<PAGE>
Filed Pursuant to Rule 497(e)
Registration File No.: 333-02419
TCW/DW GLOBAL TELECOM TRUST
PROSPECTUS
JULY 31, 1998
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."
The Fund offers four classes of shares (each, a "Class"), each with a different
combination of sales charges, ongoing fees and other features. The different
distribution arrangements permit an investor to choose the method of purchasing
shares that the investor believes is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares and other
relevant circumstances. See "Purchase of Fund Shares--Alternative Purchase
Arrangements."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated July 31, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary 2
Summary of Fund Expenses 4
Financial Highlights 5
The Fund and its Management 8
Investment Objective and Policies 8
Risk Considerations and Investment Practices 10
Investment Restrictions 15
Purchase of Fund Shares 15
Shareholder Services 23
Repurchases and Redemptions 25
Dividends, Distributions and Taxes 26
Performance Information 26
Additional Information 27
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.
TCW/DW GLOBAL TELECOM TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Morgan Stanley Dean Witter Distributors Inc.
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE>
PROSPECTUS SUMMARY
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
THE The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
FUND 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 27). The Fund offers four Classes of
OFFERED shares, each with a different combination of sales charges, ongoing fees and other features (see
pages 15-21).
- ------------------------------------------------------------------------------------------------------------------------
MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
PURCHASE EasyInvestSM). Class D shares are only available to persons investing $5 million ($25 million for
certain qualified plans) or more and to certain other limited categories of investors. For the purpose
of meeting the minimum $5 million (or $25 million) investment for Class D shares, and subject to
the $1,000 minimum initial investment for each Class of the Fund, an investor's existing holdings
of Class A shares and concurrent investments in Class D shares of the Fund and other multiple class
funds for which Morgan Stanley Dean Witter Services Company Inc. serves as manager and TCW
Funds Management, Inc. serves as investment adviser will be aggregated. The minimum subsequent
investment is $100 (see page 15).
- ------------------------------------------------------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is long-term capital appreciation.
OBJECTIVE
- ------------------------------------------------------------------------------------------------------------------------
MANAGER Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), a wholly-owned subsidiary
of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), is the Fund's manager. The
Manager also serves as manager to ten other investment companies advised by TCW Funds
Management, Inc. (the "TCW/DW Funds"). The Manager and MSDW Advisors serve in various
investment management, advisory, management and administrative capacities to a total of 103
investment companies and other portfolios with assets of approximately $115.2 billion at June 30,
1998 (see page 8).
- ------------------------------------------------------------------------------------------------------------------------
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 10 other TCW/DW Funds. As of June 30, 1998,
the Adviser and its affiliates had approximately $50 billion under management or committed to
management in various fiduciary or advisory capacities, primarily to institutional investors (see
page 8).
- ------------------------------------------------------------------------------------------------------------------------
MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.60% of daily net assets. The Adviser
AND ADVISORY receives a monthly fee at an annual rate of 0.40% of daily net assets (see page 8).
FEES
- ------------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR Morgan Stanley Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a
AND distribution plan pursuant to Rule 12b-1 under the Investment Company Act (the "12b-1 Plan")
DISTRIBUTION with respect to the distribution fees paid by the Class A, Class B and Class C shares of the Fund
FEE to the Distributor. The entire 12b-1 fee payable by Class A and a portion of the 12b-1 fee payable
by each of Class B and Class C equal to 0.25% of the average daily net assets of the Class are
currently each characterized as a service fee within the meaning of the National Association of
Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any, is characterized
as an asset-based sales charge (see pages 15 and 21).
- ------------------------------------------------------------------------------------------------------------------------
ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS o Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger
purchases. Investments of $1 million or more (and investments by certain other limited categories
of investors) are not subject to any sales charge at the time of purchase but a contingent deferred
sales charge ("CDSC") of 1.0% may be imposed on redemptions within one year of purchase. The
Fund is authorized to reimburse the Distributor for specific expenses incurred in promoting the
distribution of the Fund's Class A shares and servicing shareholder accounts pursuant to the Fund's
12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments at an annual rate
of 0.25% of average daily net assets of the Class (see pages 15, 18 and 21).
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------
o Class B shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC
will be imposed on any redemption of shares if after such redemption the aggregate current value
of a Class B account with the Fund falls below the aggregate amount of the investor's purchase
payments made during the six years preceding the redemption. A different CDSC schedule applies
to investments by certain qualified plans. Class B shares are also subject to a 12b-1 fee assessed at
the annual rate of 1.0% of the lesser of: (a) the average daily net sales of the Fund's Class B shares
or (b) the average daily net assets of Class B. All shares of the Fund held prior to July 28, 1997 have
been designated Class B shares. Shares held before May 1, 1997 will convert to Class A shares in
May, 2007. In all other instances, Class B shares convert to Class A shares approximately ten years
after the date of the original purchase (see pages 15, 19 and 21).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject to
a CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse
the Distributor for specific expenses incurred in promoting the distribution of the Fund's Class C
shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may
in no event exceed an amount equal to payments at an annual rate of 1.0% of average daily net assets
of the Class (see pages 15 and 21).
o Class D shares are offered only to investors meeting an initial investment minimum of $5 million
and to certain other limited categories of investors. Class D shares are offered without a front-end
sales charge or CDSC and are not subject to any 12b-1 fee (see pages 15 and 21).
- ------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income and distributions from net capital gains, if any, are paid at
CAPITAL GAINS least once each year. The Fund may, however, determine to retain all or part of any net long-term
DISTRIBUTIONS capital gains in any year for reinvestment. Dividends and capital gains distributions paid on shares
of a Class are automatically reinvested in additional shares of the same Class at net asset value unless
the shareholder elects to receive cash. Shares acquired by dividend and distribution reinvestment
will not be subject to any sales charge or CDSC (see pages 23 and 26).
- ------------------------------------------------------------------------------------------------------------------------
REDEMPTION Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A,
Class B or Class C shares. An account may be involuntarily redeemed if the total value of the
account is less than $100 or, if the account was opened through EasyInvestSM, if after twelve months
the shareholder has invested less than $1,000 in the account (see page 25).
- ------------------------------------------------------------------------------------------------------------------------
RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the Fund's
CONSIDERATIONS 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. There are also certain risks associated with the Fund's investments in the
telecommunications and information industries. 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. 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" before making an
investment in the Fund (see pages 10-14).
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
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 annualized fees and expenses set forth in the table
are based on the expenses and fees for the fiscal year ended May 31, 1998.
<TABLE>
<CAPTION>
Class A Class B Class C Class D
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage
of offering price) ........................................ 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ............. None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds) ........... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees ............................................ None None None None
Exchange Fee ............................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Management and Advisory Fees (5) ........................... 1.00% 1.00% 1.00% 1.00%
12b-1 Fees (6) (7) ......................................... 0.24% 0.80% 1.00% None
Other Expenses (5) ......................................... 0.32% 0.32% 0.32% 0.32%
Total Fund Operating Expenses (8) .......................... 1.56% 2.12% 2.32% 1.32%
</TABLE>
- ---------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) Management fees and other expenses are based on the Fund's actual
aggregate expenses.
(6) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of
Class B and Class C equal to 0.25% of the average daily net assets of the
Class are currently each characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or maintenance
of shareholder accounts. The remainder of the 12b-1 fee, if any, is an
asset-based sales charge, and is a distribution fee paid to the
Distributor to compensate it for the services provided and the expenses
borne by the Distributor and others in the distribution of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(7) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales
charge is imposed at the time of conversion of Class B shares to Class A
shares. Class C shares do not have a conversion feature and, therefore,
are subject to an ongoing 1.00% distribution fee (see "Purchase of Fund
Shares--Alternative Purchase Arrangements").
(8) There were no outstanding shares of Class A, Class C or Class D prior to
July 28, 1997.
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
EXAMPLES -------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end
of each time period:
Class A ................................................... $68 $99 $133 $228
Class B ................................................... $72 $96 $134 $245
Class C ................................................... $34 $72 $124 $266
Class D ................................................... $13 $42 $ 72 $159
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A ................................................... $68 $99 $133 $228
Class B ................................................... $22 $66 $114 $245
Class C ................................................... $24 $72 $124 $266
Class D ................................................... $13 $42 $ 72 $159
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Repurchases and Redemptions".
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
4
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by PricewaterhouseCoopers
LLP, independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants, which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be obtained
without charge upon request to the Fund.
<TABLE>
<CAPTION>
For the Period
For the Year August 28, 1996*
Ended through
May 31, 1998**++ May 31, 1997
------------------ -----------------
<S> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $11.43 $10.00
--------- --------
Net investment loss ............................... (0.17) (0.09)
Net realized and unrealized gain .................. 3.20 1.52
--------- --------
Total from investment operations .................. 3.03 1.43
Less distributions from net realized gain ......... (0.49) --
--------- --------
Net asset value, end of period .................... $13.97 $11.43
========= ========
TOTAL INVESTMENT RETURN+ .......................... 27.30 % 14.30 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 2.12 % 2.38 %(2)
Net investment loss ............................... (1.30)% (1.27)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $165,284 $122,240
Portfolio turnover rate ........................... 116 % 80 %(1)
Average commission rate paid ...................... $0.0049 $0.0283
</TABLE>
- ---------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All
shares of the Fund held prior to that date have been designated Class B
shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
5
<PAGE>
FINANCIAL HIGHLIGHTS, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
July 28, 1997*
through
May 31, 1998++
----------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $12.99
-------
Net investment loss ............................... (0.09)
Net realized and unrealized gain .................. 1.63
-------
Total from investment operations .................. 1.54
Less distributions from net realized gain ......... (0.49)
-------
Net asset value, end of period .................... $14.04
=======
TOTAL INVESTMENT RETURN+ .......................... 12.64 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.52 %(2)
Net investment loss ............................... (0.76)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $966
Portfolio turnover rate ........................... 116 %
Average commission rate paid ...................... $0.0049
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $12.99
-------
Net investment loss ............................... (0.17)
Net realized and unrealized gain .................. 1.62
-------
Total from investment operations .................. 1.45
Less distributions from net realized gain ......... (0.49)
-------
Net asset value, end of period .................... $13.95
=======
TOTAL INVESTMENT RETURN+ .......................... 11.86 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 2.30 %(2)
Net investment loss ............................... (1.52)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $559
Portfolio turnover rate ........................... 116 %
Average commission rate paid ...................... $0.0049
</TABLE>
- ---------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
6
<PAGE>
FINANCIAL HIGHLIGHTS, Continued
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
July 28, 1997*
through
May 31, 1998++
------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $12.99
-------
Net investment loss ............................... (0.05)
Net realized and unrealized gain .................. 1.62
-------
Total from investment operations .................. 1.57
Less distributions from net realized gain ......... (0.49)
-------
Net asset value, end of period .................... $14.07
=======
TOTAL INVESTMENT RETURN+ .......................... 12.80 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.33 %(2)
Net investment loss ............................... (0.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $11
Portfolio turnover rate ........................... 116 %
Average commission rate paid ...................... $0.0049
</TABLE>
- ---------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
7
<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.
Morgan Stanley Dean Witter Services Company Inc. ("MSDW Services" or 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 Morgan
Stanley Dean Witter Advisors Inc. ("MSDW Advisors"). MSDW Advisors is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., a preeminent
global financial services firm that maintains leading market positions in each
of its three primary businesses--securities, asset management and credit
services.
The Manager acts as manager to ten other TCW/DW Funds. The Manager and
MSDW Advisors serve in various investment management, advisory, management and
administrative capacities to a total of 103 investment companies, 28 of which
are listed on the New York Stock Exchange, with combined assets of
approximately $110.8 billion as of June 30, 1998. MSDW Advisors also manages
and advises portfolios of pension plans, other institutions and individuals
which aggregated approximately $4.4 billion at such date.
The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of TCW. The Adviser
serves as investment adviser to ten other TCW/DW Funds in addition to the Fund.
As of June 30, 1998, the Adviser and its affiliated companies had approximately
$50 billion under management or committed to management, primarily from
institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager
and the Adviser to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.60% to the Fund's net assets. As compensation for its investment advisory
services, the Fund pays the Adviser monthly compensation calculated daily by
applying an annual rate of 0.40% to the Fund's net assets. The total fees paid
by the Fund to the Manager and the Adviser are higher than the fees paid by
most other investment companies for similar services.
For the fiscal year ended May 31, 1998, the Fund accrued total
compensation to the Manager and the Adviser amounting to 0.60% and 0.40%,
respectively, of the Fund's average daily net assets. During that period, the
total expenses of Class B amounted to 2.12% of the Fund's average daily net
assets. Shares of Class A, Class C and Class D were first issued on July 28,
1997. The expenses of the Fund include: the fee of the Manager and the Adviser,
the fee pursuant to the Plan of Distribution (see "Purchase of Fund Shares");
taxes; transfer agent, custodian and auditing fees; certain legal fees; and
printing and other expenses relating to the Fund's operations which are not
expressly assumed by the Manager and the Adviser, under their respective
Agreements with the Fund.
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 provid-
8
<PAGE>
ers 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.
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. When
purchasing foreign securities, the Fund will generally enter into foreign
currency exchange transactions or forward foreign exchange contracts to
facilitate settlement. The Fund will utilize forward foreign exchange contracts
in these instances as an attempt to limit the effect of changes in the
relationship between the U.S. dollar and the foreign currency during the period
between the trade date and settlement date for the transaction. 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
9
<PAGE>
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 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 only invest in convertible and other fixed-income
securities that are rated at least B by either 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 investing 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.
10
<PAGE>
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 certificates of deposit issued by foreign branches of
domestic United States banks, consideration will be given to their domestic
marketability, the lower reserve requirements normally mandated for overseas
banking operations, the possible impact of interruptions in the flow of
international currency transactions and future international political and
economic developments which might adversely affect the payment of principal or
interest.
Many European countries are about to adopt a single European currency,
the euro (the "Euro Conversion"). The consequences of the Euro Conversion for
foreign exchange rates, interest rates and the value of European securities
eligible for purchase by the Fund are presently unclear. Such consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.
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.
11
<PAGE>
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 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
12
<PAGE>
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 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.
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
13
<PAGE>
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").
Year 2000. The management services provided to the Fund by the Manager,
the investment advisory services provided to the Fund by the Adviser and the
services provided to shareholders by the Distributor and the Transfer Agent
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. The Manager, the Adviser, the
Distributor and the Transfer Agent have been actively working on necessary
changes to their own computer systems to prepare for the year 2000 and expect
that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.
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, each a Managing Director of the Adviser, are the primary portfolio
managers of the Fund. Messrs. Hanisee and Healey have been primary 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., Morgan Stanley & Co. Incorporated and other brokers
and dealers that are affiliates 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 Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other brokers
14
<PAGE>
and dealers that are affiliates of the Manager. The Fund may incur brokerage
commissions on transactions conducted through Dean Witter Reynolds Inc., Morgan
Stanley & Co. Incorporated and other brokers and dealers that are affiliates of
the Manager. 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.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors" or the
"Distributor"), an affiliate of the Manager, shares of the Fund are distributed
by the Distributor and offered by Dean Witter Reynolds Inc. ("DWR"), a selected
dealer and subsidiary of Morgan Stanley Dean Witter & Co., 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"). It is anticipated that DWR will undergo a change
of corporate name which is expected to incorporate the brand name of "Morgan
Stanley Dean Witter," pending approval of various regulatory authorities. The
principal executive office of the Distributor is located at Two World Trade
Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales charge
are subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are
subject to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years
after purchase.) Class C shares are sold without an initial sales charge but
are subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
catego-
15
<PAGE>
ries of investors. At the discretion of the Board of Trustees of the Fund,
Class A shares may be sold to categories of investors in addition to those set
forth in this prospectus at net asset value without a front-end sales charge,
and Class D shares may be sold to certain other categories of investors, in
each case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements--Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Fund, an investor's existing holdings
of Class A shares and concurrent investments in Class D shares of the Fund and
other TCW/DW Funds which are multiple class funds ("TCW/DW Multi-Class Funds")
will be aggregated. Subsequent purchases of $100 or more may be made by sending
a check, payable to TCW/DW Global Telecom Trust, directly to Morgan Stanley
Dean Witter Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040,
Jersey City, NJ 07303 or by contacting a Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent will
not process the transaction until the proper Class is identified. The minimum
initial purchase in the case of investments through EasyInvestSM, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. The minimum initial investment in the case of
an "Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the MSDW
Advisors mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor has reason
to believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to
the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since DWR
and other Selected Broker-Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions. Sales personnel of a Selected Broker-Dealer are compensated for
selling shares of the Fund by the Distributor or any of its affiliates and/or
the Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to
provide them with the flexibility of selecting an investment best suited to
their needs. The general public is offered three Classes of shares: Class A
shares, Class B shares and Class C shares, which differ principally in terms of
sales charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors (see
"No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs
resulting from the CDSC applicable to shares of those Classes. The ongoing
distribution fees that are imposed on Class A, Class B and Class C shares will
be imposed directly against those Classes and not against all assets of the
Fund and, accordingly, such charges against one Class will not affect the net
asset value of any other Class or have any impact on investors choosing another
sales charge option. See "Plan of Distribution" and "Repurchases and
Redemptions."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
<PAGE>
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is reduced for
certain purchases. Investments of $1 million or more (and investments by
certain other limited categories of investors) are not subject to any sales
charges at the time of purchase but are subject to a CDSC of 1.0% on
redemptions made within one year after purchase, except for certain specific
circumstances. Class A
16
<PAGE>
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative--Class A Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's Class
B shares since the inception of the Fund (not including reinvestments of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Fund's inception
upon which a CDSC has been imposed or waived, or (b) the average daily net
assets of Class B. The Class B shares' distribution fee will cause that Class
to have higher expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase. This CDSC may be waived for certain
redemptions. They are subject to an annual 12b-1 fee of up to 1.0% of the
average daily net assets of the Class C shares. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares. See "Level Load Alternative--Class C
Shares."
Class D Shares. Class D shares are available only to limited categories
of investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an
investor depends on the amount and intended length of his or her investment.
Investors who prefer an initial sales charge alternative may elect to purchase
Class A shares. Investors qualifying for significantly reduced or, in the case
of purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to an
ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a front-end
sales charge and they are uncertain as to the length of time they intend to
hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all TCW/DW
Multi-Class Funds, and holdings of shares of "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") for which Class A shares have been exchanged,
will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
17
<PAGE>
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- ------- ------------------------ ----------- -------------------
<S> <C> <C> <C>
A Maximum 5.25% 0.25% No
- ------- ---- -------------------
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- ------- ------------------------ ---- ------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- ------- ------------------------ ---- ------------------
C 1.0% CDSC during 1.0% No
first year
- ------- ------------------------ ---- ------------------
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets
of the Class.
The offering price of Class A shares will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
Sales Charge
------------------------------------
Percentage of Approximate
Amount of Single Public Offering Percentage of
Transaction Price Amount Invested
- ----------------------------- ----------------- ----------------
<S> <C> <C>
Less than $25,000 ........... 5.25% 5.54%
$25,000 but less
than $50,000 ............. 4.75% 4.99%
$50,000 but less
than $100,000 ............ 4.00% 4.17%
$100,000 but less
than $250,000 ............ 3.00% 3.09%
$250,000 but less
than $1 million .......... 2.00% 2.04%
$1 million and over ......... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow
up to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (a) an individual; (b) an individual, his
or her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue Code
of a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Act; and for investments in
Individual Retirement Accounts of employees of a single employer through
Systematic Payroll Deduction plans; or (g) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other TCW/DW Multi-Class Funds. The sales charge payable on the
purchase of the Class A shares of the Fund and the Class A shares of the other
TCW/DW Multi-Class Funds will be at their respective rates applicable to the
total amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other
18
<PAGE>
TCW/DW Multi-Class Funds previously purchased at a price including a front-end
sales charge (including shares of the Fund, other TCW/DW Multi-Class Funds or
"Exchange Funds" (see "Shareholder Services--Exchange Privilege") acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions), which are held at the time of
such transaction, amounts to $25,000 or more. If such investor has a cumulative
net asset value of Class A and Class D shares that, together with the current
investment amount is equal to at least $5 million ($25 million for certain
qualified plans), such investor is eligible to purchase Class D shares subject
to the $1,000 minimum initial investment requirement of that Class of the Fund.
See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or
the shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such an
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to
confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or Class A shares of other TCW/DW Multi-Class Funds which
were previously purchased at a price including a front-end sales charge during
the 90-day period prior to the date of receipt by the Distributor of the Letter
of Intent, or of Class A shares of the Fund or other TCW/DW Multi-Class Funds
or shares of "Exchange Funds" (see "Shareholder Services--Exchange Privilege")
acquired in exchange for Class A shares of such funds purchased during such
period at a price including a front-end sales charge, which are still owned by
the shareholder, may also be included in determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments
of $1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which MSDW Trust (which is an affiliate of the Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory, administrative and/or brokerage services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs'
agreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;
(5) investors who are clients of a Morgan Stanley Dean Witter Financial
Advisor who joined Morgan Stanley Dean Witter from another investment firm
within six months prior to the date of purchase of Fund shares by such
investors, if the shares are being purchased with the proceeds from a
redemption of shares of an open-end proprietary mutual fund of the Financial
Advisor's previous firm which imposed either a front-end or deferred sales
charge, provided such purchase was made within sixty days after the redemption
and the proceeds of the redemption had been maintained in the interim in cash
or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares,
contact DWR or another Selected Broker-Dealer or consult the Statement of
Additional Information.
CONTINGENT DEFERRED SALES CHARGE
ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B shares since the inception of the
Fund (not including reinvestments of dividends or capital gains distributions),
less the average daily aggregate net asset value of the Fund's Class B shares
redeemed since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
19
<PAGE>
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may, however,
be subject to a CDSC which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the following table:
<TABLE>
<CAPTION>
Year Since
Purchase CDSC as a Percentage
Payment Made of Amount Redeemed
- -------------------------------- ---------------------
<S> <C>
First .......................... 5.0%
Second ......................... 4.0%
Third .......................... 3.0%
Fourth ......................... 2.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Seventh and thereafter ......... None
</TABLE>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject
to any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
Year Since
Purchase CDSC as a Percentage
Payment Made of Amount Redeemed
- ------------------------------- ---------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in a
qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a
"key employee" of a "top heavy" plan, following attainment of age 59 1/2); (B)
distributions from an IRA or 403(b) Custodial Account following attainment of
age 59 1/2; or (C) a tax-free return of an excess contribution to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Manager or its parent, Morgan Stanley Dean Witter Advisors Inc., as
self-directed investment alternatives and for which MSDW Trust serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to a
written Recordkeeping Services Agreement ("Eligible Plan"), provided that
either: (A) the plan continues to be an Eligible Plan after the redemption;
or (B) the redemption is in connection with the complete termination of the
plan involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to engage
in gainful employment. With reference to (2) above, the term "distribution"
does not encompass a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee. All waivers will be
granted only following receipt by the Distributor of confirmation of the
shareholder's entitlement.
Conversion to Class A Shares. All shares of the Fund held prior to July
28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances Class B
shares will convert automatically to Class A shares, based on the relative net
asset values of the shares of the two Classes on the conversion date, which
will be approximately ten (10) years after the date of the original purchase.
The ten year period is calculated from the last day of the month in which the
shares were purchased or, in the case of Class B shares acquired through an
exchange or a series of exchanges, from the last day of the month in which the
original Class B shares were purchased, provided that shares originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. The
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends and distributions owned by the shareholder
as
20
<PAGE>
the total number of his or her Class B shares converting at the time bears to
the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a Qualified Retirement Plan
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, the
plan is treated as a single investor and all Class B shares will convert to
Class A shares on the conversion date of the first shares of a TCW/DW
Multi-Class Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a TCW/DW
Multi-Class Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that
are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of
that section shall mean one year in the case of Class C shares. Class C shares
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class. Unlike Class B shares, Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will be
subject to 12b-1 fees applicable to Class C shares for an indefinite period
subject to annual approval by the Fund's Board of Trustees and regulatory
limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the MSDW Advisors mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services (subject to all
of the terms and conditions of such programs referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) certain Unit Investment
Trusts sponsored by DWR; (iv) certain other open-end investment companies whose
shares are distributed by the Distributor; and (v) other categories of
investors, at the discretion of the Board, as disclosed in the then current
prospectus of the Fund. Investors who require a $5 million (or $25 million)
minimum initial investment to qualify to purchase Class D shares may satisfy
that requirement by investing that amount in a single transaction in Class D
shares of the Fund and other TCW/DW Multi-Class Funds, subject to the $1,000
minimum initial investment required for that Class of the Fund. In addition,
for the purpose of meeting the $5 million (or $25 million) minimum investment
amount, holdings of Class A shares in all TCW/DW Multi-Class Funds, and
holdings of shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") for which Class A shares have been exchanged, will be included
together with the current investment amount. If a shareholder redeems Class A
shares and purchases Class D shares, such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C shares
of the Fund. In the case of Class A and Class C shares, the Plan provides that
the Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those
shares. Reimbursements for these expenses will be made in monthly payments by
the Fund to the Distributor, which
21
<PAGE>
will in no event exceed amounts equal to payments at the annual rates of 0.25%
and 1.0% of the average daily net assets of Class A and Class C, respectively.
In the case of Class B shares, the Plan provides that the Fund will pay the
Distributor a fee, which is accrued daily and paid monthly, at the annual rate
of 1.0% of the lesser of: (a) the average daily aggregate gross sales of the
Fund's Class B shares since the inception of the Fund (not including
reinvestments of dividends or capital gains distributions), less the average
daily aggregate net asset value of the Fund's Class B shares redeemed since the
Fund's inception upon which a CDSC has been imposed or waived, or (b) the
average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of the
NASD guidelines. In the case of Class B and Class C shares, a portion of the
fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently characterized as a service fee. A
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan in the case of Class B shares to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
For the fiscal year ended May 31, 1998, Class B shares of the Fund
accrued payments under the Plan amounting to $1,206,683, which amount is equal
to 0.80% of the average daily net assets of Class B for the fiscal year. The
payments accrued under the Plan were calculated pursuant to clause (a) of the
compensation formula under the Plan. All shares held prior to July 28, 1997
have been designated Class B shares. For the fiscal period July 28, 1997
through May 31, 1998, Class A and Class C shares of the Fund accrued payments
under the Plan amounting to $736 and $2,932, respectively, which amounts on an
annualized basis are equal to 0.24% and 1.00% of the average daily net assets
of Class A and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B shares. For example, if
$1 million in expenses in distributing Class B shares of the Fund had been
incurred and $750,000 had been received as described in (i) and (ii) above, the
excess expense would amount to $250,000. The Distributor has advised the Fund
that such excess amounts, including the carrying charge described above,
totalled $7,673,197 at May 31, 1998, which was equal to 4.64% of the net assets
of Class B on such date. Because there is no requirement under the Plan that
the Distributor be reimbursed for all distribution expenses or any requirement
that the Plan be continued from year to year, such excess amount does not
constitute a liability of the Fund. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan, and the proceeds of CDSCs paid by investors upon redemption of
shares, if for any reason the Plan is terminated the Trustees will consider at
that time the manner in which to treat such expenses. Any cumulative expenses
incurred, but not yet recovered through distribution fees or CDSCs, may or may
not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other Selected Broker-Dealer representatives at the time of sale
may be reimbursed in the subsequent calendar year. The Distributor has advised
the Fund that unreimbursed expenses representing a gross sales commission
credited to Morgan Stanley Dean Witter Financial Advisors and other Selected
Broker-Dealer representatives at the time of sale totalled $2,395 in the case
of Class C at December 31, 1997, which was equal to 0.71% of the net assets of
Class C on such date, and that there were no such expenses which may be
reimbursed in the subsequent year in the case of Class A on such date. No
interest or other financing charges will be incurred on any Class A or Class C
distribution expenses incurred by the Distributor under the Plan or on any
unreimbursed expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the
Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
22
<PAGE>
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange (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 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 applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end TCW/DW Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Repurchases and Redemptions").
Investment of Dividends or Distributions Received in Cash. Any
shareholder who receives a cash payment representing a dividend or capital
gains distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within 30 days after the payment date. Shares so acquired are acquired at
net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Repurchases and Redemptions").
EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Repurchases and Redemptions--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Any applicable CDSC
will be imposed on shares redeemed under the Withdrawal Plan (See "Purchase of
Fund Shares"). Therefore, any shareholder participating in the Withdrawal Plan
will have sufficient shares redeemed from his or her account so that the
proceeds (net of any applicable CDSC) to the shareholder will be the designated
monthly or quarterly amount. Withdrawal plan payments should not be considered
as dividends, yields or income. If periodic withdrawal plan payments
continuously exceed net investment income and net capital gains, the
shareholder's original investment will be correspondingly reduced and
ultimately exhausted. Each withdrawal constitutes a redemption of shares and
any gain or loss realized must be recognized for federal income tax purposes.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative 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
23
<PAGE>
Section 403(b)(7) of the Internal Revenue Code. Adoption of such plans should
be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other TCW/DW Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of TCW/DW North American Government
Income Trust and for shares of five money market funds for which MSDW Advisors
serves as investment manager: Morgan Stanley Dean Witter Liquid Asset Fund
Inc., Morgan Stanley Dean Witter U.S. Government Money Market Trust, Morgan
Stanley Dean Witter Tax-Free Daily Income Trust, Morgan Stanley Dean Witter
California Tax-Free Daily Income Trust and Morgan Stanley Dean Witter New York
Municipal Money Market Trust (the foregoing six funds are hereinafter
collectively referred to as "Exchange Funds"). Exchanges may be made after the
shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another TCW/DW Multi-Class Fund or any Exchange Fund that
is not a money market fund is on the basis of the next calculated net asset
value per share of each fund after the exchange order is received. When
exchanging into a money market fund from the Fund 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 of the
TCW/DW Multi-Class Funds or any Exchange Fund that is not a money market fund
can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If
those shares are subsequently re-exchanged for shares of a TCW/DW Multi-Class
Fund, the holding period previously frozen when the first exchange was made
resumes on the last day of the month in which shares of a TCW/DW Multi-Class
Fund are reacquired. Thus, the CDSC is based upon the time (calculated as
described above) the shareholder was invested in shares of a TCW/DW Multi-Class
Fund (see "Purchase of Fund Shares"). 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. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
Additional Information Regarding Exchanges. Purchases and exchanges
should be made for investment purposes only. A pattern of frequent exchanges
may be deemed by the Manager to be abusive and contrary to the best interests
of the Fund's other shareholders and, at the Manager's discretion, may be
limited by the Fund's refusal to accept additional purchases and/or 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 Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative regarding restrictions
on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of Shares and any other conditions imposed by each
fund. In the case of a shareholder holding a share certificate or certificates,
no exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege
by contacting their Morgan Stanley Dean Witter Financial Advisor or other
Selected
24
<PAGE>
Broker-Dealer representative (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 Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
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 Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent
for further information about the Exchange Privilege.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
Repurchases. DWR and other Selected Dealers are authorized to repurchase
shares represented by a share certificate which is delivered to any of their
offices. Shares held in a shareholder's account without a share certificate may
also be repurchased by DWR and other Selected Broker-Dealers upon the
telephonic or telegraphic request of the shareholder. The repurchase price is
the net asset value per share next computed (see "Purchase of Fund Shares")
after such repurchase order is received by DWR or other Selected Broker-Dealer,
reduced by any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offers by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth below under "Redemptions."
Redemptions. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along with
any additional information required by the Transfer Agent.
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum
time needed to verify that the check used for investment has been honored (not
more than fifteen days from the time of receipt of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative regarding restrictions
on redemption of shares of the Fund pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the repurchase or redemption,
reinstate any portion or all of the proceeds of such repurchase or redemption
in shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at net asset value next determined after a reinstatement request,
together with the proceeds, is received by the Transfer Agent and receive a pro
rata credit for any CDSC paid in connection with such repurchase or redemption.
Involuntary Redemption. The Fund reserves the right, on 60 days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvestSM, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before
25
<PAGE>
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 60 days to make an additional investment in an
amount which will increase the value of his or her account to at least the
applicable amount before the redemption is processed. No CDSC will be imposed
on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to pay dividends and to distribute
substantially all of 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 shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be paid
in cash. Shares acquired by dividend and distribution reinvestments will not be
subject to any front-end sales charge or CDSC. Class B shares acquired through
dividend and distribution reinvestments will become eligible for conversion to
Class A shares on a pro rata basis. Distributions paid on Class A and Class D
shares will be higher than for Class B and Class C shares because distribution
fees paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have
to pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions, to
the extent that they are derived from net investment income or net short-term
capital gains, are taxable to the shareholder as ordinary income regardless of
whether the shareholder receives such payments in additional shares or in cash.
Any dividends declared with a record date in the last quarter of any calendar
year which are paid in the following year prior to February 1 will be deemed,
for tax purposes, to have been received by the shareholder in the prior year.
Dividend payments will generally not be eligible for the federal dividends
reduced deduction.
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 would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. Shareholders will also be notified of their proportionate share of
long-term capital gains distributions that are eligible for a reduced rate of
tax under the Taxpayer Relief Act of 1997. 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 advisors to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The total return of the Fund is based on
historical earnings and is not intended to indicate future performance. The
"average annual total return" of the Fund refers to a figure reflecting the
average annualized percentage increase (or decrease) in the value of an initial
investment in a Class of the Fund of $1,000 over one, five and ten years or the
life of the Fund, if less than any of the foregoing. Average annual total
return reflects all income earned by the Fund, any appreciation or depreciation
of the Fund's assets, all expenses incurred by the applicable Class and all
sales charges which would be incurred by shareholders, for the period. It also
assumes reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical invest-
26
<PAGE>
ments of $10,000, $50,000 and $100,000 in each Class of shares of the Fund. The
Fund from time to time may also advertise its performance relative to certain
performance rankings and indexes compiled by independent organizations (such as
mutual fund performance rankings of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A 's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein, Class
A, Class B and Class C bear the expenses related to the distribution of their
respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and, in
ordinary circumstances, the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations of
the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitation on shareholder personal liability, and
the nature of the Fund's assets and operations, the possibility of the Fund
being unable to meet its obligations is remote and thus, in the opinion of
Massachusetts counsel to the Fund, the risk to Fund shareholders of personal
liability is remote.
Code of Ethics. The Adviser is subject to a Code of Ethics with respect
to investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position. The Code of Ethics, as
it pertains to the TCW/DW Funds, contains several restrictions and procedures
designed to eliminate conflicts of interest including: (a) pre-clearance of
personal investment transactions to ensure that personal transactions by
employees are not being conducted at the same time as the Adviser's clients;
(b) quarterly reporting of personal securities transactions; (c) a prohibition
against personally acquiring securities in an initial public offering, entering
into uncovered short sales and writing uncovered options; (d) a seven day
"blackout period" prior or subsequent to a TCW/DW Fund transaction during which
portfolio managers are prohibited from making certain transactions in
securities which 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.
27
<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
Barry Fink
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
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
