<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 23, 1996
REGISTRATION NOS.: 333-2419
811-7591
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 2 [X]
----------------------
TCW/DW GLOBAL TELECOM TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
SHELDON CURTIS, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
DAVID M. BUTOWSKY, ESQ.
Gordon Altman Butowsky
Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
----------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
the effective date of this amendment.
----------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
[ ] immediately upon filing pursuant to paragraph (b)
[X] on December 23, 1996 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)
[ ] on (date) pursuant to paragraph (a) of rule 485
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT INTENDS TO FILE A RULE 24F-2
NOTICE FOR ITS FISCAL PERIOD ENDING MAY 30, 1997 WITH THE SECURITIES AND
EXCHANGE COMMISSION ON OR ABOUT JULY 15, 1997.
==============================================================================
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
CROSS-REFERENCE SHEET
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
- ---- ------------------
1. ....................... Cover Page
2. ....................... Summary of Fund Expenses; Prospectus Summary
3. ....................... Performance Information
4. ....................... Investment Objective and Policies; The Fund and
its Management; Cover Page; Investment
Restrictions; Prospectus Summary
5. ....................... The Fund and its Management; Back Cover;
Investment Objective and Policies
6. ....................... Dividends, Distributions and Taxes; Additional
Information
7. ....................... Purchase of Fund Shares; Shareholder Services;
Repurchases and Redemptions
8. ....................... Repurchases and Redemptions; Shareholder Services
9. ....................... Not Applicable
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- ---- -----------------------------------
10. ...................... Cover Page
11. ...................... Table of Contents
12. ...................... The Fund and its Management
13. ...................... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and
Brokerage
14. ...................... The Fund and its Management; Trustees and Officers
15. ...................... Trustees and Officers
16. ...................... The Fund and its Management; Custodian and
Transfer Agent; Independent Accountants
17. ...................... Portfolio Transactions and Brokerage
18. ...................... Description of Shares
19. ...................... Repurchases and Redemptions; Shareholder Services
20. ...................... Dividends, Distributions and Taxes
21. ...................... The Distributor
22. ...................... Performance Information
23. ...................... Experts; Statement of Assets and Liabilities
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
DECEMBER 23, 1996
TCW/DW Global Telecom 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 a portfolio consisting of securities of domestic and
foreign companies operating in all aspects of the telecommunications and
information industries. Such issuers are information transporters (such as
local/regional telephone companies, long-distance carriers and cable
television), content providers (such as movie studios, transaction services,
publishers and advertisers) and providers of enabling technologies (such as
manufacturers of information-processing servers, software and communications
products). See "Investment Objective and Policies."
Shares of the Fund are continuously offered at the net asset value per share
next determined following receipt of an order, without imposition of a sales
charge. However, repurchases and/or redemptions of shares are subject in most
cases to a contingent deferred sales charge, scaled down from 5% to 1% of the
amount redeemed, if made within six years of purchase, which charge will be
paid to the Fund's Distributor, Dean Witter Distributors Inc. See
"Repurchases and Redemptions--Contingent Deferred Sales Charge." In addition,
the Fund pays the Distributor a Rule 12b-1 distribution fee pursuant to a
Plan of Distribution at the annual rate of 1% of the lesser of the (i)
average daily aggregate net sales or (ii) average daily net assets of the
Fund. See "Purchase of Fund Shares--Plan of Distribution."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated December 23, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed on this
page. The Statement of Additional Information is incorporated herein by
reference.
Dean Witter Distributors Inc.
Distributor
TABLE OF CONTENTS
Prospectus Summary /2
Summary of Fund Expenses /4
Financial Highlights (unaudited) /5
The Fund and its Management /6
Investment Objective and Policies /7
Risk Considerations and Investment Practices /8
Investment Restrictions /15
Purchase of Fund Shares /16
Shareholder Services /18
Repurchases and Redemptions /21
Dividends, Distributions and Taxes /23
Performance Information /23
Additional Information /24
Financial Statements (unaudited)
November 30, 1996 /25
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.
TCW/DW GLOBAL TELECOM TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or (800) 869-NEWS (toll-free)
<PAGE>
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
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 a
portfolio consisting of securities of domestic and foreign
companies operating in all aspects of the telecommunications
and information industries.
- ------------------------------------------------------------------------------
Shares Shares of beneficial interest with $0.01 par value (see page
Offered 24).
- ------------------------------------------------------------------------------
Offering At net asset value (see page 16). Shares redeemed within six
Price years of purchase are subject to a contingent deferred sales
charge under most circumstances (see page 21).
- ------------------------------------------------------------------------------
Minimum Minimum initial investment, $1,000 ($100 if the account is
Purchase opened through EasyInvest (Service Mark) ); minimum subsequent
investment, $100 (see page 16).
- ------------------------------------------------------------------------------
Investment The investment objective of the Fund is long-term capital
Objective appreciation.
- ------------------------------------------------------------------------------
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 100 investment companies and other portfolios
with assets of approximately $91 billion at November 30, 1996
(see page 6).
- ------------------------------------------------------------------------------
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 October 31, 1996, the Adviser and its affiliates had
approximately $53 billion under management or committed to
management in various fiduciary or advisory capacities,
primarily to institutional investors (see page 6).
- ------------------------------------------------------------------------------
Management The Manager receives a monthly fee at the annual rate of 0.60%
and Advisory of daily net assets. The Adviser receives a monthly fee at an
Fees annual rate of 0.40% of daily net assets (see page 6).
- ------------------------------------------------------------------------------
Dividends Income dividends and capital gains, if any, will be
distributed no less than annually. Dividends and capital gains
distributions are automatically reinvested in additional
shares at net asset value unless the shareholder elects to
receive cash (see page 23).
- ------------------------------------------------------------------------------
Distributor Dean Witter Distributors Inc. (the "Distributor"). The
Distributor receives from the Fund a distribution fee accrued
daily and payable monthly at the rate of 1.0% per annum of the
lesser of (i) the average daily aggregate net sales or (ii)
the Fund's average daily net assets. This fee compensates the
Distributor for services provided in distributing shares of
the Fund and for sales-related expenses. The Distributor also
receives the proceeds of any contingent deferred sales charges
(see pages 16 and 21).
- ------------------------------------------------------------------------------
Redemption-- Shares are redeemable by the shareholder at net asset value.
Contingent An account may be involuntarily redeemed if the total value of
Deferred the account is less than $100 or, if the account was opened
Sales through EasyInvest (Service Mark), if after twelve months the
Charge shareholder has invested less than $1,000 in the account.
Although no commission or sales load is imposed upon the
purchase of shares, a contingent deferred sales charge (scaled
down from 5% to 1%) is imposed on any redemption of shares if
after such redemption the aggregate current value of an
account with the Fund falls below the aggregate amount of the
investor's purchase payments made during the six years
preceding the redemption. However, there is no charge imposed
on redemption of shares purchased through reinvestment of
dividends or distributions (see page 21)
- ------------------------------------------------------------------------------
2
<PAGE>
- ------------------------------------------------------------------------------
Risk The net asset value of the Fund's shares will fluctuate with
Considerations 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 affecting companies
and/or industries in which the Fund invests. In addition, the
value of the Fund's fixed-income and convertible securities
generally increases or decreases due to economic and market
factors, as well as changes in prevailing interest rates.
Generally, a rise in interest rates will result in a decrease
in value while a drop in interest rates will result in an
increase in value. The Fund may invest in lower rated or
unrated convertible securities (see page 9). There are also
certain risks associated with the Fund's investments in the
telecommunications and information industries (see page 9).
The Fund will invest in the securities of foreign issuers
which entails certain additional risks. The Fund may also
invest in options and futures transactions which may be
considered speculative in nature and may involve greater risks
than those customarily assumed by other investment companies
which do not invest in such instruments. In addition, the Fund
may enter into forward foreign currency exchange contracts in
connection with its foreign securities investments and may
purchase securities on a when-issued, delayed delivery or
"when, as and if issued" basis, which involve certain special
risks (see pages 8-14). 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 page 8) before making an investment in the
Fund.
- ------------------------------------------------------------------------------
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
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The estimated annualized fees and expenses set forth
in the table are for the fiscal period ending May 31, 1997.
Shareholder Transaction Expenses
- --------------------------------
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases ............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends .................................. None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) .. 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining
rates:
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- ----------------------------------- --------------
First .............................. 5.0%
Second ............................. 4.0%
Third .............................. 3.0%
Fourth ............................. 2.0%
Fifth .............................. 2.0%
Sixth .............................. 1.0%
Seventh and thereafter ............. None
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Management and Advisory Fees ............................................. 1.00%
12b-1 Fees* .............................................................. 0.98%
Other Expenses ........................................................... 0.40%
Total Fund Operating Expenses** .......................................... 2.38%
</TABLE>
- --------------
* The 12b-1 fee is accrued daily and payable monthly, at an annual rate
of 1.0% of the lesser of: (a) the average daily aggregate gross sales
of the Fund's shares since inception (not including reinvestment of
dividends or distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or waived, or
(b) the Fund's daily net assets. A portion of the 12b-1 fee equal to
0.25% of the Fund's average daily net assets is characterized as a
service fee within the meaning of National Association of Securities
Dealers, Inc. ("NASD") guidelines and is a payment made to the selling
broker for personal service and/or maintenance of shareholder accounts.
The remainder of the 12b-1 fee 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").
** "Total Fund Operating Expenses," as shown above, is based upon the sum
of the annualized 12b-1 Fees, Management and Advisory Fees and
estimated "Other Expenses," which may be incurred by the Fund for the
fiscal period ending May 31, 1997.
<TABLE>
<CAPTION>
Example 1 year 3 years
- ------- -------- ---------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each time period: .............................. $74 $104
You would pay the following expenses on the same investment, assuming no redemption: ... $24 $74
</TABLE>
The above example should not be considered a representation of past or
future expenses or performance. Actual expenses of the Fund may be greater or
less than those shown.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Repurchases and
Redemptions" in this Prospectus.
Long-term shareholders of the Fund may pay more in sales charges including
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
4
<PAGE>
FINANCIAL HIGHLIGHTS (unaudited)
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout the period have been taken from the records of the
Fund without examination by independent accountants. The financial highlights
should be read in conjunction with the unaudited financial statements and
notes thereto which are contained in this Prospectus commencing on page 25.
FOR THE PERIOD
AUGUST 28, 1996*
THROUGH
NOVEMBER 30, 1996
-----------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . $ 10.00
-----------------
Net investment loss ................... (0.03 )
Net realized and unrealized gain ..... 0.73
-----------------
Total from investment operations ..... 0.70
-----------------
Net asset value, end of period ....... $ 10.70
=================
TOTAL INVESTMENT RETURN+ .............. 7.00 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................. 2.37 %(2)
Net investment loss ................... (1.23 )%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands ............................ $103,830
Portfolio turnover rate ............... 20 %(1)
Average commission rate paid .......... $0.0218
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
See Notes to Financial Statements
5
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
TCW/DW Global Telecom 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 March 28, 1996.
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 Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
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 100 investment companies, thirty
of which are listed on the New York Stock Exchange, with combined assets of
approximately $87.9 billion as of November 30, 1996. InterCapital also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $3.1 billion at such date.
The Fund has retained the 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 twelve other TCW/DW Funds in addition
to the Fund. As of October 31, 1996, the Adviser and its affiliated companies
had approximately $53 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.
The Fund's expenses include: the fees of the Manager and the Adviser; the
fee pursuant to the Plan of Distribution (see "Purchase of Fund Shares");
taxes; legal, transfer agent, custodian and auditing fees; federal and state
registration fees; and printing and other expenses relating to the Fund's
operations which are not expressly assumed by the Manager or Adviser under
their respective Agreements with the Fund.
6
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
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 common stocks and
securities convertible into common stocks of domestic and foreign companies
operating in all aspects of the telecommunications and information industries
(the "Target Industries"). The Fund will not have more than 25% of its total
assets invested in convertible securities. All or some of the convertible
securities in which the Fund may invest may be below investment grade. See
the Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
The Target Industries are information transporters, content providers and
providers of enabling technologies. Information transporters are companies
involved in developing and manufacturing any portion of the so-called
information superhighway, such as local/regional telephone companies,
long-distance carriers, cable television, personal communications systems,
wireless, cellular, paging, direct broadcast satellite and the Internet.
Content providers are companies providing some of the information content
that is transmitted via the information superhighway such as movie studios,
providers of transaction services, manufacturers of games and educational
programming, publishers and advertisers. Finally, providers of enabling
technologies are manufacturers of products such as information-processing
servers, consumer electronics, data and video compression, software, storage
and semiconductor products.
Companies considered to be in the Target Industries will be those which
derive at least 35% of their revenues or earnings from the Target Industries,
or devote at least 35% of their assets to activities in the Target
Industries. Investments in securities of issuers in any one country, other
than the United States, will represent no more than 25% of the Fund's total
assets. The Fund will have at least 65% of its total assets invested in
securities of issuers located in at least three different countries.
Under normal market conditions, the Fund will maintain at least 25% of its
portfolio in securities issued by issuers located in the United States. As
such, the Fund will have a greater exposure than other "global" mutual funds
to economic and political events occurring in the U.S. Changes in prevailing
U.S. interest rates, federal tax rate increases, or adverse changes in
federal or state regulations or exchange rules may all have a
disproportionate impact upon the Fund as a result of its concentration
policy. Moreover, the Fund's concentration in securities of U.S. issuers will
mean that the Fund's investments are more likely to be responsive, both
positively and negatively, to declines or advances in the U.S. dollar with
respect to foreign currencies.
The communication and use of information using existing and developing
technologies is becoming increasingly important to the global economy. There
are opportunities for continued growth in demand for components, products,
media and systems to collect, store, retrieve, transmit, process, distribute,
record, reproduce and put information to use. The telecommunications,
broadcasting, cable television, media, entertainment and computer industries
are involved in creating new ways of exchanging information and distributing
content as consumers and businesses seek to buy packages of services
including combinations of local and long distance telephone, wireless, cable
television and Internet services. While governmental regulation may impact
the Target Industries both positively and negatively (see "Risk
Considerations and Investment Practices" below), the Adviser believes that
the enactment by the U.S. Congress of the Telecommunications Reform Act of
1996 may add to these growth opportunities through increasing competition,
mergers and other transactions that could fundamentally change the way
consumers and businesses obtain communication services. All such factors are
part of the Adviser's overall investment selection process.
7
<PAGE>
Up to 75% 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), Global
Depository Receipts (GDRs) 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. GDRs are issued by a foreign bank or trust company and evidence
ownership of the underlying foreign securities. Generally, GDRs are in bearer
form and are designed for use in European and other foreign 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 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 economic 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 non-convertible fixed-income
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 securities as soon as is practicable without undue market or tax
consequences to the Fund.
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.
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 factors which cannot be predicted.
Additionally, the net asset value of the Fund's shares may increase or
8
<PAGE>
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.
Telecommunications and Information Industries. The Fund concentrates its
investments in the telecommunications and information industries. Certain
economic factors or specific events may exert a disproportionate impact upon
the prices of equity securities of companies within a particular industry
relative to their impact on the prices of securities of companies engaged in
other industries. Because of this concentration, the value of the Fund's
shares may be more volatile than that of investment companies that do not
similarly concentrate their investments. The communications and information
industries may be subject to greater changes in governmental policies and
governmental regulation than many other industries in the United States and
worldwide. Regulatory approval requirements, ownership restrictions and
restrictions on rates of return and types of services that may be offered may
materially affect the products and services of these and related industries.
Additionally, the products and services of companies in these industries may
be subject to faster obsolescence as a result of greater competition,
advancing technological developments, and changing market and consumer
preferences. As a result, the stocks of companies in these industries may
exhibit greater price volatility than those of companies in other industries.
Lower Rated or Unrated 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.
A portion of the convertible securities in which the Fund may invest will
generally be rated below investment grade. Securities below investment grade
are the equivalent of high yield, high risk bonds, commonly known as "junk
bonds." Investment grade is generally considered to be debt securities rated
BBB or higher by Standard & Poor's Corporation ("S&P") or Baa or higher by
Moody's Investors Service, Inc. ("Moody's"). Fixed-income securities rated
Baa by Moody's or BBB by S&P have speculative characteristics greater than
those of more highly rated securities, while fixed-income securities rated Ba
or BB or lower by Moody's and S&P, respectively, are considered to be
speculative investments. The Fund will not invest in convertible 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 debt
securities that are in default in payment of principal or interest. The
ratings of fixed-income securities by Moody's and S&P are a generally
accepted barometer of credit risk. However, as the creditworthiness of
issuers of lower-rated fixed-income securities is more problematic than that
of issuers of higher-rated fixed-income securities, the achievement of the
Fund's investment objective will be more dependent upon the Adviser's own
credit analysis than would be the case with a mutual fund invest-
9
<PAGE>
ing primarily in higher quality bonds. The Adviser will utilize a security's
credit rating as simply one indication of an issuer's creditworthiness and
will principally rely upon its own analysis of any security currently held by
the Fund or potentially purchasable by the Fund for its portfolio. See the
Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
Because of the special nature of the Fund's permitted investments in lower
rated or unrated convertible securities, the Adviser must take account of
certain special considerations in assessing the risks associated with such
investments. The prices of lower rated or unrated securities have been found
to be less sensitive to changes in prevailing interest rates than higher
rated investments, but are likely to be 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 lower rated or unrated securities and a corresponding
volatility in the net asset value of a share of the Fund.
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. The foreign currency
transactions of the Fund will be conducted on a spot basis or through forward
foreign currency exchange contracts (described below). The Fund will incur
certain costs in connection with these currency transactions.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of 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 certifi-
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<PAGE>
cates 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.
Warrants and Stock Rights. The Fund may invest up to 5% of the value of
its net assets in warrants, including not more than 2% in warrants not listed
on either the New York or American Stock Exchange. The Fund may also invest
in stock rights. Warrants are, in effect, an option to purchase equity
securities at a specific price, generally valid for a specific period of
time, and have no voting rights, pay no dividends and have no rights with
respect to the corporations issuing them. The Fund may acquire warrants and
stock rights attached to other securities without reference to the foregoing
limitations.
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, the Fund follows procedures designed to minimize those risks. See
the Statement of Additional Information for a further discussion of such
investments.
Private Placements. The Fund may invest up to 10% of its net 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 restricted. (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.
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
11
<PAGE>
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.
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. The Fund will not
under any circumstances lend more than 25% of the value of its total assets.
Options and Futures Transactions. The Fund may purchase and sell (write)
call and put options on (i) portfolio securities which are denominated in
either U.S. dollars or foreign currencies; (ii) stock indexes; and (iii) the
U.S. dollar and foreign currencies. Such options are or may in the future be
listed on several U.S. and foreign securities exchanges or may be traded in
over-the-counter transactions ("OTC options"). OTC options are purchased from
or sold (written) to dealers or financial institutions which have entered
into direct agreements with the Fund.
The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency in
which such security is denominated (although such hedge is limited to the
value of the premium received) and to close out long call option positions.
The Fund may write covered put options, under which the Fund incurs an
obligation to buy the security (or currency) underlying the option from the
purchaser of the put at the option's exercise price at any time during the
option period, at the purchaser's election.
The Fund may purchase listed and OTC call and put options and options on
stock indexes in amounts equalling up to 10% of its total assets, with a
maximum of 5% of its total assets invested in the purchase of stock index
options. The Fund may purchase call options to close out a covered call
position or to
12
<PAGE>
protect against an increase in the price of a security it anticipates
purchasing or, in the case of call options on a foreign currency, to hedge
against an adverse exchange rate change of the currency in which the security
it anticipates purchasing is denominated vis-a-vis the currency in which the
exercise price is denominated. The Fund may purchase put options on
securities which it holds in its portfolio to protect itself against a
decline in the value of the security and to close out written put positions
in a manner similar to call option closing purchase transactions. There are
no other limits on the Fund's ability to purchase call and put options other
than compliance with the foregoing policies.
The Fund may purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity
exchanges on underlying portfolio securities, on any currency ("currency"
futures), on U.S. and foreign fixed-income securities ("interest rate"
futures) and on such indexes of U.S. or foreign equity or fixed-income
securities as may exist or come into being ("index" futures). The Fund may
purchase or sell interest rate futures contracts for the purpose of hedging
some or all of the value of its portfolio securities (or anticipated
portfolio securities) against changes in prevailing interest rates. The Fund
may purchase or sell index futures contracts for the purpose of hedging some
or all of its portfolio (or anticipated portfolio) securities against changes
in their prices. The Fund may purchase or sell currency futures contracts to
hedge against an anticipated rise or decline in the value of the currency in
which a portfolio security is denominated vis-a-vis another currency. As a
futures contract purchaser, the Fund incurs an obligation to take delivery of
a specified amount of the obligation underlying the contract at a specified
time in the future for a specified price. As a seller of a futures contract,
the Fund incurs an obligation to deliver the specified amount of the
underlying obligation at a specified time in return for an agreed upon price.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any
such futures, options or products as may be developed, to the extent
consistent with its investment objective and applicable regulatory
requirements.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures
contract, only if a liquid secondary market exists for options or futures
contracts of that series. There is no assurance that such a market will
exist, particularly in the case of OTC options, as such options may generally
only be closed out by entering into a closing purchase transaction with the
purchasing dealer. Also, exchanges may limit the amount by which the price of
many futures contracts may move on any day. If the price moves equal the
daily limit on successive days, then it may prove impossible to liquidate a
futures position until the daily limit moves have ceased.
Futures contracts and options transactions may be considered speculative
in nature and may involve greater risks than those customarily assumed by
other investment companies which do not invest in such instruments. One such
risk is that the Adviser could be incorrect in its expectations as to the
direction or extent of various interest rate or price movements or the time
span within which the movements take place. For example, if the Fund sold
futures contracts for the sale of securities in anticipation of an increase
in interest rates, and then interest rates went down instead, causing bond
prices to rise, the Fund would lose money on the sale. Another risk which
will arise in employing futures contracts to protect against the price
volatility of portfolio securities is that the prices of securities,
currencies and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the U.S.
dollar cash prices of the Fund's portfolio securities and their denominated
currencies. See the Statement of Additional Information for a further
discussion of risks.
Forward Foreign Currency Exchange Contracts. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") in
connection with its foreign securities investments.
13
<PAGE>
A forward contract involves an obligation to purchase or sell a currency
at a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the
contract. The Fund may enter into forward contracts as a hedge against
fluctuations in future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances.
When the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in"
the price of the security in U.S. dollars or some other foreign currency
which the Fund is temporarily holding in its portfolio. By entering into a
forward contract for the purchase or sale, for a fixed amount of dollars or
other currency, of the amount of foreign currency involved in the underlying
security transactions, the Fund will be able to protect itself against a
possible loss resulting from an adverse change in the relationship between
the U.S. dollar or other currency which is being used for the security
purchase (by the Fund or the counterparty) and the foreign currency in which
the security is denominated during the period between the date on which the
security is purchased or sold and the date on which payment is made or
received.
At other times, when, for example, the Fund's Adviser believes that the
currency of a particular foreign country may suffer a substantial decline
against the U.S. dollar or some other foreign currency, the Fund may enter
into a forward contract to sell, for a fixed amount of dollars or other
currency, the amount of foreign currency approximating the value of some or
all of the Fund's securities holdings (or securities which the Fund has
purchased for its portfolio) denominated in such foreign currency. Under
identical circumstances, the Fund may enter into a forward contract to sell,
for a fixed amount of U.S. dollars or other currency, an amount of foreign
currency other than the currency in which the securities to be hedged are
denominated approximating the value of some or all of the portfolio
securities to be hedged. This method of hedging, called "cross-hedging," will
be selected by the Adviser when it is determined that the foreign currency in
which the portfolio securities are denominated has insufficient liquidity or
is trading at a discount as compared with some other foreign currency with
which it tends to move in tandem.
In addition, when the Fund's Adviser anticipates purchasing securities at
some time in the future, and wishes to lock in the current exchange rate of
the currency in which those securities are denominated against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to purchase an amount of currency equal to some or all of the value
of the anticipated purchase, for a fixed amount of U.S. dollars or other
currency. The Fund may, however, close out the forward contract without
purchasing the security which was the subject of the "anticipatory" hedge.
In all of the above circumstances, if the currency in which the Fund's
securities holdings (or anticipated portfolio securities) are denominated
rises in value with respect to the currency which is being purchased (or
sold), then the Fund will have realized fewer gains than had the Fund not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible, since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the date the forward contract is entered into and
the date it matures. The Fund is not required to enter into such transactions
with regard to its foreign currency-denominated securities and will not do so
unless deemed appropriate by the Adviser. The Fund generally will not enter
into a forward contract with a term of greater than one year, although it may
enter into forward contracts for periods of up to five years. The Fund may be
limited in its ability to enter into hedging transactions involving forward
contracts by the Internal Revenue Code requirements relating to qualification
as a regulated investment company (see "Dividends, Distributions and Taxes").
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by the Adviser with a view to
achieving the Fund's investment objective. Robert M. Hanisee and John A.
Healey,
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<PAGE>
each a Managing Director of the Adviser, are the primary portfolio managers
of the Fund. Messrs. Hanisee and Healey have been portfolio managers with
affiliates of The TCW Group, Inc. since 1990 and 1995, respectively. Prior to
1995, Mr. Healey served as an independent consultant with Healey Partners.
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"), a broker-dealer affiliate 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. The Fund
may incur brokerage commissions on transactions conducted through DWR. 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 except that the Fund will invest at least 25%
of its total assets in the telecommunications and information industry.
This restriction does not apply to obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities.
15
<PAGE>
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers 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 minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW Global Telecom Trust,
directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, NJ 07303, or by contacting an account executive of DWR or
other Selected Broker-Dealer. 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. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, in its discretion, may accept investments without regard to any
minimum amounts which would otherwise be required if the Fund has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital 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.
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of
Net Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Repurchases and Redemptions"). Sales personnel of a Selected
Broker-Dealer are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types
of non-cash compensation or special sales incentives, including trips,
educational and/or business seminars and merchandise. The Fund and the
Distributor reserve the right to reject any purchase orders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of 1% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
Fund's average daily net assets. This fee is treated by the Fund as an
expense in the year it is accrued. A portion of the fee payable pursuant to
the Plan, equal to 0.25% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of NASD guidelines. The
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
16
<PAGE>
For the fiscal period August 28, 1996 (commencement of operations) through
November 30, 1996, the Fund accrued payments under the Plan amounting to
$226,815, which amount is equal to the annualized rate of 0.97% of the Fund's
average daily net assets for the fiscal period. The payments accrued under
the Plan were calculated pursuant to clause (a) of the compensation formula
under the Plan.
Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by the Distributor and
others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and compensation to and expenses
of DWR account executives and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan to compensate DWR and other Selected Broker-Dealers for
their opportunity costs in advancing such amounts, which compensation would
be in the form of a carrying charge on any unreimbursed distribution
expenses.
At any given time, the expenses in distributing 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 contingent deferred sales charges paid by
investors upon the redemption of shares (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing 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 the
excess distribution expenses (including the excess carrying charge described
above) totalled $6,257,689 at November 30, 1996, which was equal to 6.03% of
the Fund's net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount does not constitute a
liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
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 of contingent deferred sales charges, may or may not be
recovered through future distribution fees or contingent deferred sales
charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange (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
circumstances 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
17
<PAGE>
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 as of the morning of valuation.
Dividends receivable are accrued as of the ex-dividend date or as of the time
that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less 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. All other securities and other assets
are valued at their fair value as determined in good faith under procedures
established by and under the supervision of the 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 Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other TCW/DW
Fund), unless the shareholder requests that they be paid in cash. Shares so
acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption (see "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 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 not subject to the imposition of a
contingent deferred sales charge upon their redemption (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, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other Selected Broker-Dealer account executive or the Transfer Agent.
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. Any
applicable contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (See "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). Therefore, any shareholder
participat-
18
<PAGE>
ing in the Withdrawal Plan will have sufficient shares redeemed from his or
her account so that the proceeds (net of any applicable contingent deferred
sales charge) to the shareholder will be the designated monthly or quarterly
amount.
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
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of any other TCW/DW
Fund sold with a contingent deferred sales charge ("CDSC Funds"), for shares
of TCW/DW North American Government Income Trust, TCW/DW Income and Growth
Fund, TCW/DW Balanced Fund 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
eight funds are hereinafter collectively referred to as the "Exchange
Funds"). Exchanges may be made after the shares of the Fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange
or dividend reinvestment.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, other than other TCW/DW Funds and the five money market funds
listed above.
An exchange to another CDSC Fund or to 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 or any other TCW/DW Fund, shares of the
Fund are redeemed out of the Fund at their next calculated net asset value
and the proceeds of the redemption are used to purchase shares of the money
market fund at their net asset value determined the following day. Subsequent
exchanges between any of the money market funds and any TCW/DW Fund can be
effected on the same basis. No contingent deferred sales charge ("CDSC") is
imposed at the time of any exchange, although any applicable CDSC will be
imposed upon ultimate redemption. During the period of time the shareholder
remains in the Exchange Fund (calculated from the last day of the month in
which the Exchange Fund shares were acquired), the holding period (for the
purpose of determining the rate of the CDSC) is frozen. If those shares are
subsequently reexchanged for shares of a CDSC Fund, the holding period
previously frozen when the first exchange was made resumes on the last day of
the month in which shares of a CDSC Fund are reacquired. Thus, the CDSC is
based upon the time (calculated as described above) the shareholder was
invested in a CDSC Fund (see "Repurchases and Redemptions--Contingent
Deferred Sales Charge"). However, in the case of shares of the Fund exchanged
into an Exchange Fund, upon a redemption of shares which results in a CDSC
being imposed, a credit (not to exceed the amount of the CDSC) will be given
in an amount equal to the Exchange Fund 12b-1 distribution fees which are
attributable to those shares. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Manager to be abusive
19
<PAGE>
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 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 other 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
and any other conditions imposed by each fund. 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 money
market 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.
20
<PAGE>
REPURCHASES AND REDEMPTIONS
- -----------------------------------------------------------------------------
Repurchase. 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 contingent deferred sales charge
("CDSC") (see below).
The CDSC, if any, will be the only fee imposed by the Fund, the
Distributor, DWR or other Selected Broker-Dealer. The offers by DWR and other
Selected Broker-Dealers to repurchase shares may be suspended without notice
by them at any time. In that event, shareholders may redeem their shares
through the Fund's Transfer Agent as set forth below under "Redemption."
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charge (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption along with any additional
documentation required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), 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 table below:
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
------------ ---------------
First ...................... 5.0%
Second ..................... 4.0%
Third ...................... 3.0%
Fourth ..................... 2.0%
Fifth ...................... 2.0%
Sixth ...................... 1.0%
Seventh and thereafter .... None
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions. 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-
21
<PAGE>
employed retirement plan following retirement (or, in the case of a "key
employee" of a "top heavy" plan, following attainment of age 59 1/2); (b)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (c) a tax-free return of an excess contribution to an IRA;
and
(3) all redemptions of shares held for the benefit of a participant in a
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Manager or its parent, Dean Witter InterCapital Inc., as self-directed
investment alternatives and for which Dean Witter Trust Company or Dean
Witter Trust FSB, each of which is an affiliate of the Manager, serves as
Trustee ("Eligible 401(k) Plan"), provided that either: (a) the plan
continues to be an Eligible 401(k) Plan after the redemption; or (b) the
redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
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 redemptionproceeds 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 thirty 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 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 sixty 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 EasyInvestSM, 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 him or her sixty 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.
22
<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to pay dividends and to
distribute substantially all of its 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 Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
(See "Shareholder Services -- Automatic Investment of Dividends and
Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and 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 received by the shareholder in the prior calendar
year. Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. In this regard, a 46-day holding period generally must be met by
the Fund and the shareholder.
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. The Fund is subject to foreign
withholding taxes and the pass 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. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.
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. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over 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 Fund and all sales charges
which would be incurred by redeeming shareholders, for the period. It
23
<PAGE>
also assumes reinvestment of all dividends and distributions paid by the
Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in 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.
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 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 Adviser'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.
24
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Portfolio of Investments November 30, 1996 (unaudited)
- -----------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------- --------------
COMMON STOCKS (94.1%)
AUSTRALIA (1.5%)
PUBLISHING
72,400 News Corp. Ltd. (ADR) ................. $1,538,500
--------------
BRAZIL (1.5%)
TELECOMMUNICATIONS
20,400 Telecomunicacoes Brasileiras S/A
-Tebras (ADR) ......................... 1,545,300
--------------
CANADA (3.4%)
COMMUNICATIONS - EQUIPMENT & SOFTWARE
26,200 Newbridge Network Corp.* .............. 779,450
--------------
COMMUNICATIONS-
EQUIPMENT/MANUFACTURERS
18,800 Northern Telecom Ltd. ................. 1,236,100
--------------
ENTERTAINMENT
69,000 Cinar Films, Inc. (Class B)* .......... 1,518,000
--------------
TOTAL CANADA .......................... 3,533,550
--------------
CHILE (0.8%)
TELECOMMUNICATIONS
8,300 Compania de Telecommunicaciones de
Chile S.A. (ADR) ...................... 789,537
--------------
FINLAND (1.0%)
TELECOMMUNICATIONS
17,600 Nokia Corp. (ADR) ..................... 987,800
--------------
GERMANY (1.6%)
OIL RELATED
20,000 RWE AG ................................ 883,978
TELECOMMUNICATIONS
30,100 Tele Danmark A/S (ADR) ................ 752,500
--------------
TOTAL GERMANY ......................... 1,636,478
--------------
HUNGARY (0.7%)
CABLE/CELLULAR
2,800 Matav RT* ............................. 727,135
--------------
INDONESIA (0.6%)
TELECOMMUNICATIONS
250,000 PT Indosat ............................ 690,593
--------------
ITALY (2.7%)
AUTOMOTIVE
800,000 Pirelli SpA ........................... 1,461,279
--------------
TELECOMMUNICATIONS
600,000 Telecom Italia SpA .................... 1,412,481
--------------
TOTAL ITALY ........................... 2,873,760
--------------
JAPAN (3.8%)
ELECTRONIC & ELECTRICAL EQUIPMENT
24,000 Sony Corp. (ADR) ...................... $1,551,000
--------------
ELECTRONIC COMPONENTS
10,000 Hitachi Ltd. (ADR) .................... 946,250
--------------
UTILITIES - TELEPHONE
40,000 Nippon Telegraph & Telephone (ADR) ... 1,440,000
--------------
TOTAL JAPAN ........................... 3,937,250
--------------
MALAYSIA (1.3%)
TELECOMMUNICATIONS
236,000 Leader Universal Holdings Berhad ..... 537,107
88,000 Telekom Malaysia Berhad* .............. 801,108
--------------
TOTAL MALAYSIA ........................ 1,338,215
--------------
MEXICO (0.7%)
LEISURE TIME/EQUIPMENT
25,000 Grupo Televisa S.A. (GDR)* ............ 681,250
--------------
NETHERLANDS (2.0%)
ELECTRONICS
50,000 Philips Electronics N.V. .............. 2,025,000
--------------
NORWAY (0.8%)
TELECOMMUNICATION EQUIPMENT
21,408 Nera ASA (ADR) ........................ 872,376
--------------
PHILIPPINES (1.5%)
UTILITIES TELEPHONE
28,264 Philippine Long Distance Telephone Co.
(ADR) ................................. 1,625,180
--------------
PORTUGAL (1.4%)
TELECOMMUNICATIONS
56,400 Portugal Telecom S.A. (ADR) ........... 1,494,600
--------------
RUSSIA (1.0%)
TELECOMMUNICATIONS
45 Rostelecom (RDC) -144A** .............. 1,035,000
--------------
SPAIN (0.8%)
UTILITIES - TELEPHONE
41,300 Telefonica de Espana .................. 904,961
--------------
SWEDEN (2.0%)
UTILITIES - TELEPHONE
66,000 Ericsson (L.M.) Telephone Co. AB (ADR) 2,029,500
--------------
UNITED KINGDOM (2.5%)
CABLE/CELLULAR
25,700 British Telecommunications PLC (ADR) . 1,635,163
--------------
25
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Portfolio of Investments November 30, 1996 (unaudited) (continued)
- -----------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------- --------------
TELECOMMUNICATIONS
21,200 Vodafone Group PLC (ADR) .............. $ 916,900
--------------
TOTAL UNITED KINGDOM .................. 2,552,063
--------------
UNITED STATES (61.0%)
ADVERTISING
34,500 Omnicom Group, Inc. ................... 1,759,500
--------------
BROADCAST MEDIA
36,700 American Radio Systems Corp.* ......... 990,900
29,000 BET Holdings, Inc. (Class A)* ......... 804,750
40,500 Cox Communications, Inc. (Class A)* .. 830,250
27,600 Infinity Broadcasting Corp. (Class A)* 886,650
43,600 Liberty Media Group (Class A)* ....... 1,084,550
15,000 Univision Communications, Inc.* ...... 596,250
--------------
5,193,350
--------------
BUSINESS SERVICES
44,700 Cognizant Corp* ....................... 1,542,150
--------------
CABLE TELEVISION EQUIPMENT
50,000 TV Filme, Inc.* ....................... 656,250
--------------
COMMUNICATIONS -EQUIPMENT & SOFTWARE
22,600 Cascade Communications Corp.* ......... 1,553,750
29,200 Cisco Systems, Inc.* .................. 1,981,950
--------------
3,535,700
--------------
COMPUTER SOFTWARE
9,900 Microsoft Corp.* ...................... 1,553,062
17,200 Pairgain Technologies, Inc.* .......... 1,094,350
28,600 Security Dynamics Technologies, Inc.* 1,176,175
15,200 Shiva Corp.* .......................... 627,000
60,900 Trusted Information Systems, Inc.* ... 723,187
--------------
5,173,774
--------------
COMPUTER SOFTWARE & SERVICES
102,500 GT Interactive Software Corp.* ....... 1,191,562
36,900 Objective Systems Integrators, Inc.* . 899,437
43,500 Sterling Commerce, Inc.* .............. 1,370,250
--------------
3,461,249
--------------
COMPUTERS - SYSTEMS
16,500 3Com Corp.* ........................... 1,239,562
--------------
ELECTRIC - MAJOR
94,000 Westinghouse Electric Corp. ........... 1,762,500
--------------
ELECTRONIC & ELECTRICAL EQUIPMENT
20,100 C-Cube Microsystems, Inc.* ............ 871,837
23,600 Vitesse Semiconductors Corp.* ......... 1,123,950
--------------
1,995,787
--------------
ELECTRONICS - DEFENSE
27,500 General Motors Corp. (Class H) ....... $1,498,750
--------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS
9,600 Intel Corp. ........................... 1,216,800
25,100 Maxim Integrated Products, Inc.* ..... 1,160,875
--------------
36,100 Motorola, Inc. ........................ 1,999,038
30,100 Triquint Semiconductor, Inc.* ......... 673,488
--------------
5,050,201
--------------
ENTERTAINMENT
24,900 Electronic Arts, Inc.* ................ 799,913
20,000 Evergreen Media Corp. (Class A)* ..... 495,000
--------------
1,294,913
--------------
FINANCE
100,800 CUC International, Inc.* .............. 2,658,600
--------------
MEDIA GROUP
68,000 General Instrument Corp.* ............. 1,504,500
--------------
PUBLISHING
68,700 Golden Books Family Entertainment,
Inc.* ................................. 781,463
50,100 Mecklermedia Corp.* ................... 1,014,525
11,400 Scholastic Corp.* ..................... 849,300
--------------
2,645,288
--------------
TELECOMMUNICATION EQUIPMENT
81,100 Harmonic Lightwaves, Inc.* ............ 1,601,725
42,800 LCC International, Inc. (Class A)* ... 642,000
109,900 Loral Space & Communications Ltd.* ... 2,033,150
37,000 P-COM, Inc.* .......................... 1,156,250
13,600 U.S. Robotics Corp.* .................. 1,067,600
--------------
6,500,725
--------------
TELECOMMUNICATIONS
38,300 LCI International, Inc.* .............. 1,249,538
29,100 Lucent Technologies, Inc. ............. 1,491,375
28,400 MFS Communications Company, Inc.* .... 1,370,300
28,200 Omipoint Corp.* ....................... 740,250
27,100 Qualcomm Inc.* ........................ 1,131,425
35,000 SmarTalk Teleservices Inc.* ........... 437,500
37,800 Sprint Corp. .......................... 1,582,875
71,400 Tele-Communications, Inc. (Class A)* . 963,900
95,900 Tele-Communications International,
Inc. (Class A)* ....................... 1,438,500
85,700 Teleport Communications Group Inc.
(Class A)* ............................ 2,838,813
26
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Portfolio of Investments November 30, 1996 (unaudited) (continued)
- ------------------------------------------------------------------------------
NUMBER OF
SHARES VALUE
- ----------- --------------
48,300 Western Wireless Corp. (Class A)* .... $ 676,200
49,700 Winstar Communications, Inc.* ......... 1,031,275
--------------
14,951,951
--------------
TOYS
125,000 T-HQ, Inc.* ........................... 960,938
--------------
TOTAL UNITED STATES ................... 63,385,688
--------------
VENEZUELA (1.5%)
TELECOMMUNICATIONS
60,000 Compania Anonima Nacional Telefonos de
Venezuela (ADR)* ...................... $ 1,522,500
--------------
NUMBER OF
SHARES VALUE
- ----------- ----------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $91,206,669) (A) . 94.1% 97,726,236
CASH AND OTHER ASSETS
IN EXCESS OF LIABILITIES .......... 5.9 6,104,033
---------- ----------------
NET ASSETS ......................... 100.0% $103,830,269
========== ================
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
RDC Russian Depository Certificate.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation was
$9,370,160 and the aggregate gross unrealized depreciation was
$2,850,593, resulting in net unrealized appreciation of $6,519,567.
See Notes to Financial Statements
27
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Summary of Investments November 30, 1996 (unaudited)
- -----------------------------------------------------------------------------
PERCENT OF
INDUSTRY VALUE NET ASSETS
- ---------------------------------------- ------------- ------------
Advertising ............................. $ 1,759,500 1.7%
Automotive .............................. 1,461,279 1.4
Broadcast Media ......................... 5,193,350 5.0
Business Services ....................... 1,542,150 1.5
Cable Television Equipment .............. 656,250 0.6
Cable/Cellular .......................... 2,362,297 2.3
Communications - Equipment & Software .. 4,315,150 4.2
Communications - Equipment/Manufacturers 1,236,100 1.2
Computer Software ....................... 5,173,775 5.0
Computer Software & Services ............ 3,461,250 3.3
Computers - Systems ..................... 1,239,562 1.2
Electric - Major ........................ 1,762,500 1.7
Electronic & Electrical Equipment ...... 3,546,787 3.4
Electronic Components ................... 946,250 0.9
Electronics ............................. 2,025,000 1.9
Electronics - Defense ................... 1,498,750 1.4
Electronics - Semiconductors/Components . 4,376,712 4.2
Entertainment ........................... 3,486,401 3.4
Finance ................................. 2,658,600 2.6
Leisure Time/Equipment .................. 681,250 0.7
Media Group ............................. 1,504,500 1.4
Oil Related ............................. 883,978 0.9
Publishing .............................. 4,183,788 4.0
Telecommunication Equipment ............. 7,373,101 7.1
Telecommunications ...................... 27,437,377 26.4
Toys .................................... 960,938 0.9
Utilities - Telephone ................... 5,999,641 5.8
------------- ------------
$97,726,236 94.1%
============= ============
28
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1996 (unaudited)
- -----------------------------------------------------------------------------
ASSETS:
Investments in securities, at value
(identified cost $91,206,669) ............. $ 97,726,236
Cash ....................................... 4,887,114
Receivable for:
Investments sold .......................... 1,415,958
Shares of beneficial interest sold ....... 494,604
Dividends ................................. 47,142
Interest .................................. 34,674
Deferred organizational expenses ........... 149,993
Prepaid expenses ........................... 12,879
--------------
TOTAL ASSETS ............................. 104,768,600
--------------
LIABILITIES:
Payable for:
Investments purchased ..................... 549,333
Plan of distribution fee .................. 78,002
Management fee ............................ 48,600
Investment advisory fee ................... 32,400
Shares of beneficial interest repurchased 15,662
Organizational expenses .................... 158,225
Accrued expenses ........................... 56,109
--------------
TOTAL LIABILITIES ........................ 938,331
--------------
NET ASSETS:
Paid-in-capital ............................ 97,619,568
Net unrealized appreciation ................ 6,519,444
Net investment loss ........................ (285,674)
Net realized loss .......................... (23,069)
--------------
NET ASSETS ............................... $103,830,269
==============
NET ASSET VALUE PER SHARE, 9,700,081
shares outstanding (unlimited shares
authorized of $.01 par value) ............. $ 10.70
==============
- -----------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the period
August 28, 1996* through November 30, 1996 (unaudited)
- -----------------------------------------------------------------------------
NET INVESTMENT INCOME:
INCOME
Interest ................................. $ 185,227
Dividends (net of $4,378 foreign
withholding tax) ........................ 81,897
--------------
TOTAL INCOME ............................ 267,124
--------------
EXPENSES
Plan of distribution fee ................. 226,815
Management fee ........................... 139,843
Investment advisory fee .................. 93,228
Custodian fees ........................... 21,092
Transfer agent fees and expenses ........ 16,874
Professional fees ........................ 16,427
Registration fees ........................ 14,214
Shareholder reports and notices .......... 10,894
Organizational expenses .................. 8,232
Trustees' fees and expenses .............. 5,179
--------------
TOTAL EXPENSES .......................... 552,798
--------------
NET INVESTMENT LOSS ..................... (285,674)
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments .............................. (23,424)
Foreign exchange transactions ............ 355
--------------
NET LOSS ................................ (23,069)
--------------
Net unrealized appreciation on:
Investments .............................. 6,519,567
--------------
Translation of other assets and
liabilities denominated in foreign
currencies .............................. (123)
NET APPRECIATION ........................ 6,519,444
NET GAIN ................................ 6,496,375
NET INCREASE ............................ $ 6,210,701
==============
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 28, 1996* THROUGH
NOVEMBER 30, 1996
------------------------
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss .......................................... $ (285,674)
Net realized loss ............................................ (23,069)
Net unrealized appreciation .................................. 6,519,444
-------------
Net increase ................................................ 6,210,701
Net increase from transactions in shares of beneficial
interest ...................................................... 97,519,568
-------------
Net increase ................................................ 103,730,269
NET ASSETS:
Beginning of period ........................................... 100,000
-------------
END OF PERIOD (Including a net investment loss of $285,674) .. $103,830,269
=============
</TABLE>
- --------------
* Commencement of Operations.
See Notes to Financial Statements
29
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Notes to Financial Statements November 30, 1996 (unaudited)
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Global Telecom Trust (the
"Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a diversified, open-end management investment company. The
Fund's investment objective is long-term capital appreciation. The Fund seeks
to achieve its objective by investing primarily in securities of domestic and
foreign companies operating in all aspects of the telecommunications and
information industries. The Fund was organized as a Massachusetts business
trust on March 28, 1996 and had no other operations other than those relating
to organizational matters and the issuance of 10,000 shares of beneficial
interest for $100,000 to Dean Witter InterCapital Inc. ("InterCapital"), an
affiliate of Dean Witter Services Company Inc. (the "Manager"), to effect the
Fund's initial capitalization. The Fund commenced operations on August 28,
1996.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies:
A. Valuation of Investments -- (1) an equity security listed or traded
on the New York, American or other domestic or foreign stock exchange is
valued at its latest sale price on that exchange prior to the time when
assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where securities are traded on
more than one exchange; the securities are valued on the exchange
designated as the primary market by the Adviser); (2) all other
portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to
the time of valuation; (3) when market quotations are not readily
available, including circumstances 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 Trustees; (4) certain portfolio securities
may be valued by an outside pricing service approved by the Trustees.
The pricing service utilizes a matrix system incorporating security
quality, maturity and coupon as the evaluation model parameters, and/or
research and evaluations by its staff, including review of broker-dealer
market price quotations, if available, in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service; and (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market
basis until sixty days prior to maturity and thereafter at amortized
cost based on their value on the 61st day. Short-term debt securities
have a maturity date of sixty days or less at the time of purchase are
valued at amortized cost.
B. Accounting for Investments -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the
identified cost method. Dividend income and other distributions are
recorded on the ex-dividend date except for certain dividends on foreign
securities which are recorded as soon as the Fund is informed after the
ex-dividend date. Discounts are accreted over the life of the respective
securities. Interest income is accrued daily.
C. Foreign Currency Translation -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market
value of investment securities, other assets and liabilities and forward
contracts are translated at the exchange rates prevailing at the end of
the period; and (2) purchases, sales, income and expenses are translated
at the exchange rates prevailing on the respective dates of such
transactions. The resultant exchange gains and losses are included in
the Statement of
30
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Notes to Financial Statements November 30, 1996 (unaudited) (continued)
- ------------------------------------------------------------------------------
Operations as realized and unrealized gain/loss on foreign exchange
transactions. Pursuant to U.S. Federal income tax regulations, certain
foreign exchange gains/losses included in realized and unrealized
gain/loss are included in or are a reduction of ordinary income for
federal income tax purposes. The Fund does not isolate that portion of
the results of operations arising as a result of changes in the foreign
exchange rates from the changes in the market prices of the securities.
D. Forward Foreign Currency Contracts -- The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant unrealized exchange gains and losses are
included in the Statement of Operations as unrealized foreign currency
gain or loss and in the Statement of Assets and Liabilities as part of
the related foreign currency denominated asset or liability. The Fund
records realized gains or losses on delivery of the currency or at the
time the forward contract is extinguished (compensated) by entering into
a closing transaction prior to delivery.
E. Federal Income Tax Status --It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
F. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date.
The amount of dividends and distributions from net investment income and
net realized capital gains are determined in accordance with federal
income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either
considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized
capital gains for financial reporting purposes but not for tax purposes
are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
G. Organizational Expenses -- InterCapital paid the organizational
expenses in the amount of approximately $158,000 which will be
reimbursed for the full amount thereof. Such expenses have been deferred
and are being amortized on the straight-line method over a period not to
exceed five years from the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
the Manager a management fee, accrued daily and payable monthly, by applying
the annual rate of 0.60% to the net assets of the Fund determined as of the
close of each business day.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Fund who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the
Adviser an advisory fee, accrued daily and payable monthly, by applying the
annual rate of 0.40% to the net assets of the Fund determined as of the close
of each business day.
31
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Notes to Financial Statements November 30, 1996 (unaudited) (continued)
- ------------------------------------------------------------------------------
Under the terms of the Investment Advisory Agreement, the Fund has
retained the Adviser to invest the Fund's assets, including placing orders
for the purchase and sale of portfolio securities. The Adviser obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager. The Fund
has adopted a Plan of Distribution (the "Plan"), pursuant to Rule 12b-1 under
the Act, pursuant to which the Fund pays the Distributor compensation,
accrued daily and payable monthly, at an annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the Fund's inception (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and Distributor,
and other employees or selected broker-dealers who engage in or support
distribution of the Fund's shares or who service shareholder accounts,
including overhead and telephone expenses, printing and distribution of
prospectuses and reports used in connection with the offering of the Fund's
shares to other than current shareholders and preparation, printing and
distribution of sales literature and advertising materials. In addition, the
Distributor may be compensated under the Plan for its opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered, may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. The
Distributor has advised the Fund that such excess amounts, including carrying
charges, totaled $6,257,689 at November 30, 1996.
The Distributor has informed the Fund that for the period ended November
30, 1996, it received approximately $24,000 in contingent deferred sales
charges from certain redemptions of the Fund's shares.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the period ended November 30, 1996 aggregated
$104,142,182 and $12,912,089, respectively.
32
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
Notes to Financial Statements November 30, 1996 (unaudited) (continued)
- -----------------------------------------------------------------------------
6. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest were as follows:
FOR THE PERIOD
AUGUST 28, 1996*
THROUGH
NOVEMBER 30, 1996
--------------------------
SHARES AMOUNT
----------- -------------
Sold ........... 9,823,222 $98,882,513
Repurchased ... (133,141) (1,362,945)
----------- -------------
Net increase .. 9,690,081 $97,519,568
=========== =============
- ------------
* Commencement of Operations
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS -- The
Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio
transactions or to manage foreign currency exposure associated with foreign
currency denominated securities. At November 30, 1996, there were no
outstanding forward contracts.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk
of an unfavorable change in foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their
contracts.
8. SELECTED PER SHARE DATA AND RATIOS -- See the "Financial Highlights" table
on page 5 of this Prosepctus.
33
<PAGE>
TCW/DW GLOBAL TELECOM 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
Sheldon Curtis
Senior Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
John A. Healey
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, NY 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
T C W / D W
GLOBAL
TELECOM TRUST
PROSPECTUS
DECEMBER 23, 1996
<PAGE>
TCW/DW
GLOBAL TELECOM
TRUST
STATEMENT OF ADDITIONAL INFORMATION
December 23, 1996
- -----------------------------------------------------------------------------
TCW/DW Global Telecom 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 a portfolio consisting of securities of domestic and
foreign companies operating in all aspects of the telecommunications and
information industries (the "Target Industries"). See "Investment Objective
and Policies" in the Prospectus.
A Prospectus for the Fund dated December 23, 1996, which provides basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below
or from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean
Witter Reynolds Inc. at any of its branch offices. This Statement of
Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the
Prospectus.
TCW/DW Global Telecom Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
The Fund and its Management .......................... 3
Trustees and Officers ................................ 6
Investment Practices and Policies .................... 12
Investment Restrictions .............................. 25
Portfolio Transactions and Brokerage ................. 27
The Distributor ...................................... 28
Shareholder Services ................................. 31
Repurchases and Redemptions .......................... 34
Dividends, Distributions and Taxes ................... 36
Performance Information .............................. 37
Description of Shares ................................ 37
Custodian and Transfer Agent ......................... 38
Independent Accountants .............................. 38
Reports to Shareholders .............................. 38
Legal Counsel ........................................ 38
Experts .............................................. 38
Registration Statement ............................... 39
Report of Independent Accountants .................... 40
Statement of Assets and Liabilities at June 19, 1996 41
Appendix ............................................. 43
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on March 28, 1996. The Fund is one of the TCW/DW Funds, which
currently consist, in addition to the Fund, of TCW/DW Core Equity Trust,
TCW/DW Small Cap Growth Fund, TCW/DW North American Government Income Trust,
TCW/DW Latin American Growth Fund, TCW/DW Term Trust 2002, TCW/DW Income and
Growth Fund, TCW/DW Term Trust 2003, TCW/DW Balanced Fund, TCW/DW Term Trust
2000, TCW/DW Emerging Markets Opportunities Trust, TCW/DW Total Return Trust,
TCW/DW Mid-Cap Equity Trust and TCW/DW Strategic Income Trust.
THE MANAGER
Dean Witter Services Company Inc. (the "Manager"), a Delaware corporation,
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"), a Delaware corporation. InterCapital is a
wholly-owned subsidiary of Dean Witter, Discover & Co. ("DWDC"), a Delaware
corporation. In an internal reorganization which took place in January, 1993,
InterCapital assumed the management, administrative and investment advisory
activities previously performed by the InterCapital Division of Dean Witter
Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager. (As
hereinafter used in this Statement of Additional Information, the term
"InterCapital" refers to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter). The daily
management of the Fund is conducted by or under the direction of officers of
the Fund and of the Manager and Adviser (see below), subject to review by the
Fund's Board of Trustees. Information as to these Trustees and officers is
contained under the caption "Trustees and Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and records and furnishes, at its own expense,
such office space, facilities, equipment, supplies, clerical help and
bookkeeping and certain legal services as the Fund may reasonably require in
the conduct of its business, including the preparation of prospectuses,
statements of additional information, proxy statements and reports required
to be filed with federal and state securities commissions (except insofar as
the participation or assistance of independent accountants and attorneys is,
in the opinion of the Manager, necessary or desirable). In addition, the
Manager pays the salaries of all personnel, including officers of the Fund,
who are employees of the Manager. The Manager also bears the cost of the
Fund's telephone service, heat, light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and 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 daily net assets of the Fund determined as of the close of each business
day. While the total fees payable under the Management Agreement and the
Advisory Agreement (described below) are higher than that paid by most other
investment companies for similar services, the Board of Trustees determined
that the total fees payable under the Management Agreement and the Advisory
Agreement (described below) are reasonable in relation to the scope and
quality of services to be provided thereunder. In this regard, in evaluating
the Management Agreement and the Advisory Agreement, the Board of Trustees
recognized that the Manager and the Adviser had, pursuant to an agreement
described under the section entitled "The Adviser," agreed to a division as
between themselves of the total fees necessary for the management of the
business affairs of and the furnishing of investment advice to the Fund.
Accordingly, in reviewing the Management Agreement and Advisory Agreement,
the Board viewed as most significant the question as to whether the total
fees payable under the Management and Advisory Agreements were in the
aggregate reasonable in relation to the services to be provided thereunder.
For the period August 28, 1996 (commencement of operations) through
November 30, 1996, the Fund accrued to the Manager total compensation under
the Management Agreement in the amount of $139,843.
3
<PAGE>
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for any act or omission by the Manager or for any losses sustained
by the Fund or its investors. The Management Agreement in no way restricts
the Manager from acting as manager to others.
InterCapital paid the organizational expenses of the Fund (approximately
$158,225) incurred prior to the offering of the Fund's shares. The Fund has
agreed to reimburse InterCapital for such expenses. These expenses will be
deferred by the Fund and amortized on the straight line method over a period
not to exceed five years from the date of commencement of the Fund's
operations.
The Management Agreement was approved by the Trustees on April 17, 1996
and became effective on that date. It was approved by InterCapital as the
then sole shareholder on April 18, 1996. The Management Agreement may be
terminated at any time, without penalty, on thirty days' notice by the
Trustees of the Fund, or by the Manager.
Under its terms, the Management Agreement will continue in effect until
April 30, 1997, and will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the
vote of the Trustees of the Fund, including the vote of a majority of the
Trustees of the Fund who are not parties to the Management or Advisory
Agreement or "interested persons" (as defined in the Investment Company Act
of 1940, as amended (the "Act")) of any such party (the "Independent
Trustees").
THE ADVISER
TCW Funds Management, Inc. (the "Adviser") is a wholly-owned subsidiary of
The TCW Group, Inc. ("TCW"), whose direct and indirect subsidiaries,
including Trust Company of the West and TCW Asset Management Company, provide
a variety of trust, investment management and investment advisory services.
As of October 31, 1996, the Adviser and its affiliates had approximately $53
billion under management or committed to management. Trust Company of the
West and its affiliates have managed equity securities portfolios for
institutional investors since 1971. The Adviser is headquartered at 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017 and is registered
as an investment adviser under the Investment Advisers Act of 1940. In
addition to the Fund, the Adviser serves as investment adviser to thirteen
other TCW/DW Funds: TCW/DW Small Cap Growth Fund, TCW/DW Core Equity Trust,
TCW/DW North American Government Income Trust, TCW/DW Latin American Growth
Fund, TCW/DW Term Trust 2002, TCW/DW Income and Growth Fund, TCW/DW Term
Trust 2003, TCW/DW Balanced Fund, TCW/DW Term Trust 2000, TCW/DW Emerging
Markets Opportunities Trust, TCW/DW Total Return Trust, TCW/DW Mid-Cap Equity
Trust and TCW/DW Strategic Income Trust. The Adviser also serves as
investment adviser to TCW Convertible Securities Fund, Inc., a closed-end
investment company listed on the New York Stock Exchange, and to TCW Galileo
Funds, Inc., an open-end management investment company, and acts as adviser
or sub-adviser to other investment companies.
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 of Mr. Day and his family of more than 25% of the outstanding
voting stock of TCW.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. The Adviser obtains and evaluates such information and
advice relating to the economy, securities markets, and specific securities
as it considers necessary or useful to continuously manage the assets of the
Fund in a manner consistent with its investment objective. In addition, the
Adviser pays the salaries of all personnel, including officers of the Fund,
who are employees of the Adviser.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the annual rate of
4
<PAGE>
0.40% to the daily net assets of the Fund determined as of the close of each
business day. Total compensation accrued to the Adviser for the period August
28, 1996 through November 30, 1996 amounted to $93,228.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable to the Fund or any of its
investors for any act or omission by the Adviser or for any losses sustained
by the Fund or its investors. The Advisory Agreement in no way restricts the
Adviser from acting as investment adviser to others.
The Advisory Agreement was approved by the Trustees on April 17, 1996 and
by InterCapital as the then sole shareholder on April 18, 1996. The Advisory
Agreement may be terminated at any time, without penalty, on thirty days'
notice by the Trustees of the Fund, by the holders of a majority, as defined
in the Act, of the outstanding shares of the Fund, or by the Adviser. The
Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Advisory Agreement will continue in effect until
April 30, 1997, and will continue from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the vote of the
holders of a majority, as defined in the Act, of the outstanding shares of
the Fund, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees of the Fund, which vote must be cast in person at a meeting called
for the purpose of voting on such approval.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor
of the Fund's shares, Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. The
expenses borne by the Fund include, but are not limited to: expenses of the
Plan of Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions and securities transaction costs;
taxes; engraving and printing of share certificates; registration costs of
the Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing Prospectuses and
Statements of Additional Information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of trustees or members of any advisory
board or committee who are not employees of the Manager or Adviser or any
corporate affiliate of either; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund
or of the Manager or the Adviser (not including compensation or expenses of
attorneys who are employees of the Manager or the Adviser) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and trustees) of the Fund which inure to its benefit; extraordinary
expenses (including, but not limited to, legal claims and liabilities and
litigation costs and any indemnification relating thereto); and all other
costs of the Fund's operation.
DWR and TCW have entered into an Agreement for the purpose of creating,
managing, administering and distributing a family of investment companies and
other managed pooled investment vehicles offered on a retail basis within the
United States. The Agreement contemplates that, subject to approval of the
board of trustees or directors of a particular investment entity, DWR or its
affiliates will provide management and distribution services and TCW or its
affiliates will provide investment advisory services for each such investment
entity. The Agree-ment sets forth the terms and conditions of the
relationship between TCW and its affiliates and DWR and its affiliates and
the manner in which the parties will implement the creation and maintenance
of the investment entities, including the parties' expectations as to
respective allocation of fees to be paid by an investment entity to each
party for the services to be provided to it by such party.
The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser and the
Fund is terminated.
5
<PAGE>
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with
the Manager or the Adviser, and the affiliated companies of either, and the
14 TCW/DW Funds and with the 82 investment companies of which InterCapital
serves as investment manager or investment adviser (the "Dean Witter Funds"),
are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------
<S> <C>
John C. Argue (64) Of Counsel, Argue Pearson Harbison & Myers (law firm);
Trustee Director, Avery Dennison Corporation (manufacturer
c/o Argue Pearson Harbison & Myers of self-adhesive products and office supplies) and
801 South Flower Street CalMat Company (producer of aggregates, asphalt and
Los Angeles, California ready mixed concrete); Chairman, Rose Hills Memorial
Park (cemetery); advisory director, LAACO Ltd. (owner
and operator of private clubs and real estate); director
or trustee of various business and not-for-profit
corporations; Director, Coast Savings Financial Inc.
and Coast Federal Bank (a subsidiary of Coast Savings
Financial Inc.); Director, TCW Galileo Funds, Inc.;
Trustee, University of Southern California,
Occidental College and Pomona College; Trustee of
the TCW/DW Funds.
Richard M. DeMartini* (44) President and Chief Operating Officer of Dean Witter
Trustee Capital, a division of DWR; Director of DWR, the Manager,
Two World Trade Center InterCapital, Distributors and Dean Witter Trust
New York, New York Company ("DWTC"); Executive Vice President of Dean
Witter, Discover & Co. ("DWDC"); Member of the DWDC
Management Committee; Trustee of the TCW/DW Funds;
member (since January, 1993) and Chairman (since
January, 1995) of the Board of Directors of NASDAQ.
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of
Chairman of the Board, Chief the Manager, InterCapital and Distributors; Executive
Executive Officer and Trustee Vice President and Director of DWR; Chairman of the
Two World Trade Center Board, Chief Executive Officer and Trustee of the
New York, New York TCW/DW Funds; Chairman of the Board, Director or
Trustee, President and Chief Executive Officer of
the Dean Witter Funds; Chairman and Director of DWTC;
Director and/or officer of various DWDC subsidiaries;
formerly Executive Vice President and Director of
DWDC (until February, 1993).
John R. Haire (72) Chairman of the Audit Committee and Chairman of the
Trustee Committee of the Independent Trustees and Trustee
Two World Trade Center of the TCW/DW Funds; Chairman of the Audit Committee
New York, New York and Chairman of the Committee of the Independent
Directors or Trustees and Director or Trustee of the
Dean Witter Funds; formerly President, Council for
Aid to Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an Investment
Adviser (1964-1978); Director of Washington National
Corporation (insurance).
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Koch Professor of International
c/o Johnson Smick International, Inc. Economics and Director of the Center for Global Market
1133 Connecticut Avenue, N.W. Studies at George Mason University; Co-Chairman and
Washington D.C. a founder of the Group of Seven Council (G7C), an
international economic commission; Director of NASDAQ
(since June, 1995); Director of Greenwich Capital
Markets, Inc. (broker-dealer); formerly Vice Chairman
of the Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S.
Treasury (1982-1986); Director or Trustee of the Dean
Witter Funds; Trustee of the TCW/DW Funds.
Thomas E. Larkin, Jr.* (57) Executive Vice President and Director, The TCW Group,
President and Trustee Inc.; President and Director of Trust Company of the
865 South Figueroa Street West; Vice Chairman and Director of TCW Asset Management
Los Angeles, California Company; Chairman of the Adviser; President and
Director of TCW Galileo Funds, Inc.; Senior Vice
President of TCW Convertible Securities Fund, Inc.;
Member of the Board of Trustees of the University
of Notre Dame; Director of Orthopaedic Hospital of
Los Angeles; President and Trustee of the TCW/DW Funds.
Michael E. Nugent (60) General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; formerly Vice President,
c/o Triumph Capital, L.P. Bankers Trust Company and BT Capital Corporation
237 Park Avenue (1984-1988); Director of various business
New York, New York organizations; Director or Trustee of the Dean Witter
Funds; Trustee of the TCW/DW Funds.
John L. Schroeder (66) Retired; Director or Trustee of the Dean Witter Funds;
Trustee Trustee of the TCW/DW Funds; Director of Citizens
c/o Gordon Altman Butowsky Utilities Company; formerly Executive Vice President
Weitzen Shalov & Wein and Chief Investment Officer of the Home Insurance
Counsel to the Independent Trustees Company (August, 1991-September, 1995) and Chairman
114 West 47th Street and Chief Investment Officer of Axe-Houghton
New York, New York Management and the Axe-Houghton Funds (1983-1991).
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ------------------------------------------------
Marc I. Stern* (52) President, The TCW Group, Inc. (since May, 1992);
Trustee President and Director of the Adviser (since May,
865 South Figueroa Street 1992); Vice Chairman and Director of TCW Asset
Los Angeles, California Management Company (since May, 1992); Executive Vice
President and Director of Trust Company of the West;
Chairman and Director of TCW Galileo Funds, Inc.;
Trustee of the TCW/DW Funds; Chairman of TCW Americas
Development, Inc. (since November, 1990); Chairman
of TCW Asia, Limited (since January, 1993); Chairman
of TCW London International, Limited (since March,
1993); formerly President of SunAmerica, Inc.
(financial services company); Director of Qualcomm,
Incorporated (wireless communications); Director or
Trustee of various not-for-profit organizations.
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel
Vice President, Secretary and General Counsel of the Manager and InterCapital; Senior Vice President
Two World Trade Center and Secretary of DWTC; Senior Vice President, Assistant
New York, New York Secretary and Assistant General Counsel of
Distributors; Assistant Secretary of DWR and Vice
President, Secretary and General Counsel of the TCW/DW
Funds and of the Dean Witter Funds.
Robert M. Hanisee (58) Managing Director of the Adviser (since April, 1990);
Vice President Managing Director, Director of Research and Chairman
865 South Figueroa Street of the Equity Policy Committee of Trust Company of
Los Angeles, California the West and TCW Asset Management Company; Vice
President of TCW/DW Income and Growth Fund and TCW/DW
Core Equity Trust.
John A. Healey (60) Managing Director of the Adviser (since April 1996);
Vice President previously, Senior Advisor with the Adviser (since
865 South Figueroa Street 1995); formerly, independent consultant with Healey
Los Angeles, California Partners (financial services firm until 1995);
director of Emerging Markets Country Investment Trust
Plc.
Thomas F. Caloia (50) First Vice President and Assistant Treasurer of the
Treasurer Manager and InterCapital and Treasurer of the TCW/DW
Two World Trade Center Funds and the Dean Witter Funds.
New York, New York
</TABLE>
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* Denotes Trustees who are "interested persons" of the Fund, as defined
in the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
the Manager and InterCapital, Executive Vice President of Distributors and
DWTC and Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Director of DWTC, are Vice
Presidents of the Fund, and Marilyn K. Cranney and Barry Fink, First Vice
Presidents and Assistant General Counsels of the Manager and InterCapital,
Lou Anne D. McInnis and Ruth Rossi, Vice Presidents and Assistant General
Counsels of the Manager and InterCapital, and Frank Bruttomesso and Carsten
Otto, Staff Attorneys with InterCapital, are Assistant Secretaries of the
Fund.
8
<PAGE>
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees currently consists of nine (9) trustees. These same
individuals also serve as trustees for all of the TCW/DW Funds. As of the
date of this Statement of Additional Information, there are a total of 14
TCW/DW Funds. As of November 30, 1996, the TCW/DW Funds had total net assets
of approximately $4.4 billion and approximately a quarter of a million
shareholders.
Five Trustees (56% of the total number) have no affiliation or business
connection with TCW Funds Management, Inc. or Dean Witter Services Company
Inc. or any of their affiliated persons and do not own any stock or other
securities issued by DWDC or TCW, the parent companies of Dean Witter
Services Company Inc. and TCW Funds Management, Inc., respectively. These are
the "disinterested" or "independent" Trustees. The other four Trustees (the
"management Trustees") are affiliated with either Dean Witter Services
Company Inc. or TCW. Four of the five independent Trustees are also
Independent Trustees of the Dean Witter Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The TCW/DW Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand
by others and for whom there is often competition. To accept a position on
the Funds' Boards, such individuals may reject other attractive assignments
because the Funds make substantial demands on their time. Indeed, by serving
on the Funds' Boards, certain Trustees who would otherwise be qualified and
in demand to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee
and the Committee of the Independent Trustees. Three of them also serve as
members of the Derivatives Committee. During the calendar year ended December
31, 1995, the three Committees held a combined total of nineteen meetings.
The Committees hold some meetings at the offices of the Manager or Adviser
and some outside those offices. Management Trustees or officers do not attend
these meetings unless they are invited for purposes of furnishing information
or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Each of the open-end TCW/DW Funds
has such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
On July 1, 1996, Mr. Haire became Chairman of the Committee of the
Independent Trustees and the Audit Committee of the TCW/DW Funds. The
Chairman of the Committees maintains an office in the Funds' headquarters in
New York. He is responsible for keeping abreast of regulatory and industry
developments and the Funds' operations and management. He screens and/or
prepares written materials and identifies critical issues for the Independent
Trustees to consider, develops agendas for Committee meetings, determines the
type and amount of information that the Committees will need to form a
judgment on various issues, and arranges to have that information furnished
to Committee members. He also arranges for the services of independent
experts and
9
<PAGE>
consults with them in advance of meetings to help refine reports and to focus
on critical issues. Members of the Committees believe that the person who
serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and
with the Funds' independent auditors. He arranges for a series of special
meetings involving the annual review of investment advisory, management and
other operating contracts of the Funds and, on behalf of the Committees,
conducts negotiations with the Investment Adviser and the Manager and other
service providers. In effect, the Chairman of the Committees serves as a
combination of chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the TCW/DW Funds and as Chairman of the Committee of the
Independent Trustees and the Audit Committee and Independent Director or
Trustee of the Dean Witter Funds. The current Committee Chairman has had more
than 35 years experience as a senior executive in the investment company
industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the TCW/DW Funds avoids the duplication
of effort that would arise from having different groups of individuals
serving as Independent Trustees for each of the Funds or even of sub-groups
of Funds. They believe that having the same individuals serve as Independent
Trustees of all the Funds tends to increase their knowledge and expertise
regarding matters which affect the Fund complex generally and enhances their
ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups
of Independent Trustees arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, having the same Independent Trustees serve on
all Fund Boards enhances the ability of each Fund to obtain, at modest cost
to each separate Fund, the services of Independent Trustees, and a Chairman
of their Committees, of the caliber, experience and business acumen of the
individuals who serve as Independent Trustees of the TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $2,225 plus a per
meeting fee of $200 for meetings of the Board of Trustees or committees of
the Board of Trustees attended by the Trustee (the Fund intends to pay the
Chairman of the Audit Committee an annual fee of $750 and the Chairman of the
Committee of the Independent Trustees an additional annual fee of $1,200).
The Fund also reimburses such Trustees for travel and other out-of-pocket
expenses incurred by them in connection with attending such meetings.
Trustees and officers of the Fund who are or have been employed by the
Manager or the Adviser or an affiliated company of either receive no
compensation or expense reimbursement from the Fund. The Trustees of the
TCW/DW Funds do not have retirement or deferred compensation plans.
At such time as the Fund has been in operation, and has paid fees to the
Independent Trustees, for a full fiscal year, and assuming that during such
fiscal year the Fund holds the same number of Board and committee meetings as
were held by the other TCW/DW Funds during the calendar year ended December
31, 1995, it is estimated that compensation paid to each Independent Trustee
during such fiscal year will be the amount shown in the following table.
10
<PAGE>
FUND COMPENSATION (ESTIMATED)
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
John C. Argue .............. $5,225
John R. Haire .............. 7,175
Dr. Manuel H. Johnson ..... 5,225
Michael E. Nugent .......... 5,225
John L. Schroeder .......... 5,225
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the eleven TCW/DW Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the seventy-nine Dean Witter Funds that were
in operation at December 31, 1995, and, in the case of Mr. Argue, TCW Galileo
Funds, Inc. With respect to Messrs. Haire, Johnson, Nugent and Schroeder, the
Dean Witter Funds are included solely because of a limited exchange privilege
between various TCW/DW Funds and five Dean Witter Money Market Funds. With
respect to Mr. Argue, TCW Galileo Funds, Inc. is included solely because the
Fund's Adviser, TCW Funds Management, Inc., also serves as Adviser to that
investment company. Mr. Schroeder was elected as a Trustee of each TCW/DW
Fund then in existence on April 20, 1995.
COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL COMPENSATION
FOR SERVICE AS DIRECTOR OR COMMITTEES OF PAID FOR SERVICES TO
TRUSTEE AND TRUSTEE AND FOR SERVICE AS INDEPENDENT 79 DEAN WITTER
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTOR OF DIRECTORS/ FUNDS, 11 TCW/DW
OF 11 TCW/DW OF 79 DEAN WITTER TCW GALILEO TRUSTEES AND FUNDS AND TCW
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS FUNDS, INC. AUDIT COMMITTEES GALILEO FUNDS, INC.
- --------------------------- ---------------- ----------------- -------------- ---------------- --------------------
<S> <C> <C> <C> <C> <C>
John C. Argue ............. $68,038 -- $37,500 -- $105,538
John R. Haire ............. 82,038 $ 98,450 -- $217,350(1) 397,838
Dr. Manuel H. Johnson .... 82,038 136,450 -- -- 218,488
Michael E. Nugent ......... 75,038 124,200 -- -- 199,238
John L. Schroeder ......... 46,964 136,450 -- -- 183,414
</TABLE>
- ------------
(1) For the 79 Dean Witter Funds in operation at December 31, 1995. As
noted above, on July 1, 1996, Mr. Haire became Chairman of the
Committee of the Independent Trustees and the Audit Committee of the
TCW/DW Funds in addition to continuing to serve in such capacities for
the Dean Witter Funds.
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds have adopted a retirement program under which an Independent
Trustee who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or
Trustee of any Dean Witter Fund that has adopted the retirement program (each
such Fund referred to as an "Adopting Fund" and each such Trustee referred to
as an "Eligible Trustee") is entitled to retirement payments upon reaching
the eligible retirement age (normally, after attaining age 72). Annual
payments are based upon length of service. Currently, upon retirement, each
Eligible Trustee is entitled to receive from the Adopting Fund, commencing as
of his or her retirement date and continuing for the remainder of his or her
life, an annual retirement benefit (the "Regular Benefit") equal to 25.0% of
his or her Eligible Compensation plus 0.4166666% of such Eligible
Compensation for each full month of service as an Independent Director or
Trustee of any Adopting Fund in excess of five years up to a maximum of 50.0%
after ten years of service. The foregoing percentages may be changed by the
Board.(2) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting Fund in the five
year period prior to the date of the Eligible Trustee's retirement. Benefits
under the retirement program are not secured or funded by the Adopting Funds.
- ------------
(2) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment
of benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.
11
<PAGE>
The following table illustrates the retirement benefits accrued to Messrs.
Haire, Johnson, Nugent and Schroeder by the 57 Dean Witter Funds as of
December 31, 1995, and the estimated retirement benefits for Messrs. Haire,
Johnson, Nugent and Schroeder from the 57 Dean Witter Funds as of December
31, 1995.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
CREDITED YEARS ESTIMATED ESTIMATED ANNUAL BENEFITS
OF SERVICE AT PERCENTAGE OF RETIREMENT BENEFITS UPON RETIREMENT
RETIREMENT ELIGIBLE ACCRUED AS EXPENSES FROM ALL ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION BY ALL ADOPTING FUNDS FUNDS(3)
- --------------------------- -------------- --------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
John R. Haire .............. 10 50.0% $261,763 $130,404
Dr. Manuel H. Johnson ..... 10 50.0 16,748 51,550
Michael E. Nugent .......... 10 50.0 30,370 51,550
John L. Schroeder .......... 8 41.7 51,812 42,958
</TABLE>
- ------------
(3) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (2)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose
issuing agency or instrumentality has the right to borrow, to meet its
obligations, from an existing line of credit with the U.S. Treasury. Among
the agencies and instrumentalities issuing such obligations are the
Tennessee Valley Authority, the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and the
U.S. Postal Service. The U.S. Treasury has no legal obligation to provide
such line of credit and may choose not to do so.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which
may be invested in by the Fund are guaranteed by the U.S. Government. Such
values and yield will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of any
U.S. Government securities held by the Fund will fall. Such securities with
longer maturities generally tend to produce higher yields and are subject
12
<PAGE>
to greater market fluctuation as a result of changes in interest rates than
debt securities with shorter maturities. The Fund is not limited as to the
maturities of the U.S. Government securities in which it may invest.
MONEY MARKET SECURITIES
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of
banks subject to regulation by the U.S. Government and having total assets of
$1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks except as
permitted below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United
States and abroad);
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by Federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or
the Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or the highest grade by Moody's Investors
Service, Inc. or, if not rated, issued by a company having an outstanding
debt issue rated at least AAA by Standard & Poor's or Aaa by Moody's.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to
notice provisions described below), and are at all times secured by cash or
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. The advantage of such
loans is that the Fund continues to receive the income on the loaned
securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations.
The Fund will not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state in which its shares are
qualified for sale and will not lend more than 25% of the value of its total
assets. A loan may be terminated by the borrower on one business day's
notice, or by the Fund on two business days' notice. If the borrower fails to
deliver the loaned securities within two days after receipt of notice, the
Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with
any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Adviser to be creditworthy and when
the income which can be earned from such loans justifies the attendant risks.
Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund. The creditworthiness of firms to which the
Fund lends its portfolio securities will be monitored on an ongoing basis by
the Adviser pursuant to procedures adopted and reviewed, on an ongoing basis,
by the Board of Trustees of the Fund.
13
<PAGE>
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned
securities, to be delivered within one day after notice, to permit the
exercise of such rights if the matters involved would have a material effect
on the Fund's investment in such loaned securities. The Fund will pay
reasonable finder's, administrative and custodial fees in connection with a
loan of its securities.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested
or used for payments of obligations of the Fund. These agreements, which may
be viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer.
The agreement provides that the Fund will sell back to the institution, and
that the institution will repurchase, the underlying security ("collateral")
at a specified price and at a fixed time in the future, usually not more than
seven days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease
below the purchase price plus accrued interest. If such decrease occurs,
additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
such date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed
to minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions whose financial condition will be continually monitored by the
Adviser subject to procedures established by the Board of Trustees of the
Fund. In addition, as described above, the value of the collateral underlying
the repurchase agreement will be at least equal to the repurchase price,
including any accrued interest earned on the repurchase agreement. In the
event of a default or bankruptcy by a selling financial institution, the Fund
will seek to liquidate such collateral. However, the exercising of the Fund's
right to liquidate such collateral could involve certain costs or delays and,
to the extent that proceeds from any sale upon a default of the obligation to
repurchase were less than the repurchase price, the Fund could suffer a loss.
It is the current policy of the Fund not to invest in repurchase agreements
that do not mature within seven days if any such investment, together with
any other illiquid assets held by the Fund, amounts to more than 15% of its
net assets.
WARRANTS
The Fund may invest up to 5% of the value of its net assets in warrants,
including not more than 2% in warrants not listed on either the New York or
American Stock Exchange. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period
of time, and have no voting rights, pay no dividends and have no rights with
respect to the corporations issuing them. The Fund may acquire warrants
attached to other securities without reference to the foregoing limitations.
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 and may
purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention
of acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. At the time the Fund makes the
commitment to purchase or sell securities on a when-issued, delayed delivery
or forward commitment basis, the Fund will record the transaction and
thereafter reflect the value, each day, of such security purchased or, if a
sale, the proceeds to be received, in determining its net asset value. At the
time of delivery of the securities, the value may be more or less than the
purchase or sale price. The Fund will also establish a segregated account
with the Fund's custodian bank in which it will continuously maintain cash or
U.S.
14
<PAGE>
Government securities or other liquid portfolio securities equal in value to
commitments to purchase securities on a when-issued, delayed delivery or
forward commitment basis; subject to this requirement, the Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued or
delayed delivery basis may increase the volatility of the Fund's net asset
value.
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. The commitment for the purchase of
any such security will not be recognized in the portfolio of the Fund until
the Adviser determines that issuance of the security is probable. At such
time, the Fund will record the transaction and, in determining its net asset
value, will reflect the value of the security daily. At such time, the Fund
will also establish a segregated account with its custodian bank in which it
will continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of
the occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are
not issued the Fund will have lost an investment opportunity. The Fund may
purchase securities on such basis without limit. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Adviser does not believe that the net asset value of the Fund will
be adversely affected by its purchase of securities on such basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that
the issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may write covered call options against securities held in its
portfolio and covered put options on eligible portfolio securities and stock
indexes and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of
investments (or anticipated investments) and facilitate the reallocation of
the Fund's assets into and out of equities and fixed-income securities by
purchasing put and call options on portfolio (or eligible portfolio)
securities and engaging in transactions involving futures contracts and
options on such contracts. The Fund may also hedge against potential changes
in the market value of the currencies in which its investments (or
anticipated investments) are denominated by purchasing put and call options
on currencies and engage in transactions involving currency futures contracts
and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and equity
securities are listed on Exchanges and are written in over-the-counter
transactions ("OTC options"). Listed options are issued by the Options
Clearing Corporation ("OCC") and other clearing utilities including foreign
exchanges. Ownership of a listed call option gives the Fund the right to buy
from the OCC the underlying security covered by the option at the stated
exercise price (the price per unit of the underlying security) by filing an
exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC the
underlying security at that exercise price prior to the expiration date of
the option, regardless of its then current market price. Ownership of a
listed put option would give the Fund the right to sell the underlying
security to the OCC at the stated exercise price. Upon notice of exercise of
the put option, the writer of the put would have the obligation to purchase
the underlying security from the OCC at the exercise price.
Options on Treasury Bonds and Notes. Because trading in options written on
Treasury bonds and notes tends to center on the most recently auctioned
issues, the exchanges on which such securities trade will not continue
indefinitely to introduce options with new expirations to replace expiring
options on particular issues. Instead, the expirations introduced at the
commencement of options trading on a particular issue will be allowed to run
their course, with the possible addition of a limited number of new
expirations as the original ones expire. Options trading on each issue of
bonds or notes will thus be phased out as new options are listed on more
recent issues, and options representing a full range of expirations will not
ordinarily be available for every issue on which options are traded.
Options on Treasury Bills. Because a deliverable Treasury bill changes
from week to week, writers of Treasury bill calls cannot provide in advance
for their potential exercise settlement obligations by acquiring and holding
the
15
<PAGE>
underlying security. However, if the Fund holds a long position in Treasury
bills with a principal amount of the securities deliverable upon exercise of
the option, the position may be hedged from a risk standpoint by the writing
of a call option. For so long as the call option is outstanding, the Fund
will hold the Treasury bills in a segregated account with its Custodian, so
that they will be treated as being covered.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount of such foreign currency equivalent to the current value of the
portfolio securities involved. As a result, the Fund would be enabled to sell
the foreign currency for a fixed amount of U.S. dollars, thereby "locking in"
the dollar value of the portfolio securities (less the amount of the premiums
paid for the options). Conversely, the Fund may purchase call options on
foreign currencies in which securities it anticipates purchasing are
denominated to secure a set U.S. dollar price for such securities and protect
against a decline in the value of the U.S. dollar against such foreign
currency. The Fund may also purchase call and put options to close out
written option positions.
The Fund may also write call options on foreign currency to protect
against potential declines in its portfolio securities which are denominated
in foreign currencies. If the U.S. dollar value of the portfolio securities
falls as a result of a decline in the exchange rate between the foreign
currency in which a security is denominated and the U.S. dollar, then a loss
to the Fund occasioned by such value decline would be ameliorated by receipt
of the premium on the option sold. At the same time, however, the Fund gives
up the benefit of any rise in value of the relevant portfolio securities
above the exercise price of the option and, in fact, only receives a benefit
from the writing of the option to the extent that the value of the portfolio
securities falls below the price of the premium received. The Fund may also
write options to close out long call option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. Although the Fund will not
purchase or write such options unless and until, in the opinion of the
management of the Fund, the market for them has developed sufficiently to
ensure that the risks in connection with such options are not greater than
the risks in connection with the underlying currency, there can be no
assurance that a liquid secondary market will exist for a particular option
at any specific time. In addition, options on foreign currencies are affected
by all of those factors which influence foreign exchange rates and
investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of
the option position may vary with changes in the value of either or both
currencies and have no relationship to the investment merits of a foreign
security, including foreign securities held in a "hedged" investment
portfolio. Because foreign currency transactions occurring in the interbank
market involve substantially larger amounts than those that may be involved
in the use of foreign currency options, investors may be disadvantaged by
having to deal in an odd lot market (generally consisting of transactions of
less than $1 million) for the underlying foreign currencies at prices that
are less favorable than for round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market and thus may not reflect relatively
smaller transactions (i.e., less than $1 million) where rates may be less
favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that the U.S. options markets are
closed while the markets for the underlying currencies remain open,
significant price and rate movements may take place in the underlying markets
that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC which assures
that all transactions in such options are properly executed. OTC options are
purchased from or sold (written) to dealers or financial institutions which
have entered into direct agreements with the Fund. With OTC options, such
variables as expiration date, exercise price and premium will be agreed upon
between the Fund and the transacting dealer, without the intermediation of a
third party such as the OCC. If the transacting dealer fails to make or take
delivery of the securities underlying an option it has written, in accordance
with the terms of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with primary U.S. Government
securities dealers recognized by the Federal Reserve Bank of New York.
16
<PAGE>
Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities and the U.S. dollar and foreign currencies, without
limit, in order to aid in achieving its investment objective. Generally, a
call option is "covered" if the Fund owns, or has the right to acquire,
without additional cash consideration (or for additional cash consideration
held for the Fund by its Custodian in a segregated account) the underlying
security subject to the option except that in the case of call options on
U.S. Treasury Bills, the Fund might own U.S. Treasury Bills of a different
series from those underlying the call option, but with a principal amount and
value corresponding to the exercise price and a maturity date not later than
that of the securities deliverable under the call option. A call option is
also covered if the Fund holds a call on the same security as the underlying
security of the written option, where the exercise price of the call used for
coverage is equal to or less than the exercise price of the call written or
greater than the exercise price of the call written if the mark to market
difference is maintained by the Fund in cash, U.S. Government securities or
other liquid portfolio securities which the Fund holds in a segregated
account maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these
premiums may better enable the Fund to achieve a greater total return than
would be realized from holding the underlying securities alone. Moreover, the
premium received will offset a portion of the potential loss incurred by the
Fund if the securities underlying the option are ultimately sold by the Fund
at a loss. The premium received will fluctuate with varying economic market
conditions. If the market value of the portfolio securities upon which call
options have been written increases, the Fund may receive less total return
from the portion of its portfolio upon which calls have been written than it
would have had such call not been written.
As regards listed options and certain OTC options, during the option
period, the Fund may be required, at any time, to deliver the underlying
security against payment of the exercise price on any calls it has written
(exercise of certain listed options may be limited to specific expiration
dates). This obligation is terminated upon the expiration of the option
period or at such earlier time when the writer effects a closing purchase
transaction. A closing purchase transaction is accomplished by purchasing an
option of the same series as the option previously written. However, once the
Fund has been assigned an exercise notice, the Fund will be unable to effect
a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option to prevent an underlying security from being
called, to permit the sale of an underlying security or to enable the Fund to
write another call option on the underlying security with either a different
exercise price or expiration date or both. Also, effecting a closing purchase
transaction will permit the cash or proceeds from the concurrent sale of any
securities subject to the option to be used for other investments by the
Fund. The Fund may realize a net gain or loss from a closing purchase
transaction depending upon whether the amount of the premium received on the
call option is more or less than the cost of effecting the closing purchase
transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of
the underlying security. Conversely, a gain resulting from a closing purchase
transaction could be offset in whole or in part or exceeded by a decline in
the market value of the underlying security.
If a call option expires unexercised, the Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security equal to the
difference between the purchase price of the underlying security and the
proceeds of the sale of the security plus the premium received on the option
less the commission paid.
Options written by the Fund normally have expiration dates of from up to
nine months (equity securities) to eighteen months (fixed-income securities)
from the date written. The exercise price of a call option may be below,
equal to or above the current market value of the underlying security at the
time the option is written. See "Risks of Options and Futures Transactions,"
below.
Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election (certain listed put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other liquid portfolio securities in an amount equal to at
least the exercise price of the option, at all times, during the option
period.
17
<PAGE>
Similary, a short put position could be covered by the Fund by its purchase
of a put option on the same security as the underlying security of the
written option, where the exercise price of the purchased option is equal to
or more than the exercise price of the put written or less than the exercise
price of the put written if the mark to market difference is maintained by
the Fund in cash, U.S. Government securities or other liquid portfolio
securities which the Fund holds in a segregated account maintained at its
Custodian. In writing puts, the Fund assumes the risk of loss should the
market value of the underlying security decline below the exercise price of
the option (any loss being decreased by the receipt of the premium on the
option written). During the option period, the Fund may be required, at any
time, to make payment of the exercise price against delivery of the
underlying security. The operation of and limitations on covered put options
in other respects are substantially identical to those of call options.
The Fund will write put options for two purposes: (1) to receive the
income derived from the premiums paid by purchasers; and (2) when the Adviser
wishes to purchase the security underlying the option at a price lower than
its current market price, in which case it will write the covered put at an
exercise price reflecting the lower purchase price sought. The potential gain
on a covered put option is limited to the premium received on the option
(less the commissions paid on the transaction) while the potential loss
equals the difference between the exercise price of the option and the
current market price of the underlying securities when the put is exercised,
offset by the premium received (less the commissions paid on the
transaction).
The Fund may also purchase put options to close out written put positions
in a manner similar to call options closing purchase transactions. In
addition, the Fund may sell a put option which it has previously purchased
prior to the sale of the securities (currency) underlying such option. Such a
sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the put option sold. Any such gain or loss could be offset in
whole or in part by a change in the market value of the underlying security
(currency). If a put option purchased by the Fund expired without being sold
or exercised the premium would be lost.
Purchasing Call and Put Options. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options on securities and stock indexes
in amounts equalling up to 10% of its total assets, with a maximum of 5% of
the Fund's assets invested in stock index options. The Fund may purchase call
options only in order to close out a covered call position (see "Covered Call
Writing" above) to protect against an increase in price of a security it
anticipates purchasing or, in the case of a call option on foreign currency
to hedge against an adverse exchange rate move of the currency in which the
security it anticipates purchasing is denominated vis-a-vis the currency in
which the exercise price is denominated. The purchase of a call option to
effect a closing transaction on a call written over-the-counter may be a
listed or OTC option. In either case, the call purchased is likely to be on
the same securities and have the same terms as the written option. If
purchased over-the-counter, the option would generally be acquired from the
dealer or financial institution which purchased the call written by the Fund.
The Fund may purchase put options on securities which it holds (or has the
right to acquire) in its portfolio only to protect itself against a decline
in the value of the security. If the value of the underlying security were to
fall below the exercise price of the put purchased in an amount greater than
the premium paid for the option, the Fund would incur no additional loss. The
Fund may also purchase put options to close out written put positions in a
manner similar to call options closing purchase transactions. In addition,
the Fund may sell a put option which it has previously purchased prior to the
sale of the securities underlying such option. Such a sale would result in a
net gain or loss depending on whether the amount received on the sale is more
or less than the premium and other transaction costs paid on the put option
which is sold. And such gain or loss could be offset in whole or in part by a
change in the market value of the underlying security. If a put option
purchased by the Fund expired without being sold or exercised, the premium
would be lost.
Risks of Options Transactions. The successful use of options depends on
the ability of the Adviser to forecast correctly interest rates and market
movements. If the market value of the portfolio securities (or the currencies
in which they are denominated) upon which call options have been written
increases, the Fund may receive a lower total return from the portion of its
portfolio upon which calls have been written than it would have had such
calls not been written. During the option period, the covered call writer
has, in return for the premium on the option, given up the opportunity for
capital appreciation above the exercise price should the market price of the
underlying security increase, but has retained the risk of loss should the
price of the underlying security decline. The secured
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put writer also retains the risk of loss should the market value of the
underlying security decline below the exercise price of the option less the
premium received on the sale of the option. In both cases, the writer has no
control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice,
it cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver or receive the underlying
securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction, it cannot
sell the underlying security until the option expires or the option is
exercised. Accordingly, a covered call option writer may not be able to sell
an underlying security at a time when it might otherwise be advantageous to
do so. A secured put option writer who is unable to effect a closing purchase
transaction would continue to bear the risk of decline in the market price of
the underlying security until the option expires or is exercised. In
addition, a secured put writer would be unable to utilize the amount held in
cash or U.S. government or other liquid portfolio securities as security for
the put option for other investment purposes until the exercise or expiration
of the option.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on Option
Exchanges. There is no assurance that such a market will exist, particularly
in the case of OTC options. However, the Fund may be able to purchase an
offsetting option which does not close out its position as a writer but
constitutes an asset of equal value to the obligation under the option
written. If the Fund is not able to either enter into a closing purchase
transaction or purchase an offsetting position, it will be required to
maintain the securities subject to the call, or the collateral underlying the
put, even though it might not be advantageous to do so, until a closing
transaction can be entered into (or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes
or series of options or underlying securities; (iv) interruption of the
normal operations on an Exchange; (v) inadequacy of the facilities of an
Exchange or the OCC to handle current trading volume; or (vi) a decision by
one or more Exchanges to discontinue the trading of options (or a particular
class or series of options), in which event the secondary market on that
Exchange (or in that class or series of options) would cease to exist,
although outstanding options on that Exchange that had been issued by the OCC
as a result of trades on that Exchange would generally continue to be
exercisable in accordance with their terms.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal to the daily limit on successive
days, then it may prove impossible to liquidate a futures position until the
daily limit moves have ceased. In the event of adverse price movements, the
Fund would continue to be required to make daily cash payments of variation
margin on open futures positions. In such situations, if the Fund has
insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do
so. In addition, the Fund may be required to take or make delivery of the
instruments underlying interest rate futures contracts it holds at a time
when it is disadvantageous to do so. The inability to close out options and
futures positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur
a loss of all or part of its margin deposits with the broker. Similarly, in
the event of the bankruptcy of the writer of an OTC option purchased by the
Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions are entered into by the Fund only with brokers or
financial institutions deemed creditworthy by the Adviser.
Each of the Exchanges has established limitations governing the maximum
number of call or put options on the same underlying security or futures
contract (whether or not covered) which may be written by a single investor,
whether acting alone or in concert with others (regardless of whether such
options are written on the same or different Exchanges or are held or written
on one or more accounts or through one or more brokers). An Exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose other sanctions or restrictions. These position limits may
restrict the number of listed options which the Fund may write.
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While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures contracts to
protect against the price volatility of portfolio securities is that the
prices of securities and indexes subject to futures contracts (and thereby
the futures contract prices) may correlate imperfectly with the behavior of
the cash prices of the Fund's portfolio securities. Another such risk is that
prices of interest rate futures contracts may not move in tandem with the
changes in prevailing interest rates against which the Fund seeks a hedge. A
correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between
a contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
Stock Index Options. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at
a specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level
of the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
option. This amount of cash is equal to such difference between the closing
price of the index and the exercise price of the option expressed in dollars
times a specified multiple (the "multiplier"). The multiplier for an index
option performs a function similar to the unit of trading for a stock option.
It determines the total dollar value per contract of each point in the
difference between the exercise price of an option and the current level of
the underlying index. A multiplier of 100 means that a one-point difference
will yield $100. Options on different indexes may have different multipliers.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount. Unlike stock options, all settlements are in
cash and a gain or loss depends on price movements in the stock market
generally (or in a particular segment of the market) rather than the price
movements in individual stocks. Currently, options are traded on the S&P 100
Index and the S&P 500 Index on the Chicago Board Options Exchange, the Major
Market Index and the Computer Technology Index, Oil Index and Institutional
Index on the American Stock Exchange and the NYSE Index and NYSE Beta Index
on the New York Stock Exchange, The Financial News Composite Index on the
Pacific Stock Exchange and the Value Line Index, National O-T-C Index and
Utilities Index on the Philadelphia Stock Exchange, each of which and any
similar index on which options are traded in the future which include stocks
that are not limited to any particular industry or segment of the market is
referred to as a "broadly based stock market index." The Fund will invest
only in broadly based indexes. Options on broad-based stock indexes provide
the Fund with a means of protecting the Fund against the risk of market wide
price movements. If the Investment Manager anticipates a market decline, the
Fund could purchase a stock index put option. If the expected market decline
materialized, the resulting decrease in the value of the Fund's portfolio
would be offset to the extent of the increase in the value of the put option.
If the Investment Manager anticipates a market rise, the Fund may purchase a
stock index call option to enable the Fund to participate in such rise until
completion of anticipated common stock purchases by the Fund. Purchases and
sales of stock index options also enable the Investment Manager to more
speedily achieve changes in the Fund's equity positions.
The Fund will be able to write put options on stock indexes only if such
positions are covered by cash, U.S. government securities or other liquid
portfolio securities equal to the aggregate exercise price of the puts, or by
a put option on the same stock index with a strike price no lower than the
strike price of the put option sold by the Fund, which cover is held for the
Fund in a segregated account maintained for it by the Fund's Custodian. All
call options on stock indexes written by the Fund will be covered either by a
portfolio of stocks substantially replicating the movement of the index
underlying the call option or by holding a separate call option on the same
stock index with a strike price no higher than the strike price of the call
option sold by the Fund.
Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its
writing position by holding a diversified portfolio of stocks similar to
those on which the underlying index is based. However, most investors cannot,
as a practical matter, acquire and hold a portfolio containing exactly the
same stocks as the underlying index, and, as a result, bear a risk
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that the value of the securities held will vary from the value of the index.
Even if an index call writer could assemble a stock portfolio that exactly
reproduced the composition of the underlying index, the writer still would
not be fully covered from a risk standpoint because of the "timing risk"
inherent in writing index options. When an index option is exercised, the
amount of cash that the holder is entitled to receive is determined by the
difference between the exercise price and the closing index level on the date
when the option is exercised. As with other kinds of options, the writer will
not learn that it had been assigned until the next business day, at the
earliest. The time lag between exercise and notice of assignment poses no
risk for the writer of a covered call on a specific underlying security, such
as a common stock, because there the writer's obligation is to deliver the
underlying security, not to pay its value as of a fixed time in the past. So
long as the writer already owns the underlying security, it can satisfy its
settlement obligations by simply delivering it, and the risk that its value
may have declined since the exercise date is borne by the exercising holder.
In contrast, even if the writer of an index call holds stocks that exactly
match the composition of the underlying index, it will not be able to satisfy
its assignment obligations by delivering those stocks against payment of the
exercise price. Instead, it will be required to pay cash in an amount based
on the closing index value on the exercise date; and by the time it learns
that it has been assigned, the index may have declined, with a corresponding
decrease in the value of its stock portfolio. This "timing risk" is an
inherent limitation on the ability of index call writers to cover their risk
exposure by holding stock positions.
A holder of an index option who exercises it before the closing index
value for that day is available runs the risk that the level of the
underlying index may subsequently change. If such a change causes the
exercised option to fall out-of-the-money, the exercising holder will be
required to pay the difference between the closing index value and the
exercise price of the option (times the applicable multiplier) to the
assigned writer.
If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.
Futures Contracts. As stated in the Prospectus, the Fund may purchase and
sell interest rate and stock index futures contracts ("futures contracts")
that are traded on U.S. and foreign commodity exchanges on such underlying
securities as U.S. Treasury bonds, notes, bills and GNMA Certificates
("interest rate" futures) and such indexes as the S&P 500 Index, the Moody's
Investment-Grade Corporate Bond Index and the New York Stock Exchange
Composite Index ("index" futures).
As a futures contract purchaser, the Fund incurs an obligation to take
delivery of a specified amount of the obligation underlying the contract at a
specified time in the future for a specified price. As a seller of a futures
contract, the Fund incurs an obligation to deliver the specified amount of
the underlying obligation at a specified time in return for an agreed upon
price.
The Fund will purchase or sell interest rate futures contracts and bond
index futures contracts for the purpose of hedging its fixed-income portfolio
(or anticipated portfolio) securities against changes in prevailing interest
rates. If the Investment Manager anticipates that interest rates may rise
and, concomitantly, the price of fixed-income securities falls, the Fund may
sell an interest rate futures contract or a bond index futures contract. If
declining interest rates are anticipated, the Fund may purchase an interest
rate futures contract to protect against a potential increase in the price of
U.S. Government securities the Fund intends to purchase. Subsequently,
appropriate fixed-income securities may be purchased by the Fund in an
orderly fashion; as securities are purchased, corresponding futures positions
would be terminated by offsetting sales of contracts.
The Fund will purchase or sell futures contracts on the U.S. dollar and on
foreign currencies to hedge against an anticipated rise or decline in the
value of the U.S. dollar or foreign currency in which a portfolio security of
the Fund is denominated vis-a-vis another currency.
The Fund will purchase or sell stock index futures contracts for the
purpose of hedging its equity portfolio (or anticipated portfolio) securities
against changes in their prices. If the Investment Manager anticipates that
the prices of stock held by the Fund may fall, the Fund may sell a stock
index futures contract. Conversely, if the Investment Manager wishes to hedge
against anticipated price rises in those stocks which the Fund intends to
purchase, the Fund may purchase stock index and currency futures contracts.
In addition, interest rate and stock index futures contracts will be bought
or sold in order to close out a short or long position in a corresponding
futures contract.
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Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. Stock index futures
contracts provide for the delivery of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the open
or close of the last trading day of the contract and the futures contract
price. A futures contract sale is closed out by effecting a futures contract
purchase for the same aggregate amount of the specific type of equity
security and the same delivery date. If the sales price exceeds the
offsetting purchase price, the seller would be paid the difference and would
realize a gain. If the offsetting purchase price exceeds the sale price, the
seller would pay the difference and would realize a loss. Similarly, a
futures contract purchase is closed out by effecting a futures contract sale
for the same aggregate amount of the specific type of security and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss. There is no
assurance that the Fund will be able to enter into a closing transaction.
Interest Rate Futures Contracts. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities equal to approximately 2% of the contract
amount. Initial margin requirements are established by the Exchanges on which
futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required
by the Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper
termination of the futures contract. The margin deposits made are
marked-to-market daily and the Fund may be required to make subsequent
deposits of cash or U.S. Government securities called "variation margin",
with the Fund's futures contract clearing broker, which are reflective of
price fluctuations in the futures contract. Currently, interest rate futures
contracts can be purchased on debt securities such as U.S. Treasury Bills and
Bonds, U.S. Treasury Notes with Maturities between 6 1/2 and 10 years, GNMA
Certificates and Bank Certificates of Deposit.
Currency Futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for
a set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and
under the same circumstances as forward foreign currency exchange contracts.
The Adviser will assess such factors as cost spreads, liquidity and
transaction costs in determining whether to utilize futures contracts or
forward contracts in its foreign currency transactions and hedging strategy.
Currently, currency futures exist for, among other foreign currencies, the
Japanese yen, German mark, Canadian dollar, British pound, Swiss franc and
European currency unit.
Purchasers and sellers of foreign currency futures contracts are subject
to the same risks that apply to the buying and selling of futures generally.
In addition, there are risks associated with foreign currency futures
contracts and their use as a hedging device similar to those associated with
options on foreign currencies described above. Further, settlement of a
foreign currency futures contract must occur within the country issuing the
underlying currency. Thus, the Fund must accept or make delivery of the
underlying currency in accordance with any U.S. or foreign restrictions or
regulations regarding the maintenance of foreign banking arrangements by U.S.
residents and may be required to pay any fees, taxes or charges associated
with such delivery which are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain
additional risks. Trading options on foreign currency futures contracts is
relatively new. The ability to establish and close out positions on such
options is subject to the maintenance of a liquid secondary market. To reduce
this risk, the Fund will not purchase or write options on foreign currency
futures contracts unless and until, in the Adviser's opinion, the market for
such options has developed sufficiently that the risks on connection with
such options are not greater than the risks in connection with transactions
in the underlying foreign currency.
Index Futures Contracts. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future
time. An index futures contract purchase would create an obligation by the
Fund, as purchaser, to take delivery of cash at a specified future time.
Futures contracts on indexes do not require the physical delivery of
securities, but provide for a final cash settlement on the expiration date
which reflects accumulated profits and losses credited or debited to each
party's account.
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The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. Currently, the initial
margin requirements range from 3% to 10% of the contract amount for index
futures. In addition, due to current industry practice, daily variations in
gains and losses on open contracts are required to be reflected in cash in
the form of variation margin payments. The Fund may be required to make
additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will operate
to terminate the Fund's position in the futures contract. A final
determination of variation margin is then made, additional cash is required
to be paid by or released to the Fund and the Fund realizes a loss or a gain.
Currently, index futures contracts can be purchased or sold with respect
to, among others, the Standard & Poor's 500 Stock Price Index and the
Standard & Poor's 100 Stock Price Index on the Chicago Mercantile Exchange,
the New York Stock Exchange Composite Index on the New York Futures Exchange,
the Major Market Index on the American Stock Exchange, the Value Line Stock
Index on the Kansas City Board of Trade and the Moody's Investment-Grade
Corporate Bond Index on the Chicago Board of Trade.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect
to such options to terminate an existing position. An option on a futures
contract gives the purchaser the right (in return for the premium paid), and
the writer the obligation, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in the case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for
identical purposes to those set forth above for the purchase of a futures
contract (purchase of a call option or sale of a put option) and the sale of
a futures contract (purchase of a put option or sale of a call option), or to
close out a long or short position in futures contracts. If, for example, the
Investment Manager wished to protect against an increase in interest rates
and the resulting negative impact on the value of a portion of its
fixed-income portfolio, it might write a call option on an interest rate
futures contract, the underlying security of which correlates with the
portion of the portfolio the Investment Manager seeks to hedge. Any premiums
received in the writing of options on futures contracts may, of course,
augment the total return of the Fund and thereby provide a further hedge
against losses resulting from price declines in portions of the Fund's
portfolio.
The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.
Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid
for premiums for unexpired options on futures contracts exceeds 5% of the
value of the Fund's total assets, after taking into account unrealized gains
and unrealized losses on such contracts it has entered into, provided,
however, that in the case of an option that is in-the-money (the exercise
price of the call (put) option is less (more) than the market price of the
underlying security) at the time of purchase, the in-the-money amount may be
excluded in calculating the 5%. However, there is no overall limitation on
the percentage of the Fund's assets which may be subject to a hedge position.
In addition, in accordance with the regulations of the Commodity Futures
Trading Commission ("CFTC") under which the Fund is exempted from
registration as a commodity pool operator, the Fund may only enter into
futures contracts and options on futures contracts transactions in accordance
with the limitation described above. If the CFTC changes its regulations so
that the Fund would be permitted more latitude
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to write options on futures contracts for purposes other than hedging the
Fund's investments without CFTC registration, the Fund may engage in such
transactions for those purposes. Except as described above, there are no
other limitations on the use of futures and options thereon by the Fund.
Risks of Transactions in Futures Contracts and Related Options. The
successful use of futures and related options depends on the ability of the
Adviser to accurately predict market, interest rate and currency movements.
As stated in the Prospectus, the Fund may sell a futures contract to protect
against the decline in the value of securities (or the currency in which they
are denominated) held by the Fund. However, it is possible that the futures
market may advance and the value of securities (or the currency in which they
are denominated) held in the portfolio of the Fund may decline. If this
occurred, the Fund would lose money on the futures contract and also
experience a decline in value of its portfolio securities. However, while
this could occur for a very brief period or to a very small degree, over time
the value of a diversified portfolio will tend to move in the same direction
as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy, and the value of such securities
decreases, then the Adviser may determine not to invest in the securities as
planned and the Fund will realize a loss on the futures contract that is not
offset by a reduction in the price of the securities.
In addition, if the Fund holds a long position in a futures contract or
has sold a put option on a futures contract, it will hold cash, U.S.
Government securities or other liquid portfolio securities equal to the
purchase price of the contract or the exercise price of the put option (less
the amount of initial or variation margin on deposit) in a segregated account
maintained for the Fund by its Custodian. Alternatively, the Fund could cover
its long position by purchasing a put option on the same futures contract
with an exercise price as high or higher than the price of the contract held
by the Fund.
If the Fund maintains a short position in a futures contract or has sold a
call option in a futures contract, it will cover this position by holding, in
a segregated account maintained at its Custodian, cash, U.S. Government
securities or other liquid portfolio securities equal in value (when added to
any initial or variation margin on deposit) to the market value of the
securities underlying the futures contract or the exercise price of the
option. Such a position may also be covered by owning the securities
underlying the futures contract (in the case of a stock index futures
contract a portfolio of securities substantially replicating the relevant
index), or by holding a call option permitting the Fund to purchase the same
contract at a price no higher than the price at which the short position was
established.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments
underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their
U.S. counterparts. Furthermore, foreign commodities exchanges may be less
regulated and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on
foreign exchanges. Greater margin requirements may limit the Fund's ability
to enter into certain commodity transactions on foreign exchanges. Moreover,
differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of the Fund's transactions affected on
foreign exchanges.
The extent to which the Fund may enter into transactions involving options
and futures contracts may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the
Fund's intention to qualify as such. See "Dividends, Distributions and Taxes"
in the Prospectus and this Statement of Additional Information.
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While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk which may arise in employing futures conracts to
protect against the price volitility of portfolio securities (and the
currencies in which they are denominated) is that the prices of securities
and indexes subject to futures contracts (and thereby the futures contract
prices) may correlate imperfectly with the behavior of the cash prices of the
Fund's portfolio securities (and the currencies in which they are
denominated). Another such risk is that prices of interest rate futures
contracts may not move in tandem with the changes in prevailing interest
rates against which the Fund seeks a hedge. A correlation may also be
distorted (a) temporarily, by short-term traders seeking to profit from the
difference between a contract or security price objective and their cost of
borrowed funds; (b) by investors in futures contracts electing to close out
their contracts through offsetting transactions rather than meet margin
deposit requirements; (c) by investors in futures contracts opting to make or
take delivery of underlying securities rather than engage in closing
transactions, thereby reducing liquidity of the futures market; and (d)
temporarily, by speculators who view the deposit requirements in the futures
markets as less onerous than margin requirements in the cash market. Due to
the possibility of price distortion in the futures market and because of the
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be
possible to close out a futures position and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments
of variation margin. In addition, limitations imposed by an exchange or board
of trade on which futures contracts are traded may compel or prevent the Fund
from closing out a contract which may result in reduced gain or increased
loss to the Fund. The absence of a liquid market in futures contracts might
cause the Fund to make or take delivery of the underlying securities at a
time when it may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on futures contracts involves less potential risk to the
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). However, there may be circumstances when the
purchase of a call or put option on a futures contract would result in a loss
to the Fund notwithstanding that the purchase or sale of a futures contract
would not result in a loss, as in the instance where there is no movement in
the prices of the futures contract or underlying securities.
The Adviser has substantial experience in the use of the investment
techniques described above under the heading "Options and Futures
Transactions," which techniques require skills different from those needed to
select the portfolio securities underlying various options and futures
contracts.
New Instruments. New futures contracts, options and other financial
products and various combinations thereof continue to be developed. The Fund
may invest in any such futures, options or products as may be developed, to
the extent consistent with its investment objective and applicable regulatory
requirements.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 150%. A 100% turnover rate would occur, for example, if 100% of
the securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced
within one year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund.
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<PAGE>
The Fund may not:
1. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund
may invest in the securities of companies which operate, invest in, or
sponsor such programs.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
4. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in
restriction (4). For the purpose of this restriction, collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.
6. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on
a when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money in accordance with
restrictions described above; or (e) lending portfolio securities.
7. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
8. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell financial or stock index futures contracts or
options thereon.
9. Make short sales of securities.
10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
11. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security.
12. Invest for the purpose of exercising control or management of any
other issuer.
13. Purchase warrants if as a result the Fund would then have either
more than 5% of its net assets invested in warrants or more than 2% of
its net assets invested in warrants not listed on the New York or
American Stock Exchange.
In addition, as a nonfundamental policy, the Fund may not (i) invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Adviser or the Manager
owns more than 1/2 of 1% of the outstanding securities of such issuer, and
such officers, trustees and directors who own more than 1/2 of 1% own in the
aggregate more than 5% of the outstanding securities of such issuers; and
(ii) invest more than 5% of the value of its total assets in securities of
issuers (other than obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities having a record, together with
predecessors, of less than three years of continuous operation.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
26
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. In addition, securities may be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. Futures transactions will usually be effected through a broker
and a commission will be charged. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the period August 28, 1996
(commencement of operations) through November 30, 1996, the Fund paid a total
of $168,957 in brokerage commissions.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause purchase and
sale transactions to be allocated among the Fund and others whose assets it
manages in such manner as it deems equitable. In making such allocations
among the Fund and other client accounts, the main factors considered are the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment,
the size of investments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client
accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Adviser from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any
transaction, the Adviser relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions.
If the Adviser believes such prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and
other services to the Fund or the Adviser. Such services may include, but are
not limited to, any one or more of the following: reports on industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, computer
terminals and various trading and/or quotation equipment. They also include
advice from broker-dealers as to the value of securities, availability of
securities, availability of buyers, and availability of sellers. In addition,
they include recommendations as to purchase and sale of individual securities
and timing of such transactions. The Fund will not purchase at a higher price
or sell at a lower price in connection with transactions effected with a
dealer, acting as principal, who furnishes research services to the Fund than
would be the case if no weight were given by the Fund to the dealer's
furnishing of such services. During the period August 28, 1996 through
November 30, 1996, the Fund directed the payment of $148,849 in brokerage
commissions in connection with transactions in the aggregate amount of
$53,927,390 to brokers because of research services provided.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser in the management of accounts of
some of its other clients and may not in all cases benefit the Fund directly.
While the receipt of such information and services is useful in varying
degrees and would generally reduce the amount of research or services
otherwise performed by the Adviser and thereby reduce its expenses, it is of
indeterminable value and the advisory fee paid to the Adviser is not reduced
by any amount that may be attributable to the value of such services.
27
<PAGE>
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR must be reasonable and fair compared to the commissions, fees
or other remuneration paid to other brokers in connection with comparable
transactions involving similar securities being purchased or sold on an
exchange during a comparable period of time. This standard would allow DWR to
receive no more than the remuneration which would be expected to be received
by an unaffiliated broker in a commensurate arm's-length transaction.
Furthermore, the Board of Trustees of the Fund, including a majority of the
Trustees who are not "interested" persons of the Fund, as defined in the Act,
have adopted procedures which are reasonably designed to provide that any
commissions, fees or other remuneration paid to DWR are consistent with the
foregoing standard. During the period August 28, 1996 through November 30,
1996, the Fund did not pay any brokerage commissions to DWR.
THE DISTRIBUTOR
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered
into a selected dealer agreement with DWR, which through its own sales
organization sells shares of the Fund. In addition, the Distributor may enter
into selected dealer agreements with other selected broker-dealers. The
Distributor, a Delaware corporation, is a wholly-owned subsidiary of DWDC. As
part of an internal reorganization that took place in January, 1993, the
Distributor assumed the investment company share distribution activities
previously performed by DWR. The Trustees of the Fund, including a majority
of the Independent Trustees, approved, at their meeting held on April 17,
1996, a Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement has an initial term ending April 30, 1997, and provides that it
will remain in effect from year to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
account executives. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears
the costs of initial typesetting, printing and distribution of prospectuses
and supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. Under the Distribution Agreement, the Distributor uses its best
efforts in rendering services to the Fund, but in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
To compensate the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or upon which such charge
has been waived; or (b) the Fund's average daily net assets. The Distributor
receives the proceeds of contingent deferred sales charges imposed on certain
redemptions of shares, which are separate and apart from payments made
pursuant to the Plan (see "Repurchases and Redemptions--Contingent Deferred
Sales Charge" in the Prospectus). The Distributor has informed the Fund that
it received approximately $24,000 in contingent deferred sales charges for
the period August 28, 1996 (commencement of operations) through November 30,
1996.
28
<PAGE>
The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year under the Plan of Distribution, equal to 0.25% of the
Fund's average daily net assets, is characterized as a "service fee" under
the Rules of Fair Practice of the National Association of Securities Dealers
(of which the Distributor is a member). Such fee is payments made for
personal service and/or the maintenance of shareholder accounts. The
remaining portions of the Plan of Distribution fee payments made by the Fund
are characterized as "asset-based sales charges" pursuant to the
aforementioned Rules of Fair Practice.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. In the Trustees' quarterly
reviews of the Plan, they will consider its continued appropriateness and the
level of compensation provided therein. The Fund accrued amounts payable to
the Distributor under the Plan, during the period August 28, 1996
(commencement of operations) through November 30, 1996, of $226,815. This
amount is equal to the annualized rate of 0.97% of the Fund's average daily
net assets for the fiscal period. The payments accrued under the Plan were
calculated pursuant to clause (a) of the compensation formula under the Plan.
This amount is treated by the Fund as an expense in the year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to
a contingent deferred sales charge, payable to the Distributor, if redeemed
during the six years after their purchase. DWR compensates its account
executives by paying them, from its own funds, commissions for the sale of
the Fund's shares, currently a gross sales credit of up to 5% of the amount
sold and an annual residual commission of up to 0.25 of 1% of the current
value of the amount sold. The gross sales credit is a charge which reflects
commissions paid by DWR to its account executives and DWR's Fund associated
distribution-related expenses, including sales compensation, and overhead and
other branch office distribution-related expenses including: (a) the expenses
of operating DWR's branch offices in connection with the sale of Fund shares,
including lease costs, the salaries and employee benefits of operations and
sales support personnel, utility costs, communications costs and the costs of
stationery and supplies; (b) the costs of client sales seminars; (c) travel
expenses of mutual fund sales coordinators to promote the sale of Fund
shares; and (d) other expenses relating to branch promotion of Fund share
sales. Payments may also be made with respect to distribution expenses
incurred in connection with the distribution of shares, including personal
services to shareholders with respect to holdings of such shares, of an
investment company whose assets are acquired by the Fund in a tax-free
reorganization.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and opportunity costs, such as the gross sales credit and
an assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of distribution expenses to the Fund, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross sales
credit as it is reduced by amounts received by the Distributor under the Plan
and any contingent deferred sales charges received by the Distributor upon
redemption of shares of the Fund. No other interest charge is included as a
distribution expense in the Distributor's calculation of distribution costs
for this purpose. The broker's call rate is the interest rate charged to
securities brokers on loans secured by exchange-listed securities.
The Fund paid 100% of the $226,815 accrued under the Plan for the fiscal
period August 28, 1996 (commencement of operations) through November 30, 1996
to the Distributor. The Distributor and DWR estimate that they have spent,
pursuant to the Plan, $6,508,778 on behalf of the Fund since the inception of
the Plan. It is estimated that this amount was spent in approximately the
following ways: (i) 23.01% ($1,497,848)--advertising and promotional
expenses; (ii) 3.07% ($200,006)--printing of prospectuses for distribution to
other than current shareholders; and (iii) 73.92% ($4,810,924)--other
expenses, including the gross sales credit and the carrying charge, of which
1.15% ($55,236) represents carrying charges, 39.24% ($1,888,008) represents
commission credits to DWR branch offices for payments of commissions to
account executives and 59.61% ($2,867,680) represents overhead and other
branch office distribution-related expenses.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to
the Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund
that the excess distribution
29
<PAGE>
expenses, including the carrying charge designed to approximate the
opportunity costs incurred by DWR which arise from it having advanced monies
without having received the amount of any sales charges imposed at the time
of sale of the Fund's shares, totalled $6,257,689 as of November 30, 1996.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all expenses or any requirement that the Plan be continued
from year to year, this excess amount does not constitute a liability of the
Fund. Although there is no legal obligation for the Fund to pay distribution
expenses in excess of payments made under the Plan and the proceeds of
contingent deferred sales charges paid by investors upon redemption of
shares, if for any reason the Plan is terminated, the Trustees will consider
at that time the manner in which to treat such expenses. Any cumulative
expenses incurred, but not yet recovered through distribution fees or
contingent deferred sales charges, may or may not be recovered through future
distribution fees or contingent deferred sales charges.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment
or mistake of law or for any act or omission or for any losses sustained by
the Fund or its shareholders.
The Plan will remain in effect until April 30, 1997, and will continue
from year to year thereafter, provided such continuance is approved annually
by a vote of the Trustees, including a majority of the Independent 12b-1
Trustees.
Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the Fund, and
all material amendments to the Plan must be approved by the Trustees in the
manner described above. The Plan may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent 12b-1
Trustees or by a vote of the holders of a majority of the outstanding voting
securities of the Fund (as defined in the Act) on not more than 30 days
written notice to any other party to the Plan. So long as the Plan is in
effect, the selection or nomination of the Independent Trustees is committed
to the discretion of the Independent Trustees.
No interested person of the Fund, nor any Trustee of the Fund who is not
an interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that DWR, InterCapital, the Distributor or the Manager or certain of their
employees, may be deemed to have such an interest as a result of benefits
derived from the successful operation of the Plan or as a result of receiving
a portion of the amounts expended thereunder by the Fund.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term securities with remaining
maturities of sixty 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 sixty 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. All other securities and other assets are valued at their fair
value as determined in good faith under procedures established by and under
the supervision of the Trustees.
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting its liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The New York Stock Exchange currently observes
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
30
<PAGE>
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by Dean
Witter Trust Company (the "Transfer Agent"). This is an open account in which
shares owned by the investor are credited by the Transfer Agent in lieu of
issuance of a share certificate. If a share certificate is desired, it must
be requested in writing for each transaction. Certificates are issued only
for full shares and may be redeposited in the account at any time. There is
no charge to the investor for issuance of a certificate. Whenever a
shareholder-instituted transaction takes place in the Shareholder Investment
Account, the shareholder will be mailed a confirmation of the transaction
from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid, at the net asset value per share, in shares
of the Fund (or in cash if the shareholder so requests) as of the close of
business on the record date. At any time an investor may request the Transfer
Agent, in writing, to have subsequent dividends and/or capital gains
distributions paid to him or her in cash rather than shares. To assure
sufficient time to process the change, such request should be received by the
Transfer Agent at least five business days prior to the record date of the
dividend or distribution. In the case of recently purchased shares for which
registration instructions have not been received on the record date, cash
payments will be made to DWR or the other selected broker-dealer, and which
will be forwarded to the shareholder, upon the receipt of proper
instructions.
Targeted Dividends (Service Mark). In states where it is legally
permissible, shareholders may also have all income dividends and capital
gains distributions automatically invested in shares of a TCW/DW Fund other
than TCW/DW Global Telecom Trust. Such investment will be made as described
above for automatic investment in shares of the Fund, at the net asset value
per share of the selected TCW/DW Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn
dividends, if any, in the selected TCW/DW Fund the next business day. To
participate in the Targeted Dividends program, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent. Shareholders of the Fund must be shareholders of the TCW/DW Fund
targeted to receive investments from dividends at the time they enter the
Targeted Dividends program. Investors should review the prospectus of the
targeted TCW/DW Fund before entering the program.
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, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for
investment in shares of the Fund. Shares purchased through EasyInvest will be
added to the shareholder's existing account at the net asset value calculated
the same business day the transfer of funds is effected. For further
information or to subscribe to EasyInvest, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution at the net
asset value per share, without the imposition of a contingent deferred sales
charge upon redemption, by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date. If the shareholder
returns the proceeds of a dividend or distribution, such funds must be
accompanied by a signed statement indicating that the proceeds constitute a
dividend or distribution to be invested. Such investment will be made at the
net asset value per share next determined after receipt of the check or
proceeds by the Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own
or purchase shares of the Fund having a minimum value of $10,000 based upon
the then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount,
not less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"
31
<PAGE>
in the Prospectus). Therefore, any shareholder participating in the
Withdrawal Plan will have sufficient shares redeemed from his or her account
so that the proceeds (net of any applicable contingent deferred sales charge)
to the shareholder will be the designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the
amount of the periodic withdrawal payment designated in the application. The
shares will be redeemed at their net asset value determined, at the
shareholder's option, on the tenth or twenty-fifth day (or next following
business day) of the relevant month or quarter and normally a check for the
proceeds will be mailed by the Transfer Agent, or amounts credited to a
shareholder's DWR or other selected broker-dealer brokerage account, within
five business days after the date of redemption. The Withdrawal Plan may be
terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net
investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six
years (see "Repurchases and Redemptions--Contingent Deferred Sales Charge").
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the
account must send complete written instructions to the Transfer Agent to
enroll in the Withdrawal Plan. The shareholder's signature on such
instructions must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A shareholder may, at any time, change the amount and interval of
withdrawal payments through his or her DWR or other selected broker-dealer
account executive or by written notification to the Transfer Agent. In
addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature
guarantees required in the manner described above. The shareholder may also
terminate the Withdrawal Plan at any time by written notice to the Transfer
Agent. In the event of such termination, the account will be continued as a
regular shareholder investment account. The shareholder may also redeem all
or part of the shares held in the Withdrawal Plan account (see "Repurchases
and Redemptions" in the Prospectus) at any time. Shareholders wishing to
enroll in the Withdrawal Plan should contact their account executive or the
Transfer Agent.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to TCW/DW Global
Telecom Trust, directly to the Fund's Transfer Agent. Such amounts will be
applied to the purchase of Fund shares at the net asset value per share next
computed after receipt of the check or purchase payment by the Transfer
Agent. The shares so purchased will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of the Fund may
exchange their shares for shares of other TCW/DW Funds sold with a contingent
deferred sales charge ("CDSC Funds"), for shares of TCW/DW North American
Government Income Trust, TCW/DW Income and Growth Fund and TCW/DW Balanced
Fund, and for shares of five money market funds for which InterCapital serves
as investment manager (the foregoing eight non-CDSC funds are hereinafter
collectively referred to as the "Exchange Funds"). Exchanges may be made
after the shares of the fund acquired by purchase (not by exchange or
dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange 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.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, except for other TCW/DW Funds and the five money market funds
listed in the Prospectus.
32
<PAGE>
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to
the contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit
should not be endorsed.)
As described below, and in the Prospectus under the captions "Exchange
Privilege" and "Contingent Deferred Sales Charge," a contingent deferred
sales charge ("CDSC") may be imposed upon a redemption, depending on a number
of factors, including the number of years from the time of purchase until the
time of redemption or exchange ("holding period"). When shares of the Fund or
any other CDSC Fund are exchanged for shares of an Exchange Fund, the
exchange is executed at no charge to the shareholder, without the imposition
of the CDSC at the time of the exchange. During the period of time the
shareholder remains in the Exchange Fund (calculated from the last day of the
month in which the Exchange Fund shares were acquired), the holding period or
"year since purchase payment made" is frozen. When shares are redeemed out of
the Exchange Fund, they will be subject to a CDSC which would be based upon
the period of time the shareholder held shares in the Fund. However, 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. Shareholders
acquiring shares of an Exchange Fund pursuant to this exchange privilege may
exchange those shares back into the Fund from the Exchange Fund, with no
charge being imposed on such exchange. The holding period previously frozen
when shares were first exchanged for shares of an Exchange Fund resumes on
the last day of the month in which shares of a CDSC Fund are reacquired. A
CDSC is imposed only upon an ultimate redemption, based upon the time
(calculated as described above) the shareholder was invested in a CDSC Fund.
When shares initially purchased in a CDSC Fund are exchanged for shares of
an Exchange Fund, the date of purchase of the shares of the fund exchanged
into, for purposes of the CDSC upon redemption, will be the last day of the
month in which the shares being exchanged were originally purchased. In
allocating the purchase payments between funds for purposes of the CDSC the
amount which represents the current net asset value of shares at the time of
the exchange which were (i) purchased more than six years prior to the
exchange and (ii) originally acquired through reinvestment of dividends or
distributions (all such shares called "Free Shares") will be exchanged first.
After an exchange, all dividends earned on shares in the Exchange Fund will
be considered Free Shares. If the exchanged amount exceeds the value of such
Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time. Shares equal to any appreciation
in the value of non-Free Shares exchanged will be treated as Free Shares, and
the amount of the purchase payments for the non-Free Shares of the fund
exchanged into will be equal to the lesser of (a) the purchase payments for,
or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value
of the block (up to the amount of the exchange) will be treated as Free
Shares and exchanged first, and the purchase payment for that block will be
allocated on a pro rata basis between the non-Free Shares of that block to be
retained and the non-Free Shares to be exchanged. The prorated amount of such
purchase payment attributable to the retained non-Free Shares will remain as
the purchase payment for such shares, and the amount of purchase payment for
the exchanged non-Free Shares will be equal to the lesser of (a) the prorated
amount of the purchase payment for, or (b) the current net asset value of,
those exchanged non-Free Shares. Based upon the procedures described in the
Prospectus under the caption "Contingent Deferred Sales Charge," any
applicable CDSC will be imposed upon the ultimate redemption of shares of any
fund, regardless of the number of exchanges since those shares were
originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any
other of the funds and the general administration of the Exchange Privilege,
the Transfer Agent acts as agent for the Distributor and for the
shareholder's selected broker-dealer, if any, in the performance of such
functions.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence
of its correspondents or for losses in transit. The Fund shall not be liable
for any default or negligence of the Transfer Agent, the Distributor or any
selected broker-dealer.
33
<PAGE>
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment is $5,000
for Dean Witter Liquid Asset Fund Inc., Dean Witter Tax-Free Daily Income
Trust, Dean Witter New York Municipal Money Market Trust and Dean Witter
California Tax-Free Daily Income Trust, although those funds may, at their
discretion, accept initial investments of as low as $1,000. The minimum
initial investment for Dean Witter U.S. Government Money Market Trust and for
all TCW/DW Funds is $1,000.) Upon exchange into an Exchange Fund, the shares
of that fund will be held in a special Exchange Privilege Account separately
from accounts of those shareholders who have acquired their shares directly
from that fund. As a result, certain services normally available to
shareholders of money market funds, including the check writing feature, will
not be available for funds held in that account.
The Fund, each of the other TCW/DW Funds and each of the money market
funds may limit the number of times this Exchange Privilege may be exercised
by any investor within a specified period of time. Also, the Exchange
Privilege may be terminated or revised at any time by the Fund and/or any of
the funds for which shares of the Fund have been exchanged, upon such notice
as may be required by applicable regulatory agencies (presently sixty days
for termination or material revision), provided that six months prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds pursuant to this Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice
at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange
Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to
whether the conditions prescribed in (b) or (c) exist) or (e) if the Fund
would be unable to invest amounts effectively in accordance with its
investment objective, policies and restrictions.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange may be limited in situations where there is an exchange
of shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of the Fund can be
redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds may be reduced by the amount of
any applicable contingent deferred sales charges (see below). If shares are
held in a shareholder's account without a share certificate, a written
request for redemption to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303 is required. If certificates are held by the shareholder, the
shares may be redeemed by surrendering the certificates with a written
request for redemption. The share certificate, or an accompanying stock
power, and the request for redemption, must be signed by the shareholder or
shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent
to the Fund's Transfer Agent, which will redeem the shares at their net asset
value next computed (see "Purchase of Fund Shares") after it receives the
request, and certificate, if any, in good order. Any redemption request
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature guarantees
when required by the Fund or the Transfer Agent.
34
<PAGE>
If redemption is requested by a corporation, partnership, trust or fiduciary,
the Transfer Agent may require that written evidence of authority acceptable
to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other
than the record owner, or if the proceeds are to be paid to a corporation
(other than the Distributor or a selected broker-dealer for the account of
the shareholder), partnership, trust or fiduciary, or sent to the shareholder
at an address other than the registered address, signatures must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A stock
power may be obtained from any dealer or commercial bank. The Fund may change
the signature guarantee requirements from time to time upon notice to
shareholders, which may be by means of a revised prospectus.
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding six years.
However, no CDSC will be imposed to the extent that the net asset value of
the shares redeemed does not exceed: (a) the current net asset value of
shares purchased more than six years prior to the redemption, plus (b) the
current net asset value of shares purchased through reinvestment of dividends
or distributions of the Fund or another TCW/DW Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six years. The CDSC will be paid to the
Distributor.
In determining the applicability of a CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will
be the amount which represents the net asset value of the investor's shares
purchased more than six years prior to the redemption and/or shares purchased
through reinvestment of dividends or distributions. A portion of the amount
redeemed which exceeds an amount which represents both such increase in value
and the value of shares purchased more than six years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions
will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Fund shares until the time of
redemption of such shares. For purposes of determining the number of years
from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC:
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE REDEEMED
- -------------------------- -----------------------
First ..................... 5.0%
Second .................... 4.0%
Third ..................... 3.0%
Fourth .................... 2.0%
Fifth ..................... 2.0%
Sixth ..................... 1.0%
Seventh and thereafter ... None
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year period. This will result in any such CDSC being
imposed at the lowest possible rate. Accordingly, shareholders may redeem,
without incurring any CDSC, amounts equal to any net increase in the value of
their shares above the amount of their purchase payments made within the past
six years and amounts equal to the current value of shares purchased more
than six years prior to the redemption and shares purchased through
reinvestment of dividends or distributions. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years of
purchase which are in excess of these amounts and which redemptions are not
(a) requested within one year of death or initial determination of disability
of a shareholder, or (b) made pursuant to certain taxable distributions from
retirement plans or retirement accounts, as described in the Prospectus.
35
<PAGE>
Payment for Shares Repurchased or Redeemed. As discussed in the
Prospectus, payment for shares presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. The term good order means
that the share certificate, if any, and request for redemption are properly
signed, accompanied by any documentation required by the Transfer Agent, and
bear signature guarantees when required by the Fund or the Transfer Agent.
Such payment may be postponed or the right of redemption suspended at times
(a) when the New York Stock Exchange is closed for other than customary
weekends and holidays, (b) when trading on that Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of
securities owned by it is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or
(d) during any other period when the Securities and Exchange Commission by
order so permits; provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist. If the shares to be redeemed have recently
been purchased by check, payment of the redemption proceeds may be delayed
for the minimum time needed to verify that the check used for investment has
been honored (not more than fifteen days from the time of receipt of the
check by the Transfer Agent). Shareholders maintaining margin accounts with
DWR or another selected broker-dealer are referred to their account executive
regarding restrictions on redemption of shares of the Fund pledged in the
margin account.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the contingent deferred sales charge or free of such charge
(and with regard to the length of time shares subject to the charge have been
held), any transfer involving less than all of the shares in an account will
be made on a pro-rata basis (that is, by transferring shares in the same
proportion that the transferred shares bear to the total shares in the
account immediately prior to the transfer). The transferred shares will
continue to be subject to any applicable contingent deferred sales charge as
if they had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within thirty days after the date
of redemption or repurchase reinstate any portion or all of the proceeds of
such redemption or repurchase in shares of the Fund at the net asset value
next determined after a reinstatement request, together with such proceeds,
is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss,
depending on the amount reinstated, will not be allowed as a deduction for
federal income tax purposes, but will be applied to adjust the cost basis of
the shares acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual
federal income tax. In addition, shareholders are entitled to increase their
tax basis of their investment by their pro rata share of the undistributed
gain net of the tax paid by the Fund on such gain.
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term gains or losses.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value
of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions and dividends are subject to federal income taxes. If the net
asset value of the shares should be reduced below a shareholder's cost as a
result of the payment of dividends or the distribution of realized net
long-term capital gains, such payment or distribution would be in part a
return of the shareholder's investment to the extent of such reduction below
the shareholder's
36
<PAGE>
cost, but nonetheless would be fully taxable at either ordinary or capital
gain rates. Therefore, an investor should consider the tax implications of
purchasing Fund shares immediately prior to a dividend or distribution record
date.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period and is computed by finding the annual percentage
rate which will result in the ending redeemable value of a hypothetical
$1,000 investment made at the beginning of a one, five or ten year period, or
for the period from the date of commencement of the Fund's operations, if
shorter than any of the foregoing. For periods of less than one year, the
Fund quotes its total return on a non-annualized basis.
The Fund may compute its aggregate total return for specified periods by
determining the aggregate percentage rate which will result in the ending
value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value by the
initial $1,000 investment and subtracting 1 from the result. The ending
redeemable value is reduced by any contingent deferred sales charge at the
end of the period. Based on the foregoing calculation, the Fund's total
return for the period August 28, 1996 (commencement of operations) through
November 30, 1996 was 2.00%.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred charge which, if reflected, would
reduce the performance quotes. For example, the total return of the Fund may
be calculated in the manner described above, but without deduction of any
applicable contingent deferred sales charge. Based on this calculation, the
aggregate total return of the Fund for the period August 28, 1996 through
November 30, 1996 was 7.00%.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in shares of the Fund by adding 1 to the Fund's
aggregate total return to date (expressed as a decimal and without taking
into account the effect of any applicable CDSC) and multiplying by $10,000,
$50,000 or $100,000, as the case may be. Investments of $10,000, $50,000 and
$100,000 in the Fund at inception would have grown to $10,700, $53,500 and
$107,000, respectively, at November 30, 1996.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. The Trustees were elected by InterCapital as the then sole
shareholder of the Fund prior to the public offering of the Fund's shares.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees, and they may at any time lengthen their own terms or
make their terms of unlimited duration and appoint their own successors,
provided that always at least a majority of the Trustees has been elected by
the shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right to
remove the Trustees following a meeting called for that purpose requested in
writing by the record holders of not less than ten percent of the Fund's
outstanding shares. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they
choose, elect all Trustees being selected, while the holders of the remaining
shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future
regulations or other unforeseen circumstances). The Trustees have not
presently authorized any such additional series or classes of shares.
37
<PAGE>
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his own
bad faith, willful misfeasance, gross negligence, or reckless disregard of
his duties. It also provides that all third persons shall look solely to the
Fund's property for satisfaction of claims arising in connection with the
affairs of the Fund. With the exceptions stated, the Declaration of Trust
provides that a Trustee, officer, employee or agent is entitled to be
indemnified against all liabilities in connection with the affairs of the
Fund.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest. The Fund shall be of unlimited duration subject to the
provisions of the Declaration of Trust concerning termination by action of
the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, Harborside Financial Center, Plaza Two, Jersey
City, New Jersey 07311 is the Transfer Agent of the Fund's shares and
Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Dean Witter Trust Company is an affiliate of Dean Witter Services
Company Inc., the Fund's Manager, and of Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts, disbursing cash dividends and reinvesting dividends, processing
account registration changes, handling purchase and redemption transactions,
mailing prospectuses and reports, mailing and tabulating proxies, processing
share certificate transactions, and maintaining shareholder records and lists.
For these services Dean Witter Trust Company receives a per shareholder account
fee.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund.
The independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report
containing financial statements audited by independent accountants will be
sent to shareholders each year.
The Fund's fiscal year ends on May 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The Statement of Assets and Liabilities of the Fund included in this
Statement of Additional Information and incorporated by reference in the
Prospectus has been so included and incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
38
<PAGE>
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
39
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
To the Shareholder and Trustees of TCW/DW Global Telecom Trust
In our opinion, the accompanying statement of assets and liabilities presents
fairly, in all material respects, the financial position of TCW/DW Global
Telecom Trust (the "Fund") at June 19, 1996, in conformity with generally
accepted accounting principles. This financial statement is the
responsibility of the Fund's management; our responsibility is to express an
opinion on this financial statement based on our audit. We conducted our
audit of this financial statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
June 20, 1996
40
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
STATEMENT OF ASSETS AND LIABILITIES AT JUNE 19, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Cash ................................................................................ $100,000
Deferred organizational expenses (Note 1) ........................................... 158,225
----------
Total Assets ...................................................................... 258,225
LIABILITIES:
Organizational expenses payable (Note 1) ............................................ 158,225
Commitments (Notes 1 and 2) .........................................................
----------
Net Assets ........................................................................ $100,000
==========
Net Asset Value Per Share (10,000 shares of beneficial interest outstanding; unlimited
authorized shares of beneficial interest of $.01 par value) ......................... $ 10.00
----------
</TABLE>
- --------------
NOTE 1--TCW/DW Global Telecom Trust (the "Fund") was organized as a
Massachusetts business trust on March 28, 1996. To date the Fund has had no
transactions other than those relating to organizational matters and the sale
of 10,000 shares of beneficial interest for $100,000 to Dean Witter
InterCapital Inc. (the "Manager"). The Fund is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a open-end,
diversified management investment company. Organizational expenses of the
Fund incurred prior to the offering of the Fund's shares will be paid by the
Manager. It is currently estimated that the Manager will incur and be
reimbursed by the Fund for approximately $158,225 in organizational expenses.
These expenses will be deferred and amortized by the Fund on the
straight-line method over a period not to exceed five years from the date of
commencement of the Fund's operations. In the event that at any time during
the five year period beginning with the date of the commencement of
operations the initial shares acquired by the Manager prior to such date are
redeemed, by any holder thereof, the redemption proceeds payable in respect
of such shares will be reduced by the pro rata share (based on the
proportionate share of the initial shares redeemed to the total number of
original shares outstanding at the time of redemption) of the then
unamortized deferred organizational expenses as of the date of such
redemption. In the event that the Fund liquidates before the deferred
organizational expenses are fully amortized, the Manager shall bear such
unamortized deferred organizational expenses.
NOTE 2--The Fund has entered into a management agreement with the Manager.
Certain officers and/or trustees of the Fund are officers and/or directors of
the Manager. The Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager maintains
certain of the Fund's books and records and furnishes, at its own expense,
such office space, facilities, equipment, supplies, clerical help and
bookkeeping and certain legal services as the Fund may reasonably require in
the conduct of its business, including the preparation of prospectuses,
statements of additional information, proxy statements and reports required
to be filed with federal and state securities commissions (except insofar as
the participation or assistance of independent accountants and attorneys is,
in the opinion of the Manager, necessary or desirable). In addition, the
Manager pays the salaries of all personnel, including officers of the Fund,
who are employees of the Manager. The Manager also bears the cost of the
Fund's telephone service, heat, light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund will pay the
Manager monthly compensation calculated daily by applying the annual rate of
0.60% to the daily net assets of the Fund determined as of the close of each
business day.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with TCW Funds Management, Inc. (the "Adviser") the Fund has retained the
Adviser to invest the Fund's assets, including the placing of orders for the
purchase and sale of portfolio securities. The Adviser obtains and evaluates
such information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously
manage the assets of the Fund in a manner consistent with its investment
objective. In addition, the Adviser pays the salaries of all personnel,
including officers of the Fund, who are employees of the Adviser.
41
<PAGE>
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the annual rate of 0.40% to
the daily net assets of the Fund determined as of the close of each business
day.
Shares of the Fund will be distributed by Dean Witter Distributors Inc.
(the "Distributor"), an affiliate of the Manager, during the initial and
continuous offering of the Fund's shares. The Fund has adopted a Plan of
Distribution pursuant to Rule 12b-1 under the Act (the "Plan"). The Plan
provides that the Distributor will bear the expense of all promotional and
distribution related activities on behalf of the Fund, including the payment
of commissions for sales of the Fund's shares and incentive compensation to
and expenses of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the
Manager, account executives and others who engage in or support distribution
of shares or who service shareholder accounts, including overhead and
telephone expenses; printing and distribution of prospectuses and reports
used in connection with the offering of the Fund's shares to other than
current shareholders; and preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
distribution expenses.
To compensate the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Plan, the Fund will pay the
Distributor compensation accrued daily and payable monthly at the annual rate
of 1.00% of the lesser of; (a) the average daily aggregate gross sales of the
Fund's shares since the inception of the Fund (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate
net asset value of the Fund's shares redeemed since the Fund's inception upon
which a contingent deferred sales charge has been imposed or waived; or (b)
the Fund's average daily net assets.
Dean Witter Trust Company (the "Transfer Agent"), an affiliate of the
Manager and the Distributor, is the transfer agent of the Fund's shares,
dividend disbursing agent for payment of dividends and distributions on Fund
shares and agent for shareholders under various investment plans.
The Manager has undertaken to assume all Fund expenses (except for the
Plan of Distribution fee, foreign taxes withheld and/or brokerage fees) and
to waive the compensation provided for in its Management Agreement and the
Adviser has undertaken to waive the compensation provided for in its Advisory
Agreement, until such time as the Fund had $50 million of net assets or until
six months from the date of commencement of the Fund's operations, whichever
occurs first.
42
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
BOND RATINGS
Aaa Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While
the various protective elements are likely to change, such changes as
can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment
sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well. Bonds rated Aaa, Aa, A and Baa
are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and therefore not well safeguarded during both good and bad times in
the future. Uncertainty of position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of
time may be small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
security rating system. The modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and a modifier 3 indicates that the issue ranks in the
lower end if its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess
of nine months. The ratings apply to Municipal Commercial Paper as well as
taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment
capacity of rated issuers: Prime-1, Prime-2, Prime-3.
43
<PAGE>
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3
have an acceptable capacity for repayment of short-term promissory
obligations. Issuers rated Not Prime do not fall within any of the Prime
rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small
degree.
A Debt rated "A" has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher-rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than for debt
in higher-rated categories. Bonds rated AAA, AA, A and BBB are
considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other
speculative grade debt. However, it faces major ongoing uncertainties
or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity or willingness to pay interest
and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently
has the capacity to meet interest payments and principal repayments.
Adverse business, financial or economic conditions would likely impair
capacity or willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic
conditions to meet timely payments of interest and repayments of
principal. In the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to pay interest and
repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC" rating.
44
<PAGE>
Cl The rating "Cl" is reserved for income bonds on which no interest is
being paid.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
Debt rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to
pay interest and repay principal. "BB" indicates the least degree of
speculation and "C" the highest degree of speculation. While such debt
will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
within the major ratings categories.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is very
strong.
A-2 indicates capacity for timely payment on issues with this designation
is strong. However, the relative degree of safety is not as
overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.
45
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements included in the Prospectus (Part A):
Financial Highlights for the period August 28, 1996
(commencement of operations) through November 30,
1996 (unaudited)............................................ 5
Portfolio of Investments at November 30, 1996 (unaudited)... 25
Summary of Investments at November 30, 1996 (unaudited)..... 28
Statement of Assets and Liabilities at November 30, 1996
(unaudited)................................................. 29
Statement of Operations for the period August 28, 1996
(commencement of operations) through November 30, 1996
(unaudited)................................................. 29
Statement of Changes in Net Assets for the period August 28,
1996 (commencement of operations) through November 30,
1996 (unaudited)............................................ 29
Notes to Financial Statements (unaudited)................... 30
(2) Financial Statements included in the Statement of
Additional Information (Part B):
Statement of Assets and Liabilities at June 19, 1996 ....... 41
(3) Financial statements included in the Part C:
None.
(b) Exhibits
Exhibit
Number Description
- ------ -----------
2. -- Amended and Restated By-Laws of the Registrant
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- -----------------------------
All other exhibits were previously filed and are hereby incorporated
by reference.
1
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant.
None.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at December 9, 1996
-------------- ------------------------
Shares of Beneficial Interest 14,156
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it
is determined that they acted under the belief that their actions were in
or not opposed to the best interest of the Registrant, and, with respect
to any criminal proceeding, they had reasonable cause to believe their
conduct was not unlawful. In addition, indemnification is permitted only
if it is determined that the actions in question did not render them
liable by reason of willful misfeasance, bad faith or gross negligence in
the performance of their duties or by reason of reckless disregard of
their obligations and duties to the Registrant. Trustees, officers,
employees and agents will be indemnified for the expense of litigation if
it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance
money for these expenses provided that they give their undertakings to
repay the Registrant unless their conduct is later determined to permit
indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Management and Advisory Agreements, none
of the Manager, the Adviser or any trustee, officer, employee or agent of
the Registrant shall be liable for any action or failure to act, except
in the case of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers
and controlling persons of the Registrant pursuant to the foregoing
provisions or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the
Registrant in connection with the successful defense of any action, suit
or proceeding) is asserted against the Registrant by such trustee,
officer or controlling person in connection with the shares being
registered, the
2
<PAGE>
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act, and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of Sections
17(h) and 17(i) of such Act remains in effect.
Registrant, in conjunction with the Manager, Registrant's Trustees,
and other registered investment management companies managed by the
Manager, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was
serving at the request of Registrant as a trustee, director, officer,
employee or agent of another trust or corporation, against any liability
asserted against him and incurred by him or arising out of his position.
However, in no event will Registrant maintain insurance to indemnify any
such person for any act for which Registrant itself is not permitted to
indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
The TCW Funds Management, Inc. (the "Adviser") is a 100% owned
subsidiary of The TCW Group, Inc., a Nevada corporation. The Adviser
presently serves as investment adviser to: (1) TCW Funds, Inc., a
diversified open-end management investment company, (2) TCW Convertible
Securities Fund, Inc., a diversified closed-end management investment
company; (3) TCW/DW Core Equity Trust, an open-end, non-diversified
management company, (4) TCW/DW North American Government Income Trust, an
open-end, non-diversified management company, (5) TCW/DW Income and
Growth Fund, an open-end, non-diversified management company, (6) TCW/DW
Latin American Growth Fund, an open-end non-diversified management
company, (7) TCW/DW Small Cap Growth Fund, an open-end non-diversified
management company, (8) TCW/DW Term Trust 2000, a closed-end, diversified
management company, (9) TCW/DW Term Trust 2002, a closed-end diversified
management company, (10) TCW/DW Term Trust 2003, a closed-end diversified
management company, (11) TCW/DW Balanced Fund, an open-end, diversified
management company, (12) TCW/DW Emerging Markets Opportunities Trust, a
closed-end, non-diversified management company, (13) TCW/DW Mid-Cap
Equity Trust, an open-end, diversified management company, (14) TCW/DW
Total Return Trust, an open-end non-diversified management investment
company, (15) TCW/DW Global Telecom Trust, an open-end diversified
management company and (16) TCW/DW Strategic Income Trust, an open-end
diversified management investment company. The Adviser also serves as
investment adviser or sub-adviser to other investment companies,
including foreign investment companies. The list required by this Item 28
of the officers and directors of the Adviser together with information as
to any other business, profession, vocation or employment of a
substantive nature engaged
3
<PAGE>
in by the Adviser and such officers and directors during the past two
years, is incorporated by reference to Form ADV (File No. 801- 29075)
filed by the Adviser pursuant to the Investment Advisers Act.
Item 29. Principal Underwriters.
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant. Distributors
is also the principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Premier Income Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Short-Term Bond Fund
(44) Dean Witter National Municipal Trust
(45) Dean Witter High Income Securities
4
<PAGE>
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced IncomeFund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Global Asset Allocation Fund
(52) Dean Witter Mid-Cap Growth Fund
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Hawaii Municipal Trust
(55) Dean Witter Intermediate Term U.S. Treasury Trust
(56) Dean Witter InformationFund
(57) Dean Witter Japan Fund
(58) Dean Witter Special Value Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Mid-Cap Equity Trust
(8) TCW/DW Total Return Trust
(9) TCW/DW Global Telecom Trust
(10) TCW/DW Strategic Income Trust
(b) The following information is given regarding directors and
officers of Dean Witter Distributors Inc. ("Distributors"). The principal
address of Distributors is Two World Trade Center, New York, New York
10048.
Positions and Office
with Distributors
Name and the Registrant
- ---- ------------------
Charles A. Fiumefreddo Chairman, Chief Executive
Officer and Director of
Distributors and Chairman,
Chief Executive Officer
and Trustee of the
Registrant.
Philip J. Purcell Director of Distributors.
Richard M. DeMartini Director of Distributors.
James F. Higgins Director of Distributors.
Thomas C. Schneider Executive Vice President, Chief
Financial Officer and Director
of Distributors.
Christine A. Edwards Executive Vice President,
Secretary, Chief Legal Officer
and Director of Distributors.
Robert M. Scanlan Executive Vice President of
Distributors and Vice President
of the Registrant.
5
<PAGE>
Positions and Office
with Distributors
Name and the Registrant
- ---- ------------------
Robert S. Giambrone Senior Vice President of
Distributors and Vice President
of the Registrant.
Sheldon Curtis Senior Vice President,
Assistant General Counsel and
Assistant Secretary of
Distributors and Vice President,
Secretary and General Counsel of
the Registrant.
Frederick K. Kubler Senior Vice President,
Assistant Secretary and Chief
Compliance Officer of
Distributors.
Michael T. Gregg Vice President and Assistant
Secretary of Distributors.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Thomas F. Caloia Assistant Treasurer of
Distributors and Treasurer of
the Registrant.
Michael Interrante Assistant Treasurer of
Distributors.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules
thereunder are maintained by the Manager at its offices, except records
relating to holders of shares issued by the Registrant, which are
maintained by the Registrant's Transfer Agent, at its place of business
as shown in the prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
6
<PAGE>
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual
report to shareholders, upon request and without charge.
7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 20th day of December, 1996.
TCW/DW GLOBAL TELECOM TRUST
By /s/ Sheldon Curtis
------------------
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 12/20/96
---------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/ Thomas F. Caloia 12/20/96
---------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Richard M. DeMartini
Thomas E. Larkin, Jr.
Marc I. Stern
By /s/ Sheldon Curtis 12/20/96
---------------------------
Sheldon Curtis
Attorney-in-Fact
John C. Argue Michael E. Nugent
Manuel H. Johnson John L. Schroeder
John R. Haire
By /s/ David M. Butowsky 12/20/96
---------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
TCW/DW GLOBAL TELECOM TRUST
EXHIBIT INDEX
2. -- Amended and Restated By-Laws of the Registrant
11. -- Consent of Independent Accountants
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
- ------------------
All other exhibits were previously filed and are hereby incorporated by
reference.
1
<PAGE>
BY-LAWS
OF
TCW/DW GLOBAL TELECOM TRUST
AMENDED AND RESTATED AS OF OCTOBER 25, 1996
ARTICLE I
DEFINITIONS
The terms "Commission", "Declaration", "Distributor", "Investment
Adviser", "Majority Shareholder Vote", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", and "Trustees" have the
respective meanings given them in the Declaration of Trust of TCW/DW Global
Telecom Trust dated March 28, 1996.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be
in the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or
the business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the
provisions of Section 16(a) of the 1940 Act, for that purpose. Meetings of
Shareholders shall also be called by the Secretary upon the written request
of the holders of Shares entitled to vote as otherwise required by Section
16(c) of the 1940 Act and to the extent required by the corporate or business
statute of any state in which the Shares of the Trust are sold, as made
applicable to the Trust by the provisions of Section 2.3 of the Declaration.
Such request shall state the purpose or purposes of such meeting and the
matters proposed to be acted on thereat. Except to the extent otherwise
required by Section 16(c) of the 1940 Act, as made applicable to the Trust by
the provisions of Section 2.3 of the Declaration, the Secretary shall inform
such Shareholders of the reasonable estimated cost of preparing and mailing
such notice of the meeting, and upon payment to the Trust of such costs, the
Secretary shall give notice stating the purpose or purposes of the meeting to
all entitled to vote at such meeting. No meeting need be called upon the
request of the holders of Shares entitled to cast less than a majority of all
votes entitled to be cast at such meeting, to consider any matter which is
substantially the same as a matter voted upon at any meeting of Shareholders
held during the preceding twelve months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes
thereof, shall be given by the Secretary not less than ten (10) nor more than
ninety (90) days before such meeting to each Shareholder entitled to vote at
such meeting. Such notice shall be deemed to be given when deposited in the
United States mail, postage prepaid, directed to the Shareholder at his
address as it appears on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders the holders of a majority of the Shares
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issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for
the transaction of business. In the absence of a quorum, the Shareholders
present or represented by proxy and entitled to vote thereat shall have power
to adjourn the meeting from time to time. Any adjourned meeting may be held
as adjourned without further notice. At any adjourned meeting at which a
quorum shall be present, any business may be transacted as if the meeting had
been held as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his
duly authorized attorney-in-fact, for each Share of beneficial interest of
the Trust and for the fractional portion of one vote for each fractional
Share entitled to vote so registered in his name on the records of the Trust
on the date fixed as the record date for the determination of Shareholders
entitled to vote at such meeting. No proxy shall be valid after eleven months
from its date, unless otherwise provided in the proxy. At all meetings of
Shareholders, unless the voting is conducted by inspectors, all questions
relating to the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. Pursuant to a resolution of a majority of the Trustees, proxies may
be solicited in the name of one or more Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority
Shareholder Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election
of the meeting. In case any person appointed as Inspector fails to appear or
fails or refuses to act, the vacancy may be filled by appointment made by the
Trustees in advance of the convening of the meeting or at the meeting by the
person acting as chairman. The Inspectors of Election shall determine the
number of Shares outstanding, the Shares represented at the meeting, the
existence of a quorum, the authenticity, validity and effect of proxies,
shall receive votes, ballots or consents, shall hear and determine all
challenges and questions in any way arising in connection with the right to
vote, shall count and tabulate all votes or consents, determine the results,
and do such other acts as may be proper to conduct the election or vote with
fairness to all Shareholders. On request of the chairman of the meeting, or
of any Shareholder or his proxy, the Inspectors of Election shall make a
report in writing of any challenge or question or matter determined by them
and shall execute a certificate of any facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting
of Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as
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shall be determined from time to time by the Trustees without further notice.
Special meetings of the Trustees may be called at any time by the Chairman
and shall be called by the Chairman or the Secretary upon the written request
of any two (2) Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, postage prepaid,
directed to the Trustee at his address as it appears on the records of the
Trust. Subject to the provisions of the 1940 Act, notice or waiver of notice
need not specify the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such
committee, as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act
of the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall have been
obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of the Trustees may be taken without a meeting if a consent in
writing setting forth the action shall be signed by all of the Trustees
entitled to vote upon the action and such written consent is filed with the
minutes of proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of
said persons shall receive for services rendered as a Trustee of the Trust
such compensation as may be fixed by the Trustees. Nothing herein contained
shall be construed to preclude any Trustee from serving the Trust in any
other capacity and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all
checks, notes, drafts and other obligations for the payment of money by the
Trust shall be signed, and all transfer of securities standing in the name of
the Trust shall be executed, by the Chairman, the President, any Vice
President or the Treasurer or by any one or more officers or agents of the
Trust as shall be designated for that purpose by vote of the Trustees;
notwithstanding the above, nothing in this Section 4.7 shall be deemed to
preclude the electronic authorization, by designated persons, of the Trust's
Custodian (as described herein in Section 9.1) to transfer assets of the
Trust, as provided for herein in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Trust) by
reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees, judgments, fines, and amounts paid in settlement, actually
and reasonably incurred by him in connection with the action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust, and, with respect
to any criminal action
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or proceeding, had no reasonable cause to believe his conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in
good faith and in a manner which he reasonably believed to be in or not
opposed to the best interests of the Trust, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his conduct was
unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or suit by or on behalf of the Trust to obtain a judgment or decree in its
favor by reason of the fact that he is or was a Trustee, officer, employee,
or agent of the Trust. The indemnification shall be against expenses,
including attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the Trust; except that no indemnification shall be
made in respect of any claim, issue, or matter as to which the person has
been adjudged to be liable for negligence or misconduct in the performance of
his duty to the Trust, except to the extent that the court in which the
action or suit was brought, or a court of equity in the county in which the
Trust has its principal office, determines upon application that, despite the
adjudication of liability but in view of all circumstances of the case, the
person is fairly and reasonably entitled to indemnity for those expenses
which the court shall deem proper, provided such Trustee, officer, employee
or agent is not adjudged to be liable by reason of his willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in
the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in
connection therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) or (b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists of
Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall be
entitled to indemnification for any liability, whether or not there is an
adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the
Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
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(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit
or proceeding may be paid by the Trust in advance of the final disposition
thereof if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by
the Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available facts,
that there is reason to believe that such person ultimately will be found
entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the 1940 Act, nor parties to the action, suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding the office, and shall continue as to a person
who has ceased to be a Trustee, officer, employee, or agent and inure to the
benefit of the heirs, executors and administrators of such person; provided
that no person may satisfy any right of indemnity or reimbursement granted
herein or to which he may be otherwise entitled except out of the property of
the Trust, and no Shareholder shall be personally liable with respect to any
claim for indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against
any liability asserted against him and incurred by him in any such capacity,
or arising out of his status as such. However, in no event will the Trust
purchase insurance to indemnify any officer or Trustee against liability for
any act for which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the
Trustees of the Trust and may delegate to such committees, in the intervals
between meetings of the Trustees, any or all of the powers of the Trustees in
the management of the business and affairs of the Trust. In the absence of
any member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in
place of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
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All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in
any other capacity and which shall have advisory functions with respect to
the investments of the Trust but which shall have no power to determine that
any security or other investment shall be purchased, sold or otherwise
disposed of by the Trust. The number of persons constituting any such
advisory committee shall be determined from time to time by the Trustees. The
members of any such advisory committee may receive compensation for their
services and may be allowed such fees and expenses for the attendance at
meetings as the Trustees may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at
any meeting of any Committee of the Trustees appointed pursuant to Section
5.1 of these By-Laws may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all members of the Committee
entitled to vote upon the action and such written consent is filed with the
records of the proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person,
but no officer shall execute, acknowledge or verify any instrument in more
than one capacity. The executive officers of the Trust shall be elected
annually by the Trustees and each executive officer so elected shall hold
office until his successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers and may elect, or may delegate to the Chairman the power to
appoint, such other officers and agents as the Trustees shall at any time or
from time to time deem advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any
officer or agent of the Trust may be removed by the Trustees whenever, in
their judgment, the best interests of the Trust will be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders
and of the Trustees; he shall have general and active management of the
business of the Trust, shall see that all orders and resolutions of the
Trustees are carried into effect, and, in connection therewith, shall be
authorized to delegate to the President or to one or more Vice Presidents
such of his powers and duties at such times and in such manner as he may deem
advisable; he shall be a signatory on all Annual and Semi-Annual Reports as
may be sent to shareholders, and he shall perform such other duties as the
Trustees may from time to time prescribe.
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(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by
the Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the Chairman, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President,
and he or they shall perform such other duties as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
Chairman, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or
by the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the Chairman, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and
he shall render to the Trustees and the Chairman, whenever any of them
require it, an account of his transactions as Treasurer and of the financial
condition of the Trust; and he shall perform such other duties as the
Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order
determined by the Trustees or the Chairman, shall, in the absence or
disability of the Treasurer, perform the duties and exercise the powers of
the Treasurer and shall perform such other duties and have such other powers
as the Trustees, or the Chairman, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in
Shares, from any sources permitted by law, all as the Trustees shall from
time to time determine.
Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary
from the computation thereof on the records of the Trust, the Trustees shall
have power, in their discretion, to distribute as income dividends and as
capital gain distributions, respectively, amounts sufficient to enable the
Trust to avoid or reduce liability for federal income taxes.
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ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the Chairman, the President, or a Vice President, and countersigned
by the Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option,
determine not to issue a certificate or certificates to evidence Shares owned
of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates
shall have been delivered by the Trust, such certificate or certificates
shall, nevertheless, be adopted by the Trust and be issued and delivered as
though the person or persons who signed such certificate or certificates or
whose facsimile signature or signatures shall appear therein had not ceased
to be such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Trust alleged to
have been lost, stolen or destroyed, upon satisfactory proof of such loss,
theft, or destruction; and the Trustees may, in their discretion, require the
owner of the lost, stolen or destroyed certificate, or his legal
representative, to give to the Trust and to such Registrar, Transfer Agent
and/or Transfer Clerk as may be authorized or required to countersign such
new certificate or certificates, a bond in such sum and of such type as they
may direct, and with such surety or sureties, as they may direct, as
indemnity against any claim that may be against them or any of them on
account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at
least five million dollars ($5,000,000) as custodian with authority as its
agent, but subject to such restrictions, limitations and other requirements,
if any, as may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver the
same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the
Trustees and the custodian. If so directed by a Majority Shareholder Vote,
the custodian shall deliver and pay over all property of the Trust held by it
as specified in such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon
between the custodian and such sub-custodian and approved by the Trustees.
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SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct
the custodian to deposit all or any part of the securities owned by the Trust
in a system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or
series of any issuer deposited within the system are treated as fungible and
may be transferred or pledged by bookkeeping entry without physical delivery
of such securities, provided that all such deposits shall be subject to
withdrawal only upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons
entitled to such notice and filed with the records of the meeting, whether
before or after the holding thereof, or actual attendance at the meeting of
shareholders, Trustees or committee, as the case may be, in person, shall be
deemed equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining Shareholders entitled to notice
of, or to vote at, any meeting of Shareholders, or Shareholders entitled to
receive payment of any dividend or the allotment of any rights, or in order
to make a determination of Shareholders for any other proper purpose. Such
date, in any case, shall be not more than ninety (90) days, and in case of a
meeting of Shareholders not less than ten (10) days, prior to the date on
which particular action requiring such determination of Shareholders is to be
taken. In lieu of fixing a record date the Trustees may provide that the
transfer books shall be closed for a stated period but not to exceed, in any
case, twenty (20) days. If the transfer books are closed for the purpose of
determining Shareholders entitled to notice of a vote at a meeting of
Shareholders, such books shall be closed for at least ten (10) days
immediately preceding such meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from
time to time provide. The seal of the Trust may be affixed to any document,
and the seal and its attestation may be lithographed, engraved or otherwise
printed on any document with the same force and effect as if it had been
imprinted and attested manually in the same manner and with the same effect
as if done by a Massachusetts business corporation under Massachusetts law.
SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement
between the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
9
<PAGE>
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to law, the
Declaration, or these By-Laws, a vote of the Shareholders. The Trustees shall
in no event adopt By-Laws which are in conflict with the Declaration, and any
apparent inconsistency shall be construed in favor of the related provisions
in the Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing TCW/DW Global Telecom Trust, dated
March 28, 1996, a copy of which is on file in the office of the Secretary of
the Commonwealth of Massachusetts, provides that the name TCW/DW Global
Telecom Trust refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, Shareholder,
officer, employee or agent of TCW/DW Global Telecom Trust shall be held to
any personal liability, nor shall resort be had to their private property for
the satisfaction of any obligation or claim or otherwise, in connection with
the affairs of said TCW/DW Global Telecom Trust, but the Trust Estate only
shall be liable.
10
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
June 20, 1996, relating to the statement of assets and liabilities of TCW/DW
Global Telecom Trust, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the references to us under the headings "Independent Accountants"
and "Experts" in such Statement of Additional Information.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 20, 1996
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW GLOBAL TELECOM TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 30-Nov-96 YEARS - n COMPOUND RETURN-T TOTAL RETURN
- ------------ --------- --------- ----------------- ------------
28-Aug-96 $1,020.00 0.26 N/A 2.00%
(B) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(B) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 30-Nov-96 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ ----------- ----------- --------- -------------------
28-Aug-96 $1,070.00 7.00% 0.26 N/A
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ------------ ----------- -------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
28-Aug-96 7.00 $10,700 $53,500 $107,000
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 91,206,669
<INVESTMENTS-AT-VALUE> 97,726,236
<RECEIVABLES> 1,992,378
<ASSETS-OTHER> 5,049,986
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 104,768,600
<PAYABLE-FOR-SECURITIES> 549,333
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 388,998
<TOTAL-LIABILITIES> 938,331
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,619,568
<SHARES-COMMON-STOCK> 9,700,081
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> (285,674)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (23,069)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,519,444
<NET-ASSETS> 103,830,269
<DIVIDEND-INCOME> 81,897
<INTEREST-INCOME> 185,227
<OTHER-INCOME> 0
<EXPENSES-NET> 552,798
<NET-INVESTMENT-INCOME> (285,674)
<REALIZED-GAINS-CURRENT> (23,069)
<APPREC-INCREASE-CURRENT> 6,519,444
<NET-CHANGE-FROM-OPS> 6,210,701
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9,823,222
<NUMBER-OF-SHARES-REDEEMED> 133,141
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 103,730,269
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 233,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 552,798
<AVERAGE-NET-ASSETS> 89,548,427
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.03)
<PER-SHARE-GAIN-APPREC> 0.73
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> 2.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>