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Filed Pursuant to Rule 497(c)
Registration File No.: 33-48765
PROSPECTUS
APRIL 30, 1997
TCW/DW Small Cap Growth Fund (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is capital
appreciation. The Fund seeks to achieve its investment objective by investing
primarily in common stocks and other equity securities of lesser known,
smaller capitalization domestic and foreign companies. See "Investment
Objective and Policies."
Shares of the Fund are continuously offered at net asset value without the
imposition of a sales charge. However, repurchases and/or redemptions of
shares are subject in most cases to a contingent deferred sales charge,
scaled down from 5% to 1% of the amount redeemed, if made within six years of
purchase, which charge will be paid to the Fund's Distributor, Dean Witter
Distributors Inc. See "Repurchases and Redemptions--Contingent Deferred Sales
Charge." In addition, the Fund pays the Distributor a Rule 12b-1 distribution
fee pursuant to a Plan of Distribution at the annual rate of 1% of the lesser
of the (i) average daily aggregate net sales or (ii) average daily net assets
of the Fund. See "Purchase of Fund Shares--Plan of Distribution."
This Prospectus sets forth concisely the in-formation 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 Infor-
mation, dated April 30, 1997, 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 .............................................. 3
Financial Highlights .................................................. 4
Fund and its Management ............................................... 4
Investment Objective and Policies ..................................... 5
Risk Considerations and
Investment Practices ................................................ 6
Investment Restrictions ............................................... 11
Purchase of Fund Shares ............................................... 11
Shareholder Services .................................................. 14
Repurchases and Redemptions ........................................... 16
Dividends, Distributions and Taxes .................................... 18
Performance Information ............................................... 19
Additional Information ................................................ 19
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are
not federally insured by the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TCW/DW SMALL CAP GROWTH FUND
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Dean Witter Distributors Inc.
Distributor
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PROSPECTUS SUMMARY
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<TABLE>
<CAPTION>
<S> <C>
The The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an open-end,
Fund non-diversified management investment company investing primarily in common stocks and other equity securities
of lesser-known, smaller capitalization companies.
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Shares Shares of beneficial interest with $0.01 par value (see page 19).
Offered
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Offering At net asset value (see page 11). Shares redeemed within six years of purchase are subject to a contingent
Price deferred sales charge under most circumstances (see page 16).
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Minimum The minimum initial investment is $1,000 ($100 if the account is opened through EasyInvest (Service Mark) );
Purchase and the minimum subsequent investment is $100 (see page 11).
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Investment The investment objective of the Fund is capital appreciation.
Objective
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Manager Dean Witter Services Company Inc. (the "Manager"), a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"), is the Fund's manager. The Manager serves as Manager to thirteen other investment companies
which are advised by TCW Funds Management, Inc. (the "TCW/DW Funds"). The Manager and InterCapital serve in
various investment management, advisory, management and administrative capacities to a total of 102 investment
companies and other portfolios with assets of approximately $91.4 billion at March 31, 1997.
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Adviser TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser. In addition to the Fund, the
Adviser serves as investment adviser to thirteen other TCW/DW Funds. As of March 31, 1997, the Adviser and its
affiliates had over $50 billion under management or committed to management in various fiduciary or advisory
capacities, primarily from institutional investors.
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Management The Manager receives a monthly fee at the annual rate of 0.60% of daily net assets. The Adviser receives a
and Advisory monthly fee at an annual rate of 0.40% of daily net assets (see page 5).
Fees
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Dividends Income dividends and capital gains, if any, will be distributed no less than annually. Dividends and capital
gains distributions are automatically reinvested in additional shares at net asset value unless the shareholder
elects to receive cash (see page 18).
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Distributor Dean Witter Distributors Inc. (the "Distributor") is the distributor of the Fund's shares. The Distributor
receives from the Fund a distribution fee accrued daily and payable monthly at the rate of 1% per annum of the
lesser of (i) average daily aggregate net sales or (ii) average daily net assets of the Fund. This fee
compensates the Distributor for the services provided in distributing shares of the Fund and for sales-related
expenses. The Distributor also receives the proceeds of any contingent deferred sales charges. (see page 13).
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Redemption-- Shares are redeemable by the shareholder at net asset value; an account may be involuntarily redeemed if the
Contingent total value of the account is less than $100 or, if the account was opened through EasyInvest (Service Mark),
Deferred if after twelve months the shareholder has invested less than $1,000 in the account. Although no commission or
Sales sales load is imposed upon the purchase of shares, a contingent deferred sales charge (scaled down from 5% to
Charge 1%) is imposed on any redemption of shares if after such redemption the aggregate current value of an account
with the Fund falls below the aggregate amount of the investor's purchase payments made during the six years
preceding the redemption. However, there is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see page 16).
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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. Investing in lesser known, smaller capitalization companies may involve greater risk of
volatility in the Fund's net asset value than is customarily associated with larger, more established companies.
The Fund is a non-diversified investment company and, as such, is not subject to the diversification requirements
of the Investment Company Act of 1940, as amended. As a result, a relatively high percentage of the Fund's assets
may be invested in a limited number of issuers. However, the Fund intends to continue to qualify as a regulated
investment company under the federal income tax laws and, as such, is subject to the diversification
requirements of the Internal Revenue Code. The Fund may invest in lower rated or unrated convertible
securities, may invest in foreign securities, may engage in options and futures transactions, and may purchase
securities on a when-issued, delayed delivery or "when, as and if issued" basis, which may involve certain special
risks (see page 6). In addition, the Fund's portfolio turnover rate may exceed 100%, which may result in increased
brokerage expenses (see page 11).
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</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus
and in the Statement of Additional Information.
2
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended February 28, 1997.
Shareholder Transaction Expenses
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<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases............................................ None
Maximum Sales Charge Imposed on Reinvested Dividends................................. None
Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) .. 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining
rates:
<TABLE>
<CAPTION>
Year Since Purchase Payment Made Percentage
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<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>
<TABLE>
<CAPTION>
<S> <C>
Redemption Fees .......................................................... None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
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Management and Advisory Fees.............................................. 1.00%
12b-1 Fees* .............................................................. 0.88%
Other Expenses ........................................................... 0.27%
Total Fund Operating Expenses............................................. 2.15%
</TABLE>
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* A PORTION OF THE 12B-1 FEE EQUAL TO 0.25% OF THE FUND'S AVERAGE DAILY
NET ASSETS IS CHARACTERIZED AS A SERVICE FEE WITHIN THE MEANING OF THE
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. ("NASD") GUIDELINES
(SEE "PURCHASE OF FUND SHARES").
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 YEARS 10 YEARS
- -------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period: ................$72 $97 $135 $248
You would pay the following expenses on the same
investment, assuming no redemption: .......................$22 $67 $115 $248
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Repurchases and
Redemptions" in this Prospectus.
Long-term shareholders of the Fund may pay more in sales charges and
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto, and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.
<TABLE>
<CAPTION>
For the Year ended February 28, For the Period
August 2, 1993*
------------------------------- through
1997 1996** 1995 February 28, 1994
- --------------------------------------- ---------- ---------- --------- -----------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $16.24 $ 9.90 $10.30 $10.00
---------- ---------- --------- -----------------
Net investment loss..................... (0.26) (0.19) (0.18) (0.07)
Net realized and unrealized gain
(loss)................................. (0.25) 6.53 (0.22) 0.37
---------- ---------- --------- -----------------
Total from investment operations ....... (0.51) 6.34 (0.40) 0.30
---------- ---------- --------- -----------------
Net asset value, end of period.......... $15.73 $16.24 $ 9.90 $10.30
========== ========== ========= =================
TOTAL INVESTMENT RETURN+................ (3.14)% 64.04% (3.88)% 3.00%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.15% 2.32% 2.57% 2.18%(2)(3)
Net investment loss..................... (1.70)% (1.75)% (2.04)% (1.75)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $268,783 $153,366 $69,984 $68,209
Portfolio turnover rate................. 42% 52% 116% 69%(1)
Average commission rate paid............ $0.0580 -- -- --
</TABLE>
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* Commencement of operations.
** Year ended February 29.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all its expenses that were assumed or waived by
the Manager and Adviser, the annualized expense and net investment loss
ratios would have been 2.78% and (2.35)%, respectively.
THE FUND AND ITS MANAGEMENT
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TCW/DW Small Cap Growth Fund (the "Fund") is an open-end, non-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 11, 1992.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The
Manager is a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"). InterCapital is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
On February 5, 1997, DWDC and Morgan Stanley Group Inc. announced that
they had entered into an Agreement and Plan of Merger, with the combined
company to be named Morgan Stanley, Dean Witter, Discover & Co. The business
of Morgan Stanley Group Inc. and its affiliated companies is providing a wide
range of financial services for sovereign governments, corporations,
institutions and individuals throughout the world. DWDC is the direct parent
of InterCapital and Dean Witter Distributors Inc., the Fund's distributor. It
is currently anticipated
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that the transaction will close in mid-1997. Thereafter, InterCapital and
Dean Witter Distributors Inc. will be direct subsidiaries of Morgan Stanley,
Dean Witter, Discover & Co.
The Manager acts as manager to thirteen other TCW/DW Funds. The Manager
and InterCapital act in various investment management, advisory, management
and administrative capacities to a total of 102 investment companies, thirty
of which are listed on the New York Stock Exchange, with combined assets of
approximately $88.3 billion as of March 31, 1997. InterCapital also manages
and advises portfolios of pension plans, other institutions and individuals
which aggregated approximately $3.1 billion at such date.
The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety
of trust, investment management and investment advisory services. Robert A.
Day, who is Chairman of the Board of Directors of TCW, may be deemed to be a
control person of the Adviser by virtue of the aggregate ownership by Mr. Day
and his family of more than 25% of the outstanding voting stock of The TCW
Group, Inc. The Adviser serves as investment adviser to eleven other TCW/DW
Funds in addition to the Fund. As of March 31, 1997, the Adviser and its
affiliated companies had over $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 February 28, 1997, 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 Fund's total expenses
amounted to 2.15% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is 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 invests primarily in common stocks and other equity securities of
lesser known, smaller capitalization companies. 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
stock of companies with market capitalizations at the time of purchase
(calculated by multiplying the number of outstanding shares of a company by
the current market price) of less than $1 billion. Generally, no more than
25% of the Fund's total assets will be invested in securities of companies
with market capitalizations of less than $100 million, at the time of
purchase. Investing in lesser-known, smaller capitalization companies may
involve greater risk of volatility of the Fund's net asset value than is
customarily
5
<PAGE>
associated with larger, more established companies. The Fund may invest up to
35% of its net assets in convertible securities. There are no minimum rating
or quality requirements with respect to convertible securities in which the
Fund may invest. See the Appendix to the Statement of Additional Information
for a discussion of ratings of fixed-income securities.
The Adviser invests the Fund's assets by pursuing its small cap growth
investment philosophy. That philosophy consists of fundamental
company-by-company financial analysis used in conjunction with technical and
quantitative market analysis to screen potential investments and to
continuously monitor securities in the Fund's portfolio. Under normal
circumstances it is expected that the Fund's portfolio will generally contain
securities of more than 100 separate issuers. Dividend income is not a
consideration in the selection of stocks for purchase by the Fund.
While the Fund invests primarily in common stocks and securities
convertible into common stock of small capitalization companies, under
ordinary cir cumstances it may invest up to 35% of its total assets in (i)
equity securities of companies with a market capitalization of more than $1
billion at the time of purchase as long as such investments are consistent
with the Fund's objective of capital appreciation and (ii) money market
instruments, which are short-term (maturities of up to thirteen months)
fixed-income securities issued by private and governmental institutions.
Money market instruments in which the Fund may invest are securities issued
or guaranteed by the U.S. Government or its agencies (Treasury bills, notes
and bonds); obligations of banks subject to regulation by the U.S. Government
and having total assets of $1 billion or more; Eurodollar certificates of
deposit; obligations of savings banks and savings and loan associations
having total assets of $1 billion or more; fully insured certificates of
deposit; and commercial paper rated within the two highest grades by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P")
or, if not rated, issued by a company having an outstanding debt issue rated
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 greater than 35% of its total assets is invested in money
market instruments or cash.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "Act"), and as such is not
limited by the Act in the proportion of its assets that it may invest in the
obligations of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. See "Dividends, Distributions and
Taxes." In order to qualify, among other requirements, the Fund will limit
its investments so that at the close of each quarter of the taxable year: (i)
not more than 25% of the market value of the Fund's total assets will be
invested in the securities of a single issuer, and (ii) with respect to 50%
of the market value of its total assets not more than 5% will be invested in
the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. To the extent that a
relatively high percentage of the Fund's assets may be invested in the
obligations of a limited number of issuers, the Fund's portfolio securities
may be more susceptible to any single economic, political or regulatory
occurrence than the portfolio securities of a diversified investment company.
The limitations described in this paragraph are not fundamental policies and
may be revised to the extent applicable Federal income tax requirements are
revised.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
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.
Small Cap Stocks. As stated above, investing in lesser-known, smaller
capitalization companies may involve greater risk of volatility of the Fund's
net asset value than is customarily associated with larger, more
6
<PAGE>
established companies. Often small capitalization companies and the
industries in which they are focused are still evolving and while this may
offer better growth potential than larger, more established companies, it
also may make them more sensitive to changing market conditions.
Foreign securities. The Fund may invest up to 25% of the value of its
total assets in foreign securities (other than securities of Canadian issuers
registered under the Securities Exchange Act of 1934 or American Depository
Receipts, on which there is no such limit). The Fund's investment in unlisted
foreign securities is subject to the Fund's overall policy limiting its
investment in illiquid securities to 15% or less of its net assets.
Foreign securities investments may be affected by changes in currency
rates or exchange control regulations, changes in governmental administration
or economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates
of exchange between the currencies of different nations will affect the value
of the Fund's investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S.
dollar value of the Fund's assets denominated in that currency and thereby
impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly 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.
Convertible Securities. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for
a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. Convertible
securities rank senior to common stocks in a corporation's capital structure
and, therefore, entail less risk than the corporation's common stock. The
value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and
7
<PAGE>
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.
Because of the special nature of the Fund's permitted investments in lower
rated convertible securities, the Adviser must take account of certain
special considerations in assessing the risks associated with such
investments. (Lower rated convertible and fixed-income securities are
commonly known as "junk bonds.") The prices of lower rated 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 securities and a corresponding volatility in
the net asset value of a share of the Fund.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase. While repurchase agreements
involve certain risks not associated with direct investments in debt
securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures designed to minimize such
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
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.
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.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero
8
<PAGE>
coupon securities. Such securities are purchased at a discount from their
face amount, giving the purchaser the right to receive their full value at
maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at
a constant rate eliminates the risk of receiving lower yields upon
reinvestment of interest if prevailing interest rates decline, the owner of a
zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including its advisory and administration fees. At the same time
the Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will
be absorbing duplicate levels of fees with respect to investments in real
estate investment trusts.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on
the resale of such securities may have an adverse effect on their
marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering such
securities for resale and the risk of substantial delays in effecting such
registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as
to the liquidity of each restricted security purchased by the Fund. If a
restricted 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 period of time, may be
unable to find qualified institutional buyers interested in purchasing such
securities.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities and on the U.S. dollar which are or may in the future be listed on
securities exchanges or are written in over-the-counter transactions ("OTC
options"). Listed options are issued or guaranteed by the exchange on which
they trade or by a clearing corporation such as the Options Clearing
Corporation. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the
Fund.
9
<PAGE>
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its net assets. The Fund may purchase put options on
securities which it holds in its portfolio only to protect itself against a
decline in the value of the security. The Fund may also purchase put options
to close out written put positions. The aggregate value of the obligations
underlying the puts determined as of the date the options are sold will not
exceed 50% of the Fund's net assets. There are no other limits on the Fund's
ability to purchase call and put options. The Fund may write covered call and
put options on portfolio securities and on the U.S. dollar without limit. The
Fund may also purchase and write options on stock indexes. See "Risks of
Options on Indexes" in the Statement of Additional Information.
The Fund may purchase and sell futures contracts that are currently
traded, or may in the future be traded, on commodity exchanges on underlying
portfolio securities, on fixed-income securities ("interest rate" futures)
and on such indexes of equity or fixed-income securities as may exist or come
into being ("index" futures). The Fund will purchase or sell interest rate
futures contracts for the purpose of hedging some or all of the value of its
portfolio securities (or anticipated portfolio securities) against changes in
prevailing interest rates. The Fund will purchase or sell index futures
contracts for the purpose of hedging some or all of its portfolio (or
anticipated portfolio) securities against changes in their prices.
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.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the 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 dollar cash prices of the Fund's portfolio securities and their
denominated currencies.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Fund's investment objective. Charles Larsen and Douglas S.
Foreman, Managing Directors of the Adviser, are the primary portfolio
managers of the Fund since September, 1994. Mr. Larsen has been a portfolio
manager of affiliates of The TCW Group, Inc. since 1984. Mr. Foreman has been
a portfolio manager with affiliates of The TCW Group, Inc. since May, 1994,
prior to which he was a portfolio manager with Putnam Investments.
10
<PAGE>
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager,
and others regarding economic developments and interest rate trends, and the
Adviser's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR. The Fund
may incur brokerage commissions on transactions conducted through DWR. It is
not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 150% in any one year. The Fund will incur
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. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's trading policy.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, 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 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. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any
issuer.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager, shares of
the Fund are distributed by the Distributor and offered by DWR and others
(which may include TCW Brokerage Services, an affiliate of the Adviser) which
have entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is
located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW Small Cap Growth Fund,
directly to Dean Witter Trust Com pany (the "Transfer Agent") at P.O. Box
1040, Jersey City, NJ 07303, or by contacting an account executive
11
<PAGE>
of DWR or any other Selected Broker-Dealer. The minimum initial purchase, in
the case of investments through EasyInvest (Service Mark), an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the
schedule of automatic investments will result in investments totalling at
least $1,000 within the first twelve months. In the case of investments
pursuant to Systematic Payroll Deduction Plans (including Individual
Retirement Plans), the Fund, in its discretion, may accept investments
without regard to any minimum amounts which would otherwise be required if
the Fund has reason to believe that additional investments will increase the
investment in all accounts under such Plans to at least $1,000. Certificates
for shares purchased will not be issued unless a request is made by the
shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital gains distribu tions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions.
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of
Net Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Repurchases and Redemptions"). Sales personnel are
compensated for selling shares of the Fund at the time of their sale by the
Distributor and/or Selected Broker-Dealer. In addition, some sales personnel
of the Selected Broker-Dealer will receive various types of non-cash
compensation 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.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of 1% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
Fund's average daily net assets. This fee is treated by the Fund as an
expense in the year it is accrued. A portion of the fee payable pursuant to
the Plan, equal to 0.25% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of NASD guidelines. The
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Amounts paid under the Plan are paid to the Distributor to compensate it
for the services provided and the expenses borne by the Distributor and
others in the distribution of the Fund's shares, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR's account executives and others who engage in or support
distribution of shares or who service shareholder accounts, including
overhead and telephone expenses; printing and distribution of prospectuses
and reports used in connection with the offering of the Fund's shares to
other than current shareholders; and preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor
may utilize fees paid pursuant to the Plan to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed distribution expenses.
For the fiscal year ended February 28, 1997, the Fund accrued payments
under the Plan amounting to $2,299,601, which amount is equal to 0.88% of the
Fund's average daily aggregate net sales for the fiscal
12
<PAGE>
year. The payments accrued under the Plan were calculated pursuant to clause
(a) of the compensation formula under the Plan.
At any given time, the expenses in distributing shares of the Fund may be
in excess of the total of (i) the payments made by the Fund pursuant to the
Plan, and (ii) the proceeds of contingent deferred sales charges paid by
investors upon the redemption of shares (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing shares of the Fund had been incurred and $750,000
had been received as described in (i) and (ii) above, the excess expense
would amount to $250,000. The Distributor has advised the Fund that such
excess amount, including the carrying charge described above, totalled
$13,100,382 at February 28, 1997, which was equal to 4.87% of the Fund's net
assets on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses or any requirement
that the Plan be continued from year to year, such excess amount, if any,
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made
to the Distributor under the Plan and the proceeds of contingent deferred
sales charges paid by investors upon redemption of shares, if for any reason
the Plan is terminated, the Trustees will consider at that time the manner in
which to treat such expenses. Any cumulative expenses incurred, but not yet
recovered through distribution fees or contingent deferred sales charges, may
or may not be recovered through future distribution fees or contingent
deferred sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
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 (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees), 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.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
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 and evaluations by its
staff, including review of broker-dealer market price quotations, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service.
13
<PAGE>
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other TCW/DW
Fund), unless the shareholder requests that they be paid in cash. Shares so
acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemption. (See "Repurchases and Redemptions").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
per share next determined after receipt by the Transfer Agent, by returning
the check or the proceeds to the Transfer Agent within thirty days after the
payment date. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (see "Repurchases and
Redemptions").
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund. (See "Purchases 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 contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (See "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed
from his or her account so that the proceeds (net of any applicable
contingent deferred sales charge) to the shareholder will be the designated
monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of any other TCW/DW
Fund sold with a contingent deferred sales charge ("CDSC Funds"), for shares
of TCW/DW North American Government Income Trust, TCW/DW Income and Growth
Fund, TCW/DW Balanced Fund and for shares of five money market funds for
which InterCapital serves as investment manager: Dean Witter Liquid Asset
Fund Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter
Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily Income
Trust and Dean Witter New York Municipal Money Market Trust (the foregoing
eight non-CDSC 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.
14
<PAGE>
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, other than other TCW/DW Funds and the five money market funds
listed above.
An exchange to another CDSC Fund or to any Exchange Fund that is not a
money market fund is on the basis of the next calculated net asset value per
share of each fund after the exchange order is received. When exchanging into
a money market fund from the Fund or any other CDSC Fund, shares of the Fund
are redeemed out of the Fund at their next calculated net asset value and the
proceeds of the redemption are used to purchase shares of the money market
fund at their net asset value determined the following business day.
Subsequent exchanges between any of the money market funds and any of the
TCW/DW Funds can be effected on the same basis. No contingent deferred sales
charge ("CDSC") is imposed at the time of any exchange, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains in the Exchange Fund (calculated from the
last day of the month in which the Exchange Fund shares were acquired), the
holding period (for the purpose of determining the rate of the CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a CDSC
Fund, the holding period previously frozen when the first exchange was made
resumes on the last day of the month in which shares of a CDSC Fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in a CDSC Fund (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). However, in the case of
shares exchanged into an Exchange Fund, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees which are attributable to those shares. (Exchange Fund
12b-1 distribution fees are described in the prospectuses for those funds.)
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Manager to be abusive 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 TCW/DW Funds or money market funds for
which shares of the Fund have been exchanged, upon such notice as may be
required by applicable regulatory agencies. Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on exchange of shares of the Fund
pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
15
<PAGE>
initiate an exchange of shares of the Fund for shares of any of the funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege
by contacting their DWR or other Selected Broker-Dealer account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer
but who wish to make exchanges directly by writing or telephoning the
Transfer Agent) must complete and forward to the Transfer Agent an Exchange
Privilege Authorization Form, copies of which may be obtained from the
Transfer Agent, to initiate an exchange. If the Authorization Form is used,
exchanges may be made in writing or by contacting the Transfer Agent at (800)
869-NEWS (toll free). The Fund will employ reasonable procedures to confirm
that exchange instructions communicated over the telephone are genuine. The
procedures may include requiring various forms of personal identification
such as name, mailing address, social security or other tax identification
number and DWR or other Selected Broker-Dealer account number (if any).
Telephone instructions will also be recorded. If such procedures are not
employed, the Fund may be liable for any losses due to unauthorized or
fraudulent transactions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
in the past with other funds managed by the Manager.
Shareholders should contact their account executive or the Transfer Agent
for further information about the Exchange Privilege.
REPURCHASES AND REDEMPTIONS
- -----------------------------------------------------------------------------
Repurchase. DWR and other Selected Broker-Dealers are authorized to
repurchase, as agent for the Fund, 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 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 (see below).
The CDSC, if any, will be the only fee imposed directly upon shareholders
by the Fund, the Distributor, DWR or other Selected Broker-Dealer. The offers
by DWR and other Selected Broker-Dealers to repurchase shares may be
suspended without notice by them at any time. In that event, shareholders may
redeem their shares through the Fund's Transfer Agent as set forth below
under "Redemption."
Redemption. Shares of the Fund can be redeemed for cash at any time at the
net asset value per share next determined; however, such redemption proceeds
will be reduced by the amount of any applicable contingent deferred sales
charge (see below). If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption along with any additional
documentation required by the Transfer Agent.
Contingent Deferred Sales Charge. Shares of the Fund which are held for
six years or more after purchase (calculated from the last day of the month
in which the shares were purchased) will not be subject to any charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("CDSC"), which will be a percentage of
the dollar amount of shares redeemed and will be assessed on an amount
16
<PAGE>
equal to the lesser of the current market value or the cost of the shares
being redeemed. The size of this percentage will depend upon how long the
shares have been held, as set forth in the table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE
PURCHASE AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- -------------------------- -----------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third ..................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions. 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
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Manager or its parent, Dean Witter InterCapital Inc., as self-directed
investment alternatives and for which Dean Witter Trust Company or Dean
Witter Trust FSB, each of which is an affiliate of the Manager, serves as
Trustee or the 401(k) Support Services Group of DWR serves as recordkeeper
("Eligible 401(k) Plan"), provided that either: (a) the plan continues to be
an Eligible 401(k) Plan after the redemption; or (b) the redemption is in
connection with the complete termination of the plan involving the
distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances. 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
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accounts with DWR or another Selected Broker-Dealer are referred to their
account executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the repurchase or
redemption, reinstate any portion or all of the proceeds of such repurchase
or redemption in shares of the Fund at net asset value next determined after
a reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such repurchase or redemption.
Involuntary Redemption. The Fund reserves the right, on sixty days notice,
to redeem, at their net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100 or such lesser
amount as may be fixed by the Trustees or, in the case of an account opened
through EasyInvest (Service Mark), if after twelve months the shareholder has
invested less than $1,000 in the account. No CDSC will be imposed on any
involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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Dividends and Distributions. The Fund intends to pay dividends and to
distribute substantially all of the Fund's net investment income and net
realized short-term and long-term capital gains, if any, at least once each
year. The Fund may, however, determine either to distribute or to retain all
or part of any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
(See "Shareholder Services--Automatic Investment of Dividends and
Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise continue to 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 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.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder
has held the Fund's shares and regardless of whether the distribution is
received in additional shares or in cash. Capital gains distributions are not
eligible for the corporate dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources, in effect, represent a return of a
portion of each shareholder's investment. All, or a portion, of such payments
will not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, share-
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holders' taxpayer identification numbers must be furnished and certified as
to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years, as
well as over the life of the Fund if less than any of the foregoing. Average
annual total return reflects all income earned by the Fund, any appreciation
or depreciation of the Fund's assets, all expenses incurred by the Fund and
all sales charges which would be incurred by redeeming shareholders, for the
stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred sales charge which, if reflected,
would reduce the performance quoted. The Fund may also advertise the growth
of hypothetical investments of $10,000, $50,000 and $100,000 in shares of the
Fund.
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent
organizations (such as mutual fund performance rankings of Lipper Analytical
Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
Fund obligations include such disclaimer, and provides for indemnification
and reimbursement of expenses out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations 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
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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 "black out 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.
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TCW/DW Small Cap Growth Fund TCW/DW
Two World Trade Center SMALL CAP
New York, New York 10048 GROWTH FUND
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
Charles Larsen
Vice President
Douglas S. Foreman
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER PROSPECTUS
TCW Funds Management, Inc. APRIL 30, 1997
