Geringer
Vice President
Stephen Greenhut
Vice President
Peter W. Gurman
Vice President
10
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Matthew Haynes Vice President of Dean Witter
Vice President Variable Investment Series.
Peter Hermann
Vice President Vice President of various Dean Witter Funds.
Elizabeth Hinchman
Vice President
David Hoffman
Vice President
Christopher Jones
Vice President
Kevin Jung
Vice President
James P. Kastberg
Vice President
Michelle Kaufman
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 J. Lian
Vice President Vice President of various Dean Witter Funds.
Catherine Maniscalco Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
Albert McGarity
Vice President
LouAnne D. McInnis Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean Witter
Assistant Secretary Funds and the TCW/DW Funds.
Sharon K. Milligan
Vice President
11
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Julie Morrone
Vice President
Mary Beth Mueller
Vice President
David Myers Vice President of Dean Witter Natural
Vice President Resource Development Securities Inc.
James Nash
Vice President
Richard Norris
Vice President
Carsten Otto Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean Witter
Assistant Secretary Funds and the TCW/DW Funds.
George Paoletti
Vice President
Anne Pickrell Vice President of Dean Witter Global Short-
Vice President Term Income Fund Inc.
Michael Roan
Vice President
John Roscoe
Vice President
Hugh Rose
Vice President
Robert Rossetti Vice President of Dean Witter Precious Metals
Vice President and Minerals Trust.
Ruth Rossi Vice President and Assistant Secretary of
Vice President and DWSC; Assistant Secretary of the Dean Witter
Assistant Secretary Funds and the TCW/DW Funds.
Carl F. Sadler
Vice President
Peter Seeley Vice President of Dean Witter World Wide
Vice President Income Trust.
Naomi Stein
Vice President
12
<PAGE>
NAME AND POSITION OTHER SUBSTANTIAL BUSINESS, PROFESSION,
WITH DEAN WITTER VOCATION OR EMPLOYMENT, INCLUDING NAME,
INTERCAPITAL INC. PRINCIPAL ADDRESS AND NATURE OF CONNECTION
- ----------------- ---------------------------------------------
Kathleen H. Stromberg
Vice President Vice President of various Dean Witter Funds.
Marybeth Swisher
Vice President
Vinh Q. Tran
Vice President Vice President of various Dean Witter Funds.
Robert Vanden Assem
Vice President
James P. Wallin
Vice President
Alice Weiss
Vice President Vice President of various Dean Witter Funds.
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
13
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(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) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Federal Securities Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Value-Added Market Series
(42) Dean Witter Global Utilities Fund
(43) Dean Witter International SmallCap Fund
(44) Dean Witter Balanced Growth Fund
(45) Dean Witter Balanced Income Fund
(46) Dean Witter Hawaii Municipal Trust
(47) Dean Witter Variable Investment Series
(48) Dean Witter Capital Appreciation Fund
(49) Dean Witter Intermediate Term U.S. Treasury Trust
(50) Dean Witter Information Fund
(51) Dean Witter Japan Fund
(52) Dean Witter Income Builder Fund
(53) Dean Witter Special Value Fund
(54) Dean Witter Financial Services Trust
(55) Dean Witter Market Leader Trust
(56) Dean Witter S&P 500 Index Fund
(57) Dean Witter Fund of Funds
(58) Morgan Stanley Dean Witter Competitive Edge 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 SmallCap 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.
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Name Positions and Office with 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 shareholders,
upon request and without charge.
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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 30th day of January, 1998.
DEAN WITTER PACIFIC GROWTH FUND INC.
By /s/ Barry Fink
----------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 9 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 01/30/98
----------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 01/30/98
----------------------------
Thomas F. Caloia
(3) Majority of the Directors
Charles A. Fiumefreddo (Chairman)
Philip J. Purcell
By /s/ Barry Fink 01/30/98
----------------------------
Barry Fink
Attorney-in-Fact
Michael Bozic Manuel H. Johnson
Edwin J. Garn Michael E. Nugent
John R. Haire John L. Schroeder
Wayne E. Hedien
By /s/David M. Butowsky 01/30/98
----------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
DEAN WITTER PACIFIC GROWTH FUND INC.
EXHIBIT INDEX
8. Form of Transfer Agency and Service Agreement between the
Registrant and Dean Witter Trust FSB.
11. Consent of Independent Accountants.
16. Schedules for Computations of Performance Quotations.
27. Financial Data Schedules.
Other. Power of Attorney.
<PAGE>
AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
[open-end funds]
97NYC13142
<PAGE>
TABLE OF CONTENTS
PAGE
----
Article 1 Terms of Appointment................................... 1
Article 2 Fees and Expenses...................................... 2
Article 3 Representations and Warranties of DWTFSB............... 3
Article 4 Representations and Warranties of the Fund............. 3
Article 5 Duty of Care and Indemnification....................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB......... 4
Article 7 Duration and Termination of Agreement.................. 5
Article 8 Assignment............................................. 5
Article 9 Affiliations........................................... 6
Article 10 Amendment.............................................. 6
Article 11 Applicable Law......................................... 6
Article 12 Miscellaneous.......................................... 6
Article 13 Merger of Agreement.................................... 7
Article 14 Personal Liability..................................... 7
i
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of such
Funds acting severally on its own behalf and not jointly with any of such other
Funds (each such Fund hereinafter referred to as the "Fund"), each such Fund
having its principal office and place of business at Two World Trade Center, New
York, New York, 10048, and DEAN WITTER TRUST FSB ("DWTFSB"), a federally
chartered savings bank, having its principal office and place of business at
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent, dividend
disbursing agent and shareholder servicing agent and DWTFSB desires to accept
such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act as,
the transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent in connection with any accumulation, open-account or
similar plans provided to the holders of such Shares ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form
in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act")
a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding.
DWTFSB shall also provide to the Fund on a regular basis the total number
of Shares that are authorized, issued and outstanding and shall notify
the Fund in case any proposed issue of Shares by the Fund would result in
an overissue. In case any issue of Shares
1
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for such
Shares. When recording the issuance of Shares, DWTFSB shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue
of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or
similar plans (including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited to,
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing appropriate forms required with respect to dividends and
distributions by federal tax authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account
information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of
DWTFSB for the Fund's status under the securities laws of any State or
other jurisdiction is limited to the inclusion on the system of each
State as to which the Fund has informed DWTFSB that shares may be sold in
compliance with state securities laws and the reporting of purchases and
sales in each such State to the Fund as provided above and as agreed from
time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and certain
transactional fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject to
mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees to
reimburse DWTFSB for out of pocket expenses in connection with the services
rendered by DWTFSB hereunder. In addition, any other expenses incurred by DWTFSB
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
2
<PAGE>
Article 3 REPRESENTATIONS AND WARRANTIES OF DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of Section
17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale.
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of
3
<PAGE>
offering of such Shares in such State or other jurisdiction or in violation
of any stop order or other determination or ruling by any federal agency or
any State or other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted by
it in reliance upon such instructions or upon the opinion of such counsel.
DWTFSB, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to DWTFSB or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. DWTFSB, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
5.4 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article 5
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent of
the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
4
<PAGE>
(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of Share certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by Section
31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB agrees that
all such records prepared or maintained by DWTFSB relating to the services
performed by DWTFSB hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential and shall not be voluntarily disclosed to any other person except
as may be required by law or with the prior consent of DWTFSB and the Fund.
6.5 In case of any request or demands for the inspection of the Shareholder
records of the Fund, DWTFSB will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection.
DWTFSB reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written notice,
and by DWTFSB on 90 days written notice, to the other party without payment of
any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its obligations
and duties hereunder with any person or entity including but not limited to
companies which are affiliated with DWTFSB; PROVIDED, HOWEVER, that such person
or entity has and maintains the qualifications, if any, required to perform such
obligations and duties, and that DWTFSB shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it is for its
own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Morgan Stanley, Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the case
may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in DWTFSB as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of DWTFSB may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent, dividend
disbursing agent and/or shareholder servicing agent, and DWTFSB desires to
render such services, such services shall be provided pursuant to a letter
agreement, substantially in the form of Exhibit A hereto, between DWTFSB and
each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTFSB and the Fund issued by a
surety company satisfactory to DWTFSB, except that DWTFSB may accept an
affidavit of loss and indemnity agreement executed by the registered holder (or
legal representative) without surety in such form as DWTFSB deems appropriate
indemnifying DWTFSB and the Fund for the issuance of a replacement certificate,
in cases where the alleged loss is in the amount of $1,000 or less.
12.3 In the event that any check or other order for payment of money on the
account of any Shareholder or new investor is returned unpaid for any reason,
DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may instruct
DWTFSB.
6
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12.4 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or to DWTFSB shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
12. Dean Witter Dividend Growth Securities Inc.
7
<PAGE>
13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
8
<PAGE>
SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By:
----------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- ----------------------------------
Assistant Secretary
DEAN WITTER TRUST FSB
By:
----------------------------------
John Van Heuvelen
President
ATTEST:
- ----------------------------------
Executive Vice President
9
<PAGE>
EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (INSERT NAME OF INVESTMENT COMPANY) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund to
DWTFSB of fees as set out in the fee schedule attached hereto as Schedule A,
DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(NAME OF FUND)
By: _________________________________
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By: __________________________________
Its: _________________________________
Date: ________________________________
10
<PAGE>
SCHEDULE A
Fund: Dean Witter Pacific Growth Fund Inc.
Fees: (1) Annual maintenance fee of $12.65 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
f:\schedA.1
<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. 9 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
December 17, 1997, relating to the financial statements and financial
highlights of Dean Witter Pacific Growth Fund Inc., 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 references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
January 27, 1998
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
PACIFIC GROWTH (A)
(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-97 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ ---------- ----------------
28-Jul-97 $628.40 (37.16%) 0.26 NA
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
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-97 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ------------ ----------- ----------------
28-Jul-97 $663.20 (33.68%) 0.26 NA
(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
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ------------ -------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 (33.68) $6,284 $31,834 $64,330
</TABLE>
*INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4% &
3% SALES CHARGE
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
PACIFIC GROWTH FUND (B)
(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-97 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ ---------- ----------------
31-Oct-96 $655.90 (34.41%) 1.00 (34.41%)
31-Oct-92 $1,101.80 10.18% (92.84) (0.10%)
30-Nov-90 $1,448.60 44.86% (90.92) (0.41%)
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
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-97 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- ---------- ----------------
31-Oct-96 $689.90 (31.01%) 1.00 (31.01%)
31-Oct-92 $1,121.80 12.18% 5.00 2.33%
30-Nov-90 $1,448.60 44.86% 6.92 5.50%
(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
<TABLE>
<CAPTION>
(D) (E) (F)
$10,000 TOTAL GROWTH OF GROWTH OF GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT $50,000 INVESTMENT $100,000 INVESTMENT
- ----------- ----------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C>
30-Nov-90 44.86 $14,486 $72,430 $144,860
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
PACIFIC GROWTH (C)
(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-97 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ ------------- ----------------
28-Jul-97 $655.10 (34.49%) 0.26 NA
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
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-97 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- ------------- ----------------
28-Jul-97 $661.70 (33.83%) 0.26 NA
(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
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (D) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- -------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 (33.83) $6,617 $33,085 $66,170
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
PACIFIC GROWTH (D)
(A) TOTAL RETURN (NO LOAD FUND)
(B) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
<TABLE>
<CAPTION>
(A) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Oct-97 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
28-Jul-97 $663.20 (33.68%) 0.26 NA
</TABLE>
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- --------------------- --------------------- ----------------------
<S> <C> <C> <C> <C>
28-Jul-97 (33.68) $6,632 $33,160 $66,320
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> DEAN WITTER PACIFIC GROWTH CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 926,238,826
<INVESTMENTS-AT-VALUE> 724,056,406
<RECEIVABLES> 21,222,385
<ASSETS-OTHER> 11,991,937
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 757,270,728
<PAYABLE-FOR-SECURITIES> 4,400,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,178,949
<TOTAL-LIABILITIES> 11,579,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,079,062,994
<SHARES-COMMON-STOCK> 48,394
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,880,806)
<ACCUMULATED-NET-GAINS> (126,818,335)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (202,672,283)
<NET-ASSETS> 622,202
<DIVIDEND-INCOME> 33,599,748
<INTEREST-INCOME> 1,282,514
<OTHER-INCOME> 0
<EXPENSES-NET> 34,495,368
<NET-INVESTMENT-INCOME> 386,894
<REALIZED-GAINS-CURRENT> (81,003,250)
<APPREC-INCREASE-CURRENT> (280,824,717)
<NET-CHANGE-FROM-OPS> (361,441,073)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 63,214
<NUMBER-OF-SHARES-REDEEMED> (14,820)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (878,776,310)
<ACCUMULATED-NII-PRIOR> 1,241,493
<ACCUMULATED-GAINS-PRIOR> (26,059,409)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,946,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,495,368
<AVERAGE-NET-ASSETS> 431,211
<PER-SHARE-NAV-BEGIN> 19.39
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> (6.53)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.86
<EXPENSE-RATIO> 1.92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> DEAN WITTER PACIFIC GROWTH CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 926,238,826
<INVESTMENTS-AT-VALUE> 724,056,406
<RECEIVABLES> 21,222,385
<ASSETS-OTHER> 11,991,937
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 757,270,728
<PAYABLE-FOR-SECURITIES> 4,400,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,178,949
<TOTAL-LIABILITIES> 11,579,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,079,062,994
<SHARES-COMMON-STOCK> 57,991,437
<SHARES-COMMON-PRIOR> 86,011,075
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,880,806)
<ACCUMULATED-NET-GAINS> (126,818,335)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (202,672,283)
<NET-ASSETS> 744,132,621
<DIVIDEND-INCOME> 33,599,748
<INTEREST-INCOME> 1,282,514
<OTHER-INCOME> 0
<EXPENSES-NET> 34,495,368
<NET-INVESTMENT-INCOME> 386,894
<REALIZED-GAINS-CURRENT> (81,003,250)
<APPREC-INCREASE-CURRENT> (280,824,717)
<NET-CHANGE-FROM-OPS> (361,441,073)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (25,258,274)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,630,560
<NUMBER-OF-SHARES-REDEEMED> (57,878,288)
<SHARES-REINVESTED> 1,228,090
<NET-CHANGE-IN-ASSETS> (878,776,310)
<ACCUMULATED-NII-PRIOR> 1,241,493
<ACCUMULATED-GAINS-PRIOR> (26,059,409)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,946,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,495,368
<AVERAGE-NET-ASSETS> 1,415,563,533
<PER-SHARE-NAV-BEGIN> 18.89
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> (5.77)
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.83
<EXPENSE-RATIO> 2.44
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> DEAN WITTER PACIFIC GROWTH CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 926,238,826
<INVESTMENTS-AT-VALUE> 724,056,406
<RECEIVABLES> 21,222,385
<ASSETS-OTHER> 11,991,937
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 757,270,728
<PAYABLE-FOR-SECURITIES> 4,400,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,178,949
<TOTAL-LIABILITIES> 11,579,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,079,062,994
<SHARES-COMMON-STOCK> 63,853
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,880,806)
<ACCUMULATED-NET-GAINS> (126,818,335)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (202,672,283)
<NET-ASSETS> 819,243
<DIVIDEND-INCOME> 33,599,748
<INTEREST-INCOME> 1,282,514
<OTHER-INCOME> 0
<EXPENSES-NET> 34,495,368
<NET-INVESTMENT-INCOME> 386,894
<REALIZED-GAINS-CURRENT> (81,003,250)
<APPREC-INCREASE-CURRENT> (280,824,717)
<NET-CHANGE-FROM-OPS> (361,441,073)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 76,313
<NUMBER-OF-SHARES-REDEEMED> (12,460)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (878,776,310)
<ACCUMULATED-NII-PRIOR> 1,241,493
<ACCUMULATED-GAINS-PRIOR> (26,059,409)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,946,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,495,308
<AVERAGE-NET-ASSETS> 417,013
<PER-SHARE-NAV-BEGIN> 19.39
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> (6.52)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.83
<EXPENSE-RATIO> 2.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> DEAN WITTER PACIFIC GROWTH CLASS D
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 926,238,826
<INVESTMENTS-AT-VALUE> 724,056,406
<RECEIVABLES> 21,222,385
<ASSETS-OTHER> 11,991,937
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 757,270,728
<PAYABLE-FOR-SECURITIES> 4,400,209
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,178,949
<TOTAL-LIABILITIES> 11,579,158
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,079,062,994
<SHARES-COMMON-STOCK> 9,137
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3,880,806)
<ACCUMULATED-NET-GAINS> (126,818,335)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (202,672,283)
<NET-ASSETS> 117,504
<DIVIDEND-INCOME> 33,599,748
<INTEREST-INCOME> 1,282,514
<OTHER-INCOME> 0
<EXPENSES-NET> 34,495,368
<NET-INVESTMENT-INCOME> 386,894
<REALIZED-GAINS-CURRENT> (81,003,250)
<APPREC-INCREASE-CURRENT> (280,824,717)
<NET-CHANGE-FROM-OPS> (361,441,073)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,137
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (878,776,310)
<ACCUMULATED-NII-PRIOR> 1,241,493
<ACCUMULATED-GAINS-PRIOR> (26,059,409)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13,946,846
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34,495,308
<AVERAGE-NET-ASSETS> 82,157
<PER-SHARE-NAV-BEGIN> 19.39
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> (6.55)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.86
<EXPENSE-RATIO> 1.62
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that WAYNE E. HEDIEN, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: September 1, 1997
/s/ WAYNE E. HEDIEN
--------------------------------------
Wayne E. Hedien
<PAGE>
SCHEDULE A
1. Active Assets Money Trust
2. Active Assets Tax-Free Trust
3. Active Assets Government Securities Trust
4. Active Assets California Tax-Free Trust
5. Dean Witter New York Municipal Money Market Trust
6. Dean Witter American Value Fund
7. Dean Witter Tax-Exempt Securities Trust
8. Dean Witter Tax-Free Daily Income Trust
9. Dean Witter Capital Growth Securities
10. Dean Witter U.S. Government Money Market Trust
11. Dean Witter Precious Metals and Minerals Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter World Wide Investment Trust
14. Dean Witter Value-Added Market Series
15. Dean Witter Utilities Fund
16. Dean Witter Strategist Fund
17. Dean Witter California Tax-Free Daily Income Trust
18. Dean Witter Convertible Securities Trust
19. Dean Witter Intermediate Income Securities
20. Dean Witter World Wide Income Trust
21. Dean Witter S&P 500 Index Fund
22. Dean Witter U.S. Government Securities Trust
23. Dean Witter Federal Securities Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter California Tax-Free Income Fund
26. Dean Witter New York Tax-Free Income Fund
27. Dean Witter Select Municipal Reinvestment Fund
28. Dean Witter Variable Investment Series
29. High Income Advantage Trust
30. High Income Advantage Trust II
31. High Income Advantage Trust III
32. InterCapital Insured Municipal Bond Trust
33. InterCapital Insured Municipal Trust
34. InterCapital Insured Municipal Income Trust
35. InterCapital Quality Municipal Investment Trust
36. InterCapital Quality Municipal Income Trust
37. Dean Witter Government Income Trust
38. Municipal Income Trust
39. Municipal Income Trust II
40. Municipal Income Trust III
41. Municipal Income Opportunities Trust
42. Municipal Income Opportunities Trust II
43. Municipal Income Opportunities Trust III
44. Municipal Premium Income Trust
45. Prime Income Trust
46. Dean Witter Short-Term U.S. Treasury Trust
47. Dean Witter Diversified Income Trust
48. InterCapital California Insured Municipal Income Trust
49. Dean Witter Health Sciences Trust
50. Dean Witter Global Dividend Growth Securities
51. InterCapital Quality Municipal Securities
97nyc12127
<PAGE>
52. InterCapital California Quality Municipal Securities
53. InterCapital New York Quality Municipal Securities
54. Dean Witter Retirement Series
55. Dean Witter Limited Term Municipal Trust
56. Dean Witter Short-Term Bond Fund
57. Dean Witter Global Utilities Fund
58. InterCapital Insured Municipal Securities
59. InterCapital Insured California Municipal Securities
60. Dean Witter High Income Securities
61. Dean Witter National Municipal Trust
62. Dean Witter International SmallCap Fund
63. Dean Witter Mid-Cap Growth Fund
64. Dean Witter Select Dimensions Investment Series
65. Dean Witter Global Asset Allocation Fund
66. Dean Witter Balanced Growth Fund
67. Dean Witter Balanced Income Fund
68. Dean Witter Intermediate Term U.S. Treasury Trust
69. Dean Witter Hawaii Municipal Trust
70. Dean Witter Japan Fund
71. Dean Witter Capital Appreciation Fund
72. Dean Witter Information Fund
73. Dean Witter Fund of Funds
74. Dean Witter Special Value Fund
75. Dean Witter Income Builder Fund
76. Dean Witter Financial Services Trust
77. Dean Witter Market Leader Trust
78. Dean Witter Managers' Select Fund
79. Dean Witter Liquid Asset Fund Inc.
80. Dean Witter Natural Resource Development Securities Inc.
81. Dean Witter Dividend Growth Securities Inc.
82. Dean Witter European Growth Fund Inc.
83. Dean Witter Pacific Growth Fund Inc.
84. Dean Witter High Yield Securities Inc.
85. Dean Witter Global Short-Term Income Fund Inc.
86. InterCapital Income Securities Inc.
97nyc12127
