TCW/DW SMALL CAP GROWTH FUND, 497, 1999-05-05

TCW/DW SMALL CAP GROWTH FUND
497, 1999-05-05

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<PAGE>
Filed Pursuant to Rule 497(c)
Registration File No.: 33-48765

PROSPECTUS - MAY 1, 1999

TCW/DW

---------------------------------------------------------------------

SMALL CAP GROWTH FUND

A MUTUAL FUND THAT SEEKS CAPITAL APPRECIATION

The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.

<PAGE>

CONTENTS

The Fund Investment Objective................................ 1

Principal Investment Strategies..................... 1

Principal Risks..................................... 1

Past Performance.................................... 2

Fees and Expenses................................... 3

Additional Investment Strategy Information.......... 4

Additional Risk Information......................... 5

Fund Management..................................... 6

Shareholder Information Pricing Fund Shares................................. 8

How to Buy Shares................................... 8

How to Exchange Shares............................. 10

How to Sell Shares................................. 12

Distributions...................................... 13

Tax Consequences................................... 14

Share Class Arrangements........................... 14

Financial Highlights .................................................. 21

This Prospectus contains important information about
the Fund.
Please read it carefully and keep it for future
reference.

FUND CATEGORY
- -------------
[X] GROWTH

[ ] Growth and Income

[ ] Income

[ ] Money Market

<PAGE>

THE FUND

INVESTMENT OBJECTIVE
- --------------------

TCW/DW Small Cap Growth Fund is a mutual fund that seeks capital appreciation.
There is no guarantee that the Fund will achieve this objective.

PRINCIPAL INVESTMENT STRATEGIES
- -------------------------------

The Fund will normally invest at least 65% of its assets in a diversified
portfolio of common stocks and securities convertible into common stocks of
small companies with market capitalizations, at the time of purchase, within the
capitalization range of securities comprising the Standard & Poor's Small Cap
600 Index (currently approximately $23 million to $3.6 billion as of March 31,
1999). The Fund's "Adviser," TCW Funds Management, Inc., invests in companies
that it believes exhibit superior earnings growth potential and attractive stock
market valuations. The Adviser uses its proprietary research in pursuing a
philosophy that emphasizes individual company selection. Quantitative and
qualitative standards will be used to screen companies to provide a list of
potential investment securities. The Adviser then subjects these securities to a
fundamental analysis using a variety of criteria. There are no minimum rating or
quality requirements with respect to the convertible securities in which the
Fund may invest, and the Fund may invest up to thirty-five percent of its assets
in these investments.

(sidebar)
CAPITAL APPRECIATION

An investment objective having the goal of selecting securities with the
potential to rise in price rather than pay out income.
(end sidebar)

Common stock is a share ownership or equity interest in a corporation. It may
or may not pay dividends, as some companies reinvest all of their profits back
into their businesses, while others pay out some of their profits to
shareholders as dividends. A convertible security is a bond, preferred stock or
other security that may be converted into a prescribed amount of common stock
at a particular time and price.

In pursuing the Fund's investment objective, the Adviser has considerable
leeway in deciding which investments it buys, holds or sells on a day-to-day
basis -- and which trading strategies it uses. For example, the Adviser in its
discretion may determine to use some permitted trading strategies while not
using others. In addition to U.S. common stocks, the Fund may make other
investments. The Fund also may invest up to 35% of its assets in equity
securities of medium-sized or large companies, and up to 25% of its assets in
foreign equity securities (including depository receipts).

The Fund also may invest in options and futures.

PRINCIPAL RISKS
- ---------------

The Fund's share price will fluctuate with changes in the market value of the
Fund's portfolio securities. When you sell Fund shares, they may be worth less
than what you paid for them and, accordingly, you can lose money investing in
this Fund.

A principal risk of investing in the Fund is associated with its investments in
the common stock and securities convertible into common stock of small
companies. In general, stock values fluctuate in response to activities
specific to the company as well as general market, economic and political
conditions. Stock prices can fluctuate widely in response to these factors.

If the Fund invests in lower rated convertible securities, there are special
risk considerations. The prices of lower rated securities may be greatly
affected by adverse

<PAGE>

economic changes and individual corporate developments. This may result in
increased price volatility of the Fund's lower rated portfolio securities and a
corresponding volatility in the net asset value of the Fund.

Investing in securities of small companies may involve greater risk than is
customarily associated with investing in more established companies. Often,
small companies and the industries in which they are focused are still
evolving, and they are more sensitive to changing market conditions than larger
companies in more established industries. Small companies often have limited
product lines, financial resources and less experienced management. As a
consequence, their securities may be more volatile and have returns that vary,
sometimes significantly, from the overall stock market.

The performance of the Fund also will depend on whether the Adviser is
successful in pursuing the Fund's investment strategy. The Fund is also subject
to other risks from its permissible investments including the risks associated
with its investments in medium-sized and large companies, options and futures
and foreign securities.

Shares of the Fund are not bank deposits and are not guaranteed or insured by
any bank, governmental entity, or the FDIC.

PAST PERFORMANCE
- ----------------

The bar chart and table below provide some indication of the risks of investing
in the Fund. The Fund's past performance does not indicate how the Fund will
perform in the future.

ANNUAL TOTAL RETURNS -- CALENDAR YEARS

1994 -4.62%
95' 60.21%
96' 13.71%
96' 10.64%
98' 19.39%

The bar chart reflects the performance of Class B shares; the performance of
the other Classes will differ because the Classes have different ongoing fees.
The performance information in the bar chart does not reflect the deduction of
sales charges; if these amounts were reflected, returns would be less than
shown.

During the periods shown in the bar chart, the highest return for a calendar
quarter was 32.92% (quarter ended December 31, 1998), and the lowest return for
a calendar quarter was --22.13% (quarter ended September 30, 1998).
Year-to-date total return as of March 31, 1999 was 6.86%.

(sidebar)
ANNUAL TOTAL RETURNS

This chart shows how the performance of the Fund's Class B shares has varied
from year to year over the past five calendar years.
(end sidebar)

<PAGE>

AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED THE 1998 CALENDAR YEAR)
- --------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
(SINCE 8/2/93)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A 13.97% -- --
- --------------------------------------------------------------------------------
Class B(1) 14.39% 17.87% 16.86%(4)
- --------------------------------------------------------------------------------
Class C 18.39% -- --
- --------------------------------------------------------------------------------
Class D 20.58% -- --
- --------------------------------------------------------------------------------
Russell 2000(2) -2.55% 11.87% 12.84%(4)
- --------------------------------------------------------------------------------
Lipper Small Cap Funds Index(3) -0.85% 11.30% 12.41%(5)
- --------------------------------------------------------------------------------
</TABLE>

1 Prior to July 28, 1997, the Fund only issued Class B shares.
2 The Russell 2000 Small Stock Index is a capitalization-weighted price-only
index of the 2000 smallest stocks represented in the Russell 3000 Index. The
performance of the Index does not include expenses or fees, and should not be
considered an investment.
3 The Lipper Small-Cap Funds Index is an equally-weighted performance index of
qualifying small-cap funds. The Index is unmanaged and should not be
considered an investment.
4 For the period August 2, 1993 to December 31, 1998.
5 For the period August 5, 1993 to December 31, 1998.

(sidebar)
AVERAGE ANNUAL
TOTAL RETURNS

This table compares the Fund's average annual returns with those of a broad
measure of market performance over time. The Fund's returns include the maximum
applicable sales charge for each Class and assume you sold your shares at the
end of each period.
(end sidebar)

FEES AND EXPENSES
- -----------------

The Fund offers four Classes of shares: Classes A, B, C and D. Each Class has a
different combination of fees, expenses and other features. The table below
briefly describes the fees and expenses that you may pay if you buy and hold
shares of the Fund. The Fund does not charge account or exchange fees. See the
"Share Class Arrangements" section for further fee and expense information.

(sidebar)

SHAREHOLDER FEES

These fees are paid directly from your investment.

ANNUAL FUND OPERATING EXPENSES

These expenses are deducted from the Fund's assets and are based on expenses
paid for the fiscal year ended February 28, 1999.
(end sidebar)

<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
- -----------------------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) 5.25%(1) None None None

- -----------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) (as a
percentage based on the lesser of the offering None(2) 5.00%(3) 1.00%(4) None
price or net asset value at redemption)
- -----------------------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- -----------------------------------------------------------------------------------------------------------------
Management and Advisory fee 1.00% 1.00% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.24% 0.92% 1.00% None
- -----------------------------------------------------------------------------------------------------------------
Other expenses 0.26% 0.26% 0.26% 0.26%
- -----------------------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.50% 2.18% 2.26% 1.26%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>

1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of purchase
are subject to a contingent deferred sales charge ("CDSC") of 1.00% that will
be imposed on sales made within one year after purchase, except for certain
specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable to sales made within one year after purchase.

<PAGE>

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that you invest $10,000 in the Fund, your investment has a
5% return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the tables below show your
costs at the end of each period based on these assumptions depending upon
whether or not you sell your shares at the end of each period.

<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
- -------------------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------- ------------------------------------------------
CLASS A $669 $973 $1,299 $2,218 $ 669 $973 $1,299 $2,218
- -------------------------------------------------------- ------------------------------------------------
CLASS B $721 $981 $1,368 $2,510 $ 221 $681 $1,168 $2,510
- -------------------------------------------------------- ------------------------------------------------
CLASS C $329 $705 $1,208 $2,591 $ 229 $705 $1,208 $2,591
- -------------------------------------------------------- ------------------------------------------------
CLASS D $128 $399 $692 $1,519 $ 128 $399 $692 $1,519
- -------------------------------------------------------- ------------------------------------------------

</TABLE>

ADDITIONAL INVESTMENT STRATEGY INFORMATION
- ------------------------------------------

The Fund seeks capital appreciation. There is no guarantee that the Fund will
achieve this objective.

This section provides additional information concerning the Fund's principal
strategies.

OPTIONS AND FUTURES. The Fund may invest in put and call options and futures
with respect to financial instruments, and stock and interest rate indexes.
Options and futures may be used to seek to protect against a decline in
securities prices or an increase in prices of securities that may be purchased.

DEFENSIVE INVESTING. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in cash or money market instruments in a defensive posture
when the Adviser believes it is advisable to do so. Although taking a defensive
posture is designed to protect the Fund from an anticipated market downturn, it
could have the effect of reducing the benefit from any upswing in the market.

PORTFOLIO TURNOVER. The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment strategies. The
portfolio turnover rate is not expected to exceed 150% annually under normal
circumstances. A high turnover rate will increase Fund brokerage costs. It also
may increase the Fund's capital gains, which are passed along to Fund
shareholders as distributions. This, in turn, may increase your tax liability
as a Fund shareholder. See the sections on "Distributions" and "Tax
Consequences."

The percentage limitations relating to the composition of the Fund's portfolio
referenced in "Principal Investment Strategies" apply at the time the Fund
acquires an investment. Subsequent percentage changes that result from market
fluctuations or

<PAGE>

changes in assets will not require the Fund to sell any portfolio security. The
Fund may change its principal investment strategies without shareholder
approval; however, you would be notified of any changes.

ADDITIONAL RISK INFORMATION
- ---------------------------

As discussed in the "Principal Risks" section, principal risks of investing in
the Fund are associated with its small-cap stock and convertible securities
investments. This section provides additional information regarding the
principal risks of investing in the Fund.

OTHER INVESTMENTS. Any Fund investments in medium-sized and large companies
involve the risks associated with stocks in general. Stock values fluctuate in
response to activities specific to the company as well as general market,
economic and political conditions. Stock prices can fluctuate widely in
response to these factors.

FOREIGN SECURITIES. The Fund's investments in foreign securities (including
depository receipts) involve risks that are in addition to the risks associated
with domestic securities. One additional risk is currency risk. While the price
of Fund shares is quoted in U.S. dollars, the Fund generally converts U.S.
dollars to a foreign market's local currency to purchase a security in that
market. If the value of that local currency falls relative to the U.S. dollar,
the U.S. dollar value of the foreign security will decrease. This is true even
if the foreign security's local price remains unchanged.

Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation, exchange
control regulation, limitations on the use or transfer of Fund assets and any
effects of foreign social, economic or political instability. Foreign
companies, in general, are not subject to the regulatory requirements of U.S.
companies and, as such, there may be less publicly available information about
these companies. Moreover, foreign accounting, auditing and financial reporting
standards generally are different from those applicable to U.S. companies.
Finally, in the event of a default of any foreign debt obligations, it may be
more difficult for the Fund to obtain or enforce a judgment against the issuers
of the securities.

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 U.S. counterparts.

Many European countries have adopted or are in the process of adopting a single
European currency, referred to as the "euro." The consequences of the euro
conversion for foreign exchange rates, interest rates and the value of European
securities the Fund may purchase are presently unclear. The consequences may
adversely affect the value and/or increase the volatility of securities held by
the Fund.

OPTIONS AND FUTURES. If the Fund invests in options and/or futures, its
participation in these markets would subject the Fund's portfolio to certain
risks. The Adviser's predictions of movements in the direction of the stock or
interest rate markets may be inaccurate, and the adverse consequences to the
Fund (e.g., a reduction in the Fund's net asset value or a reduction in the
amount of income available for distribution) may leave the Fund in a worse
position than if these strategies were not used. Other risks

<PAGE>

inherent in the use of options and futures include, for example, the possible
imperfect correlation between the price of options and futures contracts and
movements in the prices of the securities being hedged, and the possible
absence of a liquid secondary market for any particular instrument. Certain
options may be over-the-counter options, which are options negotiated with
dealers; there is no secondary market for these investments.

YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of Morgan Stanley Dean Witter Services
Company Inc. (the "Manager"), the Adviser and the Fund's other service
providers, as well as the markets and individual and governmental issuers in
which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Manager, Adviser and
affiliates are working hard to avoid any problems and to obtain assurances from
their service providers that they are taking similar steps.

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.

FUND MANAGEMENT
- ---------------

The Fund has retained the Manager -- Morgan Stanley Dean Witter Services
Company Inc. -- to provide administrative services and manage its business
affairs (other than providing investment advice). The Fund has contracted with
the Adviser -- TCW Funds Management, Inc. -- to invest the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. The Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter Advisors Inc., which is in turn 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's main business
office is located at Two World Trade Center, New York, NY 10048.

The Adviser, together with its affiliated companies, manages more than $55
billion primarily for institutional investors. The Adviser is a wholly-owned
subsidiary of The TCW Group, Inc. Its main business address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017.

Charles Larsen, Douglas S. Foreman and Christopher J. Ainley, Managing
Directors of the Adviser, have been the primary portfolio managers of the Fund
since September 1994 in the case of Messrs. Larsen and Foreman and since April
1998 in the case of Mr. Ainley. Mr. Larsen has been a portfolio manager with
the TCW Group, Inc. for over five years. Mr. Foreman and Mr. Ainley have been
portfolio managers with the TCW Group, Inc. since May 1994, prior to which they
were portfolio managers with Putnam Investments.

(sidebar)
MORGAN STANLEY DEAN WITTER ADVISORS INC.

The Manager is a wholly owned subsidiary of Morgan Stanley Dean Witter Advisors
Inc., which is widely recognized as a leader in the mutual fund industry.
Together, the Manager and Morgan Stanley Dean Witter Advisors Inc. have more
than $129.2 billion in assets under management or administration as of March
31, 1999.
(end sidebar)

<PAGE>

The Fund pays the Manager and Adviser a monthly management or advisory fee as
full compensation for the services and facilities furnished to the Fund, and
for Fund expenses assumed by the Manager and Adviser. The fee is based on the
Fund's average daily net assets. For the fiscal year ended February 28, 1999
the Fund accrued aggregate total compensation to the Manager and the Adviser of
1.00% of the Fund's average daily net assets (0.60% to the Manager and 0.40% to
the Adviser).

In connection with the contemplated consolidation of the TCW/DW Funds with the
Morgan Stanley Dean Witter Funds, the Fund's Board of Trustees has approved
changes to the Fund's management/advisory relationships. Specifically, the
Board has approved the appointment of Morgan Stanley Dean Witter Advisors as
the new investment manager to replace the Adviser. The Board also has approved
the retention of the Adviser as sub-advisor to the Fund. The result of the new
arrangements would be that Morgan Stanley Dean Witter Advisors would have
overall responsibility for management of the Fund, including supervisory
responsibility over the Fund's investment programs, while TCW Funds Management,
Inc. would retain responsibility for investing the Fund's assets. The Manager
would continue to have responsibility for administrative services. Under the
new arrangements, the investment management fee rate that would be paid by the
Fund would be equal to the aggregate management/advisory fee rate currently
paid by the Fund. The Adviser would receive a sub-advisory fee paid by the
Manager equal to 0.40% of the Manager's fee. In order for the new arrangements
to be implemented, they must be approved by the Fund's shareholders, who will
be asked to approve the changes at a June 8, 1999 shareholders' meeting. Once
shareholder approval is obtained, the new arrangements would be effective as
soon as practicable thereafter.

<PAGE>

SHAREHOLDER INFORMATION

PRICING FUND SHARES
- -------------------

The price of Fund shares (excluding sales charges), called "net asset value,"
is based on the value of the Fund's portfolio securities. While the assets of
each Class are invested in a single portfolio of securities, the net asset
value of each Class will differ because the Classes have different ongoing
distribution fees.

The net asset value per share of the Fund is determined once daily at 4:00 p.m.
Eastern time on each day that the New York Stock Exchange is open (or, on days
when the New York Stock Exchange closes prior to 4:00 p.m., at such earlier
time). Shares will not be priced on days that the New York Stock Exchange is
closed.

The value of the Fund's portfolio securities is based on the securities' market
price when available. When a market price is not readily available, including
circumstances under which the Adviser determines that a security's market price
is not accurate, a portfolio security is valued at its fair value, as
determined under procedures established by the Fund's Board of Trustees. In
these cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. In addition, if the Fund
holds securities primarily listed on foreign exchanges, the value of the Fund's
portfolio securities may change on days when you will not be able to purchase
or sell your shares.

An exception to the Fund's general pricing policy concerns its short-term debt
portfolio securities. Debt securities with remaining maturities of sixty days
or less at the time of purchase are valued at amortized cost. However, if the
cost does not reflect the securities' market value, these securities will be
valued at their fair value.

HOW TO BUY SHARES
- -----------------

You may open a new account to buy Fund shares or buy additional Fund shares for
an existing account by contacting your Morgan Stanley Dean Witter Financial
Advisor or other authorized financial representative. Your Financial Advisor
will assist you, step-by-step, with the procedures to invest in the Fund. You
may also purchase shares directly by calling the Fund's transfer agent and
requesting an application.

Because every investor has different immediate financial needs and long-term
investment goals, the Fund offers investors four Classes of shares: Classes A,
B, C and D. Class D shares are only offered to a limited group of investors.
Each Class of shares offers a distinct structure of sales charges, distribution
and service fees, and other features that are designed to address a variety of
needs. Your Financial Advisor or other authorized financial representative can
help you decide which Class may be most appropriate for you. When purchasing
Fund shares, you must specify which Class of shares you wish to purchase.

When you buy Fund shares, the shares are purchased at the next share price
calculated, less any applicable front-end sales charge, after we receive your
investment order in proper form. We reserve the right to reject any order for
the purchase of Fund shares.

(sidebar)
CONTACTING A FINANCIAL ADVISOR

If you are new to the TCW/DW Funds family and would like to contact a Financial
Advisor, call (800) THE-DEAN for the telephone number of the Morgan Stanley
Dean Witter office nearest you. You may also access our office locator on our
Internet site at: www.deanwitter.com/funds
(end sidebar)

<PAGE>

MINIMUM INVESTMENT AMOUNTS
- -----------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
--------------------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>

Regular Accounts $1,000 $ 100
Individual Retirement Accounts: Regular IRAs $1,000 $ 100
Education IRAs $500 $ 100
- -----------------------------------------------------------------------------------------------------
EasyInvest(SM) (Automatically from your
checking or savings account or
Money Market Fund) $ 100* $ 100*
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.

(sidebar)
EASYINVEST(SM)

A purchase plan that allows you to transfer money automatically from your
checking or savings account or from a Money Market Fund on a semi-monthly,
monthly or quarterly basis. Contact your Morgan Stanley Dean Witter Financial
Advisor for further information about this service.
(end sidebar)

There is no minimum investment amount if you purchase Fund shares through: (1)
the Morgan Stanley Dean Witter Advisors' mutual fund asset allocation plan, or
(2) a program, approved by the Fund's distributor, in which you pay an
asset-based fee for advisory, administrative and/or brokerage services, or (3)
employer-sponsored employee benefit plan accounts.

INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER INVESTORS/CLASS D
SHARES.
To be eligible to purchase Class D shares, you must qualify under one of the
investor categories specified in the "Share Class Arrangements" section of this
Prospectus.

THREE DAY SETTLEMENT. Fund shares are sold through the Fund's distributor,
Morgan Stanley Dean Witter Distributors Inc., on a normal three business day
basis; that is, your payment for Fund shares is due on the third business day
(settlement day) after you place a purchase order.

SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to buying
additional Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor, you may send a check directly to the
Fund. To buy additional shares in this manner:

o Write a "letter of instruction" to the Fund specifying the name(s) on the
account, the account number, the social security or tax identification
number, the Class of shares you wish to purchase and the investment amount
(which would include any applicable front-end sales charge). The letter must
be signed by the account owner(s).

o Make out a check for the total amount payable to: TCW/DW Small Cap Growth
Fund.

o Mail the letter and check to Morgan Stanley Dean Witter Trust FSB at P.O. Box
1040, Jersey City, NJ 07303.

<PAGE>

HOW TO EXCHANGE SHARES
- ----------------------

PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of the Fund
for the same Class of any other continuously offered TCW/DW Multi-Class Fund
advised by the Adviser and managed by the Manager, without the imposition of an
exchange fee. You may also exchange Fund shares, without the imposition of an
exchange fee, for shares of TCW/DW North American Government Income Trust, and
five Money Market Funds for which Morgan Stanley Dean Witter Advisors serves as
Investment Manager.

Exchanges may be made after shares of the Fund acquired by purchase have been
held for thirty days. There is no waiting period for exchanges of shares
acquired by exchange or dividend reinvestment. The current Prospectus for each
Fund describes its investment objective(s), policies and investment minimums,
and should be read before investment.

EXCHANGE PROCEDURES. You can process an exchange by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Otherwise, you must forward an exchange privilege authorization
form to the Fund's transfer agent -- Morgan Stanley Dean Witter Trust FSB --
and then write the transfer agent or call (800) 869-NEWS to place an exchange
order. You can obtain an exchange privilege authorization form by contacting
your Financial Advisor or other authorized financial representative or by
calling (800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.

An exchange to any Fund (except a Money Market Fund) is made on the basis of
the next calculated net asset values of the Funds involved after the exchange
instructions are accepted. When exchanging into a Money Market Fund, the Fund's
shares are sold at their next calculated net asset value and the Money Market
Fund's shares are purchased at their net asset value on the following business
day.

The Fund may terminate or revise the exchange privilege upon required notice.
Certain services normally available to shareholders of Money Market Funds,
including the check writing privilege, are not available for Money Market Fund
shares you acquire in an exchange.

TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley Dean
Witter Trust FSB, we will employ reasonable procedures to confirm that exchange
instructions communicated over the telephone are genuine. These procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number. Telephone
instructions also may be recorded.

Telephone instructions will be accepted if received by the Fund's transfer
agent between 9:00 a.m. and 4:00 p.m. Eastern time, on any day the New York
Stock Exchange is open for business. During periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case with the Fund in
the past.

<PAGE>

MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin account,
contact your Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative regarding restrictions on the exchange of such shares.

TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund for shares
of another Fund there are important tax considerations. For tax purposes, the
exchange out of the Fund is considered a sale of Fund shares -- and the
exchange into the other Fund is considered a purchase. As a result, you may
realize a capital gain or loss.

You should review the "Tax Consequences" section and consult your own tax
professional about the tax consequences of an exchange.

FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the Fund
limiting or prohibiting, at its discretion, additional purchases and/or
exchanges. The Fund will notify you in advance of limiting your exchange
privileges.

CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements" section of
this Prospectus for a further discussion of how applicable contingent deferred
sales charges (CDSCs) are calculated for shares of one Fund that are exchanged
for shares of another.

For further information regarding exchange privileges, you should contact your
Morgan Stanley Dean Witter Financial Advisor or call (800) 869-NEWS.

<PAGE>

HOW TO SELL SHARES
- ------------------

You can sell some or all of your Fund shares at any time. If you sell Class A,
Class B or Class C shares, your net sale proceeds are reduced by the amount of
any applicable CDSC. Your shares will be sold at the next share price
calculated after we receive your order to sell as described below.

<TABLE>

OPTIONS PROCEDURES
- --------------------------------------------------------------------------------------------------------
<S> <C>
Contact Your To sell your shares, simply call your Morgan Stanley Dean Witter Financial
Financial Advisor Advisor or other authorized financial representative.
-----------------------------------------------------------------------------------
Payment will be sent to the address to which the account is registered or
deposited in your brokerage account.
- --------------------------------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of instruction" that includes:
o your account number;
o the dollar amount or the number of shares you wish to sell;
o the Class of shares you wish to sell; and
o the signature of each owner as it appears on the account.
-----------------------------------------------------------------------------------
If you are requesting payment to anyone other than the registered owner(s) or
that payment be sent to any address other than the address of the registered
owner(s) or pre-designated bank account, you will need a signature guarantee.
You can obtain a signature guarantee from an eligible guarantor acceptable to
Morgan Stanley Dean Witter Trust FSB. (You should contact Morgan Stanley
Dean Witter Trust FSB at (800) 869-NEWS for a determination as to whether a
particular institution is an eligible guarantor.) A notary public cannot provide a
signature guarantee. Additional documentation may be required for shares held
by a corporation, partnership, trustee or executor.
-----------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at P.O. Box 983, Jersey
City, New Jersey 07303. If you hold share certificates, you must return the
certificates, along with the letter and any required additional documentation.
-----------------------------------------------------------------------------------
A check will be mailed to the name(s) and address in which the account is
registered, or otherwise according to your instructions.
- --------------------------------------------------------------------------------------------------------
Systematic If your investment in all of the TCW/DW Family of Funds has a total market
Withdrawal Plan value of at least $10,000, you may elect to withdraw amounts of $25 or more,
or in any whole percentage of a Fund's balance (provided the amount is at least
$25), on a monthly, quarterly, semi-annual basis, from any Fund with a balance of
at least $1,000. Each time you add a Fund to the plan, you must meet the plan
requirements.
-----------------------------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC may be
waived under certain circumstances. See the Class B waiver categories listed in
the "Share Class Arrangements" section of this Prospectus.
-----------------------------------------------------------------------------------
To sign up for the Systematic Withdrawal Plan, contact your Morgan Stanley
Dean Witter Financial Advisor or call (800) 869-NEWS. You may terminate or
suspend your plan at any time. Please remember that withdrawals from the plan
are sales of shares, not Fund "distributions," and ultimately may exhaust your
account balance. The Fund may terminate or revise the plan at any time.
- --------------------------------------------------------------------------------------------------------

</TABLE>

PAYMENT FOR SOLD SHARES. After we receive your complete instructions to sell as
described above, a check will be mailed to you within seven days, although we
will attempt to make payment within one business day. Payment may also be sent
to your brokerage account.

Payment may be postponed or the right to sell your shares suspended under
unusual circumstances. If you request to sell shares that were recently
purchased by check, payment of the sale proceeds may be delayed for the minimum
time needed to verify that the check has been honored (not more than fifteen
days from the time we receive the check).

<PAGE>

TAX CONSIDERATIONS. Normally, your sale of Fund shares is subject to federal
and state income tax. You should review the "Tax Consequences" section of this
Prospectus and consult your own tax professional about the tax consequences of
a sale.

REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not previously
exercised the reinstatement privilege, you may, within 35 days after the date
of sale, invest any portion of the proceeds in the same Class of Fund shares at
their net asset value and receive a pro rata credit for any CDSC paid in
connection with the sale.

INVOLUNTARY SALES. The Fund reserves the right, on sixty days' notice, to sell
the shares of any shareholder (other than shares held in an IRA or 403(b)
Custodial Account) whose shares, due to sales by the shareholder, have a value
below $100, or in the case of an account opened through EasyInvest(SM), if after
12 months the shareholder has invested less than $1,000 in the account.

However, before the Fund sells your shares in this manner, we will notify you
and allow you sixty days to make an additional investment in an amount that
will increase the value of your account to at least the required amount before
the sale is processed. No CDSC will be imposed on any involuntary sale.

MARGIN ACCOUNTS. Certain restrictions may apply to Fund shares pledged in
margin accounts with Dean Witter Reynolds or another authorized broker-dealer
of Fund shares. If you hold Fund shares in this manner, please contact your
Morgan Stanley Dean Witter Financial Advisor or other authorized financial
representative for more details.

DISTRIBUTIONS
- -------------

The Fund passes substantially all of its earnings from income and capital gains
along to its investors as "distributions." The Fund earns income from stocks and
interest from fixed-income investments. These amounts are passed along to Fund
shareholders as "income dividend distributions." The Fund realizes capital gains
whenever it sells securities for a higher price than it paid for them. These
amounts may be passed along as "capital gain distributions."

The Fund declares income dividends separately for each Class. Distributions
paid on Class A and Class D shares will be higher than for Class B and Class C
because distribution fees that Class B and Class C pay are higher. Normally,
income dividends and capital gains are distributed annually in December. The
Fund, however, may retain and reinvest any long-term capital gains. The Fund
may at times make payments from sources other than income or capital gains that
represent a return of a portion of your investment.

Distributions are reinvested automatically in additional shares of the same
Class and automatically credited to your account, unless you request in writing
that all distributions be paid in cash. If you elect the cash option, the Fund
will mail a check to you no later than seven business days after the
distribution is declared. No interest will accrue on uncashed checks. If you
wish to change how your distributions are paid, your request should be received
by the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at least
five business days prior to the record date of the distributions.

(sidebar)

TARGETED DIVIDENDS(SM)
You may select to have your Fund distributions automatically invested in other
Classes of Fund shares or Classes of another TCW/DW Fund that you own. Contact
your Morgan Stanley Dean Witter Financial Advisor for further information about
this service.
(end sidebar)

<PAGE>

TAX CONSEQUENCES
- ----------------

As with any investment, you should consider how your Fund investment will be
taxed. The tax information in this Prospectus is provided as general
information. You should consult your own tax professional about the tax
consequences of an investment in the Fund.

Unless your investment in the Fund is through a tax-deferred retirement
account, such as a 401(k) plan or IRA, you need to be aware of the possible tax
consequences when:

o The Fund makes distributions; and

o You sell Fund shares, including an exchange to another Fund.

TAXES ON DISTRIBUTIONS. Your distributions are normally subject to federal and
state income tax when they are paid, whether you take them in cash or reinvest
them in Fund shares. A distribution also may be subject to local income tax.
Any income dividend distributions and any short-term capital gain distributions
are taxable to you as ordinary income. Any long-term capital gain distributions
are taxable as long-term capital gains, no matter how long you have owned
shares in the Fund.

Every January, you will be sent a statement (IRS Form 1099-DIV) showing the
taxable distributions paid to you in the previous year. The statement provides
full information on your dividends and capital gains for tax purposes.

TAXES ON SALES. Your sale of Fund shares normally is subject to federal and
state income tax and may result in a taxable gain or loss to you. A sale also
may be subject to local income tax. Your exchange of Fund shares for shares of
another Fund is treated for tax purposes like a sale of your original shares
and a purchase of your new shares. Thus, the exchange may, like a sale, result
in a taxable gain or loss to you and will give you a new tax basis for your new
shares.

When you open your Fund account, you should provide your social security or tax
identification number on your investment application. By providing this
information, you will avoid being subject to a federal backup withholding tax
of 31% on taxable distributions and redemption proceeds. Any withheld amount
would be sent to the IRS as an advance tax payment.

SHARE CLASS ARRANGEMENTS
- ------------------------

The Fund offers several Classes of shares having different distribution
arrangements designed to provide you with different purchase options according
to your investment needs. Your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative can help you decide which Class may
be appropriate for you.

The general public is offered three Classes: Class A shares, Class B shares and
Class C shares, which differ principally in terms of sales charges and ongoing
expenses. A fourth Class, Class D shares, is offered only to a limited category
of investors. Shares that you acquire through reinvested distributions will not
be subject to any front-end sales charge or CDSC -- contingent deferred sales
charge. Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each Class provide for the
distribution financing of shares of that Class.

<PAGE>

The chart below compares the sales charge and annual 12b-1 fee applicable to
each Class:

CLASS SALES CHARGE ANNUAL 12B-1FEE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
A Maximum 5.25% initial sales charge reduced for purchase of
$25,000 or more; shares sold without an initial sales charge are
generally subject to a 1.0% CDSC during the first year 0.25%
- ----------------------------------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year decreasing to 0%
after six years 1.0%
- ----------------------------------------------------------------------------------------------
C 1.0% CDSC during the first year 1.0%
- ----------------------------------------------------------------------------------------------
D None None
- ----------------------------------------------------------------------------------------------

</TABLE>

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 purchases of
$25,000 or more according to the schedule below. Investments of $1 million or
more are not subject to an initial sales charge, but are generally subject to a
contingent deferred sales charge, or CDSC, of 1.0% on sales made within one year
after the last day of the month of purchase. The CDSC will be assessed in the
same manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25% of the
average daily net assets of the Class.

The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:

<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
--------------------------------------------------
PERCENTAGE OF APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION PUBLIC OFFERING PRICE OF 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>

The reduced sales charge schedule is applicable to purchases of Class A shares
in a single transaction by:

o A single account (including an individual, trust or fiduciary account).

o Family member accounts (limited to husband, wife and children under the age
of 21).

(sidebar)
FRONT-END SALES CHARGE OR FSC

An initial sales charge you pay when purchasing Class A shares that is based on
a percentage of the offering price. The percentage declines based upon the
dollar value of Class A shares you purchase. We offer three ways to reduce your
Class A sales charges -- the Combined Purchase Privilege, Right of Accumulation
and Letter of Intent.
(end sidebar)
15

<PAGE>

o Pension, profit sharing or other employee benefit plans of companies and
their affiliates.

o Tax-exempt organizations.

o Groups organized for a purpose other than to buy mutual fund shares.

COMBINED PURCHASE PRIVILEGE. You also will have the benefit of reduced sales
charges by combining purchases of Class A shares of the Fund in a single
transaction with purchases of Class A shares of other TCW/DW Multi-Class Funds.

RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales charges
if the cumulative net asset value of Class A shares of the Fund purchased in a
single transaction, together with shares of other TCW/DW Funds you currently
own which were previously purchased at a price including a front-end sales
charge (including shares acquired through reinvestment of distributions),
amounts to $25,000 or more. Also, if you have a cumulative net asset value of
all your Class A and Class D shares equal to at least $5 million (or $25
million for certain employee benefit plans), you are eligible to purchase Class
D shares of any TCW/DW Fund subject to the Fund's minimum initial investment
requirement.

You must notify your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative (or Morgan Stanley Dean Witter Trust FSB if
you purchase directly through the Fund), 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 when an order is
placed by mail. The reduced sales charge will not be granted if: (i)
notification is not furnished at the time of the order; or (ii) a review of the
records of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.

LETTER OF INTENT. The schedule of reduced sales charges for larger purchases
also will be available to you if you enter into a written "letter of intent." A
letter of intent provides for the purchase of Class A shares of the Fund or
other TCW/DW Multi-Class Funds. The initial purchase under a letter of intent
must be at least 5% of the stated investment goal. To determine the applicable
sales charge reduction, you may also include: (1) the cost of 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 distributor
receiving the letter of intent, and (2) the cost of shares of other Funds you
currently own acquired in exchange for shares of Funds purchased during that
period at a price including a front-end sales charge. You can obtain a letter
of intent by contacting your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative, or by calling (800) 869-NEWS. If you
do not achieve the stated investment goal within the thirteen-month period, you
are required to pay the difference between the sales charges otherwise
applicable and sales charges actually paid.

OTHER FRONT-END SALES CHARGE WAIVERS. In addition to investments of $1 million
or more, your purchase of Class A shares is not subject to a front-end sales
charge (or a CDSC upon sale) if your account qualifies under one of the
following categories:

<PAGE>

o A trust for which Morgan Stanley Dean Witter Trust FSB provides discretionary
trustee services.

o Persons participating in a fee-based investment program (subject to all of
its terms and conditions, including mandatory sale or transfer restrictions
on termination) approved by the Fund's distributor pursuant to which they
pay an asset-based fee for investment advisory, administrative and/or
brokerage services.

o Employer-sponsored employee benefit plans, whether or not qualified under the
Internal Revenue Code, for which Morgan Stanley Dean Witter Trust FSB serves
as trustee or Dean Witter Reynolds' Retirement Plan Services serves as
recordkeeper under a written Recordkeeping Services Agreement ("MSDW
Eligible Plans") which have at least 200 eligible employees.

o A MSDW Eligible Plan whose Class B shares have converted to Class A shares,
regardless of the plan's asset size or number of eligible employees.

o A client of a Morgan Stanley Dean Witter Financial Advisor who joined us from
another investment firm within six months prior to the date of purchase of
Fund shares, and you used the proceeds from the sale of shares of a
proprietary mutual fund of that Financial Advisor's previous firm that
imposed either a front-end or deferred sales charge to purchase Class A
shares, provided that: (1) you sold the shares not more than 60 days prior
to the purchase of Fund shares, and (2) the sale proceeds were maintained in
the interim in cash or a money market fund.

CLASS B SHARES Class B shares are offered at net asset value with no initial
sales charge but are subject to a contingent deferred sales charge, or CDSC, as
set forth in the table below. For the purpose of calculating the CDSC, shares
are deemed to have been purchased on the last day of the month during which they
were purchased.

<TABLE>
<CAPTION>
YEAR SINCE PURCHASE PAYMENT MADE CDSC AS A PERCENTAGE 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>

Each time you place an order to sell or exchange shares, shares with no CDSC
will be sold or exchanged first, then shares with the lowest CDSC will be sold
or exchanged next. For any shares subject to a CDSC, the CDSC will be assessed
on an amount equal to the lesser of the current market value or the cost of the
shares being sold.

CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the case of:

o Sales of shares held at the time you die or become disabled (within the
definition in Section 72(m)(7) of the Internal Revenue Code which relates to
the ability to engage in gainful employment), if the shares are: (i)
registered either in your name (not a trust) or in the names of you and your
spouse as joint tenants with right of

(sidebar)
CONTINGENT DEFERRED
SALES CHARGE OR CDSC

A fee you pay when you sell shares of certain TCW/DW Funds purchased without an
initial sales charge. This fee declines the longer you hold your shares as set
forth in the table.
(end sidebar)
17

<PAGE>

survivorship; or (ii) held in a qualified corporate or self-employed
retirement plan, IRA or 403(b) Custodial Account, provided in either case that
the sale is requested within one year of your death or initial determination
of disability.

o Sales in connection with the following retirement plan "distributions": (i)
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 591/2); (ii) distributions
from an IRA or 403(b) Custodial Account following attainment of age 591/2;
or (iii) a tax-free return of an excess IRA contribution (a "distribution"
does not include a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee).

o Sales of shares held for you as a participant in a MSDW Eligible Plan.

o Sales of shares in connection with the Systematic Withdrawal Plan of up to
12% annually of the value of each Fund from which plan sales are made. The
percentage is determined on the date you establish the Systematic Withdrawal
Plan and based on the next calculated share price. You may have this CDSC
waiver applied in amounts up to 1% per month, 3% per quarter, 6%
semi-annually or 12% annually. Shares with no CDSC will be sold first,
followed by those with the lowest CDSC. As such, the waiver benefit will be
reduced by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan payments
without requiring a new determination of the account value for the 12% CDSC
waiver.

All waivers will be granted only following the Distributor receiving
confirmation of your entitlement. If you believe you are eligible for a CDSC
waiver, please contact your Financial Advisor or call (800) 869-NEWS.

DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee of 1.0% of
the lesser of: (a) the average daily aggregate gross purchases by all
shareholders 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 sold by
all shareholders since the Fund's inception upon which a CDSC has been imposed
or waived, or (b) the average daily net assets of Class B.

CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales charge. The
ten year period runs 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, from
the last day of the month in which the original Class B shares were purchased;
the shares will convert to Class A shares based on their relative net asset
values in the month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically reinvested
distributions will convert to Class A shares on the same basis. (Class B shares
held before May 1, 1997, however, will convert to Class A shares in May 2007.)

In the case of Class B shares held in a MSDW Eligible Plan, 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 Class B shares of a TCW/DW Fund purchased by that
plan.

<PAGE>

Currently, the Class B share conversion is not a taxable event; the conversion
feature may be cancelled if it is deemed a taxable event in the future by the
Internal Revenue Service.

If you exchange your Class B shares for shares of one of the five Money Market
Funds for which Morgan Stanley Dean Witter Advisors serves as Investment
Manager, TCW/DW Multi-Class Fund or TCW/DW North American Government Income
Trust, the holding period for conversion is frozen as of the last day of the
month of the exchange and resumes on the last day of the month you exchange
back into Class B shares.

EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations when you
exchange Fund shares that are subject to a CDSC. When determining the length of
time you held the shares and the corresponding CDSC rate, any period (starting
at the end of the month) during which you held shares of a fund that does not
charge a CDSC will not be counted. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a fund that
does not charge a CDSC.

For example, if you held Class B shares of the Fund in a regular account for
one year, exchanged to Class B of another TCW/DW Multi-Class Fund for another
year, then sold your shares, a CDSC rate of 4% would be imposed on the shares
based on a two year holding period -- one year for each Fund. However, if you
had exchanged the shares of the Fund for a Money Market Fund (which does not
charge a CDSC) instead of the TCW/DW Multi-Class Fund, then sold your shares, a
CDSC rate of 5% would be imposed on the shares based on a one year holding
period. The one year in the Money Market Fund would not be counted.
Nevertheless, if shares subject to a CDSC are exchanged for a Fund that does
not charge a CDSC, you will receive a credit when you sell the shares equal to
the distribution (12b-1) fees, if any, you paid on those shares while in that
Fund up to the amount of any applicable CDSC.

In addition, shares that are exchanged into or from a TCW/DW Multi-Class Fund
subject to a higher CDSC rate will be subject to the higher rate, even if the
shares are re-exchanged into a Fund with a lower CDSC rate.

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 sales made within one year after the
last day of the month of purchase. The CDSC will be assessed in the same manner
and with the same CDSC waivers as with Class B shares.

DISTRIBUTION FEE. Class C shares are subject to an annual distribution (12b-1)
fee of up to 1.0% of the average daily net assets of that Class. 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. Unlike Class B shares, Class C
shares have no conversion feature and, accordingly, an investor that purchases
Class C shares may be subject to distribution (12b-1) fees applicable to Class
C shares for an indefinite period.

<PAGE>

CLASS D SHARES Class D shares are offered without any sales charge on purchases
or sales and without any distribution (12b-1) fee. Class D shares are offered
only to investors meeting an initial investment minimum of $5 million ($25
million for MSDW Eligible Plans) and the following investor categories:

o Investors participating in Morgan Stanley Dean Witter Advisors' mutual fund
asset allocation program (subject to all of its terms and conditions,
including mandatory sale or transfer restrictions on termination) pursuant
to which they pay an asset-based fee.

o Employee benefit plans maintained by Morgan Stanley Dean Witter & Co. or any
of its subsidiaries for the benefit of certain employees of Morgan Stanley
Dean Witter & Co. and its subsidiaries.

o Certain unit investment trusts sponsored by Dean Witter Reynolds.

o Certain other open-end investment companies whose shares are distributed by
the Fund's distributor.

MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25 million for
MSDW Eligible Plans) initial investment to qualify to purchase Class D shares
you may combine: (1) purchases in a single transaction of Class D shares of the
Fund and other TCW/DW Multi-Class Funds and/or (2) previous purchases of Class
A shares of TCW/DW Multi-Class Funds, TCW/DW North American Government Income
Trust and five Money Market Funds advised by Morgan Stanley Dean Witter
Advisors you currently own.

NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a cash
payment representing an income dividend or capital gain and you reinvest that
amount in the applicable Class of shares by returning the check within 30 days
of the payment date, the purchased shares would not be subject to an initial
sales charge or CDSC.

PLAN OF DISTRIBUTION (RULE 12B-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment Company Act of
1940 with respect to the distribution of Class A, Class B and Class C shares.
The Plan allows the Fund to pay distribution fees for the sale and distribution
of these shares. It also allows the Fund to pay for services to shareholders of
Class A, Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase the cost
of your investment in these Classes and may cost you more than paying other
types of sales charges.

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost
on an investment in the Fund (assuming reinvestment of all dividends and
distributions).

This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report,
which is available upon request.

CLASS B SHARES
- --------------------------------------------------------------------------------------------------------------------------
FOR THE YEARS ENDED FEBRUARY 28 1999++ 1998**++ 1997 1996* 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED PER SHARE DATA
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.08 $ 15.73 $ 16.24 $ 9.90 $ 10.30
- --------------------------------------------------------------------------------------------------------------------------
Income (loss) from investment operations:
Net investment loss (0.43) (0.37) (0.26) (0.19) (0.18)
Net realized and unrealized gain (loss) 2.19 5.72 (0.25) 6.53 (0.22)
Total income (loss) from investment
operations 1.76 5.35 (0.51) 6.34 (0.40)
--------- --------- --------- --------- --------
Net asset value, end of period $ 22.84 $ 21.08 $ 15.73 $ 16.24 $ 9.90
- --------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.35 % 34.01 % (3.14)% 64.04 % (3.88)%
- --------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------
Expenses 2.18 %(1) 2.25 % 2.15 % 2.32 % 2.57 %
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss (2.08)%(1) (2.05)% (1.70)% (1.75)% (2.04)%
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $322,489 $340,665 $268,783 $153,366 $69,984
- --------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51 % 61% 42% 52% 116%
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>

* Year ended February 29.

** 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) Reflects overall Fund ratios for investment income and non-class
specific expenses.

<PAGE>

CLASS A SHARES++
- ----------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28 1997*
FEBRUARY 28, 1999 THROUGH FEBRUARY 28, 1998
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER SHARE DATA
- ----------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.18 $ 18.12
- ----------------------------------------------------------------------------------------------------
Income from Investment operations
Net investment loss (0.29) (0.15)
Net realized and unrealized gain 2.24 3.21
Total income from investment operations 1.95 3.06
------- ---------
Net asset value, end of period $ 23.13 $ 21.18
- ----------------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.21 % 16.89 %(1)
- ----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------
Expenses 1.50 %(3) 1.52 %(2)
- ----------------------------------------------------------------------------------------------------
Net investment loss (1.40)%(3) (1.32)%(2)
- ----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $2,450 $ 276
- ----------------------------------------------------------------------------------------------------
Portfolio turnover rate 51% 61 %(1)
- ----------------------------------------------------------------------------------------------------
</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.

(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.

CLASS C SHARES++
- -------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28 1997*
FEBRUARY 28, 1999 THROUGH FEBRUARY 28, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED PER SHARE DATA
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.08 $18.12
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.45) (0.24)
Net realized and unrealized gain 2.22 3.20
Total income from investment operations 1.77 2.96
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 22.85 $21.08
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.35 % 16.39 %(1)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -------------------------------------------------------------------------------------------------------
Expenses 2.26 %(3) 2.29 %(2)
- -------------------------------------------------------------------------------------------------------
Net investment loss (2.16)%(3) (2.10)%(2)
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 2,662 $ 923
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51 % 61 %(1)
- -------------------------------------------------------------------------------------------------------
</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.

(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.

<PAGE>

CLASS D SHARES++
- -------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28 1997*
FEBRUARY 28, 1999 THROUGH FEBRUARY 28, 1998
<S> <C> <C>
SELECTED PER SHARE DATA
- -------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 21.21 $ 18.12
- -------------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment loss (0.24) (0.12)
Net realized and unrealized gain 2.23 3.21
Total income from investment operations 1.99 3.09
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.20 $ 21.21
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.38 % 17.05 %(1)
- -------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- -------------------------------------------------------------------------------------------------------
Expenses 1.26 %(3) 1.27 %(2)
- -------------------------------------------------------------------------------------------------------
Net investment loss (1.16)%(3) (1.10)%(2)
- -------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $ 13 $ 12
- -------------------------------------------------------------------------------------------------------
Portfolio turnover rate 51 % 61 %(1)
- -------------------------------------------------------------------------------------------------------
</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.

(3) Reflects overall Fund ratios for investment income and non-class
specific expenses.

<PAGE>

NOTES

------------------------------------------------------------------------

<PAGE>

TCW/DW SMALL CAP GROWTH FUND

Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
The Fund's Statement of Additional Information also provides additional
information about the Fund. The Statement of Additional Information is
incorporated herein by reference (legally is part of this Prospectus). For a
free copy of any of these documents, to request other information about the
Fund, or to make shareholder inquiries, please call:

(800) 869-NEWS

You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:

WWW.DEANWITTER.COM/FUNDS

Information about the Fund (including the Statement of Additional Information)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov), and copies of this information may be obtained, upon payment of
a duplicating fee, by writing the Public Reference Section of the SEC,
Washington, DC 20549-6009.

(sidebar)
TICKER SYMBOLS:
Class A: TSGAX
- ------------------
Class B: TSGBX
- ------------------
Class C: TSGCX
- ------------------
Class D: TSGDX
- ------------------
(end sidebar)

(INVESTMENT COMPANY ACT FILE NO. 811-6711)

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION TCW/DW SMALL CAP
GROWTH FUND
MAY 1, 1999

- --------------------------------------------------------------------------------

This Statement of Additional Information is not a Prospectus. The
Prospectus (dated May 1, 1999) for TCW/DW Small Cap Growth Fund may be obtained
without charge from the Fund at its address or telephone number listed below or
from Dean Witter Reynolds at any of its branch offices.

TCW/DW Small Cap Growth Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS

<PAGE>

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

<TABLE>
<S> <C>
I. Fund History ......................................................... 4
II. Description of the Fund and Its Investments and Risks ................ 4
A. Classification .................................................. 4
B. Investment Strategies and Risks ................................. 4
C. Fund Policies/Investment Restrictions ........................... 12
III. Management of the Fund ............................................... 14
A. Board of Trustees ............................................... 14
B. Management Information .......................................... 14
C. Compensation .................................................... 18
IV. Control Persons and Principal Holders of Securities .................. 20
V. Management, Investment Advice and Other Services ..................... 20
A. Manager ......................................................... 20
B. The Adviser ..................................................... 20
C. Principal Underwriter ........................................... 21
D. Services Provided by the Manager, the Adviser and Fund
Expenses Paid by Third Parties .................................. 21
E. Dealer Reallowances ............................................. 22
F. Rule 12b-1 Plan ................................................. 23
G. Other Service Providers ......................................... 26
VI. Brokerage Allocation and Other Practices ............................. 27
A. Brokerage Transactions .......................................... 27
B. Commissions ..................................................... 27
C. Brokerage Selection ............................................. 27
D. Directed Brokerage .............................................. 28
E. Regular Broker-Dealers .......................................... 28
VII. Capital Stock and Other Securities ................................... 28
VIII. Purchase, Redemption and Pricing of Shares ........................... 29
A. Purchase/Redemption of Shares ................................... 29
B. Offering Price .................................................. 30
IX. Taxation of the Fund and Shareholders ................................ 31
X. Underwriters ......................................................... 32
XI. Calculation of Performance Data ...................................... 33
XII. Financial Statements ................................................. 34
</TABLE>

2
<PAGE>

GLOSSARY OF SELECTED DEFINED TERMS

The terms defined in this glossary are frequently used in this Statement
of Additional Information (other terms used occasionally are defined in the
text of the document).

"Adviser " -- TCW Funds Management, Inc., a wholly-owned subsidiary of
TCW.

"Custodian " -- The Bank of New York.

"Dean Witter Reynolds " -- Dean Witter Reynolds Inc., a wholly-owned
broker-dealer subsidiary of MSDW.

"Distributor " -- Morgan Stanley Dean Witter Distributors Inc., a
wholly-owned broker-dealer subsidiary of MSDW.

"Financial Advisors " -- Morgan Stanley Dean Witter authorized financial
services representatives.

"Fund " -- TCW/DW Small Cap Growth Fund, a registered open-end investment
company.

"Independent Trustees " -- Trustees who are not "interested persons" (as
defined by the Investment Company Act) of the Fund.

"Manager " -- Morgan Stanley Dean Witter Services Company Inc., a
wholly-owned subsidiary of Morgan Stanley Dean Witter Advisors Inc. The Manager
may also be referred to as MSDW Services Company.

"Morgan Stanley & Co." -- Morgan Stanley & Co. Incorporated, a
wholly-owned broker-dealer subsidiary of MSDW.

"Morgan Stanley Dean Witter Funds " -- Registered investment companies (i)
for which the MSDW Advisors serves as the investment advisor; and (ii) that
hold themselves out to investors as related companies for investment and
investor services.

"MSDW " -- Morgan Stanley Dean Witter & Co., a preeminent global financial
services firm.

"MSDW Advisors " -- Morgan Stanley Dean Witter Advisors, Inc., a
wholly-owned investment advisor subsidiary of MSDW.

"TCW " -- The TCW Group, Inc., a preeminent investment management and
investment advisory services firm.

"TCW/DW Funds " -- The registered investment companies managed by the
Manager and advised by the Adviser.

"Transfer Agent " -- Morgan Stanley Dean Witter Trust FSB, a wholly-owned
transfer agent subsidiary of MSDW.

"Trustees " -- The Board of Trustees of the Fund.

3
<PAGE>

I. FUND HISTORY
- --------------------------------------------------------------------------------

The Fund was organized under the laws of the Commonwealth of Massachusetts
on March 11, 1992 as a Massachusetts business trust.

II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------

A. CLASSIFICATION

The Fund is an open-end, non-diversified management investment company
whose investment objective is capital appreciation.

B. INVESTMENT STRATEGIES AND RISKS

The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's Prospectus titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information" and "Additional Risk Information."

CONVERTIBLE SECURITIES. The Fund may invest in fixed-income securities
which are 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, will sell at some premium over its
conversion value. (This premium represents the price investors are willing to
pay for the privilege of purchasing a fixed-income security with a possibility
of capital appreciation due to the conversion privilege.) At such times the
price of the convertible security will tend to fluctuate directly with the
price of the underlying equity security. Convertible securities may be
purchased by the Fund at varying price levels above their investment values
and/or their conversion values in keeping with the Fund's objective.

MONEY MARKET SECURITIES. In addition to the short-term fixed-income
securities in which the Fund may otherwise invest, the Fund may invest in
various money market securities for cash management purposes or when assuming a
temporary defensive position, which among others may include commercial paper,
bank acceptances, bank obligations, corporate debt securities, certificates of
deposit, U.S. Government securities and obligations of savings institutions and
repurchase agreements. Such securities are limited to:

U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;

Bank Obligations. Obligations (including certificates of deposit, time
deposits and bankers' acceptances) of banks subject to regulation by the U.S.
Government and having total assets of $1 billion or more, and instruments
secured by such obligations, not including obligations of foreign branches of
domestic banks except to the extent below;

Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;

Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;

4
<PAGE>

Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered
by the FDIC), limited to $100,000 principal amount per certificate and to 10%
or less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;

Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grade by Moody's
Investor's Service, Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AA by S&P or Aa by Moody's; and

Repurchase Agreements. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition, by
the Fund, of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides
that the Fund will sell back to the institution, and that the institution will
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to
the account to maintain full collateralization. The Fund will accrue interest
from the institution until the time when the repurchase is to occur. Although
this date is deemed by the Fund to be the maturity date of a repurchase
agreement, the maturities of securities subject to repurchase agreements are
not subject to any limits.

While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Adviser subject
to procedures established by the Trustees. In addition, as described above, the
value of the collateral underlying the repurchase agreement will be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not
to invest in repurchase agreements that do not mature within seven days if any
such investment, together with any other illiquid assets held by the Fund,
amounts to more than 15% of its net assets.

OPTION AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options. Listed options are issued or guaranteed by the exchange
on which they are traded or by a clearing corporation such as the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the Fund
the right to buy from the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security or currency covered by the option at the
stated exercise price (the price per unit of the underlying security) by filing
an exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC (in
the U.S.) or other clearing corporation or exchange, the underlying security or
currency at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security or currency to
the OCC (in the U.S.) or other clearing corporation or exchange, at the stated
exercise price. Upon notice of exercise of the put option, the writer of the
put would have the obligation to purchase the underlying security or currency
from the OCC (in the U.S.) or other clearing corporation or exchange, at the
excercise price.

Covered Call Writing. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar, without limit.

5
<PAGE>

The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (or currencies) alone.
Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (or currencies) underlying the option
decline in value.

The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. This obligation is terminated upon the expiration of
the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.

Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written.

Covered Put Writing. As a writer of a covered put option, the Fund incurs
an obligation to buy the security underlying the option from the purchaser of
the put, at the option's exercise price at any time during the option period,
at the purchaser's election. Through the writing of a put option, the Fund
would receive income from the premium paid by purchasers. The potential gain on
a covered put option is limited to the premium received on the option (less the
commissions paid on the transaction). During the option period, the Fund may be
required, at any time, to make payment of the exercise price against delivery
of the underlying security (or currency). The aggregate value of the
obligations underlying puts may not exceed 50% of the Fund's assets. The
operation of and limitations on covered put options in other respects are
substantially identical to those of call options.

Purchasing Call and Put Options. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.

OTC Options. OTC options are purchased from or sold (written) to dealers
or financial institutions which have entered into direct agreements with the
Fund. With OTC options, such variables as expiration date, exercise price and
premium will be agreed upon between the Fund and the transacting dealer,
without the intermediation of a third party such as the OCC. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
Bank System or primary dealers in U.S. Government securities or with affiliates
of such banks or dealers. The Fund will engage in OTC option transactions only
with member banks of the Federal Reserve System or primary dealers in U.S.
Government securities or with affiliates of such banks or dealers which have
capital of at least $50 million or whose obligations are guaranteed by an
entity having capital of at least $50 million.

Risks of Options Transactions. The successful use of options depends on
the ability of the Adviser to forecast correctly interest rates, currency
exchange rates and/or market movements. If the market value of the portfolio
securities (or the currencies in which they are denominated) upon which call
options have been written increases, the Fund may receive a lower total return
from the portion of its portfolio upon which calls have been written than it
would have had such calls not been written. During the option period, the
covered call writer has, in return for the premium on the option, given up the
opportunity for capital appreciation above the exercise price should the market
price of the underlying security (or the value of its denominated currency)
increase, but has retained the risk of loss should the price of the underlying
security (or the value of its denominated currency) decline. The covered put
writer also retains the risk of loss should the market value of the underlying
security decline below the exercise price of the option less the premium
received on the sale of the option. In both cases, the writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Prior to exercise or expiration, an option position can only be
terminated by entering into a closing purchase or sale transaction. Once an
option writer has received an exercise notice, it cannot effect a closing
purchase transaction in order to terminate its obligation under the option and
must deliver or receive the underlying securities at the exercise price.

6
<PAGE>

The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case
of OTC options.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.

Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone or in concert with others
(regardless of whether such options are written on the same or different
exchanges or are held or written on one or more accounts or through one or more
brokers). An exchange may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
These position limits may restrict the number of listed options which the Fund
may write.

The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be
reflected in the option markets.

Stock Index Options. The Fund may invest in options on broadly based
indexes. Options on stock indexes are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price,
an option on a stock index gives the holder the right to receive, upon exercise
of the option, an amount of cash if the closing level of the stock index upon
which the option is based is greater than, in the case of a call, or less than,
in the case of a put, the exercise price of the option. This amount of cash is
equal to such difference between the closing price of the index and the
exercise price of the option expressed in dollars times a specified multiple.
The writer of the option is obligated, in return for the premium received, to
make delivery of this amount.

Risks of Options on Indexes. Because exercises of stock index options are
settled in cash, the Fund could not, if it wrote a call option, provide in
advance for its potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the
securities held will vary from the value of the index. Even if an index call
writer could assemble a stock portfolio that exactly reproduced the composition
of the underlying index, the writer still would not be fully covered from a
risk standpoint because of the "timing risk" inherent in writing index options.

When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the writer will not learn that it had been assigned
until the next business day, at the earliest. The time lag between exercise and
notice of assignment poses no risk for the writer of a covered call on a
specific underlying security, such as a common stock, because there the
writer's obligation is to deliver the underlying security, not to pay its value
as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds stocks that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those stocks against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decrease in the value of its stock
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding stock positions.

7
<PAGE>

A holder of an index option who exercises it before the closing index
value for that day is available runs the risk that the level of the underlying
index may subsequently change. If a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.

If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.

Futures Contracts. The Fund may purchase and sell interest rate, currency
and index futures contracts that are traded on U.S. commodity exchanges on such
underlying securities as U.S. Treasury bonds, notes, bills and GNMA
Certificates and/or any foreign government fixed-income security, on various
currencies and on such indexes of U.S. securities as may exist or come into
existence.

A futures contract purchaser 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. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security or currency and protect against a rise in
prices pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security or currency
and protect against declines in the value of portfolio securities.

The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio securities against changes in their
prices. If the Adviser anticipates that the prices of securities held by the
Fund may fall, the Fund may sell an index futures contract. Conversely, if the
Fund wishes to hedge against anticipated price rises in those securities which
the Fund intends to purchase, the Fund may purchase an index futures contract.

In addition, interest rate, index futures will be bought or sold in order
to close out a short or long position maintained by the Fund in a corresponding
futures contract.

Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.

Margin. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" or cash or U.S. Government securities
or other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges
on which futures contracts trade and may, from time to time, change. In
addition, brokers may establish margin deposit requirements in excess of those
required by the exchanges.

Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a broker's client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract.

8
<PAGE>

The margin deposits made are marked to market daily and the Fund may be
required to make subsequent deposits of cash or U.S. Government securities,
called "variation margin," which are reflective of price fluctuations in the
futures contract.

Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect
to such options to terminate an existing position. An option on a futures
contract gives the purchaser the right (in return for the premium paid), and
the writer the obligation, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put)
at a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract at the time of
exercise exceeds, in the case of a call, or is less than, in the case of a put,
the exercise price of the option on the futures contract.

The writer of an option on a futures contract is required to deposit
initial and variation margin pursuant to requirements similar to those
applicable to futures contracts. Premiums received from the writing of an
option on a futures contract are included in initial margin deposits.

Limitations on Futures Contracts and Options in Futures. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however,
that in the case of an option that is in-the-money (the exercise price of the
call (put) option is less (more) than the market price of the underlying
security) at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. However, there is no overall limitation on the percentage
of the Fund's net assets which may be subject to a hedge position.

Risks of Transactions in Futures Contracts and Related Options. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities (and the currencies in which they are
denominated). Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates, market movements and/or currency exchange
rates against which the Fund seeks a hedge. A correlation may also be distorted
(a) temporarily, by short-term traders' seeking to profit from the difference
between a contract or security price objective and their cost of borrowed
funds; (b) by investors in futures contracts electing to close out their
contracts through offsetting transactions rather than meet margin deposit
requirements; (c) by investors in futures contracts opting to make or take
delivery of underlying securities rather than engage in closing transactions,
thereby reducing liquidity of the futures market; and (d) temporarily, by
speculators who view the deposit requirements in the futures markets as less
onerous than margin requirements in the cash market. Due to the possibility of
price distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Investment Manager may still
not result in a successful hedging transaction.

There is no assurance that a liquid secondary market will exist for
futures contracts and related options in which the Fund may invest. In the
event a liquid market does not exist, it may not be possible to close out a
futures position and, in the event of adverse price movements, the Fund would
continue to be required to make daily cash payments of variation margin. In
addition, limitations imposed by an exchange or board of trade on which futures
contracts are traded may compel or prevent the Fund from closing out a contract
which may result in reduced gain or increased loss to the Fund. The absence of
a liquid market in futures contracts might cause the Fund to make or take
delivery of the underlying securities (currencies) at a time when it may be
disadvantageous to do so.

Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures

9
<PAGE>

position until the daily limit moves have ceased. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments
of variation margin on open futures positions. In these situations, if the Fund
has insufficient cash, it may have to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous to do
so. In addition, the Fund may be required to take or make delivery of the
instruments underlying interest rate futures contracts it holds at a time when
it is disadvantageous to do so. The inability to close out options and futures
positions could also have an adverse impact on the Fund's ability to
effectively hedge its portfolio.

Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on
foreign exchanges. Greater margin requirements may limit the Fund's ability to
enter into certain commodity transactions on foreign exchanges. Moreover,
differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of the Fund's transactions effected on
foreign exchanges.

In the event of the bankruptcy of a broker through which the Fund engages
in transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the
broker and/or incur a loss of all or part of its margin deposits with the
broker.

ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.

A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.

INVESTMENT IN REAL ESTATE INVESTMENT TRUSTS. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Fund to invest in the
real estate industry (the Fund is prohibited from investing in real estate
directly). As a shareholder in a real estate investment trust, the Fund would
bear its ratable share of the real estate investment trust's expenses,
including its advisory and administration fees. At the same time the Fund would
continue to pay its own management fees, investment advisory fees and other
expenses, as a result of which the Fund and its shareholders in effect will be
absorbing duplicate levels of fees with respect to investments in real estate
investment trusts.

LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities
to brokers, dealers and other financial institutions, provided that the loans
are callable at any time by the Fund, and are at all times secured by cash or
cash equivalents, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least 100% of the market value,
determined daily, of the loaned securities. The advantage of these loans is
that the Fund continues to receive the income on the loaned securities while at
the same time earning interest on the cash amounts deposited as collateral,
which will be invested in short-term obligations. The Fund will not lend more
than 25% of the value of its total assets.

10
<PAGE>

As with any extensions of credit, there are risks of delay in recovery
and, in some cases, even loss of rights in the collateral should the borrower
of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Fund's management to be
creditworthy and when the income which can be earned from such loans justifies
the attendant risks. Upon termination of the loan, the borrower is required to
return the securities to the Fund. Any gain or loss in the market price during
the loan period would inure to the Fund.

When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of the
rights if the matters involved would have a material effect on the Fund's
investment in the loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. 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 these
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
commitment. While the Fund will only purchase securities on a when-issued,
delayed delivery or forward commitment basis with the intention of acquiring
the securities, the Fund may sell the securities before the settlement date, if
it is deemed advisable. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date.

At the time the Fund makes the commitment to purchase or sell securities
on a when-issued, delayed delivery or forward commitment basis, it will record
the transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. 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 its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase
securities on a when-issued, delayed delivery or forward commitment basis.

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 or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Adviser determines that issuance of the security is probable. At that time,
the Fund will record the transaction and, in determining its net asset value,
will reflect the value of the security daily. At that time, the Fund will also
establish a segregated account on the Fund's books in which it will maintain
cash or cash equivalents or other liquid portfolio securities equal in value to
recognized commitments for such securities.

An increase in the percentage of the Fund's assets committed to the
purchase of securities on a "when, as and if issued" basis may increase the
volatility of its net asset value. The Fund may also sell securities on a
"when, as and if issued" basis provided that the issuance of the security will
result automatically from the exchange or conversion of a security owned by the
Fund at the time of sale.

PRIVATE PLACEMENTS AND RESTRICTED SECURITIES. The Fund may invest up to
15% 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 (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 these 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 the
securities for resale and the risk of substantial delays in effecting the
registration.

11
<PAGE>

Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Adviser, pursuant to procedures
adopted by the Trustees, 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," the 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.

WARRANTS AND SUBSCRIPTION 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. A warrant is, in
effect, an option to purchase equity securities at a specific price, generally
valid for a specific period of time, and has no voting rights, pays no
dividends and has no rights with respect to the corporation issuing it. The
Fund may acquire warrants and subscription rights attached to other securities
without reference to the percentage limitations.

A subscription right is a privilege granted to existing shareholders of a
corporation to subscribe to shares of a new issue of common stock before it is
offered to the public. A subscription right normally has a life of two to four
weeks and a subscription price lower than the current market value of the
common stock. A subscription right is freely transferable. The Fund may invest
up to 5% of the value of its net assets in rights.

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.

C. FUND POLICIES/INVESTMENT RESTRICTIONS

The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act
of 1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the
Fund. The Investment Company Act defines a majority as the lesser of (a) 67% or
more of the shares present at a meeting of shareholders, if the holders of 50%
of the outstanding shares of the Fund are present or represented by proxy; or
(b) more than 50% of the outstanding shares of the Fund. For purposes of the
following restrictions: (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 will:

1. Seek capital appreciation.

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 or to cash equivalents.

12
<PAGE>

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 3
years of continuous operation. This restriction does not apply to any
obligation of the United States Government, its agencies or
instrumentalities.

3. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.

4. Purchase oil, gas or other mineral leases, rights or royalty contracts,
or exploration or development programs, except that the Fund may invest
in the securities of companies which operate, invest in, or sponsor such
programs.

5. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell financial or stock index futures contracts.

6. Borrow money, except that the Fund may borrow from a bank for temporary
or emergency purposes in amounts not exceeding 5% (taken at the lower of
cost or current value) of its total assets (not including the amount
borrowed).

7. Pledge its assets or assign or otherwise encumber them except to secure
permitted borrowings effected within the limitations set forth in
restriction (6). For the purpose of this restriction, collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.

8. Issue senior securities as defined in the Investment Company Act, except
insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) purchasing
any securities on a when-issued or delayed delivery basis; (c)
purchasing or selling any financial futures contracts; (d) borrowing
money, or (e) lending portfolio securities.

9. Make loans of money or securities, except: (a) by the purchase of
portfolio securities; (b) by investment in repurchase agreements; or (c)
by lending its portfolio securities.

10. Make short sales of securities.

11. Purchase securities on margin, except for short-term loans as are
necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts or related options thereon is not considered the
purchase of a security on margin.

12. Engage in the underwriting of securities, except insofar as the Fund may
be deemed an underwriter under the Securities Act in disposing of a
portfolio security.

13. Invest for the purpose of exercising control or management of any other
issuer.

In addition, as a non-fundamental policy, the Fund may not (1) as to 75%
of its assets, purchase more than 10% of the voting securities of any issuer,
and (2) purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets or by
purchase in the open market of securities of closed-end investment companies
where no underwriter's or dealer's commission or profit, other than customary
broker's commissions, is involved and only if immediately thereafter not more
than (a) 5% of the Fund's total assets, taken at market value, would be
invested in any one such company and (b) 10% of the Fund's total assets would
be invested in such securities.

Notwithstanding any other investment policy or restriction, the Fund may
seek to achieve its investment objective by investing all or substantially all
of its assets in another investment company having substantially the same
investment objective and policies as the Fund.

13
<PAGE>

III. MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

A. BOARD OF TRUSTEES

The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Adviser to ensure that the Fund's general
investment policies and programs are properly carried out. The Trustees also
conduct their review of the Manager to ensure that administrative services are
provided to the Fund in a satisfactory manner.

Under state law, the duties of the Trustees are generally characterized as
a duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's
own interest or the interest of another person or organization. A Trustee
satisfies his or her duty of care by acting in good faith with the care of an
ordinarily prudent person and in a manner the Trustee reasonably believes to be
in the best interest of the Fund and its shareholders.

B. MANAGEMENT INFORMATION

TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as trustees for all of the TCW/DW
Funds. Four Trustees (50% of the total number) have no affiliation or business
connection with the Manager or Adviser or any of their affiliated persons and
do not own any stock or other securities issued by the Manager's parent
company, MSDW or the Adviser's parent company, TCW. These are the
"disinterested" or "independent" Trustees. The other four Trustees (the
"Management Trustees") are affiliated with the Manager or Adviser. Three of the
four Independent Trustees also serve as Independent Trustees of "Discover
Brokerage Index Series" a mutual fund for which the Manager is the investment
advisor. Four of the five Independent Trustees are also Independent Trustees of
the Morgan Stanley Dean Witter Funds.

The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Manager or the Adviser, and with the 85 Morgan Stanley Dean Witter Funds, the
11 TCW/DW Funds and Discover Brokerage Index Series are shown below.

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
John C. Argue (67) ........................ Of Counsel, Argue Pearson Harbison & Myers (law
Trustee firm); Trustee of the TCW/DW Funds; Director,
c/o Argue Pearson Harbison & Myers Avery Dennison Corporation (manufacturer of
801 South Flower Street self-adhesive products and office supplies);
Los Angeles, California Chairman, The Rio Hondo Memorial Foundation
(charitable foundation); advisory director, LAACO
Ltd. (owner and operator of private clubs and real
estate); director or trustee of various business and
not-for-profit corporations; Director, TCW Galileo
Funds, Inc.; Director, TCW Convertible Securities
Fund, Inc.; Director, Apex Mortgage Capital, Inc.
and Nationwide Health Properties, Inc. (real estate
investment trusts).

Richard M. DeMartini* (46) ................ President and Chief Operating Officer of Morgan
Trustee Stanley Dean Witter Individual Asset Management
Two World Trade Center Group, a business unit of MSDW; President and
New York, New York Chief Operating Officer of Dean Witter Reynolds;
Trustee of the TCW/DW Funds and the Van
Kampen American Capital Funds; Director and/or
officer of various MSDW subsidiaries; formerly
Vice Chairman of the Board of the National
Association of Securities Dealers, Inc.; and
Chairman of the Board of Directors of the NASDAQ
Market, Inc.
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (65) .............. Chairman, Chief Executive Officer and Trustee of
Chairman of the Board, President, the TCW/DW Funds; Chairman, Director or Trustee
Chief Executive Officer and Trustee and Chief Executive Officer of the Morgan Stanley
Two World Trade Center Dean Witter Funds; Trustee of Discover Brokerage
New York, New York Index Series; formerly Chairman, Chief Executive
Officer and Director of the Manager, the Distributor
and MSDW Advisors; Executive Vice President
and Director of Dean Witter Reynolds; Chairman
and Director of the Transfer Agent; formerly Director
and/or officer of various Morgan Stanley Dean
Witter subsidiaries (until June, 1998).

Dr. Manuel H. Johnson (50) ................ Senior Partner, Johnson Smick International, Inc.,
Trustee a consulting firm; Co-Chairman and a founder of
c/o Johnson Smick International, Inc. the Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Chairman of the Audit
Washington, D.C. Committee and Director or Trustee of the TCW/DW
Funds, the Morgan Stanley Dean Witter Funds and
Discover Brokerage Index Series; Director of
Greenwich Capital Markets, Inc. (broker-dealer)
and NVR, Inc. (home construction); Chairman and
Trustee of the Financial Accounting Foundation
(oversight organization of the Financial Accounting
Standards Board); formerly Vice Chairman of the
Board of Governors of the Federal Reserve System
(1986-1990) and Assistant Secretary of the U.S.
Treasury.

Thomas E. Larkin, Jr.* (59) ............... Executive Vice President and Director, TCW;
Trustee President and Director, Trust Company of the
865 South Figueroa Street West; Vice Chairman and Director of TCW Asset
Los Angeles, California Management Company; Vice Chairman and
Director of the Adviser; President and Director of
TCW Galileo Funds, Inc.; Senior Vice President of
TCW Convertible Securities Fund, Inc.; Trustee of
the TCW/DW Funds; Member of the Board of
Trustees of the University of Notre Dame; Director
of Los Angeles Orthopaedic Hospital Foundation.

Michael E. Nugent (62) .................... General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; Chairman of the Insurance
c/o Triumph Capital, L.P. Committee and Director or Trustee of the TCW/DW
237 Park Avenue Funds, the Morgan Stanley Dean Witter Funds and
New York, New York Discover Brokerage Index Series; formerly Vice
President, Bankers Trust Company and BT Capital
Corporation (1984-1988); Director of various
business organizations.

John L. Schroeder (68) .................... Retired; Chairman of the Derivatives Committee
Trustee and Director or Trustee of the TCW/DW Funds, the
c/o Gordon Altman Butowsky Morgan Stanley Dean Witter Funds and Discover
Weitzen Shalov & Wein Brokerage Index Series; Director of Citizens Utilities
Counsel to the Independent Trustees Company; formerly Executive Vice President and
114 West 47th Street Chief Investment Officer of the Home Insurance
New York, New York Company (August, 1991-September, 1995).
</TABLE>

15
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Marc I. Stern* (54) ....................... President and Director, TCW; Chairman and
Trustee Director of the Adviser; Vice Chairman and Director
865 South Figueroa Street of TCW Asset Management Company; Executive
Los Angeles, California Vice President and Director of Trust Company of
the West; Chairman and Director of the TCW
Galileo Funds, Inc.; Trustee of the TCW/DW Funds;
formerly President and Director of SunAmerica,
Inc. (financial services company) (1988-1990);
Director of Qualcomm, Incorporated (wireless
communications); director or trustee of various
not-for-profit organizations.

Mitchell M. Merin (45) .................... President and Chief Operating Officer of Asset
President Management of MSDW (since December, 1998);
Two World Trade Center President and Director (since April, 1997) and
New York, New York Chief Executive Officer (since June, 1998) of the
Manager and MSDW Advisors; Chairman, Chief
Executive Officer and Director of the Distributor
(since June, 1998); Chairman and Chief Executive
Officer (since June, 1998) and Director (since
January, 1998) of the Transfer Agent; Director of
various MSDW subsidiaries; President of the
TCW/DW Funds, the Morgan Stanley Dean Witter
Funds and Discover Brokerage Index Series (since
May, 1999); previously Chief Strategic Officer of
the Manager and MSDW Advisors and Executive
Vice President of the Distributor (April, 1997-June,
1998), Vice President of the TCW/DW Funds, the
Morgan Stanley Dean Witter Funds and Discover
Brokerage Index Series (May, 1997-April, 1999),
and Executive Vice President of Dean Witter,
Discover & Co.

Barry Fink (44) ........................... Senior Vice President (since March, 1997),
Vice President, Secretary and General Counsel (since February,
Secretary and General Counsel 1997) and Director (since July, 1998) of the
Two World Trade Center Manager and MSDW Advisors; Senior Vice
New York, New York President (since March, 1997) and Assistant
Secretary and Assistant General Counsel (since
February, 1997) of the Distributor; Assistant
Secretary of Dean Witter Reynolds (since August,
1996); Vice President, Secretary and General
Counsel of the TCW/DW Funds and the Morgan
Stanley Dean Witter Funds (since February, 1997);
Vice President, Secretary and General Counsel of
Discover Brokerage Index Series; previously First
Vice President (June, 1993-February, 1997), Vice
President and Assistant Secretary and Assistant
General Counsel of the Manager and MSDW
Advisors and Assistant Secretary of the TCW/DW
Funds and the Morgan Stanley Dean Witter Funds.

Charles Larsen (54) ....................... Managing Director of the Adviser, Trust Company
Vice President of the West and TCW Asset Management
865 South Figueroa Street Company.
Los Angeles, California
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ------------------------------------------- ----------------------------------------------------
<S> <C>
Douglas S. Foreman (41) ................... Managing Director of the Adviser, Trust Company
Vice President of the West and TCW Asset Management Company
865 South Figueroa Street (since May, 1994); previously portfolio manager
Los Angeles, California with Putnam Investments.

Christopher J. Ainley (40) ................ Managing Director of the Adviser, Trust Company
Vice President of the West and TCW Asset Management Company
865 South Figueroa Street (since February, 1996); formerly Senior Vice
Los Angeles, California President of the Adviser, Trust Company of the
West and TCW Asset Management Company (May,
1994-February, 1996); previously portfolio manager
with Putnam Investments.

Thomas F. Caloia (53) ..................... First Vice President and Assistant Treasurer of the
Treasurer Manager and MSDW Advisors; Treasurer of the
Two World Trade Center TCW/DW Funds, the Morgan Stanley Dean Witter
New York, New York Funds and Discover Brokerage Index Series.
</TABLE>

- ----------
* Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.

In addition, Ronald E. Robison, Executive Vice President, Chief
Administrative Officer and Director of the Manager and MSDW Advisors, and
Robert S. Giambrone, Senior Vice President of the Manager, MSDW Advisors, the
Distributor and the Transfer Agent and Director of the Transfer Agent are Vice
Presidents of the Fund.

In addition, Frank Bruttomesso, Marilyn K. Cranney, Lou Anne D. McInnis,
Carsten Otto and Ruth Rossi, First Vice Presidents and Assistant General
Counsels of the Manager and MSDW Advisors, and Todd Lebo, Vice President and
Assistant General Counsel of the Manager and MSDW Advisors, are Assistant
Secretaries of the Fund.

INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The TCW/DW
Funds seek as Independent Trustees individuals of distinction and experience in
business and finance, government service or academia; these are people whose
advice and counsel are in demand by others and for whom there is often
competition. To accept a position on the Funds' Boards, such individuals may
reject other attractive assignments because the Funds make substantial demands
on their time. All of the Independent Trustees serve as members of the Audit
Committee. In addition, two of the Trustees, including one Independent Trustee,
serve as members of the Derivatives Committee and the Insurance Committee.

The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Each of the open-end TCW/DW Funds has a Rule 12b-1 plan.

The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.

17
<PAGE>

The Board of each Fund has a Derivatives Committee to approve parameters
for and monitor the activities of the Fund with respect to derivative
investments, if any, made by the Fund.

Finally, the Board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.

ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR TCW/DW
FUNDS. The Independent Trustees and the Funds' management believe that having
the same Independent Trustees for each of the TCW/DW Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and
enhances their ability to negotiate on behalf of each Fund with the Fund's
service providers. This arrangement also precludes the possibility of separate
groups of Independent Trustees arriving at conflicting decisions regarding
operations and management of the Funds and avoids the cost and confusion that
would likely ensue. Finally, having the same Independent Trustees serve on all
Fund Boards enhances the ability of each Fund to obtain, at modest cost to each
separate Fund, the services of Independent Trustees, of the caliber, experience
and business acumen of the individuals who serve as Independent Trustees of the
TCW/DW Funds.

TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer, employee or agent
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his/her or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his/her or its duties.
It also provides that all third persons shall look solely to the Fund property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liability
in connection with the affairs of the Fund.

C. COMPENSATION

The Fund pays each Independent Trustee an annual fee of $2,800 plus a per
meeting fee of $200 for meetings of the Board of Trustees or Committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an additional annual fee of $750, the Chairman of the Committee
of the Independent Trustees an additional annual fee of $1,200, and pays the
Chairman of the Derivatives and Insurance Committees annual fees of $500). If a
Board meeting and a Committee meeting, or more than one Committee meeting, take
place on a single day, the Trustees are paid a single meeting fee by the Fund.
The Fund also reimburses such Trustees for travel and other out-of-pocket
expenses incurred by them in connection with attending such meetings. Trustees
and officers of the Fund who are or have been employed by the Manager, the
Adviser or an affiliated company receive no compensation or expenses reimbursed
from the Fund for their services as Trustee. The Trustees of the TCW/DW Funds
do not have retirement or deferred compensation plans.

The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended February 28, 1999.

FUND COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
--------------------------- -------------
<S> <C>
John C. Argue ................. $5,800
Dr. Manuel H. Johnson ......... 5,800
Michael E. Nugent ............. 5,800
John L. Schroeder ............. 6,000
</TABLE>

The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 11 TCW/DW Funds that were in operation

18
<PAGE>

at December 31, 1998, and, in the case of Messrs. Johnson, Nugent and
Schroeder, the 85 Morgan Stanley Dean Witter Funds that were in operation at
December 31, 1998; and, in the case of Mr. Argue, TCW Galileo Funds, Inc. and
TCW Convertible Securities Fund, Inc. With respect to Messrs. Johnson, Nugent
and Schroeder, the Morgan Stanley Dean Witter Funds are included solely because
of a limited exchange privilege between various TCW/DW Funds and five Morgan
Stanley Dean Witter Money Market Funds. With respect to Mr. Argue, TCW Galileo
Funds, Inc. and TCW Convertible Securities Fund, Inc. are included solely
because the Fund's Adviser, TCW Funds Management, Inc., also serves as Advisor
to those investment companies.

CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS

<TABLE>
<CAPTION>
FOR SERVICE TOTAL CASH
AS DIRECTOR COMPENSATION
OR TRUSTEE FOR SERVICE FOR SERVICES
AND COMMITTEE AS TRUSTEE TO 85
MEMBER OF 85 AND COMMITTEE MORGAN STANLEY
MORGAN STANLEY MEMBER OF 11 DEAN WITTER
NAME OF DEAN WITTER TCW/DW FUNDS AND 11
INDEPENDENT TRUSTEE FUNDS FUNDS TCW/DW FUNDS
- ------------------- ----- ----- ------------
<S> <C> <C> <C>
John C. Argue ................. -- $62,331 $ 62,331
Dr. Manuel H. Johnson ......... $128,400 62,331 190,731
Michael E. Nugent ............. 132,450 62,131 194,581
John L. Schroeder ............. 132,450 64,731 197,181
</TABLE>

As of the date of this Statement of Additional Information, 55 of the
Morgan Stanley Dean Witter Funds have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Morgan Stanley Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service.

Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation
plus 0.5036667% of such Eligible Compensation for each full month of service as
an Independent Director or Trustee of any Adopting Fund in excess of five years
up to a maximum of 60.44% after ten years of service. The foregoing percentages
may be changed by the Board.(1) "Eligible Compensation" is one-fifth of the
total compensation earned by such Eligible Trustee for service to the Adopting
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.

The following table illustrates the retirement benefits accrued to Messrs.
Johnson, Nugent and Schroeder by the 55 Morgan Stanley Dean Witter Funds for
the year ended December 31, 1998, and the estimated retirement benefits for the
Independent Trustees, to commence upon their retirement, from the 55 Morgan
Stanley Dean Witter Funds as of December 31, 1998.

RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS

<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS
---------------------------------
ESTIMATED
CREDITED
YEARS ESTIMATED RETIREMENT BENEFITS ESTIMATED ANNUAL
OF SERVICE AT PERCENTAGE OF ACCRUED AS EXPENSES BENEFITS UPON RETIREMENT
NAME OF RETIREMENT ELIGIBLE BY ALL FROM ALL
INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION ADOPTING FUNDS ADOPTING FUNDS(2)
- ------------------- ------------ ------------ -------------- -----------------
<S> <C> <C> <C> <C>
Dr. Manuel H. Johnson 10 60.44 $14,047 $52,250
Michael E. Nugent ......... 10 60.44 25,336 52,250
John L. Schroeder ......... 8 50.37 45,117 44,343
</TABLE>

- ----------
(1) An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee and
his or her spouse on the date of such Eligible Trustee's retirement.

19
<PAGE>

In addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.

(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote 1 above.

IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------

The following persons owned 5% or more of the Class A Shares of the Fund
as of April 23, 1999: Morgan Stanley Dean Witter Trust FSB, Trustee, Northeast
Regional Medical Center, P.O. Box 957, Jersey City, NJ 07303-0957 -- 32.236%;
Morgan Stanley Dean Witter Trust FSB, Trustee, Physician Primary Care, P.O. Box
957, Jersey City, NJ 07303-0957 -- 11.154%; Beatus Pension Trust U/A DTD 3/1/71
B.L. Beatus M.D., Trustee, 55 Humphreys Center, Suite 300, Memphis, TN
38120-2367 -- 6.941%; Morgan Stanley Dean Witter Trust FSB, Trustee, West Coast
Beauty Supply Co. Retirement Savings Plan, P.O. Box 957, Jersey City, NJ
07373-0957 -- 5.624%; Reed A. Larson and Joyce A. Larson, JT WROS, N7766
Highway 26, Watertown, WI 53094-9440 -- 5.127%; The following persons owned 5%
or more of the Class C Shares of the Fund as of April 23, 1999: Nino
Karamzadeh, P.O. Box 560525, Dallas, TX 75356-0525 -- 6.035%; David W. Adams,
808 Lake Meadows Circle, Rockwall, TX 75087-3672 -- 5.936%; The following
persons owned 5% or more of the Class D Shares of the Fund as of April 23,
1999: Morgan Stanley Dean Witter Advisors Inc., Attn: Maurice Bendrihem, Two
World Trade Center, 73rd Floor, New York, NY 10048-0203 -- 99.785%.

As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1% of the Fund's shares of
beneficial interest outstanding.

V. MANAGEMENT, INVESTMENT ADVICE AND OTHER SERVICES
- --------------------------------------------------------------------------------

A. MANAGER

The Manager to the Fund is Morgan Stanley Dean Witter Services Company, a
Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048. The Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter Advisors Inc., a Delaware corporation. Morgan Stanley Dean Witter
Advisors is a wholly-owned subsidiary of Morgan Stanley, Dean Witter & Co.
("MSDW"), a Delaware corporation. MSDW is a preeminent global financial
services firm that maintains leading market positions in each of its three
primary businesses: securities, asset management and credit services.

Pursuant to a Management Agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. The Fund pays the Manager monthly compensation calculated daily by
applying the annual rate of 0.60% to the net assets of the Fund determined as
of the close of each business day. The management fee is allocated among the
Classes pro rata based on the net assets of the Fund attributable to each
Class. For the fiscal years ended February 28, 1997, 1998 and 1999, the Manager
accrued total compensation under the Management Agreement in the amounts of
$1,565,847, $1,831,059 and $1,913,167, respectively.

B. THE ADVISER

The Adviser to the Fund is TCW Funds Management, Inc., a wholly-owned
subsidiary of TCW, whose direct and indirect subsidiaries provide a variety of
trust, investment management and investment advisory services. The Adviser is
headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017.

Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the

20
<PAGE>

purchase and sale of portfolio securities. The Fund pays the Adviser monthly
compensation calculated daily by applying the annual rate of 0.40% to the net
assets of the Fund determined as of the close of each business day. The
advisory fee is allocated among the Classes pro rata based on the net assets of
the Fund attributable to each Class. For the fiscal years ended February 28,
1997, 1998 and 1999, the Adviser accrued total compensation under the Advisory
Agreement in the amounts of $1,043,898, $1,220,706 and $1,275,444,
respectively.

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.

C. PRINCIPAL UNDERWRITER

The Fund's principal underwriter is the Distributor (which has the same
address as the Manager). In this capacity, the Fund's shares are distributed by
the Distributor. The Distributor has entered into a selected dealer agreement
with Dean Witter Reynolds, which through its own sales organization sells
shares of the Fund. In addition, the Distributor may enter into similar
agreements with other selected broker-dealers. The Distributor, a Delaware
corporation, is a wholly-owned subsidiary of MSDW.

The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. These expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to
Financial Advisors. The Distributor also pays certain expenses in connection
with the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal and state securities laws and
pays filing fees in accordance with state securities laws.

The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.

D. SERVICES PROVIDED BY THE MANAGER, THE ADVISER AND FUND EXPENSES PAID BY
THIRD PARTIES

Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, the office
space, facilities, equipment, clerical help, bookkeeping and certain legal
services as the Fund may reasonably require in the conduct of its business,
including the preparation of prospectuses, proxy statements and reports
required to be filed with federal and state securities commissions (except
insofar as the participation or assistance of independent accountants and
attorneys is, in the opinion of the Manager, necessary or desirable). In
addition, the Manager pays the salaries of all personnel, including officers of
the Fund, who are employees of the Manager. The Manager also bears the cost of
telephone service, heat, light, power and other utilities provided to the Fund.

The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for any act or omission by the Manager or for any losses sustained by
the Fund or its investors.

The Management Agreement had an initial term ending April 30, 1994 and
will remain in effect from year to year thereafter, provided continuance of the
Management Agreement is approved at least annually by the vote of the holders
of a majority, as defined in the Investment Company Act, of the outstanding
shares of the Fund, or by the Trustees; provided that in either event such
continuance is

21
<PAGE>

approved annually by the vote of a majority of the Trustees. At a meeting held
on April 30, 1998, the Board of Trustees, including the Independent Trustees,
approved continuance of the Management Agreement until April 30, 1999.

Under the terms of the Advisory Agreement, the Adviser invests the Fund's
assets, including placing orders for the purchase and sale of portfolio
securities. The Adviser obtains and evaluates such information and advice
relating to the economy, securities markets, and specific securities as it
considers necessary or useful to continuously manage the assets of the Fund in
a manner consistent with its investment objective. In addition, the Adviser
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Adviser.

The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable to the Fund or any of its
investors for any act or omission by the Adviser or for any losses sustained by
the Fund or its investors. The Advisory Agreement in no way restricts the
Adviser from acting as investment adviser to others.

The Advisory Agreement had an initial term ending April 30, 1994, and
provides that it will continue from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the vote of the
holders of a majority, as defined in the Act, of the outstanding shares of the
Fund, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees of the Fund, which vote must be cast in person at a meeting called for
the purpose of voting on such approval. At a meeting held on April 30, 1998,
the Board of Trustees, including the Independent Trustees, approved the
continuance of the Advisory Agreement until April 30, 1999.

Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor,
will be paid by the Fund. These expenses will be allocated among the four
Classes of shares pro rata based on the net assets of the Fund attributable to
each Class, except as described below. Such expenses include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1;
charges and expenses of any registrar, custodian, stock transfer and dividend
disbursing agent; brokerage commissions; taxes; engraving and printing share
certificates; registration costs of the Fund and its shares under federal and
state securities laws; the cost and expense of printing, including typesetting,
and distributing prospectuses of the Fund and supplements thereto to the Fund's
shareholders; all expenses of shareholders' and Trustees' meetings and of
preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees of the Manager or Adviser or any
corporate affiliate of either; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund or
of the Manager or the Adviser (not including compensation or expenses of
attorneys who are employees of the Manager or the Adviser); fees and expenses
of the Fund's independent accountants; membership dues of industry
associations; interest on Fund borrowings; postage; insurance premiums on
property or personnel (including officers and Trustees) of the Fund which inure
to its benefit; extraordinary expenses (including, but not limited to, legal
claims and liabilities and litigation costs and any indemnification relating
thereto); and all other costs of the Fund's operation. The 12b-1 fees relating
to a particular Class will be allocated directly to that Class. In addition,
other expenses associated with a particular Class (except advisory or custodial
fees) may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.

E. DEALER REALLOWANCES

Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge 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.

22
<PAGE>

F. RULE 12B-1 PLAN

The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Investment Company Act (the "Plan") pursuant to which each Class, other
than Class D, pays the Distributor compensation accrued daily and payable
monthly at the following annual rates: 0.25% and 1.0% of the average daily net
assets of Class A and Class C, respectively, and, with respect to Class B, 1.0%
of the lesser of: (a) the average daily aggregate gross sales of the Fund's
Class B shares since the inception of the Fund (not including reinvestment of
dividends or capital gains distributions), less the average daily aggregate net
asset value of the Fund's Class B shares redeemed since the Fund's inception
upon which a contingent deferred sales charge has been imposed or upon which
such charge has been waived; or (b) the average daily net assets of Class B
shares.

The Distributor also receives the proceeds of front-end sales charges
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or Dean Witter
Reynolds received the proceeds of CDSCs and FSCs, for the last three fiscal
years ended February 28, in approximate amounts as provided in the table below
(the Distributor did not retain any of these amounts).

<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Class A .......... FSCs:(1) $ 17,451 FSCs: $ 13,125 FSCs: N/A(2)
CDSCs: $ 0 CDSCs: $ 0 CDSCs: N/A(2)
Class B .......... CDSCs: $1,029,288 CDSCs: $1,164,710 CDSCs: $648,629
Class C .......... CDSCs: $ 2,813 CDSCs: $ 685 CDSCs: N/A(2)
</TABLE>

- ----------

(1) FSCs apply to Class A only.
(2) This Class commenced operations on July 28, 1997.

The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.25% of such Class' average daily net assets are
currently each characterized as a "service fee" under the Rules of the National
Association of Securities Dealers, Inc. (of which the Distributor is a member).
The "service fee" is a payment made for personal service and/or the maintenance
of shareholder accounts. The remaining portion of the Plan fees payable by a
Class, if any, is characterized as an "asset-based sales charge" as such is
defined by the Rules of the Association.

Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report
provided by the Distributor of the amounts expended under the Plan and the
purpose for which such expenditures were made. Class B shares of the Fund
accrued amounts payable to the Distributor under the Plan, during the fiscal
year ended February 28, 1999, of $2,909,563. This amount is equal to 0.92% of
the average daily net sales of Class B for the fiscal year and was calculated
pursuant to clause (b) of the compensation formula under the Plan. For the
fiscal year ended February 28, 1999, Class A and Class C shares of the Fund
accrued payments under the Plan amounting to $2,753 and $14,300, respectively,
which amounts are equal to 0.24% and 1.00% of the average daily net assets of
Class A and Class C, respectively, for the fiscal year.

The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.

With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for
the sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer-sponsored employee
benefit plans, whether or not qualified under the Internal Revenue Code, for
which the Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement
Plan Services serves as recordkeeper pursuant

23
<PAGE>

to a written Recordkeeping Services Agreement ("MSDW Eligible Plans"), MSDW
Advisors compensates Financial Advisors by paying them, from its own funds, a
gross sales credit of 1.0% of the amount sold.

With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 5.0% of the amount
sold (except as provided in the following sentence) and an annual residual
commission, currently a residual of up to 0.25% of the current value (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased on or after July 28, 1997 by
MSDW Eligible Plans, Dean Witter Reynolds compensates its Financial Advisors by
paying them, from its own funds, a gross sales credit of 3.0% of the amount
sold.

With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 1.0% of the current
value of the respective accounts for which they are the Financial Advisors of
record.

With respect to Class D shares other than shares held by participants in
MSDW Advisor's mutual fund asset allocation program, the MSDW Advisor
compensates Dean Witter Reynolds' Financial Advisors by paying them, from its
own funds, commissions for the sale of Class D shares, currently a gross sales
credit of up to 1.0% of the amount sold. There is a chargeback of 100% of the
amount paid if the Class D shares are redeemed in the first year and a
chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Manager also compensates Dean Witter Reynolds'
Financial Advisors by paying them, from its own funds, an annual residual
commission, currently up to 0.10% of the current value of the respective
accounts for which they are the Financial Advisors of record (not including
accounts of participants in MSDW Advisor's mutual fund asset allocation
program).

The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation,
and overhead and other branch office distribution-related expenses including
(a) the expenses of operating Dean Witter Reynolds' branch offices in
connection with the sale of Fund shares, including lease costs, the salaries
and employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.

The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on
behalf of the Fund and, in the case of Class B shares, opportunity costs, such
as the gross sales credit and an assumed interest charge thereon ("carrying
charge"). In the Distributor's reporting of the distribution expenses to the
Fund, in the case of Class B shares, such assumed interest (computed at the
"broker's call rate") has been calculated on the gross credit as it is reduced
by amounts received by the Distributor under the Plan and any contingent
deferred sales charges received by the Distributor upon redemption of shares of
the Fund. No other interest charge is included as a distribution expense in the
Distributor's calculation of its distribution costs for this purpose. The
broker's call rate is the interest rate charged to securities brokers on loans
secured by exchange-listed securities.

The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event
exceed an amount equal to a payment at the annual rate of 0.25%, in the case of
Class A, and 1.0%, in the case of Class C, of the average net assets of the
respective Class during the month. No interest or other financing charges, if
any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Financial Advisors

24
<PAGE>

and other authorized financial representatives, such amounts shall be
determined at the beginning of each calendar quarter by the Trustees,
including, a majority of the Independent Trustees. Expenses representing the
service fee (for Class A) or a gross sales credit or a residual to Financial
Advisors and other authorized financial representatives (for Class C) may be
reimbursed without prior determination. In the event that the Distributor
proposes that monies shall be reimbursed for other than such expenses, then in
making quarterly determinations of the amounts that may be reimbursed by the
Fund, the Distributor will provide and the Trustees will review a quarterly
budget of projected distribution expenses to be incurred on behalf of the Fund,
together with a report explaining the purposes and anticipated benefits of
incurring such expenses. The Trustees will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.

Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended February 28, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $26,453,019 on behalf of Class B since the inception of the Plan. It
is estimated that this amount was spent in approximately the following ways:
(i) 10.46% ($2,766,369)--advertising and promotional expenses; (ii) 0.66%
($174,893)--printing and mailing of prospectuses for distribution to other than
current shareholders; and (iii) 88.88% ($23,511,757)--other expenses, including
the gross sales credit and the carrying charge, of which 8.53% ($2,006,557)
represents carrying charges, 37.87% ($8,903,153) represents commission credits
to Dean Witter Reynolds branch offices and other selected broker-dealers for
payments of commissions to Financial Advisors and other authorized financial
representatives, and 53.60% ($12,602,047) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and Class
C for distribution during the fiscal year ended February 28, 1999 were for
expenses which relate to compensation of sales personnel and associated
overhead expenses.

In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of 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 in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $12,935,646 as of February 28, 1999 (the end of
the Fund's fiscal year), which was equal to 4.01% 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 with respect to Class B
shares or any requirement that the Plan be continued from year to year, this
excess amount does not constitute a liability of the Fund. Although there is no
legal obligation for the Fund to pay expenses 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 authorized financial 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 authorized financial
representatives at the time of sale totaled $4,969 in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to
0.24% of the net assets of Class C on such

25
<PAGE>

date, and that there were no such expenses that may be reimbursed in the
subsequent year in the case of Class A on such date. No interest or other
financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.

No interested person of the Fund nor any Independent Trustee has any
direct financial interest in the operation of the Plan except to the extent
that the Distributor, the Manager, Dean Witter Reynolds, MSDW Advisors or
certain of their employees may be deemed to have such an interest as a result
of benefits derived from the successful operation of the Plan or as a result of
receiving a portion of the amounts expended thereunder by the Fund.

On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan, including that: (a) the Plan is essential in order to
give Fund investors a choice of alternatives for payment of distribution and
service charges and to enable the Fund to continue to grow and avoid a pattern
of net redemptions which, in turn, are essential for effective investment
management; and (b) without the compensation to individual brokers and the
reimbursement of distribution and account maintenance expenses of Dean Witter
Reynolds' branch offices made possible by the 12b-1 fees, Dean Witter Reynolds
could not establish and maintain an effective system for distribution,
servicing of Fund shareholders and maintenance of shareholder accounts; and (3)
what services had been provided and were continuing to be provided under the
Plan to the Fund and its shareholders. Based upon their review, the Trustees,
including each of the Independent Trustees, determined that continuation of the
Plan would be in the best interest of the Fund and would have a reasonable
likelihood of continuing to benefit the Fund and its shareholders. In the
Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.

The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.

G. OTHER SERVICE PROVIDERS

(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT

Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans. The principal business address of the Transfer Agent is
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.

(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS

The Bank of New York, 90 Washington Street, New York, New York 10286, is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.

PricewaterhouseCoopers LLP, 1177 Avenue of the Americas, New York, New
York 10036, serves as the independent accountants of the Fund. The independent
accountants are responsible for auditing the annual financial statements of the
Fund.

26
<PAGE>

(3) AFFILIATED PERSONS

The Transfer Agent is an affiliate of the Manager, and of the Distributor.
As Transfer Agent and Dividend Disbursing Agent, the Transfer Agent's
responsibilities include maintaining shareholder accounts, disbursing cash
dividends and reinvesting dividends, processing account registration changes,
handling purchase and redemption transactions, mailing prospectuses and
reports, mailing and tabulating proxies, processing share certificate
transactions, and maintaining shareholder records and lists. For these
services, the Transfer Agent receives a per shareholder account fee from the
Fund and is reimbursed for its out-of-pocket expenses in connection with such
services.

VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------

A. BROKERAGE TRANSACTIONS

Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. The Fund also expects that securities will be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid.

During the fiscal years ended February 28, 1997, 1998 and 1999, the Fund
paid a total of $157,019, $212,905 and $201,332, respectively, in brokerage
commissions.

B. COMMISSIONS

Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through Dean Witter Reynolds, Morgan Stanley & Co. and other
affiliated brokers and dealers. In order for an affiliated broker or dealer to
effect any portfolio transactions on an exchange for the Fund, the commissions,
fees or other remuneration received by the affiliated broker or dealer must be
reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow the affiliated broker or dealer to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Trustees, including the Independent Trustees, have adopted procedures which
are reasonably designed to provide that any commissions, fees or other
remuneration paid to an affiliated broker or dealer are consistent with the
foregoing standard. The Fund does not reduce the management fee it pays to the
Manager by any amount of the brokerage commissions it may pay to an affiliated
broker or dealer.

During the fiscal year ended February 28, 1997, the Fund paid a total of
$110 in brokerage commissions to Dean Witter Reynolds. During the fiscal years
ended February 28, 1998 and 1999 there were no brokerage fees paid to Dean
Witter Reynolds. During the period June 1, 1997 through February 28, 1998 and
during the fiscal year ended February 28, 1999, the Fund paid a total of $2,473
and $16,025, respectively, in brokerage commissions to Morgan Stanley & Co.,
which broker-dealer became an affiliate of the Distributor on May 31, 1997 upon
consummation of the merger of Dean Witter, Discover & Co. with Morgan Stanley
Group Inc. During the fiscal year ended February 28, 1999, the brokerage
commissions paid to Morgan Stanley & Co. represented approximately 7.96% of the
total brokerage commissions paid by the Fund for this period and were paid on
account of transactions having an aggregate dollar value equal to approximately
9.05% of the aggregate dollar value of all portfolio transactions of the Fund
during the year for which commissions were paid.

C. BROKERAGE SELECTION

The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions.

27
<PAGE>

Consistent with this policy, when securities transactions are effected on a
stock exchange, the Fund's policy is to pay commissions which are considered
fair and reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a requirement
always to seek the lowest possible commission cost could impede effective
portfolio management and preclude the Fund and the Adviser from obtaining a
high quality of brokerage and research services. In seeking to determine the
reasonableness of brokerage commissions paid in any transaction, the Adviser
relies upon its experience and knowledge regarding commissions generally
charged by various brokers and on its judgment in evaluating the brokerage and
research services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.

In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions. If
the Adviser believes the prices and executions are obtainable from more than
one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Adviser. The services may include, but are not
limited to, any one or more of the following: information as to the
availability of securities for purchase or sale; statistical or factual
information or opinions pertaining to investment; wire services; and appraisals
or evaluations of portfolio securities. The information and services received
by the Adviser from brokers and dealers may be of benefit to the Adviser in the
management of accounts of some of its other clients and may not in all cases
benefit the Fund directly.

The Adviser currently serves as investment advisor to a number of clients,
including other investment companies, and may in the future act as investment
advisor to others. It is the practice of the Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of
the same or comparable securities, the availability of cash for investment, the
size of investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
In the case of certain initial and secondary public offerings, the Adviser
utilizes a pro rata allocation process based on the size of the funds involved
and the number of shares available from the public offering.

D. DIRECTED BROKERAGE

During the fiscal year ended February 28, 1999, the Fund paid $146,517 in
brokerage commissions in connection with transactions in the aggregate amount
of $49,083,781 to brokers because of research services provided.

E. REGULAR BROKER-DEALERS

During the fiscal year ended February 28, 1999, the Fund did not purchase
securities issued by brokers or dealers that were among the ten brokers or the
ten dealers that executed transactions for or with the Fund in the largest
dollar amounts during the year.

VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------

The shareholders of the Fund are entitled to a full vote for each full
share of beneficial interest held. The Fund is authorized to issue an unlimited
number of shares of beneficial interest. 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, Class A, Class
B and Class C bear expenses related to the distribution of their respective
shares.

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<PAGE>

The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be
invested in separate, independently managed portfolios) and additional Classes
of shares within any series. The Trustees have not presently authorized any
such additional series or Classes of shares other than as set forth in the
Prospectus.

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 Investment Company 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 limited circumstances, be held personally liable as partners for the
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 notice of such Fund obligations include such disclaimer, and
provides for indemnification 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.

The Trustees themselves have the power to alter the number and the terms
of office of the Trustees (as provided for in the Declaration of Trust), and
they may at any time lengthen or shorten their own terms or make their terms of
unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Fund.

VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------

A. PURCHASE/REDEMPTION OF SHARES

Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's Prospectus.

TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other TCW/DW Multi-Class Fund, any shares of TCW/DW North American
Government Income Trust or any shares of five Morgan Stanley Dean Witter money
market funds and the general administration of the exchange privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
authorized broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any authorized
broker-dealer.

The Distributor and any authorized broker-dealer have appointed the
Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any
other TCW/DW Multi-Class Fund, any shares of TCW/DW North American Government
Income Trust or any shares of five Morgan Stanley Dean Witter money market
funds and the general administration of the exchange privilege. No commission
or discounts will be paid to the Distributor or any authorized broker-dealer
for any transaction pursuant to the exchange privilege.

TRANSFERS OF SHARES. In the event a shareholder requests a transfer of
Fund shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.

29
<PAGE>

EXCHANGING SHARES OF CLASSES WITH A CDSC

When exchanging shares of a Class of the Fund that imposes a CDSC, shares
that are not subject to a CDSC because they were (i) purchased more than one
year ago (for Class A and Class C) or six years ago (for Class B) or (ii)
acquired through reinvestment of dividends or distributions (all such shares
referred to as "Free Shares") will be exchanged first. After exchanging such
Free Shares the shares subject to a CDSC that were held the longest will be
exchanged next. Shares purchased during the same month are deemed to be held
for the same length of time. (For shares held for the same length of time but
subject to different CDSC rates, the shares with the lower CDSC rate will be
exchanged first.) When exchanging shares subject to a CDSC, you should know
that the CDSC rate will be calculated on such exchanged shares based on the
lesser of: (a) the purchase price of those shares; or (b) their current net
asset value at the time of the exchange. Accordingly, any appreciation in value
on such exchanged shares are not subject to a CDSC. When exchanging a portion
of shares deemed to be held for the same length of time, shares representing
any appreciation in value (and therefore, such shares will not be subject to
any CDSC) will be exchanged first.

B. OFFERING PRICE

The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Management, Investment Advice and Other Services--F. Rule 12b-1 Plan." The
price of Fund shares, called "net asset value," is based on the value of the
Fund's portfolio securities. Net asset value per share of each Class is
calculated by dividing the value of the portion of the Fund's securities and
other assets attributable to that Class, less the liabilities attributable to
that Class, by the number of shares of that Class outstanding. The assets of
each Class of shares are invested in a single portfolio. The net asset value of
each Class, however, will differ because the Classes have different ongoing
fees.

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, prior to
the time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price (in cases where 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 Fund's 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.

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 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.

Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange rates
are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events which may affect

30
<PAGE>

the values of such securities and such exchange rates may occur between the
times at which they are determined and the close of the New York Stock Exchange
and will therefore not be reflected in the computation of the Fund's net asset
value. If events that may affect the value of such securities occur during such
period, then these securities may be valued at their fair value as determined
in good faith under procedures established by and under the supervision of the
Trustees.

IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------

The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount, timing and character
of the distributions made by the Fund. Tax issues relating to the Fund are not
generally a consideration for shareholders such as tax exempt entities and
tax-advantaged retirement vehicles such as an IRA or 401(k) plan. Shareholders
are urged to consult their own tax professionals regarding specific questions
as to federal, state or local taxes.

INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.

The Fund generally intends to distribute sufficient income and gains so
that the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.

Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have a tax holding period of more
than one year. Gains or losses on the sale of securities with a tax holding
period of one year or less will be short-term gains or losses.

Under certain tax rules, the Fund may be required to accrue a portion of
any discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year.
To the extent that the Fund invests in such securities, it would be required to
pay out such accrued discount as an income distribution in each year in order
to avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The Fund may
realize a gain or loss from such sales. In the event the Fund realizes net
capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.

TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have
to pay federal income taxes, and any state and/or local income taxes, on the
dividends and other 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. The Taxpayer Relief Act of 1997
reduced the maximum tax on long-term capital gains applicable to individuals
from 28% to 20%.

Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.

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<PAGE>

Subject to certain exceptions, a corporate shareholder may be eligible for
a 70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.

Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.

After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the
federal dividends received deduction for corporations.

PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment
company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, such dividends and capital gains
distributions are subject to federal income taxes. If the net asset value of
the shares should be reduced below a shareholder's cost as a result of the
payment of dividends or the distribution of realized long-term capital gains,
such payment or distribution would be in part a return of the shareholder's
investment but nonetheless would be taxable to the shareholder. Therefore, an
investor should consider the tax implications of purchasing Fund shares
immediately prior to a distribution record date.

In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains
or losses and those held for more than one year generally result in long-term
gain or loss. Any loss realized by shareholders upon a redemption of shares
within six months of the date of their purchase will be treated as a long-term
capital loss to the extent of any distributions of net long-term capital gains
with respect to such shares during the six-month period.

Gain or loss on the sale or redemption of shares in the Fund is measured
by the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the
tax basis of their shares. Under certain circumstances a shareholder may
compute and use an average cost basis in determining the gain or loss on the
sale or redemption of shares.

Exchanges of Fund shares for shares of any other TCW/DW Multi-Class Fund,
TCW/DW North American Government Income Trust or five money market funds for
which Morgan Stanley Dean Witter Advisors Inc. serves as investment manager are
also subject to similar tax treatment. Such an exchange is treated for tax
purposes as a sale of the original shares in the first fund, followed by the
purchase of shares in the second fund.

If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.

X. UNDERWRITERS
- --------------------------------------------------------------------------------

The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain
obligations under the Distribution Agreement concerning the distribution of the
shares. These obligations and the compensation the Distributor receives are
described above in the sections titled "Principal Underwriter" and "Rule 12b-1
Plans".

32
<PAGE>

XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------

From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment (which in the case of Class A shares is reduced by the Class A
initial sales charge), taking a root of the quotient (where the root is
equivalent to the number of years in the period) and subtracting 1 from the
result. The average annual total returns for Class B for the one year, five
year and the life of the Fund (which commenced on August 2, 1993) periods ended
February 28, 1999 were 3.35%, 17.05% and 15.88%, respectively. The average
annual total returns of Class A for the fiscal year ended February 28, 1999 and
for the period July 28, 1997 (inception of the Class) through February 28, 1999
were 3.47% and 12.72%, respectively. The average annual total returns of Class
C for the fiscal year ended February 28, 1999 and for the period July 28, 1997
(inception of the Class) through February 28, 1999 were 7.35% and 15.73%,
respectively. The average annual total returns of Class D for the fiscal year
ended February 28, 1999 and for the period July 28, 1997 (inception of the
Class) through February 28, 1999 were 9.38% and 16.84%, respectively.

In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction
of the CDSC for each of Class B and Class C which, if reflected, would reduce
the performance quoted. For example, the average annual total return of the
Fund may be calculated in the manner described above, but without deduction for
any applicable sales charge. Based on this calculation, the average annual
total returns of Class B for the one year, five year and the life of the Fund
periods ended February 28, 1999, were 8.35%, 17.27% and 15.97%, respectively.
The average annual total returns of Class A for the fiscal year ended February
28, 1999 and for the period July 28, 1997 through February 28, 1999 were 9.21%
and 16.62%, respectively. The average annual total returns of Class C for the
fiscal year ended February 28, 1999 and for the period July 28, 1997 through
February 28, 1999 were 8.35% and 15.73%, respectively. The average annual total
returns of Class D for the fiscal year ended February 28, 1999 and for the
period July 28, 1997 through February 28, 1999 were 9.38% and 16.84%,
respectively.

In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the
aggregate total returns for Class B for the one year, five year and the life of
the Fund periods ended February 28, 1999, were 8.35%, 121.75% and 128.40%,
respectively. The aggregate total returns of Class A for the fiscal year ended
February 28, 1999 and for the period July 28, 1997 through February 28, 1999
were 9.21% and 27.65%, respectively. The aggregate total returns of Class C for
the fiscal year ended February 28, 1999 and for the period July 28, 1997
through February 28, 1999 were 8.35% and 26.10%, respectively. The aggregate
total returns of Class D for the fiscal year ended February 28, 1999 and for
the period July 28, 1997 through February 28, 1999 were 9.38% and 28.04%,
respectively.

The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and

33
<PAGE>

multiplying by $9,475, $48,000 and $97,000 in the case of Class A (investments
of $10,000, $50,000 and $100,000 adjusted for the initial sales charge) or by
$10,000, $50,000 and $100,000 in the case of each of Class B, Class C and Class
D, as the case may be. Investments of $10,000, $50,000 and $100,000 in each
Class at inception of the Class would have grown to the following amounts at
February 28, 1999:

<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ------------------------------------
CLASS DATE $10,000 $50,000 $100,000
- ----- ---- ------- ------- --------
<S> <C> <C> <C> <C>
Class A ......... 7/28/97 $12,095 $61,272 $123,821
Class B ......... 8/2/93 22,840 114,200 228,400
Class C ......... 7/28/97 12,610 63,050 126,100
Class D ......... 7/28/97 12,804 64,020 128,040
</TABLE>

The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.

XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

EXPERTS. The financial statements of the Fund for the fiscal year ended
February 28, 1999 included in this Statement of Additional Information and
incorporated by reference in the Prospectus have been so included and
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.

* * * * *

This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the SEC. The complete Registration Statement may be obtained from
the SEC.

34
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS February 28, 1999

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.0%)
Advertising (3.8%)
313,907 Outdoor Systems, Inc.* ................ $ 8,769,777
109,500 Snyder Communications, Inc.* .......... 3,750,375
------------
12,520,152
------------
Airlines (0.7%)
68,700 Atlantic Coast Airlines Holdings,
Inc.* ................................. 2,198,400
------------
Books/Magazines (0.3%)
99,100 Applied Graphics Technologies,
Inc.* ................................. 879,512
------------
Broadcasting (2.8%)
141,600 Clear Channel Communications,
Inc.* ................................. 8,496,000
24,900 Entercom Communications Corp.*......... 781,237
------------
9,277,237
------------
Catalog/Specialty Distribution (1.5%)
167,900 Beyond.com Corp.* ..................... 4,344,412
49,600 DM Management Co.* .................... 644,800
------------
4,989,212
------------
Clothing/Shoe/Accessory Stores (0.7%)
60,400 Ann Taylor Stores Corp.* .............. 2,283,875
------------
Computer Software & Services (7.0%)
44,200 BroadVision, Inc.* .................... 1,972,425
98,040 CSG Systems International, Inc.* ...... 6,973,095
145,500 Documentum, Inc.* ..................... 3,110,062
16,200 Engineering Animation, Inc. ........... 733,050
77,100 HNC Software, Inc.* ................... 2,072,062
127,900 International Integration Inc.* ....... 2,526,025
110,800 Legato Systems, Inc.* ................. 5,456,900
------------
22,843,619
------------
Computer Software (17.0%)
101,400 Aspect Development, Inc.* ............. 3,080,025
61,900 CBT Group PLC (ADR) (Ireland)*......... 986,531
211,350 Citrix Systems, Inc.* ................. 16,300,369
60,700 Concord Communications, Inc.* ......... 3,437,137
163,800 GeoTel Communications Corp.* .......... 6,981,975
26,700 Hyperion Solutions Corp.* ............. 378,806
25,000 Macromedia, Inc.* ..................... 762,500
30,000 Mercury Interactive Corp.* ............ 1,942,500
82,000 Micromuse Inc.* ....................... 2,624,000
3,700 MicroStrategy Inc.* ................... 92,500
37,700 ModaCAD, Inc.* ........................ 622,050
157,100 New Era of Networks, Inc.* ............ 9,730,381

<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------
<S> <C> <C>
9,500 ONYX Software Corp.* .................. $ 172,187
194,400 Siebel Systems, Inc.* ................. 8,529,300
------------
55,640,261
------------
Consumer/Business Services (0.7%)
95,800 Corporate Executive Board Co.* ........ 2,347,100
------------
Discount Chains (1.2%)
96,975 Dollar Tree Stores, Inc.* ............. 3,879,000
------------
Diversified Commercial Services (10.0%)
22,800 Abacus Direct Corp.* .................. 1,539,000
106,000 Administaff, Inc.* .................... 1,450,875
285,400 Dendrite International, Inc.* ......... 8,026,875
14,800 Exchange Applications, Inc.* .......... 244,200
106,050 HA-LO Industries, Inc.* ............... 1,133,409
120,100 MAXIMUS, Inc.* ........................ 3,355,294
39,700 MemberWorks Inc.* ..................... 1,379,575
48,800 Paymentech, Inc.* ..................... 933,300
40,300 Profit Recovery Group
International, Inc. (The)* ............ 1,314,787
102,150 Robert Half International, Inc.* ...... 3,677,400
274,200 Romac International, Inc.* ............ 3,290,400
208,000 Whittman-Hart, Inc.* .................. 6,487,000
------------
32,832,115
------------
Diversified Electronic Products (3.3%)
167,900 Gemstar International Group Ltd.*
(Virgin Islands) ...................... 10,724,612
------------
Diversified Financial Services (0.3%)
37,700 HealthCare Financial Partners,
Inc.* ................................. 984,912
------------
E.D.P. Peripherals (4.6%)
177,700 Avid Technology, Inc.* ................ 5,197,725
233,000 Network Appliance, Inc.* .............. 9,786,000
------------
14,983,725
------------
E.D.P. Services (3.8%)
101,400 CIBER, Inc.* .......................... 2,547,675
114,600 META Group, Inc.* ..................... 2,535,525
138,100 National TechTeam, Inc.* .............. 889,019
67,300 Pegasus Systems, Inc.* ................ 2,532,163
86,400 SportsLine USA, Inc.* ................. 3,866,400
------------
12,370,782
------------
Electronic Components (0.6%)
63,400 DSP Communications, Inc.* ............. 951,000
87,600 SIPEX Corp.* .......................... 996,450
------------
1,947,450
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

35
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS February 28, 1999, continued

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Electronic Distributors (0.0%)
1,500 Intraware, Inc.* ..................... $ 28,125
------------
Electronic Production
Equipment (0.5%)
42,100 Veeco Instruments, Inc.* ............. 1,599,800
------------
Healthcare (1.1%)
150,900 Ocular Sciences, Inc.* ............... 3,678,188
------------
Insurance Brokers/Services (0.1%)
17,500 Insurance Management Solutions
Group, Inc.* ......................... 166,250
------------
Internet Services (12.8%)
58,600 Broadcast.com Inc.* .................. 4,907,750
102,100 Exodus Communications, Inc.* ......... 7,491,588
3,400 InfoSpace.com, Inc.* ................. 184,875
22,100 Lycos, Inc.* ......................... 1,935,131
1,700 pcOrder.com, Inc.* ................... 79,900
124,200 Verio Inc.* .......................... 3,446,550
46,500 VeriSign, Inc.* ...................... 4,527,938
21,100 VerticalNet, Inc.* ................... 865,100
120,500 Yahoo! Inc.* ......................... 18,496,750
------------
41,935,582
------------
Investment Bankers/Brokers/
Services (2.2%)
154,800 E*TRADE Group, Inc.* ................. 7,111,125
------------
Major Pharmaceuticals (0.6%)
70,000 Alkermes, Inc.* ...................... 1,955,625
------------
Medical Specialties (2.3%)
195,500 Diametrics Medical, Inc.* ............ 867,531
116,500 Hanger Orthopedic Group, Inc.* ....... 1,769,344
32,300 Perclose, Inc.* ...................... 1,364,675
158,100 Safeskin Corp.* ...................... 3,665,944
------------
7,667,494
------------
Movies/Entertainment (1.7%)
56,900 SFX Entertainment, Inc.* ............. 3,470,900
89,300 Westwood One, Inc.* .................. 2,176,688
------------
5,647,588
------------
Other Consumer Services (0.4%)
43,100 Steiner Leisure Ltd.* ................ 1,266,063
2,500 Ticketmaster Online-CitySearch,
Inc. (Series B)* ..................... 90,313
------------
1,356,376
------------
Other Pharmaceuticals (1.4%)
37,500 Sepracor, Inc.* ...................... 4,668,750
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------
<S> <C> <C>
Other Specialty Stores (4.2%)
161,200 Cost Plus, Inc.* ..................... $ 5,732,675
182,700 Guitar Center, Inc.* ................. 3,014,550
188,100 PETsMART, Inc.* ...................... 1,481,288
93,500 Restoration Hardware, Inc.* .......... 1,893,375
104,900 Whitehall Jewellers, Inc.* ........... 1,750,519
------------
13,872,407
------------
Other Telecommunications (0.9%)
71,000 MetroNet Communications Corp.
(Class B)* ........................... 3,079,625
------------
Real Estate (0.1%)
22,900 Trammell Crow Co.* ................... 354,950
------------
Restaurants (0.1%)
49,200 Il Fornaio (America) Corp.* .......... 399,750
------------
Retail - Specialty (3.6%)
201,400 Bed Bath & Beyond, Inc.* ............. 5,916,125
164,100 Hollywood Entertainment Corp.* ....... 4,471,725
146,875 Just For Feet, Inc.* ................. 1,496,289
------------
11,884,139
------------
Savings & Loan Associations (0.8%)
60,500 Telebanc Financial Corp.* ............ 2,480,500
------------
Semiconductors (3.6%)
124,300 Maxim Integrated Products, Inc.*...... 5,127,375
70,500 Micrel, Inc.* ........................ 3,172,500
81,300 Semtech Corp.* ....................... 2,469,488
27,800 TranSwitch Corp.* .................... 962,575
------------
11,731,938
------------
Services to the Health Industry (0.6%)
46,000 Eclipsys Corp.* ...................... 1,408,750
4,200 Healthcare Recoveries, Inc.* ......... 34,650
14,400 MEDE AMERICA Corp.* .................. 246,600
26,600 QuadraMed Corp.* ..................... 408,975
------------
2,098,975
------------
Smaller Banks (0.1%)
7,875 Bank of Granite Corp. ................ 206,719
------------
Specialty Foods/Candy (1.1%)
160,200 Balance Bar Co.* ..................... 1,521,900
174,000 Neose Technologies, Inc.* ............ 1,979,250
------------
3,501,150
------------
Wholesale Distributor (0.5%)
88,700 Daisytek International Corp.* ........ 1,674,213
------------
TOTAL COMMON STOCKS
(Identified Cost $173,457,398)........ 317,801,233
------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

36
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS February 28, 1999, continued

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (1.8%)
REPURCHASE AGREEMENT
$ 5,793 The Bank of New York 4.75%
due 03/01/99 (dated 02/26/99;
proceeds $5,795,353) (a)
(Identified Cost $5,793,060).......... $ 5,793,060
------------
TOTAL INVESTMENTS
(Identified Cost $179,250,458) (b)..... 98.8% 323,594,293
OTHER ASSETS IN EXCESS OF
LIABILITIES ........................... 1.2 4,019,341
----- -----------
NET ASSETS ............................ 100.0% $327,613,634
===== ============
</TABLE>

- -------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $5,665,841 U.S. Treasury Note 6.50% due 05/31/01
valued at $5,908,921.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$159,263,366 and the aggregate gross unrealized depreciation is
$14,919,531, resulting in net unrealized appreciation of $144,343,835.

SEE NOTES TO FINANCIAL STATEMENTS

37
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
February 28, 1999

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $179,250,458)................................... $ 323,594,293
Receivable for:
Investments sold ............................................... 5,468,111
Shares of beneficial interest sold ............................. 349,352
Prepaid expenses and other assets ................................ 32,114
-------------
TOTAL ASSETS ................................................... 329,443,870
-------------
LIABILITIES:
Payable for:
Investments purchased .......................................... 892,981
Shares of beneficial interest repurchased ...................... 362,593
Plan of distribution fee ....................................... 242,089
Management fee ................................................. 169,131
Investment advisory fee ........................................ 110,696
Accrued expenses and other payables .............................. 52,746
-------------
TOTAL LIABILITIES .............................................. 1,830,236
-------------
NET ASSETS ..................................................... $ 327,613,634
=============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $ 174,007,910
Net unrealized appreciation ...................................... 144,343,835
Accumulated undistributed net realized gain ...................... 9,261,889
-------------
NET ASSETS ..................................................... $ 327,613,634
=============
CLASS A SHARES:
Net Assets ....................................................... $2,450,064
Shares Outstanding (unlimited authorized, $.01 par value)......... 105,934
NET ASSET VALUE PER SHARE ...................................... $23.13
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $24.41
======
CLASS B SHARES:
Net Assets ....................................................... $322,488,560
Shares Outstanding (unlimited authorized, $.01 par value)......... 14,118,639
NET ASSET VALUE PER SHARE ...................................... $22.84
======
CLASS C SHARES:
Net Assets ....................................................... $2,662,180
Shares Outstanding (unlimited authorized, $.01 par value)......... 116,532
NET ASSET VALUE PER SHARE ...................................... $22.85
======
CLASS D SHARES:
Net Assets ....................................................... $12,830
Shares Outstanding (unlimited authorized, $.01 par value)......... 553
NET ASSET VALUE PER SHARE ...................................... $23.20
======
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

38
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF OPERATIONS
For the year ended February 28, 1999

<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Interest .......................................... $ 279,958
Dividends ......................................... 49,786
------------
TOTAL INCOME .................................... 329,744
------------
EXPENSES
Plan of distribution fee (Class A shares) ......... 2,753
Plan of distribution fee (Class B shares) ......... 2,909,563
Plan of distribution fee (Class C shares) ......... 14,300
Investment management fee ......................... 1,913,167
Investment advisory fee ........................... 1,275,444
Transfer agent fees and expenses .................. 477,243
Registration fees ................................. 112,448
Shareholder reports and notices ................... 69,518
Professional fees ................................. 46,744
Custodian fees .................................... 37,179
Trustees' fees and expenses ....................... 32,422
Organizational expenses ........................... 15,378
Other ............................................. 26,754
------------
TOTAL EXPENSES .................................. 6,932,913
------------
NET INVESTMENT LOSS ............................. (6,603,169)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ................................. 12,853,310
Net change in unrealized appreciation ............. 18,442,746
------------
NET GAIN ........................................ 31,296,056
------------
NET INCREASE ...................................... $ 24,692,887
============
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS

39
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS, continued

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1999 FEBRUARY 28, 1998*
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment loss .................................. $ (6,603,169) $ (6,259,873)
Net realized gain .................................... 12,853,310 8,132,612
Net change in unrealized appreciation ................ 18,442,746 87,911,112
------------- -------------
NET INCREASE ......................................... 24,692,887 89,783,851
Net decrease from transactions in shares of beneficial
interest ........................................... (38,954,929) (16,691,187)
------------- -------------
NET INCREASE (DECREASE) ............................ (14,262,042) 73,092,664
NET ASSETS:
Beginning of period .................................. 341,875,676 268,783,012
------------- -------------
END OF PERIOD ...................................... $ 327,613,634 $ 341,875,676
============= =============
</TABLE>

- --------------
* Class A, Class C and Class D shares were issued July 28, 1997.

SEE NOTES TO FINANCIAL STATEMENTS

40
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999

1. ORGANIZATION AND ACCOUNTING POLICIES

TCW/DW Small Cap Growth Fund (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end
management investment company. The Fund's investment objective is capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
common stocks and other equity securities of lesser known, smaller
capitalization domestic and foreign companies. The Fund was organized as a
Massachusetts business trust on March 11, 1992 and commenced operations on
August 2, 1993. On July 28, 1997, the Fund commenced offering three additional
classes of shares, with the then current shares designated as Class B shares.

The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.

The following is a summary of significant accounting policies:

A. VALUATION OF INVESTMENTS -- (1) An equity security listed or traded on the
New York or American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are
valued; if there were no sales that day, the security is valued at the latest
bid price (in cases where securities are traded on more than one exchange, the
securities are valued on the exchange designated as the primary market pursuant
to procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by TCW Funds Management, Inc. (the "Adviser") that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation of
debt securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in coupon,
rating and maturity or an appropriate matrix utilizing similar factors); and
(4) short-term debt securities having a maturity date of more than sixty days
at time of purchase are valued on a mark-to-market basis until sixty days prior
to

41
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999, continued

maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.

B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.

C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are charged directly to the
respective class.

D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.

F. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc.,
formerly Dean Witter InterCapital Inc., an affiliate of Morgan Stanley Dean
Witter Services Co. Inc. (the "Manager"), paid the organizational expenses of
the Fund in the amount of $170,413 which have been reimbursed for the full
amount thereof. Such expenses were deferred and fully amortized as of August 1,
1998.

42
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999, continued

2. MANAGEMENT AGREEMENT

Pursuant to a Management Agreement, the Fund pays the Manager a management fee,
accrued daily and payable monthly, by applying the annual rate of 0.60% to the
net assets of the Fund determined as of the close of each business day.

Under the terms of the Management Agreement, the Manager maintains certain of
the Fund's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
pays the salaries of all personnel, including officers of the Fund who are
employees of the Manager. The Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.

3. INVESTMENT ADVISORY AGREEMENT

Pursuant to an Investment Advisory Agreement, the Fund pays an advisory fee,
accrued daily and payable monthly, by applying the annual rate of 0.40% to the
net assets of the Fund determined as of the close of each business day.

Under the terms of the Investment Advisory Agreement, the Fund has retained the
Adviser to invest the Fund's assets, including placing orders for the purchase
and sale of portfolio securities. The Adviser obtains and evaluates such
information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Fund in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Fund who are employees of the Adviser.

4. PLAN OF DISTRIBUTION

Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -- up to
0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived: or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the

43
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999, continued

Distributor for (1) services provided and the expenses borne by it and others
in the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors, and others who
engage in or support distribution of the shares or who service shareholder
accounts, including overhead and telephone expenses; (2) printing and
distribution of prospectuses and reports used in connection with the offering
of these shares to other than current shareholders; and (3) 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 Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Manager and Distributor, and other selected broker-dealers for
their opportunity costs in advancing such amounts, which compensation would be
in the form of a carrying charge on any unreimbursed expenses.

In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $12,935,646 at February 28, 1999.

In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors, and
other selected broker-dealer representatives may be reimbursed in the
subsequent calendar year. For the year ended February 28, 1999, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.24% and 1.00%, respectively.

The Distributor has informed the Fund that for the year ended February 28, 1999
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $1,029,288 and $2,813, respectively
and received $17,451 in front-end sales charges from sales of the Fund's Class
A shares. The respective shareholders pay such charges which are not an expense
of the Fund.

44
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999, continued

5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended February 28, 1999
aggregated $159,725,807 and $220,940,036, respectively.

For the year ended February 28, 1999, the Fund incurred brokerage commissions
of $16,025 with Morgan Stanley & Co., Inc., an affiliate of the Manager and
Distributor, for portfolio transactions executed on behalf of the Fund. At
February 28, 1999, the Fund's receivable for investments sold included
unsettled trades with Morgan Stanley & Co., Inc. of $392,508.

Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent.

6. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 28, 1999 FEBRUARY 28, 1998*
----------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ............................ 116,536 $ 2,511,381 13,711 $ 261,176
Redeemed ........................ (23,647) (450,535) (666) (13,032)
------- -------------- ------ --------------
Net increase -- Class A ......... 92,889 2,060,846 13,045 248,144
------- -------------- ------ --------------
CLASS B SHARES
Sold ............................ 4,486,194 90,833,133 5,153,345 91,806,062
Redeemed ........................ (6,527,001) (133,486,471) (6,080,943) (109,578,810)
---------- -------------- ---------- --------------
Net decrease -- Class B ......... (2,040,807) (42,653,338) (927,598) (17,772,748)
---------- -------------- ---------- --------------
CLASS C SHARES
Sold ............................ 108,755 2,343,245 49,455 935,270
Redeemed ........................ (35,976) (705,682) (5,702) (111,875)
---------- -------------- ---------- --------------
Net increase -- Class C ......... 72,779 1,637,563 43,753 823,395
---------- -------------- ---------- --------------
CLASS D SHARES
Sold ............................ -- -- 553 10,022
---------- -------------- ---------- --------------
Net decrease in Fund ............ (1,875,139) $ (38,954,929) (870,247) $ (16,691,187)
========== ============== ========== ==============
</TABLE>

- ---------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through February 28, 1998.

7. FEDERAL INCOME TAX STATUS

During the year ended February 28, 1999, the Fund utilized its net capital loss
carryover of approximately $3,370,000.

45
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS February 28, 1999, continued

As of February 28, 1999, the Fund had temporary book/tax differences
attributable to capital loss deferrals on wash sales and permanent book/tax
differences attributable to a net operating loss. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged and net
investment loss was credited $6,603,169.

8. OTHER

On February 25, 1999, the Board of Trustees of the Fund recommended that the
Fund engage Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), an
affiliate of the Manager, to serve as the Funds' new investment manager and
that a new investment management agreement between the Fund and MSDW Advisors
be submitted to shareholders for approval. Under the new agreement, MSDW
Advisors would be responsible for all the services presently provided by both
the Manager and the Adviser. The compensation paid to MSDW Advisors would be
equal to the total compensation presently paid to both the Manager and the
Adviser.

Additionally, on February 25, 1999, the Board of Trustees recommended that a
new sub-advisory agreement between MSDW Advisors and the present Adviser be
submitted to shareholders for approval. Under the new sub-advisory agreement,
MSDW Advisors would pay the new sub-adviser monthly compensation equal to 40%
of the compensation it receives under the new investment management agreement.

46
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS

Selected ratios and per share data for a share of beneficial interest
outstanding throughout each year:

<TABLE>
<CAPTION>
FOR THE YEAR ENDED FEBRUARY 28,
-----------------------------------------------------------------
1999++ 1998**++ 1997 1996* 1995
- ---------------------------------------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ................... $ 21.08 $ 15.73 $ 16.24 $ 9.90 $ 10.30
-------- -------- -------- -------- -------
Income (loss) from investment operations:
Net investment loss ................................... (0.43) (0.37) (0.26) (0.19) (0.18)
Net realized and unrealized gain (loss) ............... 2.19 5.72 (0.25) 6.53 (0.22)
-------- -------- -------- -------- -------
Total income (loss) from investment operations ......... 1.76 5.35 (0.51) 6.34 (0.40)
-------- -------- -------- -------- -------
Net asset value, end of period ......................... $ 22.84 $ 21.08 $ 15.73 $ 16.24 $ 9.90
======== ======== ======== ======== =======
TOTAL RETURN+ .......................................... 8.35% 34.01% (3.14)% 64.04% (3.88)%

RATIOS TO AVERAGE NET ASSETS:
Expenses ............................................... 2.18%(1) 2.25% 2.15% 2.32% 2.57%
Net investment loss .................................... (2.08)%(1) (2.05)% (1.70)% (1.75)% (2.04)%

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ................ $322,489 $340,665 $268,783 $153,366 $69,984
Portfolio turnover rate ................................ 51% 61% 42% 52% 116%
</TABLE>

- -------------
* Year ended February 29.

** 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

47
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
FEBRUARY 28, 1999 FEBRUARY 28, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 21.18 $ 18.12
------- -------
Income from investment operations:
Net investment loss ............................ (0.29) (0.15)
Net realized and unrealized gain ............... 2.24 3.21
------- -------
Total income from investment operations ......... 1.95 3.06
------- -------
Net asset value, end of period .................. $ 23.13 $ 21.18
======= =======
TOTAL RETURN+ ................................... 9.21% 16.89%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.50%(3) 1.52%(2)
Net investment loss ............................. (1.40)%(3) (1.32)%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $2,450 $ 276
Portfolio turnover rate ......................... 51% 61%(1)

CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 21.08 $ 18.12
------- -------
Income from investment operations:
Net investment loss ............................ (0.45) (0.24)
Net realized and unrealized gain ............... 2.22 3.20
------- -------
Total income from investment operations ......... 1.77 2.96
------- -------
Net asset value, end of period .................. $ 22.85 $ 21.08
======= =======
TOTAL RETURN+ ................................... 8.35% 16.39%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 2.26%(3) 2.29%(2)
Net investment loss ............................. (2.16)%(3) (2.10)%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $2,662 $ 923
Portfolio turnover rate ......................... 51% 61%(1)
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

48
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued

<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
FEBRUARY 28, 1999 FEBRUARY 28, 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $ 21.21 $ 18.12
------- -------
Income from investment operations:
Net investment loss ............................ (0.24) (0.12)
Net realized and unrealized gain ............... 2.23 3.21
------- -------
Total income from investment operations ......... 1.99 3.09
------- -------
Net asset value, end of period .................. $ 23.20 $ 21.21
======= =======
TOTAL RETURN+ ................................... 9.38% 17.05%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.26%(3) 1.27%(2)
Net investment loss ............................. (1.16)%(3) (1.10)%(2)

SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $ 13 $ 12
Portfolio turnover rate ......................... 51% 61%(1)
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.

SEE NOTES TO FINANCIAL STATEMENTS

49
<PAGE>

TCW/DW SMALL CAP GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW SMALL CAP GROWTH FUND

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of TCW/DW Small Cap Growth Fund (the
"Fund") at February 28, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at February 28, 1999 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.

PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
April 13, 1999