<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 33-63685
PROSPECTUS
JANUARY 30, 1998
TCW/DW Mid-Cap Equity Trust (the "Fund") is an open-end, diversified
management investment company, whose investment objective is long-term
capital appreciation. The Fund seeks to achieve its investment objective by
investing primarily in equity securities issued by medium-sized companies
whose market capitalizations, at the time of acquisition, are in the $300
million to $5 billion range and that, in the opinion of the Fund's Adviser,
exhibit superior earnings growth prospects and attractive stock market
valuations. See "Investment Objective and Policies."
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."
TCW/DW MID-CAP EQUITY TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
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 and Investment Practices / 11
Investment Restrictions / 16
Purchase of Fund Shares / 17
Shareholder Services / 27
Repurchases and Redemptions / 30
Dividends, Distributions and Taxes / 31
Performance Information / 31
Additional Information / 32
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.
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.
<PAGE>
PROSPECTUS SUMMARY
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THE The Fund is organized as a Trust, commonly known as a
FUND Massachusetts business trust, and is an open-end,
diversified management investment company investing
primarily in equity securities issued by medium-sized
companies whose market capitalizations, at the time of
acquisition, are in the $300 million to $5 billion range
and that, in the opinion of the Adviser exhibit superior
earnings growth prospects and attractive stock market
valuations.
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SHARES OFFERED Shares of beneficial interest with $.01 par value (see
page 32). The Fund offers four Classes of shares, each
with a different combination of sales charges, ongoing
fees and other features (see pages 17-26).
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MINIMUM PURCHASE The minimum initial investment for each Class is $1,000
($100 if the account is opened through EasyInvest (Service
Mark)); 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 concurrent investments in Class D
shares of the Fund and other multiple class funds for
which Dean Witter Services Company Inc. serves as manager
and TCW Funds Management, Inc. serves as investment
adviser will be aggregated. The minimum subsequent
investment, $100 (see page 17).
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INVESTMENT The investment objective of the Fund is long-term capital
OBJECTIVE appreciation (see page 10).
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MANAGER Dean Witter Services Company Inc. (the "Manager"), a
wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"), is the Fund's manager. The Manager also
serves as manager to thirteen other investment companies
advised by TCW Funds Management, Inc. (the "TCW/DW
Funds"). The Manager and InterCapital serve in various
investment management, advisory, management and
administrative capacities to a total of 103 investment
companies and other portfolios with assets of
approximately $102.9 billion at December 31, 1997 (see
page 9).
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ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's
investment adviser. In addition to the Fund, the Adviser
serves as investment adviser to thirteen other TCW/DW
Funds. As of December 31, 1997, the Adviser and its
affiliates had approximately $50 billion under management
or committed to management in various fiduciary or
advisory capacities, primarily to institutional investors
(see page 9).
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MANAGEMENT The Manager receives a monthly fee at the annual rate of
AND ADVISORY 0.60% of daily net assets. The Adviser receives a monthly
FEES fee at an annual rate of 0.40% of daily net assets (see
page 9).
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DISTRIBUTOR AND Dean Witter Distributors Inc. (the "Distributor"). The
DISTRIBUTION Fund has adopted a distribution plan pursuant to Rule
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 17 and 25).
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ALTERNATIVE Four classes of shares are offered: o Class A shares are
PURCHASE offered with a front-end sales charge, starting at 5.25%
ARRANGEMENTS and reduced for larger purchases. 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 17, 20 and 25).
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2
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o 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 17, 22 and 25).
o 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 17, 24 and 25).
o 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 17, 24 and 25).
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DIVIDENDS AND Income dividends and capital gains, if any, will be
CAPITAL GAINS distributed no less than annually. The Fund may, however,
DISTRIBUTIONS determine to retain all or part of any net long-term 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
27 and 31).
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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 (Service Mark),
if after twelve months the shareholder has invested less
than $1,000 in the account (see page 30).
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RISK The net asset value of the Fund's shares will fluctuate
CONSIDERATIONS with changes in the market value of the Fund's portfolio
securities. The market value of the Fund's portfolio
securities will increase or decrease due to a variety of
economic, market or political factors which cannot be
predicted. The Fund is intended for long-term investors
who can accept the risks involved in seeking long-term
capital appreciation through the investment in securities
of medium-sized companies whose equity capitalizations are
in the $300 million to $5 billion range which involve
greater risk of volatility in the Fund's net asset value
than is associated with the investment in larger, more
established companies. The Fund may invest in foreign
securities and may purchase securities on a when-issued,
delayed delivery or "when, as and if issued" basis, which
may involve certain special risks. An investment in shares
of the Fund should not be considered a complete investment
program and is not appropriate for all investors.
Investors should carefully consider their ability to
assume these risks and the risks outlined under the
heading "Risk Considerations and Investment Practices,"
(see pages 11-15) before making an investment in the Fund.
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
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 fees and expenses set forth in the table are
based on the expenses and fees for the fiscal year ended November 30, 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 and Advisory Fees ................................. 1.00% 1.00% 1.00% 1.00%
12b-1 Fees (5)(6)............................................. 0.25% 1.00% 1.00% None
Other Expenses ............................................... 0.29% 0.29% 0.29% 0.29%
Total Fund Operating Expenses (7)............................. 1.54% 2.29% 2.29% 1.29%
</TABLE>
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(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 .......................................................... $67 $ 99 $132 $226
Class B .......................................................... $73 $102 $142 $262
Class C........................................................... $33 $ 72 $122 $262
Class D .......................................................... $13 $ 41 $ 71 $156
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A .......................................................... $67 $ 99 $132 $226
Class B .......................................................... $23 $ 72 $122 $262
Class C .......................................................... $23 $ 72 $122 $262
Class D .......................................................... $13 $ 41 $ 71 $156
</TABLE>
The above examples should not be considered a representation of past or
future expenses or performance. Actual expenses of each Class of the Fund may
be greater or less than those shown.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of
Distribution" and "Repurchases and Redemptions."
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
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants, which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED FEBRUARY 27, 1996*
NOVEMBER 30, THROUGH
1997**++ NOVEMBER 30, 1996
- -----------------------------------------------------------------------------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATIMG PERFORMANCE:
Net asset value, beginning of period ... $ 10.92 $ 10.00
-------- --------
Net investment loss ..................... (0.22) (0.13)
Net realized and unrealized gain ....... 0.15 1.05
-------- --------
Total from investment operations ....... (0.07) 0.92
-------- --------
Net asset value, end of period .......... $ 10.85 $ 10.92
======== ========
TOTAL INVESTMENT RETURN+ ................ (0.64)% 9.20%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 2.29% 2.28%(2)
Net investment loss ..................... (2.16)% (1.79)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $174,412 $205,274
Portfolio turnover rate ................. 49% 25%(1)
Average commission rate paid ............ $ 0.0569 $ 0.0577
</TABLE>
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* Commencement of operations.
** 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. Not annualized.
(2) Annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS, Continued
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<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
NOVEMBER 30,
1997++
- -------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $ 10.85
-------
Net investment loss ........................................ (0.06)
Net realized and unrealized gain .......................... 0.09
-------
Total from investment operations .......................... 0.03
-------
Net asset value, end of period ............................. $ 10.88
=======
TOTAL INVESTMENT RETURN+ ................................... 0.28%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................................... 1.55%(2)
Net investment loss ........................................ (1.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $ 58
Portfolio turnover rate .................................... 49%
Average commission rate paid ............................... $0.0569
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $ 10.85
-------
Net investment loss ........................................ (0.08)
Net realized and unrealized gain .......................... 0.08
-------
Total from investment operations .......................... --
-------
Net asset value, end of period ............................. $ 10.85
=======
TOTAL INVESTMENT RETURN+ ................................... 0.09%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................................... 2.32%(2)
Net investment loss ........................................ (2.22)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $ 83
Portfolio turnover rate .................................... 49%
Average commission rate paid ............................... $0.0569
</TABLE>
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* 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>
FINANCIAL HIGHLIGHTS, Continued
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<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
NOVEMBER 30,
1997++
- -------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ...................... $ 10.85
-------
Net investment loss ........................................ (0.05)
Net realized and unrealized gain .......................... 0.09
-------
Total from investment operations .......................... 0.04
-------
Net asset value, end of period ............................. $ 10.89
=======
TOTAL INVESTMENT RETURN+ ................................... 0.37%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................................... 1.30%(2)
Net investment loss ........................................ (1.19)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .................... $ 10
Portfolio turnover rate .................................... 49%
Average commission rate paid ............................... $0.0569
</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
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TCW/DW Mid-Cap Equity Trust (the "Fund") is an open-end, diversified
management investment company. The Fund is a trust of the type commonly known
as a "Massachusetts business trust" and was organized under the laws of
Massachusetts on October 17, 1995.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The
Manager is a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"). InterCapital is a wholly-owned subsidiary of Morgan
Stanley, Dean Witter, Discover & Co., a preeminent global financial services
firm that maintains leading market portions in each of its three primary
businesses--securities, asset management and credit services.
The Manager acts as manager to thirteen other TCW/DW Funds. The Manager
and InterCapital serve in various investment management, advisory, management
and administrative capacities to a total of 103 investment companies, thirty
of which are listed on the New York Stock Exchange, with combined assets of
approximately $98.9 billion as of December 31, 1997. InterCapital 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 Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety
of trust, investment management and investment advisory services. Robert A.
Day, who is Chairman of the Board of Directors of TCW, may be deemed to be a
control person of the Adviser by virtue of the aggregate ownership by Mr. Day
and his family of more than 25% of the outstanding voting stock of TCW. The
Adviser serves as investment adviser to thirteen other TCW/DW Funds in
addition to the Fund. As of December 31, 1997, the Adviser and its affiliated
companies had approximately $50 billion under management or committed to
management, primarily from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager
and the 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.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.60% to the Fund's net assets. As compensation for its investment advisory
services, the Fund pays the Adviser monthly compensation calculated daily by
applying an annual rate of 0.40% to the Fund's net assets. The total fees
paid by the Fund to the Manager and the Adviser are higher than the fees paid
by most other investment companies for similar services. For the fiscal year
ended November 30, 1997, the Fund accrued to the Manager and the Adviser
total compensation amounting to an annualized rate of 0.60% and 0.40%,
respectively, of the Fund's average daily net assets. During the period, the
Fund's total expenses of Class B amounted to an annualized rate of 2.29% of
the Fund's 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 fees of the Manager and Adviser; 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 Manager under its Management Agreement with the Fund or by the Adviser
under its Investment Advisory Agreement with the Fund.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is long-term capital appreciation.
This objective is fundamental and may not be changed without shareholder
approval. There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in equity securities
issued by medium-sized companies whose market capitalizations, at the time of
acquisition, are in the $300 million to $5 billion range and that, in the
opinion of the Adviser, exhibit superior earnings growth prospects and
attractive stock market valuations. The Fund may purchase securities with
market capitalizations not within the $300 million to $5 billion range, but
such securities will not apply to the 65% requirement described above. The
equity securities in which the Fund may invest include common stocks and
convertible securities such as investment grade convertible bonds, notes,
debentures, preferred stocks or other securities convertible into common
stock.
The Adviser pursues a "bottom-up" investment philosophy in investing the
Fund's assets. The "bottom-up" investment process is characterized by the
Adviser's proprietary research process which is to be used in the selection
of investments. Quantitative and qualitative criteria also will be used to
screen the more than 1,000 medium-sized companies within the $300 million to
$5 billion market capitalization range thereby providing the Adviser with a
list of potential investment securities. This list of securities is then
subjected to fundamental analysis. The Adviser will consider certain criteria
which include, amongst other things, a demonstrated record of consistent
earnings growth or the potential to grow earnings; an ability to earn an
attractive return on equity; the Adviser's expectation that earnings will
exceed Wall Street research analysts' earnings estimates (i.e., potential for
earnings surprises); a price/earnings ratio which is less than the Adviser's
internally estimated three-year earnings growth rate; a large and growing
market share; a strong balance sheet (i.e., low debt to capitalization
ratio); a significant ownership interest by management and a strong
management team. Under normal market conditions, the Fund intends to hold a
portfolio generally containing approximately 40 to 60 issues. Subject to the
Fund's investment objective, the Adviser may modify the foregoing criteria
and analysis without notice.
Up to 25% of the Fund's total assets may be invested in equity securities
of foreign issuers. Such foreign investments may be in the form of direct
investments in securities of foreign issuers or in the form of American
Depository Receipts (ADRs), European Depository Receipts (EDRs) or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying securities. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are designed for
use in European securities markets. The Fund's investments in unlisted
foreign securities are subject to the Fund's overall policy limiting its
investment in illiquid securities to 15% or less of its net assets.
Up to 35% of the Fund's total assets may be invested in equity securities
whose market capitalization at the time of acquisition is not within the $300
million to $5 billion range, as well as in investment grade fixed-income
securities consisting of securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, corporate debt securities and
money market instruments. With respect to corporate debt securities, the term
"investment grade" means securities which are rated Baa or higher by Moody's
Investors Services, Inc. ("Moody's") or BBB or higher by Standard & Poor's
Corporation ("S&P") or, if not rated, are deemed by the Adviser to be of
comparable quality. See the Appendix to the Statement of Additional
Information for a discussion of ratings of fixed-income securities.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in eco-
10
<PAGE>
nomic conditions or other circumstances are more likely to weaken their
capacity to make principal and interest payments than would be the case with
investments in securities with higher credit ratings. If a fixed-income or
convertible security held by the Fund is rated BBB or Baa and is subsequently
downgraded by a rating agency, or otherwise falls below investment grade, the
Fund will sell such security as soon as is practicable without undue market
or tax consequences to the Fund.
The Fund may also invest up to 5% of its assets in convertible securities
and other fixed-income securities rated below investment grade. Securities
below investment grade are the equivalent of high yield, high risk bonds
(commonly known as "junk bonds"). However, the Fund will not invest in
convertible and other fixed-income securities that are rated lower than B by
S&P or Moody's or, if not rated, determined to be of comparable quality by
the Adviser. The Fund will not invest in fixed-income securities that are in
default in payment of principal or interest. A description of fixed-income
securities ratings is contained in the Appendix to the Statement of
Additional Information. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for
a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The
value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion
value" (the security's worth if it were to be exchanged for the underlying
security, at market value, pursuant to its conversion privilege). To the
extent that a convertible security's investment value is greater than its
conversion value, its price will be primarily a reflection of such investment
value and its price will be likely to increase when interest rates fall and
decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on
the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, may 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.
Money market instruments in which the Fund may invest are securities
issued or guaranteed by the U.S. Government or its agencies (Treasury Bills,
Notes and Bonds); obligations of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more; Eurodollar
certificates of deposit; obligations of savings banks and savings and loan
associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, issued by a company having an
outstanding debt issue rated AAA by S&P or Aaa by Moody's.
There may be periods during which, in the opinion of the Adviser, market
conditions warrant reduction of some or all of the Fund's securities
holdings. During such periods, the Fund may adopt a temporary "defensive"
posture in which up to 100% of its total assets may be invested in money
market instruments or cash.
The Fund will not invest in options and futures contracts.
RISK CONSIDERATIONS AND
INVESTMENT PRACTICES
Given the investment risks described below, an investment in shares of the
Fund should not be considered a complete investment program and is not
appropriate for all investors. Investors should carefully consider their
ability to assume these risks before making an investment in the Fund.
The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's portfolio securities. The market value of the
Fund's portfolio securities will increase or decrease due to a variety of
economic, market or political
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<PAGE>
factors which cannot be predicted. Additionally, the net asset value of the
Fund's shares may increase or decrease due to changes in prevailing interest
rates. Generally, a rise in interest rates will result in a decrease in the
value of the Fund's fixed-income securities, while a drop in interest rates
will result in an increase in the value of those securities.
Mid-Cap Stocks. The Fund is intended for long-term investors who can
accept the risks involved in seeking long-term capital appreciation through
the investment in securities of medium-sized companies whose market
capitalizations, at the time of acquisition, are in the $300 million to $5
billion range which may involve greater risk of volatility of the Fund's net
asset value than is customarily associated with investing in larger, more
established companies. Often mid-size companies and the industries in which
they are focused are still evolving and while this may offer better growth
potential than larger, established companies, it also may make them more
sensitive to changing market conditions. Because prices of stocks, including
mid-cap stocks, fluctuate from day to day, the value of an investment in the
Fund will vary based upon the Fund's investment performance.
Convertible Securities. The Fund may acquire, through purchase or a
distribution by the issuer of a security held in its portfolio, a
fixed-income security which is convertible into common stock of the issuer.
Convertible securities rank senior to common stocks in a corporation's
capital structure and, therefore, entail less risk than the corporation's
common stock. The value of a convertible security is a function of its
"investment value" (its value as if it did not have a conversion privilege),
and its "conversion value" (the security's worth if it were to be exchanged
for the underlying security, at market value, pursuant to its conversion
privilege).
To the extent that a convertible security's investment value is greater
than its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security
(the credit standing of the issuer and other factors may also have an effect
on the convertible security's value). If the conversion value exceeds the
investment value, the price of the convertible security will rise above its
investment value and, in addition, may 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. In addition, see "High
Yield, High Risk Securities" below for a discussion of the risks of investing
in convertible and other fixed-income securities below investment grade.
Foreign securities. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United
States and abroad) or changed circumstances in dealings between nations.
Fluctuations in the relative rates of exchange between the currencies of
different nations will affect the value of the Fund's investments denominated
in foreign currency. 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.
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. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly
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<PAGE>
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 the Fund's trades effected in
such markets. As such, the inability to dispose of portfolio securities due
to settlement delays could result in losses to the Fund due to subsequent
declines in value of such securities and the inability of the Fund to make
intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments. To the
extent the Fund purchases Eurodollar certificates of deposit issued by
foreign branches of domestic United States banks, consideration will be given
to their domestic marketability, the lower reserve requirements normally
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions and future
international political and economic developments which might adversely
affect the payment of principal or interest.
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 designed to minimize those
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization. See the Statement of Additional
Information for a further discussion of such investments.
Private Placements. The Fund may invest up to 15% 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 under 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 Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as
to the liquidity of each such restricted security purchased by the Fund. If
such Rule 144A security is determined to be "liquid," such security will not
be included within the category "illiquid securities," which under current
policy may not exceed 15% of the Fund's net assets. However, investing in
Rule 144A securities could have the effect of increasing the level of Fund
illiquidity to the extent the Fund, at a particular point in time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.
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<PAGE>
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.
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. See the Statement
of Additional Information for a further discussion of such investments.
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. 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. See
the Statement of Additional Information for a further discussion of such
investments.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts.
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
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. 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, loans of portfolio securities will only be made to
firms deemed by the Adviser to be creditworthy and when the income which can
be earned from such loans justifies the attendant risks.
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<PAGE>
High Yield, High Risk Securities. Because of the ability of the Fund to
invest in certain high yield, high risk convertible and other fixed-income
securities (commonly known as "junk bonds"), the Adviser must take into
account the special nature of such securities and certain special
considerations in assessing the risks associated with such investments.
Although the growth of the high yield securities market in the 1980s had
paralleled a long economic expansion, since that time many issuers have been
affected by adverse economic and market conditions. It should be recognized
that an economic downturn or increase in interest rates is likely to have a
negative effect on the high yield bond market and on the value of the high
yield securities held by the Fund, as well as on the ability of the
securities' issuers to repay principal and interest on their borrowings.
The prices of high yield securities have been found to be less sensitive
to changes in prevailing interest rates than higher-rated investments but
more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress
which would adversely affect their ability to service their principal and
interest payment obligations, to meet their projected business goals or to
obtain additional financing. If the issuer of a fixed-income security owned
by the Fund defaults, the Fund may incur additional expenses to seek
recovery. In addition, periods of economic uncertainty and change can be
expected to result in an increased volatility of market prices of high yield
securities and a concomitant volatility in the net asset value of a share of
the Fund.
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse
effect on the market prices of certain securities. The limited liquidity of
the market may also adversely affect the ability of the Fund's Trustees to
arrive at a fair value for certain high yield securities at certain times and
could make it difficult for the Fund to sell certain securities. In addition,
new laws and potential new laws may have an adverse effect upon the value of
high yield securities and a concomitant negative impact upon the net asset
value of a share of the Fund.
Year 2000. The management services provided to the Fund by the Manager,
the investment advisory services provided to the Fund by the 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 Manager, the 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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Fund's investment objective. Douglas S. Foreman, Group Managing
Director of the Adviser, is the Fund's primary portfolio manager and
Christopher J. Ainley, Managing Director of the Adviser, assists Mr. Foreman
in managing the Fund's assets. Mr. Foreman and Mr. Ainley have been portfolio
managers with affiliates of The TCW Group, Inc. since 1994, prior to which
they were portfolio managers with Putnam Investments.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the 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 affiliated broker-dealers of the Manager, and others regarding economic
developments and interest rate trends, and the Adviser's own analysis of
factors it deems relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR, Morgan
Stanley & Co. Incorporated and other brokers and dealers
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that are affiliates of the Manager or Adviser. The Fund may incur brokerage
commissions on transactions conducted through such affiliates. The Fund
intends to buy and hold securities for capital appreciation. Although the
Fund does not intend to engage in substantial short-term trading as a means
of achieving its investment objective, the Fund may sell portfolio securities
without regard to the length of time that they have been held, in order to
take advantage of new investment opportunities or yield differentials, or
because the Fund desires to preserve gains or limit losses due to changing
economic conditions, interest rate trends, or the financial condition of the
issuer. It is not anticipated that the Fund's portfolio turnover rate will
exceed 150% in any one year. The Fund will incur underwriting discount costs
(on underwritten securities) and brokerage costs commensurate with its
portfolio turnover rate, and thus a higher level (over 100%) of portfolio
transactions will increase the Fund's overall brokerage expenses. Short term
gains and losses may result from such portfolio transactions. See "Dividends,
Distributions and Taxes" for a discussion of the tax implications of the
Fund's transactions.
The expenses of the Fund relating to its portfolio management are likely
to be greater than those incurred by other investment companies investing
only in securities issued by domestic issuers, as custodial costs, brokerage
commissions and other transaction charges related to investing on foreign
markets are generally higher than in the United States.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and thus may be
changed without shareholder approval.
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 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 assets, purchase more than 10% of all outstanding
voting securities or more than 10% of 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. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
4. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
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PURCHASE OF FUND SHARES
- -------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares 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 Manager, shares of
the Fund are distributed by the Distributor and offered by DWR and other
dealers (which may include TCW Brokerage Services, an affiliate of the
Adviser) who have entered into selected broker-dealer agreements with the
Distributor ("Selected Broker-Dealers"). The principal executive office of
the Distributor is located at Two World Trade Center, New York, New York
10048.
The 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 Trustees 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 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 and concurrent investments in Class D
shares of the Fund and other TCW/DW Funds which are multiple class funds
("TCW/DW Multi-Class Funds") will be aggregated. Subsequent purchases of $100
or more may be made by sending a check, payable to TCW/DW Mid-Cap Equity
Trust, directly to Dean Witter Trust FSB (the "Transfer Agent" or "DWT") at
P.O. Box 1040, Jersey City, NJ 07303, or by contacting an account executive
of DWR or other Selected Broker-Dealer. 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 (Service
Mark), an automatic purchase plan (see "Shareholder Services"), is $100,
provided that the schedule of automatic investments will result in
investments totalling at least $1,000 within the first twelve months. The
minimum initial investment 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,
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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 gains distributions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions. 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 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
"Repurchases and Redemptions."
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
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<PAGE>
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 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 minimum (or $25 million)
investment amount for Class D shares, holdings of Class A shares in all
TCW/DW Multi-Class Funds, and holdings of shares of "Exchange Funds" (see
"Shareholder Services--Exchange Privilege") for which Class A 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.
19
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
Conversion
Class Sales Charge 12b-1 Fee Feature
- -------------------------------------------------------------------------------
<S> <C> <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% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 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 SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT 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.
<PAGE>
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 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
enumer-
20
<PAGE>
ated 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 TCW/DW Multi-Class Funds. The sales charge payable on the
purchase of the Class A shares of the Fund and the Class A shares of the
other TCW/DW Multi-Class 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 TCW/DW Multi-Class
Funds previously purchased at a price including a front-end sales charge
(including shares of the Fund, other TCW/DW Multi-Class Funds or "Exchange
Funds" (see "Shareholder Services--Exchange Privilege") 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 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 Class A shares of other TCW/DW Multi-Class 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 other TCW/DW
Multi-Class Funds or shares of "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") acquired in exchange for Class A 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.
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" or Dean Witter Trust FSB ("DWTFSB") (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
21
<PAGE>
termination fees, mandatory redemption upon termination and such other
circumstances as specified in the program's 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 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
22
<PAGE>
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. 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
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Manager or its parent, Dean Witter InterCapital 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
23
<PAGE>
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 TCW/DW 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 TCW/DW
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
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 Trustees 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
24
<PAGE>
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)
certain Unit Investment Trusts sponsored by DWR; (iv) certain other open-end
investment companies whose shares are distributed by the Distributor; and (v)
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 TCW/DW 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
TCW/DW Multi-Class Funds, and holdings of shares of "Exchange Funds" (see
"Shareholder Services--Exchange Privilege") for which Class A 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 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 November 30, 1997, Class B shares of the Fund
accrued payments under
25
<PAGE>
the Plan amounting to $1,802,459, which amount is equal to the annualized
rate of 1.00% of the average daily net assets of Class B for the fiscal
period. These payments accrued under the Plan 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 November 30, 1997, Class A and Class B shares of the Fund
accrued payments under the Plan amounting to $46 and $178, respectively,
which amounts on an annualized basis are equal to .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 $9,313,194 at November 30, 1997, which was equal to 5.34% of the net
assets of Class B on such date. Because there is no requirement under the
Plan that the Distributor be reimbursed for all distribution expenses or any
requirement that the Plan be continued from year to year, such excess amount
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 Trustees 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 $469 in the case of Class C at December 31, 1997, which amount was
equal to 53% 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 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; if there were no sales that day, the security is valued at the
latest bid price; and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price. When market quotations are not readily available, including
circum-
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<PAGE>
stances under which it is determined by the 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 Board of Trustees.
For valuation purposes, quotations of foreign portfolio securities, other
assets and liabilities and forward contracts stated in foreign currency are
translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange. Dividends receivable are accrued
as of the ex-dividend date or as of the time that the relevant ex-dividend
date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees
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
Trustees. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of 60 days,
whereupon they will be valued at amortized cost using their value on the 61st
day unless the Trustees 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 Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may
utilize a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research evaluations by its staff,
including review of broker-dealer market price quotations, in determining
what the pricing service believes is the fair valuation of such portfolio
securities.
SHAREHOLDER SERVICES
- -------------------------------------------------------------------------------
Automatic Investment of Dividends and Distribu tions. 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 TCW/DW 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 "Repurchases and Redemptions").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution in shares of the applicable Class may invest such dividend or
distribution at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within 30 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 "Repurchases and Redemptions").
EasyInvest (Service Mark) . Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, 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 "Repurchases and
Redemptions--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. 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
27
<PAGE>
be the designated monthly or quarterly amount. 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.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for information about any of the
above services.
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.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other TCW/DW Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of TCW/DW North American Government
Income Trust and for shares of five money market funds for which InterCapital
serves as investment manager: Dean Witter Liquid Asset Fund Inc., Dean Witter
U.S. Government Money Market Trust, Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust (the foregoing six funds are hereinafter
collectively referred to as "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another TCW/DW Multi-Class Fund or any Exchange Fund that
is not a money market fund is on the basis of the next calculated net asset
value per share of each fund after the exchange order is received. When
exchanging into a money market fund from the Fund, shares of the Fund are
redeemed out of the Fund at their next calculated net asset value and the
proceeds of the redemption are used to purchase shares of the money market
fund at their net asset value determined the following business day.
Subsequent exchanges between any of the money market funds and any TCW/DW
Multi-Class Funds 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 TCW/DW
Multi-Class Fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
TCW/DW Multi-Class Fund are reacquired. Thus, the CDSC is based upon the time
(calculated as described above) the shareholder was invested in shares of a
TCW/DW Multi-Class Fund (see "Purchase of Fund Shares"). In the case of
shares 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 which are attributable to those shares. (Exchange Fund
12b-1 distribution fees are described in the prospectuses for those funds.)
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Manager to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Manager's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or
28
<PAGE>
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, each of the other
TCW/DW Funds and each of the money market funds may in its 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 TCW/DW Funds or money market 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 funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege
by contacting their DWR or other Selected Broker-Dealer account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer
but who wish to make exchanges directly by writing or telephoning the
Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization Form, copies of which may be obtained from the
Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made 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 include requiring various forms of personal identification such as
name, mailing address, social security or other tax identification number and
DWR or other Selected Broker-Dealer account number (if any). Telephone
instructions will also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
in the past with other funds managed by the Manager.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
29
<PAGE>
REPURCHASES AND REDEMPTIONS
- -------------------------------------------------------------------------------
Repurchases. DWR and other Selected 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 or telegraphic request of the shareholder. The repurchase price is
the net asset value per share 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 below under "Redemptions."
Redemptions. 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 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, along
with any additional information required by the Transfer Agent.
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, 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
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the repurchase or redemption,
reinstate any portion or all of the proceeds of such repurchase or redemption
in shares of the Fund in the same Class from 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
repurchase or redemption.
Involuntary Redemption. The Fund reserves the right, on 60 days' notice,
to redeem, at their 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 Internal Revenue 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 Trustees or, in the case of an account opened
through EasyInvest (Service Mark), if after twelve months the shareholder has
invested less than $1,000 in the account. However, before the Fund redeems
such shares and sends the proceeds to the shareholder, it will notify the
shareholder that the value of the shares is less than the applicable amount
and allow the shareholder 60 days to make an additional investment in an
amount which will increase the value of his or her account to at least the
applicable amount before the redemption is processed. No CDSC will be imposed
on any involuntary redemption.
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<PAGE>
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 short-term and
net long-term capital gains, if any, at least once each year. The Fund may,
however, determine to retain all or part of any net 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 distribute all of its net investment
income and capital gains to shareholders and otherwise qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have
to pay federal income taxes, and any state 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 net
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 with a record date in the last
quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed (for tax purposes) to have been received by the
shareholder in the prior year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Some part of such dividends and
distributions may be eligible for the Federal dividend received deduction
available to the Fund's corporate shareholders. The Fund may be subject to
foreign withholding taxes and thepass through of such taxes may not be
available to 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 calendar year, shareholders will be sent 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.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
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
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<PAGE>
the value of an initial investment in a Class of the Fund of $1,000 over one,
five and ten years or the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the
Fund, any appreciation or depreciation of the Fund's assets, all expenses
incurred by the applicable Class and all sales charges which would be
incurred by shareholders, forthe 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. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. 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. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are 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
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by
the shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
Fund obligations include such disclaimer, and provides for indemnification
and reimbursement of expenses out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitation on shareholder personal liability,
and the nature of the Fund's assets and operations, the possibility of the
Fund being unable to meet its obligations is remote and thus, in the opinion
of Massachusetts counsel to the Fund, the risk to Fund shareholders of
personal liability is remote.
Code of Ethics. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position. The Code of Ethics,
as it pertains to the TCW/DW Funds, contains several restrictions and
procedures designed to eliminate conflicts of interest including: (a)
pre-clearance of personal investment transactions to ensure that personal
transactions by employees are not being conducted at the same time as the
Adviser's clients; (b) quarterly reporting of personal securities
transactions; (c) a prohibition against personally acquiring securities in an
initial public offering, entering into uncovered short sales and writing
uncovered options; (d) a seven day "blackout period" prior or subsequent to a
TCW/DW Fund transaction during which portfolio managers are prohibited from
making certain transactions in securities which
32
<PAGE>
are being purchased or sold by a TCW/DW Fund; (e) a prohibition, with respect
to certain investment personnel, from profiting in the purchase and sale, or
sale and purchase, of the same (or equivalent) securities within 60 calendar
days; and (f) a prohibition against acquiring any security which is subject
to firm wide or, if applicable, a department restriction of the Adviser. The
Code of Ethics provides that exemptive relief may be given from certain of
its requirements, upon application. The Ad viser's Code of Ethics complies
with regulatory requirements and, insofar as it relates to persons associated
with registered investment companies, the 1994 Report of the Advisory Group
on Personal Investing of the Investment Company Institute.
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.
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TCW/DW Mid-Cap Equity Trust
Two World Trade Center
New York, New York 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
Douglas S. Foreman
Vice President
Christopher J. Ainley
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
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
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
TCW/DW
MID-CAP EQUITY
TRUST
PROSPECTUS
JANUARY 30, 1998
