<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998
REGISTRATION NOS.: 33-55218
811-7372
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 /X/
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 7 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 8 /X/
-------------------
TCW/DW INCOME AND GROWTH FUND
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
-------------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Post-Effective Amendment becomes effective.
-------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
___X_ immediately upon filing pursuant to paragraph (b)
_____ on (date) pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)
_____ on (date) pursuant to paragraph (a) of rule 485.
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
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<PAGE>
TCW/DW INCOME AND GROWTH FUND
CROSS REFERENCE SHEET
FORM N-1A
<TABLE>
<CAPTION>
ITEM CAPTION
- ----------------------------------------------- -----------------------------------------------------------------------
<S> <C>
PART A PROSPECTUS
1. .......................................... Cover Page
2. .......................................... Summary of Fund Expenses; Prospectus Summary
3. .......................................... Financial Highlights; Performance Information
4. .......................................... Investment Objective and Policies; The Fund and Its Management; Cover
Page; Investment Restrictions; Prospectus Summary
5. .......................................... The Fund and Its Management; Back Cover; Investment Objective and
Policies
6. .......................................... Dividends, Distributions and Taxes; Additional Information
7. .......................................... Purchase of Fund Shares; Shareholder Services; Repurchases and
Redemptions
8. .......................................... Repurchases and Redemptions; Shareholder Services
9. .......................................... Not Applicable
PART B STATEMENT OF ADDITIONAL INFORMATION
10. .......................................... Cover Page
11. .......................................... Table of Contents
12. .......................................... The Fund and Its Management
13. .......................................... Investment Practices and Policies; Investment Restrictions; Portfolio
Transactions and Brokerage
14. .......................................... The Fund and Its Management; Trustees and Officers
15. .......................................... Trustees and Officers
16. .......................................... The Fund and Its Management; Custodian and Transfer Agent; Independent
Accountants
17. .......................................... Portfolio Transactions and Brokerage
18. .......................................... Description of Shares
19. .......................................... Purchase of Fund Shares; Repurchases and Redemptions; Financial
Statements; Shareholder Services
20. .......................................... Dividends, Distributions and Taxes;
21. .......................................... The Distributor
22. .......................................... Performance Information
23. .......................................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS
MARCH 31, 1998
TCW/DW Income and Growth Fund (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is to generate high
total return by providing a high level of current income and the potential for
capital appreciation. The Fund seeks to achieve its investment objective by
investing primarily in convertible securities, fixed-income securities and
common stocks. The Fund will invest at least 50% of its total assets in a
combination of equity securities and fixed-income securities with equity
components.
THE FUND MAY INVEST WITHOUT LIMITATION IN CONVERTIBLE AND FIXED-INCOME
SECURITIES RATED BELOW INVESTMENT GRADE (COMMONLY KNOWN AS "JUNK BONDS"),
although the Fund will only invest in convertible and fixed-income securities
rated at least B by either Moody's Investor's Service, Inc. or Standard & Poor's
Corporation or, if not rated, determined to be of comparable quality.
INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISK, INCLUDING THE RISK OF
DEFAULT, THAN HIGHER RATED SECURITIES, AND ARE CONSIDERED TO BE SPECULATIVE WITH
REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL. INVESTORS SHOULD
CAREFULLY ASSESS THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND. (SEE
"INVESTMENT OBJECTIVE AND POLICIES.")
The Fund offers four classes of shares (each, a "Class"), each with a different
combination of sales charges, ongoing fees and other features. The different
distribution arrangements permit an investor to choose the method of purchasing
shares that the investor believes is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares and other
relevant circumstances. Except as discussed herein, shares of the Fund held
prior to July 28, 1997 have been designated Class C shares. (See "Purchase of
Fund Shares -- Alternative Purchase Arrangements.")
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated March 31, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary /2
Summary of Fund Expenses /5
Financial Highlights /7
The Fund and its Management /10
Investment Objective and Policies /11
Risk Considerations /12
Investment Restrictions /18
Purchase of Fund Shares /18
Shareholder Services /29
Repurchases and Redemptions /31
Dividends, Distributions and Taxes /32
Performance Information /33
Additional Information /34
Appendix /35
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
TCW/DW INCOME AND
GROWTH FUND
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll free)
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
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<TABLE>
<S> <C>
THE The Fund is organized as a Massachusetts business trust, and is an open-end,
FUND non-diversified management investment company investing primarily in
convertible securities, fixed-income securities and common stocks.
- ------------------------------------------------------------------------------------------------
SHARES Shares of beneficial interest with $0.01 par value (see page 34). The Fund
OFFERED offers four Classes of shares, each with a different combination of sales
charges, ongoing fees and other features (see pages 18-26).
- ------------------------------------------------------------------------------------------------
MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account
PURCHASE is opened through EasyInvest-SM-). Class D shares are only available to
persons investing $5 million ($25 million for certain qualified plans) or more
and to certain other limited categories of investors. For the purpose of
meeting the minimum $5 million (or $25 million) investment for Class D shares,
and subject to the $1,000 minimum initial investment for each Class of the
Fund, an investor's existing holdings of Class A shares and concurrent
investments in Class D shares of the Fund and other multiple class funds for
which Dean Witter Services Company Inc. serves as manager and TCW Funds
Management, Inc. serves as investment adviser will be aggregated. The minimum
subsequent investment is $100 (see page 18).
- ------------------------------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is to generate high total return by
OBJECTIVE providing a high level of current income and the potential for capital
appreciation.
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MANAGER Dean Witter Services Company Inc. (the "Manager"), a wholly-owned subsidiary
of Dean Witter InterCapital Inc. ("InterCapital"), is the Fund's Manager. The
Manager also serves as Manager to ten other investment companies which are
advised by TCW Funds Management, Inc. (the "TCW/DW Funds"). The Manager and
InterCapital serve in various investment management, advisory, management and
administrative capacities to a total of 101 investment companies and other
portfolios with assets of approximately $110 billion at February 28, 1998 (see
page 10).
- ------------------------------------------------------------------------------------------------
ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser.
In addition to the Fund, the Adviser serves as investment adviser to ten other
TCW/DW Funds. As of February 28, 1998, the Adviser and its affiliates had over
$50 billion under management or committed to management in various fiduciary
or advisory capacities, primarily from institutional investors (see page 10).
- ------------------------------------------------------------------------------------------------
MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.45% of daily net
AND ADVISORY assets, scaled down on assets over $500 million. The Adviser receives a
FEES monthly fee at an annual rate of 0.30% of daily net assets, scaled down on
assets over $500 million (see page 10).
- ------------------------------------------------------------------------------------------------
DISTRIBUTOR AND Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a
DISTRIBUTION distribution plan pursuant to Rule 12b-1 under the Investment Company Act (the
FEE "12b-1 Plan") with respect to the distribution fees paid by the Class A, Class
B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of Class B
and Class C equal to 0.20% of the average daily net assets of Class B and
0.25% of the average daily net assets of Class C are currently each
characterized as a service fee within the meaning of the National Association
of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1
fee, if any, is characterized as an asset-based sales charge (see pages 18 and
27).
</TABLE>
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2
<PAGE>
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<TABLE>
<S> <C>
ALTERNATIVE Four classes of shares are offered:
PURCHASE - Class A shares are offered with a front-end sales charge, starting at 4.25%
ARRANGEMENTS and reduced for larger purchases. Investments of $1 million or more (and
investments by certain other limited categories of investors) are not subject
to any sales charge at the time of purchase but a contingent deferred sales
charge ("CDSC") of 1.0% may be imposed on redemptions within one year of
purchase. The Fund is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the Fund's Class A shares
and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual
rate of 0.25% of average daily net assets of the Class (see pages 18, 22 and
27).
- Class B shares are offered without a front-end sales charge, but will in
most cases be subject to a CDSC (scaled down from 5.0% to 1.0%) if redeemed
within six years after purchase. The CDSC will be imposed on any redemption of
shares if after such redemption the aggregate current value of a Class B
account with the Fund falls below the aggregate amount of the investor's
purchase payments made during the six years preceding the redemption. A
different CDSC schedule applies to investments by certain qualified plans.
Class B shares are also subject to a 12b-1 fee assessed at the annual rate of
0.75% of the average daily net assets of Class B. Shares of the Fund held
prior to July 28, 1997 which were acquired in exchange for shares of TCW/DW
Funds sold with a CDSC, including shares acquired through reinvestment of
dividends and distributions thereon, have been designated Class B shares.
Shares held before May 1, 1997 that have been designated Class B shares will
convert to Class A shares in May, 2007. In all other instances, Class B shares
convert to Class A shares approximately ten years after the date of the
original purchase (see pages 18, 24 and 27).
- Class C shares are offered without a front-end sales charge, but will in
most cases be subject to a CDSC of 1.0% if redeemed within one year after
purchase. The Fund is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the Fund's Class C shares
and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual
rate of 0.75% of average daily net assets of the Class. All shares of the Fund
held prior to July 28, 1997 (other than shares which were acquired in exchange
for shares of TCW/DW Funds offered with a CDSC and shares acquired through
reinvestment of dividends and distributions thereon) have been designated
Class C shares. Shares held before July 28, 1997 that have been designated
Class C shares are not subject to the 1.0% CDSC (see pages 26 and 27).
- Class D shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for certain qualified plans) and to certain
other limited categories of investors. Class D shares are offered without a
front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages
26 and 27).
</TABLE>
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3
<PAGE>
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<TABLE>
<S> <C>
DIVIDENDS Income dividends are paid quarterly. Capital gains, if any, will be
AND CAPITAL distributed at least annually. The Fund may, however, determine to retain all
GAINS or part of any net long-term capital gains in any year for reinvestment.
DISTRIBUTIONS Dividends and capital gains distributions are automatically reinvested in
additional shares of the same Class at net asset value unless the shareholder
elects to receive cash (see page 32). Shares acquired by dividend and
distribution reinvestment will not be subject to any sales charge or CDSC (see
pages 29 and 32).
- ------------------------------------------------------------------------------------------------
REDEMPTION Shares are redeemable by the shareholder at net asset value less any
applicable CDSC on Class A, Class B or Class C shares. An account may be
redeemed involuntarily if the total value of the account is less than $100 or,
if the account was opened through EasyInvest-SM-, if after twelve months the
shareholder has invested less than $1,000 in the account (see page 31).
- ------------------------------------------------------------------------------------------------
RISK The net asset value of the Fund's shares will fluctuate with changes in the
CONSIDERATIONS market value of the Fund's portfolio securities. The value of the Fund's
convertible and fixed-income portfolio securities generally increase or
decrease due to changes in prevailing interest rates. Generally, a rise in
interest rates will result in a decrease in value, while a drop in interest
rates will result in an increase in value. The high yield, high risk
fixed-income securities in which the Fund may invest are subject to greater
risk of loss of income and principal than higher rated, lower yielding
fixed-income securities. The prices of high yield, high risk securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. The Fund is a
non-diversified investment company and, as such, is not subject to the
diversification requirements of the Investment Company Act of 1940, as
amended. As a result, a relatively high percentage of the Fund's assets may be
invested in a limited number of issuers. However, the Fund intends to continue
to qualify as a regulated investment company under the federal income tax laws
and, as such, is subject to the diversification requirements of the Internal
Revenue Code. The Fund may invest up to 25% of its total assets in non-dollar
denominated foreign securities, which may entail special risks (see page 11).
The Fund also may engage in options and futures transactions and may purchase
securities on a when-issued, delayed delivery or "when, as and if issued"
basis, which involve certain additional risks (see page 12).
</TABLE>
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE IN THIS PROSPECTUS AND IN THE STATEMENT
OF ADDITIONAL INFORMATION.
4
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are based on the
expenses and fees for the fiscal year ended January 31, 1998.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
- -------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price)............................................ 4.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments............... None None None None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds)............ None(2) 5.00%(3) 1.00%(4) None
Redemption Fees.............................................. None None None None
Exchange Fee................................................. None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
- --------------------------------------------------------------------------
Management and Advisory Fees................................. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (5) (6)........................................... 0.25% 0.75% 0.75% None
Other Expenses............................................... 0.51% 0.51% 0.51% 0.51%
Total Fund Operating Expenses (7)............................ 1.51% 2.01% 2.01% 1.26%
</TABLE>
- ------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund Shares --
Initial Sales Charge Alternative -- Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on redemptions
made within one year after purchase, except for certain specific
circumstances (see "Purchase of Fund Shares -- Initial Sales Charge
Alternative -- Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares -- Level Load Alternative -- Class C Shares").
Shares of the Fund held prior to July 28, 1997 that have been designated
Class C shares are not subject to the 1.00% CDSC.
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of Class
B and Class C equal to 0.20% of the average daily net assets of Class B and
0.25% of the average daily net assets of Class C are currently each
characterized as a service fee within the meaning of National Association
of Securities Dealers, Inc. ("NASD") guidelines and are payments made for
personal service and/or maintenance of shareholder accounts. The remainder
of the 12b-1 fee, if any, is an asset-based sales charge, and is a
distribution fee paid to the Distributor to compensate it for the services
provided and the expenses borne by the Distributor and others in the
distribution of the Fund's shares (see "Purchase of Fund Shares -- Plan of
Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales
charge is imposed at the time of conversion of Class B shares to Class A
shares. Class C shares do not have a conversion feature and, therefore, are
subject to an ongoing 0.75% distribution fee (see "Purchase of Fund Shares
-- Alternative Purchase Arrangements").
(7) There were no outstanding shares of Class A, Class B or Class D prior to
July 28, 1997. Accordingly, "Total Fund Operating Expenses," as shown above
with respect to those Classes, are estimates based upon the sum of 12b-1
Fees, Management Fees and estimated "Other Expenses."
5
<PAGE>
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<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the
end of each time period:
Class A................................................... $ 57 $ 88 $ 121 $ 215
Class B................................................... $ 70 $ 93 $ 128 $ 234
Class C................................................... $ 30 $ 63 $ 108 $ 234
Class D................................................... $ 13 $ 40 $ 69 $ 152
You would pay the following expenses on the same $1,000
investment assuming no redemption at the end of the period:
Class A................................................... $ 57 $ 88 $ 121 $ 215
Class B................................................... $ 20 $ 63 $ 108 $ 234
Class C................................................... $ 20 $ 63 $ 108 $ 234
Class D................................................... $ 13 $ 40 $ 69 $ 152
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares -- Plan of Distribution"
and "Repurchases and Redemptions" in this Prospectus.
Long-term shareholders of Class B and Class C may pay more in sales charges,
including distribution fees, than the economic equivalent of the maximum
front-end sales charges permitted by the NASD.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements and notes thereto and the unqualified report of
independent accountants, which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 31,
1993*
FOR THE YEAR ENDED JANUARY 31, THROUGH
------------------------------------------------------- JANUARY 31,
1998**++ 1997 1996 1995 1994
---------- ---------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................... $ 11.42 $ 11.13 $ 9.77 $ 10.98 $ 10.00
---------- ---------- ---------- ---------- ------
Net investment income............... 0.57 0.60 0.59 0.59 0.45
Net realized and unrealized gain
(loss)............................. 0.96 0.84 1.37 (1.20) 1.02
---------- ---------- ---------- ---------- ------
Total from investment operations...... 1.53 1.44 1.96 (0.61) 1.47
---------- ---------- ---------- ---------- ------
Less dividends and distributions from:
Net investment income............... (0.60) (0.60) (0.60) (0.55) (0.39)
Net realized gain................... (0.74) (0.55) -- (0.05) (0.10)
---------- ---------- ---------- ---------- ------
Total dividends and distributions..... (1.34) (1.15) (0.60) (0.60) (0.49)
---------- ---------- ---------- ---------- ------
Net asset value, end of period........ $ 11.61 $ 11.42 $ 11.13 $ 9.77 $ 10.98
---------- ---------- ---------- ---------- ------
---------- ---------- ---------- ---------- ------
TOTAL INVESTMENT RETURN+................ 14.03% 13.46% 20.52% (5.59)% 15.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................. 2.01% 2.02% 2.21% 2.04% 1.57%(2)(3)
Net investment income................. 4.84% 5.19% 5.41% 5.83% 5.62%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands............................ $54,863 $60,941 $57,631 $55,335 $64,370
Portfolio turnover rate............... 96% 102% 79% 88% 84%(1)
Average commission rate paid.......... $0.0169 $0.0540 -- -- --
</TABLE>
- ------------
* COMMENCEMENT OF OPERATIONS.
** PRIOR TO JULY 28, 1997, THE FUND ISSUED ONE CLASS OF SHARES. ALL SHARES OF
THE FUND HELD PRIOR TO THAT DATE, OTHER THAN SHARES WHICH WERE ACQUIRED IN
EXCHANGE FOR SHARES OF FUNDS FOR WHICH DEAN WITTER SERVICES COMPANY INC.
SERVES AS MANAGER AND TCW FUNDS MANAGEMENT, INC. SERVES AS ADVISER ("TCW/DW
FUNDS") OFFERED WITH A CONTINGENT DEFERRED SALES CHARGE ("CDSC") AND SHARES
ACQUIRED THROUGH REINVESTMENT OF DIVIDENDS AND DISTRIBUTIONS THEREON, HAVE
BEEN DESIGNATED CLASS C SHARES. SHARES HELD PRIOR TO JULY 28, 1997 WHICH
WERE ACQUIRED IN EXCHANGE FOR SHARES OF A TCW/DW FUND SOLD WITH A CDSC,
INCLUDING SHARES ACQUIRED THROUGH REINVESTMENT OF DIVIDENDS AND
DISTRIBUTIONS THEREON, HAVE BEEN DESIGNATED CLASS B SHARES.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE MANAGER AND INVESTMENT ADVISER HAD NOT REIMBURSED ALL EXPENSES AND
WAIVED THE MANAGEMENT FEE, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT
INCOME RATIOS WOULD HAVE BEEN 2.00% AND 5.18%, RESPECTIVELY.
7
<PAGE>
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<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
--------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 11.81
------
Net investment income................................... 0.31
Net realized and unrealized gain........................ 0.38
------
Total from investment operations.......................... 0.69
------
Less dividends and distributions from:
Net investment income................................... (0.33)
Net realized gain....................................... (0.57)
------
Total dividends and distributions......................... (0.90)
------
Net asset value, end of period............................ $ 11.60
------
------
TOTAL INVESTMENT RETURN+.................................... 6.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 1.54%(2)
Net investment income..................................... 5.04%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................... $28
Portfolio turnover rate................................... 96%
Average commission rate paid.............................. $0.0169
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 11.81
------
Net investment income................................... 0.28
Net realized and unrealized gain........................ 0.38
------
Total from investment operations.......................... 0.66
------
Less dividends and distributions from:
Net investment income................................... (0.30)
Net realized gain....................................... (0.57)
------
Total dividends and distributions......................... (0.87)
------
Net asset value, end of period............................ $ 11.60
------
------
TOTAL INVESTMENT RETURN+.................................... 5.80%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 2.02%(2)
Net investment income..................................... 4.58%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................... $6,597
Portfolio turnover rate................................... 96%
Average commission rate paid.............................. $0.0169
</TABLE>
- ------------
* THE DATE THE SHARES WERE FIRST ISSUED. CLASS B PARTICIPANTS WHO HELD SHARES
PRIOR TO JULY 28, 1997 SHOULD REFER TO THE FINANCIAL HIGHLIGHTS OF CLASS C
TO OBTAIN THE HISTORICAL PER SHARE AND RATIO INFORMATION OF THEIR SHARES.
++ THE PER SHARE AMOUNTS WERE COMPUTED USING AN AVERAGE NUMBER OF SHARES
OUTSTANDING DURING THE PERIOD.
+ DOES NOT REFLECT THE DEDUCTION OF SALES CHARGE. CALCULATED BASED ON THE NET
ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
8
<PAGE>
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<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
--------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period...................... $ 11.81
------
Net investment income..................................... 0.32
Net realized and unrealized gain.......................... 0.39
------
Total from investment operations.......................... 0.71
------
Less dividends and distributions from:
Net investment income................................... (0.34)
Net realized gain....................................... (0.57)
------
Total dividends and distributions......................... (0.91)
------
Net asset value, end of period............................ $ 11.61
------
------
TOTAL INVESTMENT RETURN+.................................... 6.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................. 1.27%(2)
Net investment income..................................... 5.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands................... $11
Portfolio turnover rate................................... 96%
Average commission rate paid.............................. $0.0169
</TABLE>
- ------------
* THE DATE THE 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.
9
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
TCW/DW Income and Growth Fund (the "Fund") is an open-end, non-diversified
management investment company. The Fund is a trust of the type commonly known as
a "Massachusetts business trust" and was organized under the laws of
Massachusetts on November 23, 1992.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The Manager
is a wholly-owned subsidiary of Dean Witter InterCapital Inc. ("InterCapital").
InterCapital is a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co., a
preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses--securities, asset management
and credit services.
The Manager acts as manager to ten other TCW/DW Funds. The Manager and
InterCapital act in various investment management, advisory, management and
administrative capacities to a total of 101 investment companies, 28 of which
are listed on the New York Stock Exchange, with combined assets of approximately
$105.8 billion as of February 28, 1998. InterCapital also manages and advises
portfolios of pension plans, other institutions and individuals which aggregated
approximately $4.1 billion at such date.
The Fund has retained the Manager to manage its business affairs, supervise
its overall day-to-day operations (other than providing investment advice) and
provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of The TCW Group, Inc.
The Adviser serves as investment adviser to ten other TCW/DW Funds in addition
to the Fund. As of February 28, 1998, the Adviser and its affiliated companies
had over $50 billion under management or committed to management, primarily from
institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager and
the Adviser to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.45% to
the Fund's net assets up to $500 million, scaled down to 0.42% on assets over
$500 million. As compensation for its investment advisory services, the Fund
pays the Adviser monthly compensation calculated daily by applying an annual
rate of 0.30% to the Fund's net assets up to $500 million, scaled down to 0.28%
on assets over $500 million. For the fiscal year ended January 31, 1998, the
Fund accrued total compensation to the Manager and the Adviser amounting to
0.45% and 0.30%, respectively, of the Fund's average daily net assets and total
expenses of Class C amounted to 2.01% of the average daily net assets of Class
C. Shares of Class A, Class B and Class D were first issued on July 28, 1997.
The expenses of the Fund include: the fees of the Manager and the Adviser; the
fee pursuant to the Plan of Distribution (see "Purchase of Fund Shares"); taxes;
transfer agent, custodian and auditing fees; certain legal fees; and printing
and other expenses relating to the Fund's operations which are not expressly
assumed by the Manager or the Adviser under their respective Agreements with the
Fund.
10
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is to generate high total return by
providing a high level of current income and the potential for capital
appreciation. This objective is fundamental and may not be changed without
shareholder approval. There is no assurance that the objective will be achieved.
The Fund seeks to achieve its investment objective by investing, in
descending order of preference under current market conditions, at least 65% of
its total assets in any or all of the following types of securities: (1) bonds
or preferred stock convertible into common stock ("convertible securities"); (2)
other fixed-income securities, including bonds, notes, debentures and preferred
stocks; (3) common stocks; and (4) U.S. Government securities (securities issued
or guaranteed by the United States or its agencies or instrumentalities).
The Fund will invest at least 50% of its total assets in a combination of
equity securities and fixed-income securities with equity components such as
convertible securities and warrants. In addition, all fixed-income securities
without an equity component in which the Fund invests will have a weighted
average life or a maturity date of ten years or less.
The Fund may invest in convertible securities and other fixed-income
securities rated below investment grade. Securities below investment grade are
the equivalent of high yield, high risk bonds. Investment grade is generally
considered to be debt securities rated BBB or higher by Standard & Poor's
Corporation ("S&P") or Baa or higher by Moody's Investors Service, Inc.
("Moody's"). (Convertible and other fixed-income securities rated BBB by S&P or
Baa by Moody's, which generally are regarded as having an adequate capacity to
pay interest and repay principal, have speculative characteristics.) However,
the Fund will only invest in convertible and other fixed-income securities that
are rated at least B by either S&P or Moody's or, if not rated, determined to be
of comparable quality by the Adviser. The Fund will not invest in fixed-income
securities that are in default in payment of principal or interest. A
description of fixed-income securities ratings is contained in the Appendix to
this Prospectus.
PORTFOLIO CHARACTERISTICS
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or based on a specified formula.
Convertible securities rank senior to common stocks in a corporation's capital
structure and, therefore, entail less risk than the corporation's common stock.
The value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, may sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
FOREIGN SECURITIES. The Fund may invest in securities of foreign companies.
The Fund may invest in Eurodollar convertible securities, which are fixed-income
securities of a U.S. or foreign issuer that are issued in U.S. dollars outside
the United States and are convertible into or exchangeable for equity securities
of the same or a different issuer. Interest and dividends on Eurodollar
securities are payable in U.S. dollars outside of the United States. The Fund
may invest without limitation in Eurodollar convertible securities that are
11
<PAGE>
convertible into or exchangeable for U.S. or foreign equity securities listed,
or represented by American Depository Receipts listed, on a U.S. stock exchange.
The Fund's investments in other Eurodollar convertible securities which are
exchangeable for unlisted foreign equity securities are subject to the Fund's
overall policy limiting its investment in illiquid securities to 15% or less of
its net assets.
The Fund will not invest more than 25% of the value of its total assets, at
the time of purchase, in non-dollar denominated foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange Act of
1934 or American Depository Receipts, on which there is no such limit). The
Fund's investments in unlisted foreign securities are subject to the Fund's
overall policy limiting its investment in illiquid securities to 15% or less of
its net assets. Foreign securities investments may be affected by changes in
currency rates or exchange control regulations, changes in governmental
administration or economic or monetary policy (in the United States and abroad)
or changed circumstances in dealings between nations. Costs may be incurred in
connection with conversions between various currencies held by the Fund. The
Fund currently does not intend to invest more than 25% of its total assets in
the securities of issuers in any one country outside the United States. For a
discussion of the risks of foreign securities, see "Risk Considerations," below.
RISK CONSIDERATIONS
Fund's shares will fluctuate with changes in the market value of the Fund's
portfolio securities. The market value of the Fund's portfolio securities will
increase or decrease due to a variety of economic, market and political factors
affecting the creditworthiness of the underlying issuers, as well as changes in
prevailing interest rates, none of which can be predicted. A decline in
prevailing interest rates will generally increase the value of fixed-income
securities, while an increase in rates usually reduces the value of those
securities. The Fund's yield also will vary based on the yield of the Fund's
portfolio securities.
HIGH YIELD, HIGH RISK SECURITIES. Because of the ability of the Fund to
invest in certain high yield, high risk convertible and fixed-income securities,
the Adviser must take into account the special nature of such securities and
certain special considerations in assessing the risks associated with such
investments. Although the growth of the high yield securities market in the
1980s had paralleled a long economic expansion, recently many issuers have been
affected by adverse economic and market conditions. It should be recognized that
an economic downturn or increase in interest rates is likely to have a negative
effect on the high yield bond market and on the value of the high yield
securities held by the Fund, as well as on the ability of the securities'
issuers to repay principal and interest on their borrowings.
The prices of high yield securities have been found to be less sensitive to
changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the Fund
defaults, the Fund may incur additional expenses to seek recovery. In addition,
periods of economic uncertainty and change can be expected to result in an
increased volatility of market prices of high yield securities and a concomitant
volatility in the net asset value of a share of the Fund.
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a fair
value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities. In addition, new laws and
potential new laws may have an adverse effect upon the value of high yield
securities and a concomitant negative impact upon the net asset value of a share
of the Fund.
For a discussion of the risks of the Fund's status as a non-diversified
investment company, see "Other
12
<PAGE>
Investment Policies," below. For a discussion of warrants and stock rights, see
"Warrants and Stock Rights," below. For a discussion of the risks of options and
futures transactions, see "Options and Futures Transactions," below.
During the fiscal year ended January 31, 1998, the monthly dollar weighted
average ratings of the debt obligations held by the Fund, expressed as a
percentage of the Fund's total debt investments, were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL DEBT
RATINGS INVESTMENTS
- ---------------------------------- -------------------
<S> <C>
AAA/Aaa........................... 2.0%
AA/Aa............................. 1.9%
A/A............................... 8.4%
BBB/Baa........................... 7.8%
BB/Ba............................. 15.2%
B/B............................... 37.8%
CCC/Caa........................... 0.0%
CC/Ca............................. 0.0%
C/C............................... 0.0%
D................................. 0.0%
Unrated........................... 26.9%
</TABLE>
FOREIGN SECURITIES. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmental administration or economic or monetary policy (in the United States
and abroad) or changed circumstances in dealings between nations. Fluctuations
in the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign currency.
Changes in foreign currency exchange rates relative to the U.S. dollar will
affect the U.S. dollar value of the Fund's assets denominated in that currency
and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected by
the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of the
exchanges on which the currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments. To the extent the Fund purchases Eurodollar
certificates of deposit issued by foreign branches of domestic United States
banks, consideration will be given to their domestic marketability, the lower
reserve requirements normally mandated for overseas banking operations, the
possible impact of interruptions in the flow of international currency
transactions and future international political and economic developments which
might adversely affect the payment of principal or interest.
The risks of other investment techniques which may be utilized by the Fund
are described under "Other Investment Policies" and "Options and Futures
Transactions" below.
13
<PAGE>
WARRANTS AND STOCK RIGHTS
The Fund may invest up to 5% of the value of its net assets in warrants,
including not more than 2% in warrants not listed on either the New York or
American Stock Exchange. The Fund may also invest up to 5% of the value of its
net assets in stock rights. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period of
time, and have no voting rights, pay no dividends and have no rights with
respect to the corporations issuing them. The Fund may acquire warrants and
stock rights attached to other securities without reference to the foregoing
limitations.
OTHER INVESTMENT POLICIES
While the Fund invests primarily in the types of securities described above,
under ordinary circumstances it may invest up to 35% of its total assets in
money market instruments, which are short-term (maturities of up to thirteen
months) fixed-income securities issued by private and governmental institutions.
Money market instruments in which the Fund may invest are securities issued or
guaranteed by the U.S. Government or its agencies; obligations of banks subject
to regulation by the U.S. Government and having total assets of $1 billion or
more; Eurodollar certificates of deposit; obligations of savings banks and
savings and loan associations having total assets of $1 billion or more; fully
insured certificates of deposit; and commercial paper rated within the two
highest grades by Moody's or S&P or, if not rated, issued by a company having an
outstanding debt issue rated AAA by S&P or Aaa by Moody's.
There may be periods during which, in the opinion of the Adviser, market
conditions warrant reduction of some or all of the Fund's securities holdings.
During such periods, the Fund may adopt a temporary "defensive" posture in which
greater than 35% of its total assets is invested in money market instruments or
cash.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "Act"), and, as such, is not
limited by the Act in the proportion of its assets that it may invest in the
obligations of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code. See "Dividends, Distributions and Taxes." In
order to qualify, among other requirements, the Fund will limit its investments
so that at the close of each quarter of the taxable year, (i) not more than 25%
of the market value of the Fund's total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market value
of its total assets not more than 5% will be invested in the securities of a
single issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. To the extent that a relatively high percentage
of the Fund's assets may be invested in the obligations of a limited number of
issuers, the Fund's portfolio securities may be more susceptible to any single
economic, political or regulatory occurrence than the portfolio securities of a
diversified investment company. The limitations described in this paragraph are
not fundamental policies and may be revised to the extent applicable Federal
income tax requirements are revised.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures
designed to minimize those risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions and maintaining adequate collateralization.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis.
14
<PAGE>
When such transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. There is no overall limit on the percentage of the
Fund's assets which may be committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. 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 the sale.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," such security will not be included within
the category "illiquid securities," which under current policy may not exceed
15% of the Fund's net assets. However, investing in Rule 144A securities could
have the effect of increasing the level of Fund illiquidity to the extent the
Fund, at a particular period in time, may be unable to find qualified
institutional buyers in purchasing such securities.
INVESTMENT IN OTHER INVESTMENT VEHICLES. Under the Investment Company Act
of 1940, as amended, the Fund generally may invest up to 10% of its total assets
in the aggregate in shares of other investment companies and up to 5% of its
total assets in any one investment company. The Fund may not own more than 3% of
the voting stock of any investment company. In addition, the Fund may invest in
real estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in other investment
companies may be the sole or most practical means by which the Fund may
participate in certain securities markets, and 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 an investment company or real estate
investment trust, the Fund would bear its ratable share of that entity's
expenses, including its advisory and administration fees. At the same time the
Fund would continue to pay its own investment management fees and other
expenses, as a result of which the Fund and its shareholders in effect will be
absorbing duplicate levels of fees with respect to investments in other
investment companies and in real estate investment trusts.
15
<PAGE>
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.
OPTIONS AND FUTURES TRANSACTIONS
The Fund may purchase and sell (write) call and put options on portfolio
securities and on the U.S. dollar which are or may in the future be listed on
securities exchanges or are written in over-the-counter transactions ("OTC
Options"). Listed options are issued or guaranteed by the exchange on which they
trade or by a clearing corporation such as the Options Clearing Corporation. OTC
options are purchased from or sold (written) to dealers or financial
institutions which have entered into direct agreements with the Fund. The Fund
is permitted to write covered call options on portfolio securities and the U.S.
dollar, without limit, in order to aid it in achieving its investment objective.
The Fund may also write covered put options; however, the aggregate value of the
obligations underlying the puts determined as of the date the options are sold
will not exceed 50% of the Fund's net assets.
The Fund may purchase listed and OTC call and put options on securities and
stock indexes in amounts equalling up to 5% of its total assets. The Fund may
purchase call options to close out a covered call position or to protect against
an increase in the price of a security it anticipates purchasing. The Fund may
purchase put options on securities which it holds in its portfolio only to
protect itself against a decline in the value of the security. The Fund may also
purchase put options to close out written put positions in a manner similar to
call option closing purchase transactions. There are no other limits on the
Fund's ability to purchase call and put options.
The Fund may also purchase and sell interest rate and stock index futures
contracts ("futures contracts") that are traded on U.S. commodity exchanges on
such underlying securities as U.S. Treasury bonds, notes, and bills and GNMA
Certificates ("interest rate" futures) and such indexes as the S&P 500 Index and
the New York Stock Exchange Composite Index ("stock index" futures) and the
Moody's Investment-Grade Corporation Bond Index ("bond index" futures). The Fund
will purchase or sell interest rate futures contracts and bond index futures
contracts for the purpose of hedging its fixed-income portfolio (or anticipated
portfolio) against changes in prevailing interest rates and to alter the Fund's
asset allocation in fixed-income securities. The Fund will purchase or sell
stock index futures contracts for the purpose of hedging its equity portfolio
(or anticipated portfolio) against changes in their prices.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any such
futures, options or products as may be developed, to the extent consistent with
its investment objective and applicable regulatory requirements.
RISKS OF OPTIONS AND FUTURES TRANSACTIONS. The Fund may close out its
position as writer of an option, or as a buyer or seller of a futures contract,
only if a liquid
16
<PAGE>
secondary market exists for options or futures contracts of that series. There
is no assurance that such a market will exist, particularly in the case of OTC
options, as such options may generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. Also, exchanges may
limit the amount by which the price of many futures contracts may move on any
day. If the price moves equal the daily limit on successive days, then it may
prove impossible to liquidate a futures position until the daily limit moves
have ceased.
While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk is that the Adviser could be incorrect in its expectations as to
the direction or extent of various interest rate or price movements or the time
span within which the movements take place. For example, if the Fund sold
futures contracts for the sale of securities in anticipation of an increase in
interest rates, and then interest rates went down instead, causing bond prices
to rise, the Fund would lose money on the sale. Another risk which will arise in
employing futures contracts to protect against the price volatility of portfolio
securities is that the prices of securities, currencies and indexes subject to
futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the dollar cash prices of the Fund's portfolio
securities and their denominated currencies. See the Statement of Additional
Information for a further discussion of such risks.
YEAR 2000. The management services provided to the Fund by the Manager, the
investment advisory services provided to the Fund by the Adviser and the
services provided to shareholders by the Distributor and the Transfer Agent
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to 1900
or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. The Manager, the Adviser, the
Distributor and the Transfer Agent have been actively working on necessary
changes to their own computer systems to prepare for the year 2000 and expect
that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time. In
addition, it is possible that the markets for securities in which the Fund
invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Fund's investment objective. Robert M. Hanisee, Mark Attanasio,
Kevin A. Hunter and Melissa Weiler, Managing Directors of the Adviser, are the
primary portfolio managers of the Fund. Messrs. Hanisee and Hunter and Ms.
Weiler have been primary portfolio managers of the Fund since April, 1995 and
Mr. Attanasio has been a portfolio manager of the Fund since March, 1996.
Messrs. Hanisee and Hunter have been portfolio managers with affiliates of The
TCW Group, Inc. for over five years. Mr. Attanasio has been a portfolio manager
with the TCW Group Inc. and affiliates thereof since April, 1995. Prior thereto
he was Co-Chief Executive Officer and Chief Portfolio Strategist of Crescent
Corporation (April, 1991-April 1995). Ms. Weiler has been a portfolio manager
with affiliates of The TCW Group, Inc. since April, 1995, and prior thereto was
a Vice President and Portfolio Manager of Crescent Capital Corporation, an
Investment Adviser, with which she had been affiliated since February 1992.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser
17
<PAGE>
will rely on information from various sources, including research, analysis and
appraisals of brokers and dealers, including Dean Witter Reynolds Inc. ("DWR"),
Morgan Stanley & Co. Incorporated and other broker-dealer affiliates of the
Manager, and others regarding economic developments and interest rate trends,
and the Adviser's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR, Morgan Stanley
& Co. Incorporated and other brokers and dealers that are affiliates of the
Manager or Adviser. The Fund may incur brokerage commissions on transactions
conducted through such affiliates. Under normal circumstances it is not
anticipated that the portfolio trading will result in the Fund's portfolio
turnover rate exceeding 150% in any one year. The Fund will incur brokerage
costs commensurate with its portfolio turnover rate, and thus, a higher level
(over 100%) of portfolio transactions will increase the Fund's overall brokerage
expenses. Short term gains and losses may result from such portfolio
transactions.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one industry. This restriction does not apply to obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities.
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of its
total assets, purchase more than 10% of the voting securities of any issuer.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a continuous
basis. Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager, shares of
the Fund are distributed by the Distributor and offered by DWR and others (which
may include TCW Brokerage Services, an affiliate of the Adviser) who have
entered into agreements with the Distributor ("Selected Broker-Dealers"). The
principal executive office of the Distributor is located at Two World Trade
Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares are
sold to investors with an initial sales charge that declines to zero for larger
purchases; however, Class A shares sold without an
18
<PAGE>
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but are
subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most redemptions
within six years after purchase. (Class B shares purchased by certain qualified
plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed within
three years after purchase.) Class C shares are sold without an initial sales
charge but are subject to a CDSC of 1.0% on most redemptions made within one
year after purchase. Class D shares are sold without an initial sales charge or
CDSC and are available only to investors meeting an initial investment minimum
of $5 million ($25 million for certain qualified plans), and to certain other
limited categories of investors. At the discretion of the Board of Trustees of
the Fund, Class A shares may be sold to categories of investors in addition to
those set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of investors,
in each case as may be described in the then current prospectus of the Fund. See
"Alternative Purchase Arrangements -- Selecting a Particular Class" for a
discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class
A shares and concurrent investments in Class D shares of the Fund and other
TCW/DW Funds which are multiple class funds ("TCW/DW Multi-Class Funds") will be
aggregated. Subsequent purchases of $100 or more may be made by sending a check,
payable to TCW/DW Income and Growth Fund, directly to Morgan Stanley Dean Witter
Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City,
NJ 07303, or by contacting an account executive of DWR or another Selected
Broker-Dealer. When purchasing shares of the Fund, investors must specify
whether the purchase is for Class A, Class B, Class C or Class D shares. If no
Class is specified, the Transfer Agent will not process the transaction until
the proper Class is identified. The minimum initial purchase in the case of
investments through EasyInvest-SM-, an automatic purchase plan (see "Shareholder
Services"), is $100, provided that the schedule of automatic investments will
result in investments totalling at least $1,000 within the first twelve months.
The minimum initial investment in the case of an "Education IRA" is $500, if the
Distributor has reason to believe that additional investments will increase the
investment in the account to $1,000 within three years. In the case of
investments pursuant to (i) Systematic Payroll Deduction Plans (including
Individual Retirement Plans), (ii) the InterCapital mutual fund asset allocation
program and (iii) fee-based programs approved by the Distributor, pursuant to
which participants pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services, the Fund, in its
discretion, may accept investments without regard to any minimum amounts which
would otherwise be required, provided, in the case of Systematic Payroll
Deduction Plans, that the Distributor has reason to believe that additional
investments will increase the investment in all accounts under such Plans to at
least $1,000. Certificates for shares purchased will not be issued unless a
request is made by the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business
19
<PAGE>
on the day prior to the record date for such dividends and distributions.
Sales personnel of a Selected Broker-Dealer are compensated for selling
shares of the Fund by the Distributor or any of its affiliates and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation as special
sales incentives, including trips, educational and/or business seminars and
merchandise. The Fund and the Distributor reserve the right to reject any
purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their needs.
The general public is offered three Classes of shares: Class A shares, Class B
shares and Class C shares, which differ principally in terms of sales charges
and rate of expenses to which they are subject. A fourth Class of shares, Class
D shares, is offered only to limited categories of investors (see "No Load
Alternative -- Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs resulting
from the CDSC applicable to shares of those Classes. The ongoing distribution
fees that are imposed on Class A, Class B and Class C shares will be imposed
directly against those Classes and not against all assets of the Fund and,
accordingly, such charges against one Class will not affect the net asset value
of any other Class or have any impact on investors choosing another sales charge
option. See "Plan of Distribution" and "Repurchases and Redemptions."
Set forth below is a summary of the differences between the Classes and the
factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
CLASS A SHARES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain other
limited categories of investors) are not subject to any sales charges at the
time of purchase but are subject to a CDSC of 1.0% on redemptions made within
one year after purchase, except for certain specific circumstances. Class A
shares are also subject to a 12b-1 fee of up to 0.25% of the average daily net
assets of the Class. See "Initial Sales Charge Alternative -- Class A Shares."
CLASS B SHARES. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 0.75% of
the average daily net assets of Class B. The Class B shares' distribution fee
will cause that Class to have higher expenses and pay lower dividends than Class
A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time. See
"Contingent Deferred Sales Charge Alternative -- Class B Shares."
CLASS C SHARES. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They are
subject to an annual 12b-1 fee of up to 0.75% of the average daily net assets of
the Class C shares. The Class C shares' distribution fee may cause
20
<PAGE>
that Class to have higher expenses and pay lower dividends than Class A or Class
D shares. See "Level Load Alternative -- Class C Shares."
CLASS D SHARES. Class D shares are available only to limited categories of
investors (see "No Load Alternative -- Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative -- Class D Shares."
SELECTING A PARTICULAR CLASS. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly lower
CDSC upon redemptions, they do not, unlike Class B shares, convert into Class A
shares after approximately ten years, and, therefore, are subject to an ongoing
12b-1 fee of 0.75% (rather than the 0.25% fee applicable to Class A shares) for
an indefinite period of time. Thus, Class B shares may be more attractive than
Class C shares to investors with longer term investment outlooks. Other
investors, however, may elect to purchase Class C shares if, for example, they
determine that they do not wish to be subject to a front-end sales charge and
they are uncertain as to the length of time they intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all TCW/DW
Multi-Class Funds, and holdings of shares of "Exchange Funds" (see "Shareholder
Services -- Exchange Privilege") for which Class A shares have been exchanged,
will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class of
shares. Investors should understand that the purpose of a CDSC is the same as
that of the initial sales charge in that the sales charges applicable to each
Class provide for the financing of the distribution of shares of that Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
CONVERSION
CLASS SALES CHARGE 12b-1 FEE FEATURE
<C> <S> <C> <C>
A Maximum 4.25% 0.25% No
initial sales
charge reduced
for purchases of
$25,000 and over;
shares sold
without an
initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
B Maximum 5.0% CDSC 0.75% B shares
during the first convert to A
year decreasing shares
to 0 after six automatically
years after
approximately
ten years
C 1.0% CDSC during 0.75% No
first year
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value,"
21
<PAGE>
"Dividends, Distributions and Taxes" and "Shareholder Services -- Exchange
Privilege" for other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE --
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge. In
some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase (calculated from the last day of the month in which the shares
were purchased), except for certain specific circumstances. The CDSC will be
assessed on an amount equal to the lesser of the current market value or the
cost of the shares being redeemed. The CDSC will not be imposed (i) in the
circumstances set forth below in the section "Contingent Deferred Sales Charge
Alternative -- Class B Shares -- CDSC Waivers," except that the references to
six years in the first paragraph of that section shall mean one year in the case
of Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets of
the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net Asset
Value" below), plus a sales charge (expressed as a percentage of the offering
price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
-----------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- ------------------------- ---------------- -----------------
<S> <C> <C>
Less than $25,000........ 4.25% 4.44%
$25,000 but less
than $50,000............ 4.00% 4.17%
$50,000 but less
than $100,000........... 3.50% 3.63%
$100,000 but less
than $250,000........... 2.75% 2.83%
$250,000 but less
than $1 million......... 1.75% 1.78%
$1 million and over...... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or her
spouse and their children under the age of 21 purchasing shares for his, her or
their own accounts; (c) a trustee or other fiduciary purchasing shares for a
single trust estate or a single fiduciary account; (d) a pension, profit-sharing
or other employee benefit plan qualified or non-qualified under Section 401 of
the Internal Revenue Code; (e) tax-exempt organizations enumerated in Section
501(c)(3) or (13) of the Internal Revenue Code; (f) employee benefit plans
qualified under Section 401 of the Internal Revenue Code of a single employer or
of employers who are "affiliated persons" of each other within the meaning of
Section 2(a)(3)(c) of the Act; and for investments in Individual Retirement
Accounts of employees of a single employer through Systematic Payroll Deduction
plans; or (g) any other organized group of persons, whether incorporated or not,
provided the organization has been in existence for at least six months and has
some purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
COMBINED PURCHASE PRIVILEGE. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other TCW/DW Multi-Class Funds. The sales charge payable on the
purchase of the Class A shares of the Fund and the Class A shares of the other
TCW/DW Multi-Class Funds will be at their respective rates applicable to the
total amount of the combined concurrent purchases of such shares.
RIGHT OF ACCUMULATION. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund
22
<PAGE>
and other TCW/DW Multi-Class Funds previously purchased at a price including a
front-end sales charge (including shares of the Fund, other TCW/DW Multi-Class
Funds or "Exchange Funds" (see "Shareholder Services -- Exchange Privilege")
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions), which are held at
the time of such transaction, amounts to $25,000 or more. If such investor has a
cumulative net asset value of Class A and Class D shares that, together with the
current investment amount, is equal to at least $5 million ($25 million for
certain qualified plans), such investor is eligible to purchase Class D shares
subject to the $1,000 minimum initial investment requirement of that Class of
the Fund. See "No Load Alternative -- Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the dealer or shareholder when such an order is
placed by mail. The reduced sales charge will not be granted if: (a) such
notification is not furnished at the time of the order; or (b) a review of the
records of the Selected Broker-Dealer or the Transfer Agent fails to confirm the
investor's represented holdings.
LETTER OF INTENT. The foregoing schedule of reduced sales charges will also
be available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from DWR or other Selected Broker-Dealers. The cost of Class A shares of the
Fund or Class A shares of other TCW/DW Multi-Class Funds which were previously
purchased at a price including a front-end sales charge during the 90-day period
prior to the date of receipt by the Distributor of the Letter of Intent, or of
Class A shares of the Fund or other TCW/DW Multi-Class Funds or shares of
"Exchange Funds" (see "Shareholder Services -- Exchange Privilege") acquired in
exchange for Class A shares of such funds purchased during such period at a
price including a front-end sales charge, which are still owned by the
shareholder, may also be included in determining the applicable reduction.
ADDITIONAL NET ASSET VALUE PURCHASE OPTIONS. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value by
the following:
(1)trusts for which MSDW Trust (an affiliate of
the Investment Manager) provides discretionary trustee services;
(2)persons participating in a fee-based program
approved by the Distributor, pursuant to which such persons pay an asset based
fee for services in the nature of investment advisory or administrative services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs'
agreements, and restrictions on transferability of Fund shares);
(3)employer-sponsored 401(k) and other plans
qualified under Section 401(a) of the Internal Revenue Code ("Qualified
Retirement Plans") with at least 200 eligible employees and for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement;
(4)Qualified Retirement Plans for which MSDW
Trust serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement;
(5)investors who are clients of a Dean Witter
account executive who joined Dean Witter from another investment firm within six
months prior to the date of purchase of Fund shares by such investors, if the
shares are being purchased with the proceeds from a redemption of shares of an
open-end proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase was
made within sixty days after the redemption and the proceeds of the redemption
had been maintained in the interim in cash or a money market fund; and
23
<PAGE>
(6)other categories of investors, at the discretion
of the Board, as disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE --
CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement Plans,
three years) preceding the redemption. In addition, Class B shares are subject
to an annual 12b-1 fee of 0.75% of the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in which
the shares were purchased) will not be subject to any CDSC upon redemption.
Shares redeemed earlier than six years after purchase may, however, be subject
to a CDSC which will be a percentage of the dollar amount of shares redeemed and
will be assessed on an amount equal to the lesser of the current market value or
the cost of the shares being redeemed. The size of this percentage will depend
upon how long the shares have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First.......................... 5.0%
Second......................... 4.0%
Third.......................... 3.0%
Fourth......................... 2.0%
Fifth.......................... 2.0%
Sixth.......................... 1.0%
Seventh and thereafter......... None
</TABLE>
In the case of Class B shares purchased on or after July 28, 1997 by
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject to
any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above), the percentage of which will depend on how long the shares
have been held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First.......................... 2.0%
Second......................... 2.0%
Third.......................... 1.0%
Fourth and thereafter.......... None
</TABLE>
CDSC WAIVERS. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or, in
the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain employer-
sponsored benefit plans, three years) prior to the redemption; and (iii) the
current net asset value of shares purchased through reinvestment of dividends or
distributions. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1)redemptions of shares held at the time a
shareholder dies or becomes disabled, only if the shares are: (a) registered
either in the name of an individual shareholder (not a trust), or in the names
of such shareholder and his or her spouse as joint tenants with right of
survivorship; or (b) held in a qualified corporate or self-employed retirement
plan, Individual Retirement
24
<PAGE>
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination of
disability;
(2)redemptions in connection with the following
retirement plan distributions: (a) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following retirement (or,
in the case of a "key employee" of a "top heavy" plan, following attainment of
age 59 1/2); (b) distributions from an IRA or 403(b) Custodial Account
following attainment of age 59 1/2; or (c) a tax-free return of an excess
contribution to an IRA; and
(3)all redemptions of shares held for the benefit of
a participant in a Qualified Retirement Plan which offers investment companies
managed by the Manager or its parent, Dean Witter InterCapital Inc., as self-
directed investment alternatives and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (a)
the plan continues to be an Eligible Plan after the redemption; or (b) the
redemption is in connection with the complete termination of the plan involving
the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability, the
Distributor utilizes the definition of disability contained in Section 72(m)(7)
of the Internal Revenue Code, which relates to the inability to engage in
gainful employment. With reference to (2) above, the term "distribution" does
not encompass a direct transfer of IRA, 403(b) Custodial Account or retirement
plan assets to a successor custodian or trustee. All waivers will be granted
only following receipt by the Distributor of confirmation of the shareholder's
entitlement.
CONVERSION TO CLASS A SHARES. Shares of the Fund held prior to July 28,
1997 which were acquired in exchange for shares of TCW/DW Funds sold with a
CDSC, including shares acquired through reinvestment of dividends and
distributions thereon, have been designated Class B shares. Shares held before
May 1, 1997 that have been designated Class B shares will convert to Class A
shares in May, 2007. In all other instances Class B shares will convert
automatically to Class A shares, based on the relative net asset values of the
shares of the two Classes on the conversion date, which will be approximately
ten (10) years after the date of the original purchase. The ten year period is
calculated from the last day of the month in which the shares were purchased or,
in the case of Class B shares acquired through an exchange or a series of
exchanges, from the last day of the month in which the original Class B shares
were purchased, provided that shares originally purchased before May 1, 1997
will convert to Class A shares in May, 2007. The conversion of shares purchased
on or after May 1, 1997 will take place in the month following the tenth
anniversary of the purchase. There will also be converted at that time such
proportion of Class B shares acquired through automatic reinvestment of
dividends and distributions owned by the shareholder as the total number of his
or her Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the case
of Class B shares held by a Qualified Retirement Plan for which MSDW Trust
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, the plan is treated as a
single investor and all Class B shares will convert to Class A shares on the
conversion date of the first shares of a TCW/DW Multi-Class Fund purchased by
that plan. In the case of Class B shares previously exchanged for shares of an
"Exchange Fund" (see "Shareholder Services -- Exchange Privilege"), the period
of time the shares were held in the Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired) is excluded from
the holding period for conversion. If those shares are subsequently re-exchanged
for Class B shares of a TCW/DW Multi-Class Fund, the holding period resumes on
the last day of the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date
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for conversion. Class B shares evidenced by share certificates that are not
received by the Transfer Agent at least one week prior to any conversion date
will be converted into Class A shares on the next scheduled conversion date
after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion will
have a basis equal to the shareholder's basis in the converted Class B shares
immediately prior to the conversion, and (iii) Class A shares received on
conversion will have a holding period that includes the holding period of the
converted Class B shares. The conversion feature may be suspended if the ruling
or opinion is no longer available. In such event, Class B shares would continue
to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE -- CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative -- Class B Shares --
CDSC Waivers," except that the references to six years in the first paragraph of
that section shall mean one year in the case of Class C shares. Class C shares
are subject to an annual 12b-1 fee of up to 0.75% of the average daily net
assets of the Class. Unlike Class B shares, Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will be
subject to 12b-1 fees applicable to Class C shares for an indefinite period
subject to annual approval by the Fund's Board of Trustees and regulatory
limitations. All shares of the Fund held prior to July 28, 1997 (other than
shares which were acquired in exchange for shares of TCW/DW Funds sold with a
CDSC and shares acquired through reinvestment of dividends and distributions
thereon) have been designated Class C shares. Shares held before July 28, 1997
that have been designated Class C shares are not subject to the 1.0% CDSC.
NO LOAD ALTERNATIVE -- CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors: (i)
investors participating in the InterCapital mutual fund asset allocation program
pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory or administrative services (subject to all of the terms and
conditions of such programs referred to in (i) and (ii) above, which may include
termination fees, mandatory redemption upon termination and such other
circumstances as specified in the programs' agreements, and restrictions on
transferability of Fund shares); (iii) certain Unit Investment Trusts sponsored
by DWR; (iv) certain other open-end investment companies whose shares are
distributed by the Distributor; and (v) other categories of investors, at the
discretion of the Board, as disclosed in the then current prospectus of the
Fund. Investors who require a $5 million (or $25 million) minimum initial
investment to qualify to purchase Class D shares may satisfy that requirement by
investing that amount in a single transaction in Class D shares of the Fund and
other TCW/DW Multi-Class Funds, subject to the $1,000 minimum initial investment
required for that Class of the Fund. In addition, for the purpose of meeting the
$5 million (or $25 million) minimum investment amount, holdings of Class A
shares in all TCW/DW Multi-Class Funds, and holdings of shares of "Exchange
Funds" (see "Shareholder Services -- Exchange Privilege") for which Class A
shares have been exchanged, will be included together with the current
investment amount.
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If a shareholder redeems Class A shares and purchases Class D shares, such
redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Act with respect to the distribution of Class A, Class B and Class C shares of
the Fund. In the case of Class A and Class C shares, the Plan provides that the
Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those shares.
Reimbursements for these expenses will be made in monthly payments by the Fund
to the Distributor, which will in no event exceed amounts equal to payments at
the annual rates of 0.25% and 0.75% of the average daily net assets of Class A
and Class C, respectively. In the case of Class B shares, the Plan provides that
the Fund will pay the Distributor a fee, which is accrued daily and paid
monthly, at the annual rate of 0.75% of the average daily net assets of Class B.
The fee is treated by the Fund as an expense in the year it is accrued. In the
case of Class A shares, the entire amount of the fee currently represents a
service fee within the meaning of the NASD guidelines. In the case of Class B
and Class C shares, a portion of the fee payable pursuant to the Plan, equal to
0.20% and 0.25% of the average daily net assets of each of these Classes,
respectively, is currently characterized as a service fee. A service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of DWR's account executives
and others who engage in or support distribution of shares or who service
shareholder accounts, including overhead and telephone expenses; printing and
distribution of prospectuses and reports used in connection with the offering of
the Fund's shares to other than current shareholders; and preparation, printing
and distribution of sales literature and advertising materials. In addition, the
Distributor may utilize fees paid pursuant to the Plan in the case of Class B
shares to compensate DWR and other Selected Broker-Dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
For the fiscal year ended January 31, 1998, Class C shares of the Fund
accrued payments under the Plan amounting to $437,111, which amount is equal to
0.75% of the average daily net assets of Class C for the fiscal year. All shares
held prior to July 28, 1997 (other than shares which were acquired in exchange
for shares of TCW/DW Fund sold with a CDSC, including shares acquired through
reinvestment of dividends and distributions thereon which have been designated
Class B shares) have been designated Class C shares. For the fiscal period July
28, 1997 through January 31, 1998, the Class A and Class B shares of the Fund
accrued payments under the Plan amounting to $23 and $21,976, respectively,
which amounts on an annualized basis are equal to 0.25% and 0.75% of the average
daily net assets of Class A and Class B, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i) the
payments made by the Fund pursuant to the Plan, and (ii) the proceeds of CDSCs
paid by investors upon the redemption of Class B shares. For example, if $1
million in expenses in distributing Class B shares of the Fund had been incurred
and $750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that such
excess amounts, including the carrying charge described above totalled $55,344
for Class B at January 31, 1998 which was equal to 0.84% of the net assets of
Class B on such date. Because there is no requirement under the Plan that the
Distributor be reimbursed for all distribution expenses or any requirement that
the Plan be continued from year to year, such excess amount does not constitute
a liability of the Fund. Although there is no legal obligation for the Fund to
pay expenses incurred in excess of payments made to
27
<PAGE>
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 0.75% of the average daily net
assets of Class A or Class C, respectively, will not be reimbursed by the Fund
through payments in any subsequent year, except that expenses representing a
gross sales commission credited to account executives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
account executives at the time of sale totalled $8,405 in the case of Class C at
December 31, 1997, which amount was equal to 0.02% of the net assets of Class C
on such dates, and that there were no such expenses which may be reimbursed in
the subsequent year in the Class A and Class C on such date. No interest or
other financing charges will be incurred on any Class A or Class C distribution
expenses incurred by the Distributor under the Plan or on any unreimbursed
expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the Class
A, Class B, Class C and Class D shares will be invested together in a single
portfolio. The net asset value of each Class, however, will be determined
separately by subtracting each Class's accrued expenses and liabilities. The net
asset value per share will not be determined on Good Friday and on such other
federal and non-federal holidays as are observed by the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
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); and (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. 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 are translated
into U.S. dollar equivalents at the prevailing market rates prior to the close
of the New York Stock Exchange. Dividends receivable are accrued as of the
ex-dividend date or as of the time that the relevant ex-dividend date and
amounts become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
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SHAREHOLDER SERVICES
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the shareholder,
in shares of any other open-end TCW/DW Fund), unless the shareholder requests
that they be paid in cash. Shares so acquired are acquired at net asset value
and are not subject to the imposition of a front-end sales charge or a CDSC (see
"Repurchases and Redemptions").
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within 30 days after the payment date. Shares so acquired are acquired at
net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Repurchases and Redemptions").
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Repurchases and Redemptions --
Involuntary Redemption").
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Only shareholders
having accounts in which no share certificates have been issued will be
permitted to enroll in the Withdrawal Plan. Any applicable CDSC will be imposed
on shares redeemed under the Withdrawal Plan (see "Purchase of Fund Shares").
Therefore, any shareholder participating in the Withdrawal Plan will have
sufficient shares redeemed from his or her account so that the proceeds (net of
any applicable CDSC) to the shareholder will be the designated monthly or
quarterly amount. Withdrawal plan payments should not be considered as
dividends, yields or income. If periodic withdrawal plan payments continuously
exceed net investment income and net capital gains, the shareholder's original
investment will be correspondingly reduced and ultimately exhausted. Each
withdrawal constitutes a redemption of shares and any gain or loss realized must
be recognized for federal income tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the Transfer
Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other TCW/DW Multi-Class Fund without the imposition of any exchange fee. Shares
may also be exchanged for shares of TCW/DW North American Government Income
Trust and for shares of five money market funds for which InterCapital serves as
investment manager: Dean Witter Liquid Asset Fund Inc., Dean Witter U.S.
Government Money Market Trust, Dean Witter Tax-Free Daily Income Trust, Dean
Witter California Tax-Free Daily Income Trust and Dean Witter New York Municipal
Money Market Trust (the foregoing six
29
<PAGE>
funds are hereinafter collectively referred to as "Exchange Funds"). Exchanges
may be made after the shares of the Fund acquired by purchase (not by exchange
or dividend reinvestment) have been held for thirty days. There is no waiting
period for exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another TCW/DW Multi-Class Fund or any Exchange Fund that is
not a money market fund is on the basis of the next calculated net asset value
per share of each fund after the exchange order is received. When exchanging
into a money market fund from the Fund, shares of the Fund are redeemed out of
the Fund at their next calculated net asset value and the proceeds of the
redemption are used to purchase shares of the money market fund at their net
asset value determined the following business day. Subsequent exchanges between
any of the money market funds and any of the TCW/DW Multi-Class Funds or any
Exchange Fund that is not a money market fund can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently re-exchanged for shares of a TCW/DW Multi-Class Fund,
the holding period previously frozen when the first exchange was made resumes on
the last day of the month in which shares of a TCW/DW Multi-Class Fund are
reacquired. Thus, the CDSC is based upon the time (calculated as described
above) the shareholder was invested in shares of a TCW/DW Multi-Class Fund (see
"Purchase of Fund Shares"). In the case of shares exchanged into an Exchange
Fund, upon a redemption of shares which results in a CDSC being imposed, a
credit (not to exceed the amount of the CDSC) will be given in an amount equal
to the Exchange Fund 12b-1 distribution fees which are attributable to those
shares. (Exchange Fund 12b-1 distribution fees are described in the prospectuses
for those funds.)
ADDITIONAL INFORMATION REGARDING EXCHANGES. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Manager to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Manager's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor. Although the Fund does not have any specific definition of what
constitutes a pattern of frequent exchanges, and will consider all relevant
factors in determining whether a particular situation is abusive and contrary to
the best interests of the Fund and its other shareholders, investors should be
aware that the Fund, each of the other TCW/DW Funds and each of the money market
funds may in their discretion limit or otherwise restrict the number of times
this Exchange Privilege may be exercised by any investor. Any such restriction
will be made by the Fund on a prospective basis only, upon notice to the
shareholder not later than ten days following such shareholder's most recent
exchange. Also, the Exchange Privilege may be terminated or revised at any time
by the Fund and/or any of such TCW/DW Funds or money market funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies. Shareholders maintaining margin accounts with
DWR or another Selected Broker-Dealer are referred to their account executive
regarding restrictions on exchange of shares pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement of
each Class of shares and any other conditions imposed by each fund. In the case
of a shareholder holding a share certificate or certificates, no exchanges may
be made until all applicable share certificates have been received by the
Transfer Agent and deposited in the shareholder's account. An exchange will be
treated for federal income tax purposes the same as a repurchase or redemption
of shares, on which the shareholder may realize a capital gain or
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<PAGE>
loss. However, the ability to deduct capital losses on an exchange may be
limited in situations where there is an exchange of shares within ninety days
after the shares are purchased. The Exchange Privilege is only available in
states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege by
contacting their DWR or other Selected Broker-Dealer account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or other Selected Broker-Dealers but
who wish to make exchanges directly by writing or telephoning the Transfer
Agent) must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent, to
initiate an exchange. If the Authorization Form is used, exchanges may be made
in writing or by contacting the Transfer Agent at (800) 869-NEWS (toll-free).
The Fund will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. The procedures include requiring
various forms of personal identification such as name, mailing address, social
security or other tax identification number and DWR or other Selected Broker-
Dealer account number (if any). Telephone instructions will also be recorded. If
such procedures are not employed, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult to implement, although this has not been the case in the past with
other funds managed by the Manager.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
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REPURCHASES. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next determined (see "Purchase of Fund Shares") after such
repurchase order is received by DWR or other Selected Broker-Dealer reduced by
any applicable CDSC. The CDSC, if any, will be the only fee imposed by the Fund
or the Distributor. The offer by DWR and other Selected Broker-Dealers to
repurchase shares from shareholders may be suspended by them at any time. In
that event, shareholders may redeem their shares through the Fund's Transfer
Agent as set forth below under "Redemptions."
REDEMPTIONS. Shares of each Class of the Fund can be redeemed for cash at
any time at net asset value per share next determined, less the amount of any
applicable CDSC in the case of Class A, Class B or Class C shares (see "Purchase
of Fund Shares"). If shares are held in a shareholder's account at the Transfer
Agent without a share certificate, a written request for
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<PAGE>
redemption must be sent to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303. If certificates are held by the shareholder, the shares may be
redeemed by surrendering the certificates with a written request for redemption,
along with any additional information required by the Transfer Agent.
PAYMENT FOR SHARES REPURCHASED OR REDEEMED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase in
shares of the Fund in the same Class from which such shares were redeemed or
repurchased, at their net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such redemption
or repurchase.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on 60 days' notice, to
redeem, at their net asset value, the shares of any shareholder (other than
shares held in an individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account offered through
EasyInvest, if after twelve months the shareholder has invested less than $1,000
in the account. However, before the Fund redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares is less than the applicable amount and allow the shareholder 60 days
to make an additional investment in an amount which will increase the value of
the account to at least the applicable amount before the redemption is
processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
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DIVIDENDS AND DISTRIBUTIONS. The Fund declares dividends separately for
each Class of shares and intends to pay quarterly income dividends and to
distribute net short-term and net long-term capital gains, if any, at least once
each year. The Fund may, however, determine either to distribute or to retain
all or part of any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
shares of the same Class and automatically credited to the shareholder's account
without issuance of a share certificate unless the shareholder requests in
writing that all dividends and/or distributions be paid in cash. Shares acquired
by dividend and distribution reinvestments will not be subject to any front-end
sales charge or CDSC. Class B shares acquired through dividend and distribution
reinvestments will become eligible for conversion to Class A shares on a pro
rata basis. Distributions paid on Class A and Class D shares will be higher than
for Class B and Class C shares because distribution fees paid by Class B and
Class C shares are higher. (See "Shareholder Services -- Automatic Investment of
Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have to
pay federal income taxes, and any
32
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state income taxes, on the dividends and distributions they receive from the
Fund. Such dividends and distributions, to the extent that they are derived from
net investment income or short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed, for tax purposes, to have been received by the
shareholder in the prior calendar year.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the corporate dividends received deduction.
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments would not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes.
Shareholders will also be notified of their proportionate share of capital gains
distributions that are eligible for a reduced rate of tax under the Taxpayer
Relief Act of 1997. To avoid being subject to a 31% federal backup withholding
tax on taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers must
be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return"
in advertisements and sales literature. These figures are computed separately
for Class A, Class B, Class C and Class D shares. Both the yield and the total
return of the Fund are based on historical earnings and are not intended to
indicate future performance. The yield of each Class of the Fund is computed by
dividing the Class's net investment income over a 30-day period by an average
value (using the average number of shares entitled to receive dividends and the
net asset value per share at the end of the period), all in accordance with
applicable regulatory requirements. Such amount is compounded for six months and
then annualized for a twelve-month period to derive the Fund's yield for each
Class.
The "average annual total return" of the Fund refers to a figure reflecting
the average annualized percentage increase (or decrease) in the value of an
initial investment in a Class of the Fund of $1,000 over periods of one, five
and ten years, as well as over the life of the Fund, if less than any of the
foregoing. Average annual total return reflects all income earned by the Fund,
any appreciation or depreciation of the Fund's assets and all expenses incurred
by the applicable Class and all sales charges, which would be incurred by
shareholders, for the stated periods. It also assumes reinvestment of all
dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
33
<PAGE>
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except that
each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other matter
in which the interests of one Class differ from the interests of any other
Class. In addition, Class B shareholders will have the right to vote on any
proposed material increase in Class A's expenses, if such proposal is submitted
separately to Class A shareholders. Also, as discussed herein, Class A, Class B
and Class C bear the expenses related to the distribution of their respective
shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. Under
certain circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right under certain circumstances to remove Trustees.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for obligations of
the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to shareholders of personal liability is remote.
CODE OF ETHICS. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the Adviser's officers, directors and certain
other persons have a beneficial interest to avoid any actual or potential
conflict or abuse of their fiduciary position. The Code of Ethics, as it
pertains to the TCW/DW Funds, contains several restrictions and procedures
designed to eliminate conflicts of interest including: (a) pre-clearance of
personal investment transactions to ensure that personal transactions by
employees are not being conducted at the same time as the Adviser's clients; (b)
quarterly reporting of personal securities transactions; (c) a prohibition
against personally acquiring securities in an initial public offering, entering
into uncovered short sales and writing uncovered options; (d) a seven day
"black-out period" prior to or subsequent to a TCW/DW Fund transaction during
which portfolio managers are prohibited from making certain transactions in
securities which are being purchased or sold by a TCW/DW Fund; (e) a
prohibition, with respect to certain investment personnel, from profiting in the
purchase and sale, or sale and purchase, of the same (or equivalent) securities
within 60 calendar days; and (f) a prohibition against acquiring any security
which is subject to firm wide or, if applicable, a department restriction of the
Adviser. The Code of Ethics provides that exemptive relief may be given from
certain of its requirements, upon application. The Adviser's Code of Ethics
complies with regulatory requirements and, insofar as it relates to persons
associated with registered investment companies, the 1994 Report of the Advisory
Group on Personal Investing of the Investment Company Institute.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
34
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
FIXED-INCOME SECURITY RATINGS
<TABLE>
<S> <C>
Aaa Fixed-income securities which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa Fixed-income securities which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as high
grade fixed-income securities. They are rated lower than the best fixed-income securities
because margins of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A Fixed-income securities which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
Baa Fixed-income securities which are rated Baa are considered as medium grade obligations;
i.e., they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time. Such
fixed-income securities lack outstanding investment characteristics and in fact have
speculative characteristics as well.
Fixed-income securities rated Aaa, Aa, A and Baa are considered investment grade.
Ba Fixed-income securities which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate, and therefore not well safeguarded during both
good and bad times in the future. Uncertainty of position characterizes bonds in this
class.
B Fixed-income securities which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of other terms
of the contract over any long period of time may be small.
Caa Fixed-income securities which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or interest.
Ca Fixed-income securities which are rated Ca present obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C Fixed-income securities which are rated C are the lowest rated class of fixed-income
securities, and issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
</TABLE>
RATING REFINEMENTS: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal
fixed-income security rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and a modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
35
<PAGE>
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody's employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
FIXED-INCOME SECURITY RATINGS
A Standard & Poor's fixed-income security rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligation; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
<TABLE>
<S> <C>
AAA Fixed-income securities rated "AAA" have the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
AA Fixed-income securities rated "AA" have a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A Fixed-income securities rated "A" have a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than fixed-income securities in higher-rated
categories.
BBB Fixed-income securities rated "BBB" are regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal for fixed-income
securities in this category than for fixed-income securities in higher-rated categories.
Fixed-income securities rated AAA, AA, A and BBB are considered investment grade.
BB Fixed-income securities rated "BB" have less near-term vulnerability to default than
other speculative grade fixed-income securities. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or economic conditions which
could lead to inadequate capacity or willingness to pay interest and repay principal.
B Fixed-income securities rated "B" have a greater vulnerability to default but presently
has the capacity to meet interest payments and principal repayments Adverse business,
financial or economic conditions would likely impair capacity or willingness to pay
interest and repay principal.
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
CCC Fixed-income securities rated "CCC" have a current identifiable vulnerability to
default, and is dependent upon favorable business, financial and economic conditions to
meet timely payments of interest and repayments of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the capacity to pay
interest and repay principal.
CC The rating "CC" is typically applied to fixed-income securities subordinated to senior
debt which is assigned an actual or implied "CCC" rating.
C The rating "C" is typically applied to fixed-income securities subordinated to senior
debt which is assigned an actual or implied "CCC-" rating.
CI The rating "CI" is reserved for fixed-income securities on which no interest is being
paid.
NR Indicates that no rating has been requested, that there is insufficient information on
which to base a rating or that Standard & Poor's does not rate a particular type of
obligation as a matter of policy.
Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are regarded as having
predominantly speculative characteristics with respect to capacity to pay interest and
repay principal. "BB" indicates the least degree of speculation and "C" the highest
degree of speculation. While such fixed-income securities will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the addition of
a plus or minus sign to show relative standing with the major ratings categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by S&P from other sources it considers reliable. The ratings
may be changed, suspended, or withdrawn as a result of changes in or
unavailability of such information. Ratings are graded into group categories,
ranging from "A" for the highest quality obligations to "D" for the lowest.
Ratings are applicable to both taxable and tax-exempt commercial paper. The
categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2, and 3 to indicate the relative degree of safety.
<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However,
the relative degree of safety is not as overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this
designation are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
</TABLE>
37
<PAGE>
TCW/DW Income and
Growth Fund
Two World Trade Center
New York, New York 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
Kevin A. Hunter
Vice President
Mark Attanasio
Vice President
Melissa Weiler
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
AND
DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
[LOGO]
INCOME AND
GROWTH FUND
[LOGO]
PROSPECTUS
MARCH 31, 1998
<PAGE>
[LOGO]
INCOME AND
GROWTH FUND
STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 1998
- --------------------------------------------------------------------------------
TCW/DW Income and Growth Fund (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is to generate high
total return by providing a high level of current income and the potential for
capital appreciation. The Fund seeks to achieve its investment objective by
investing primarily in convertible securities, fixed-income securities and
common stocks. See "Investment Objective and Policies."
A Prospectus for the Fund dated March 31, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
TCW/DW INCOME AND GROWTH FUND
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
<TABLE>
<S> <C>
The Fund and its Management.......................................................... 3
Trustees and Officers................................................................ 6
Investment Practices and Policies.................................................... 13
Investment Restrictions.............................................................. 26
Portfolio Transactions and Brokerage................................................. 27
The Distributor...................................................................... 29
Determination of Net Asset Value..................................................... 32
Purchase of Fund Shares.............................................................. 33
Shareholder Services................................................................. 35
Repurchases and Redemptions.......................................................... 39
Dividends, Distributions and Taxes................................................... 41
Performance Information.............................................................. 42
Description of Shares................................................................ 44
Custodian and Transfer Agent......................................................... 44
Independent Accountants.............................................................. 44
Reports to Shareholders.............................................................. 45
Legal Counsel........................................................................ 45
Experts.............................................................................. 45
Registration Statement............................................................... 45
Report of Independent Accountants.................................................... 46
Financial Statements--January 31, 1998............................................... 47
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
November 23, 1992. The Fund is one of the TCW/DW Funds, which currently
consist, in addition to the Fund, of TCW/DW North American Government Income
Trust, TCW/DW Latin American Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW
Mid-Cap Equity Trust, TCW/DW Global Telecom Trust, TCW/DW Term Trust 2000,
TCW/DW Term Trust 2002, TCW/DW Term Trust 2003, TCW/DW Emerging Markets
Opportunities Trust and TCW/DW Total Return Trust.
THE MANAGER
Dean Witter Services Company Inc. (the "Manager"), a Delaware corporation,
whose address is Two World Trade Center, New York, New York 10048, is the
Fund's Manager. The Manager is a wholly-owned subsidiary of Dean Witter
InterCapital Inc. ("InterCapital"), a Delaware corporation. InterCapital is a
wholly-owned subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"), a
Delaware corporation. In an internal reorganization which took place in
January, 1993, InterCapital assumed the investment advisory, administrative and
management activities previously performed by the InterCapital Division of Dean
Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager. (As
hereinafter used in this Statement of Additional Information, the term
"InterCapital" refers to DWR's InterCapital Division prior to the internal
reorganization and to Dean Witter InterCapital Inc. thereafter.) The daily
management of the Fund is conducted by or under the direction of officers of
the Fund and of the Manager and Adviser (see below), subject to review by the
Fund's Board of Trustees. Information as to these Trustees and officers is
contained under the caption "Trustees and Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and furnishes, at its own expense, such office
space, facilities, equipment, supplies, clerical help and bookkeeping and legal
services as the Fund may reasonably require in the conduct of its business,
including the preparation of prospectuses, statements of additional
information, proxy statements and reports required to be filed with the federal
and state securities commissions (except insofar as the participation or
assistance of independent accountants and attorneys is, in the opinion of the
Manager, necessary or desirable). In addition, the Manager pays the salaries of
all personnel, including officers of the Fund, who are employees of the
Manager. The Manager also bears the cost of the Fund's telephone service, heat,
light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the following annual rates to
the net assets of the Fund determined as of the close of each business day:
0.45% of the portion of daily net assets not exceeding $500 million; and 0.42%
of the portion of daily net assets exceeding $500 million. While the total fees
payable under the Management Agreement and the Advisory Agreement (described
below) are higher than that paid by most other investment companies for similar
services, the Board of Trustees determined that the total fees payable under
the Management Agreement and the Advisory Agreement are reasonable in relation
to the scope and quality of services to be provided thereunder. In this regard,
in evaluating the Management Agreement and the Advisory Agreement, the Board of
Trustees recognized that the Manager and the Adviser had, pursuant to an
agreement described under the section entitled "The Adviser," agreed to a
division as between themselves of the total fees necessary for the management
of the business affairs of and the furnishing of investment advice to the Fund.
Accordingly, in reviewing the Management Agreement and Advisory Agreement, the
Board viewed as most significant the question as to whether the total fees
payable under the Management and Advisory Agreements were in the aggregate
reasonable in relation to the services to be provided thereunder. For the
fiscal years ended
3
<PAGE>
January 31, 1996, January 31, 1997 and January 31, 1998, the Fund accrued to
the Manager and InterCapital total compensation under the Management Agreement
(and the prior management agreements described below) of $247,315, $260,240 and
$275,518, respectively. The management fee is allocated among the Classes pro
rata based on the net assets of the Fund attributable to each Class.
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 ommission by the Manager or for any losses sustained
by the Fund or its investors. The Management Agreement in no way restricts the
Manager from acting as manager to others.
InterCapital paid the organizational expenses of the Fund incurred prior to
the offering of the Fund's shares. The Fund has reimbursed InterCapital for
$200,000 of such expenses, in accordance with the terms of the Underwriting
Agreement between the Fund and Dean Witter Distributors Inc. The Fund has
deferred and is amortizing the reimbursed expenses on the straight line method
over a period not to exceed five years from the date of commencement of the
Fund's operations.
The Management Agreement was initially approved by the Trustees on June 4,
1994 and became effective on April 17, 1995. The Management Agreement replaced
a prior management agreement in effect between the Fund and the Manager, which
in turn replaced a management agreement between the Fund and InterCapital, the
parent company of the Manager. The nature and scope of services provided to the
Fund, and the formula to determine fees paid by the Fund under the Management
Agreement, are identical to those of the previous agreement. (The prior
management agreement, in turn, had replaced, on June 30, 1993, upon the
spin-off by Sears, Roebuck and Co. of its remaining shares of DWDC, an earlier
substantially identical management agreement which was approved by the Trustees
on January 21, 1993 and by InterCapital as the then sole shareholder on January
22, 1993.) The Management Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Trustees of the Fund, or by the Manager.
Under its terms, the Management Agreement had an initial term ending April
30, 1995, and provides that it will continue in effect from year to year
thereafter, provided continuance of the Agreement is approved at least annually
by the Trustees of the Fund, including the vote of a majority of the Trustees
of the Fund who are not parties to the Management or Advisory Agreement or
"interested persons" (as defined in the Investment Company Act of 1940, as
amended (the "Act")), of any such party (the "Independent Trustees").
Continuation of the Management Agreement for one year, until April 30, 1998,
was approved by the Trustees, including a majority of the Independent Trustees,
at a meeting called for that purpose on April 24, 1997.
THE ADVISER
TCW Funds Management, Inc. (the "Adviser") is a wholly-owned subsidiary of
The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust Company of the
West and TCW Asset Management Company, provide a variety of trust, investment
management and investment advisory services. As of June 30, 1997, the Adviser
and its affiliates had over $50 billion under management or committed to
management. The Adviser is headquartered at 865 South Figueroa Street, Suite
1800, Los Angeles, California 90017 and is registered as an investment adviser
under the Investment Advisers Act of 1940. In addition to the Fund, the Adviser
serves as investment adviser to ten other TCW/DW Funds: TCW/DW North American
Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW Small Cap
Growth Fund, TCW/DW Mid-Cap Equity Trust, TCW/DW Term Trust 2000, TCW/DW Term
Trust 2002, TCW/DW Term Trust 2003, TCW/DW Emerging Markets Opportunities
Trust, TCW/DW Global Telecom Trust, and TCW/DW Total Return Trust. The Adviser
also serves as investment adviser to TCW Convertible Securities Fund, Inc., a
closed-end investment company traded on the New York Stock Exchange, and to TCW
Galileo Funds, Inc., an open-end investment company, and acts as adviser or
sub-adviser to other investment companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW.
4
<PAGE>
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. The Adviser obtains and evaluates such information and advice
relating to the economy, securities markets, and specific securities as it
considers necessary or useful to continuously manage the assets of the Fund in
a manner consistent with its investment objective. In addition, the Adviser
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Adviser.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the following annual rates to
the net assets of the Fund determined as of the close of each business day:
0.30% of the portion of daily net assets not exceeding $500 million; and 0.28%
of the portion of daily net assets exceeding $500 million. For the fiscal years
ended January 31, 1996, January 31, 1997 and January 31, 1998, the Fund accrued
to the Adviser total compensation under the Advisory Agreement of $164,877,
$173,493 and $183,678, respectively. The advisory fee is allocated among the
Classes pro rata based on the net assets of the Fund attributable to each Class.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations
thereunder, the Adviser is not liable to the Fund or any of its investors for
any act or omission by the Adviser or for any losses sustained by the Fund or
its Investors. The Advisory Agreement in no way restricts the Adviser from
acting as investment adviser to others.
The Advisory Agreement was initially approved by the Trustees on January
21, 1993 and by InterCapital as then sole shareholder on January 22, 1993. The
Advisory Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Act, of the outstanding shares of the Fund, or by the Adviser.
The Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Advisory Agreement continued in effect until 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. Continuation of the Advisory Agreement
until April 30, 1998 was approved by the Trustees, including a majority of the
Independent Trustees, at a meeting called for that purpose on April 24, 1997.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor of
the Fund's shares, Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. These
expenses will be allocated among four classes of shares of the Fund (each, a
"Class") 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 (the "12b-1
fee") (see "The Distributor"); charges and expenses of any registrar;
custodian, stock transfer and dividend disbursing agent; brokerage commissions
and securities transaction costs; taxes; engraving and printing of share
certificates; registration costs of the Fund and its shares under federal and
state securities laws; the cost and expense of printing, including typesetting,
and distributing Prospectuses and Statements of Additional Information of the
Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Trustees' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
Trustees or members of any advisory board or committee who are not employees of
the Manager or Adviser or any corporate affiliate of either; all expenses
incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Manager or the Adviser (not including
compensation or expenses of attorneys who are employees of the Manager or the
Adviser) and independent accountants; membership dues of industry associations;
interest on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and Trustees) of the Fund which inure to its
benefit; extraordinary expenses
5
<PAGE>
(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.
The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, or if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser and the Fund
is terminated.
The following owned 5% or more of the outstanding shares of Class A on
February 28, 1998: Dean Witter InterCapital, Inc., Attn: Maurice Bendrihem, 2
World Trade Center 73rd Fl., New York, NY 10048-0203--38.07%; Tecla Marie Baker
TTEE of the Tecla Marie Baker TR DTD 7-24-79 as amended 12-23-97, 21821
Summerwind Lane, Huntington Beach, CA 92646-8265--27.26%; Dean Witter Reynolds
Cust for Rick D. Schwab IRA Rollover Dated 11/05/97, 9914 N 57th Drive,
Glendale AZ 85302-1339--18.73%; Dean Witter Reynolds Cust for Agatha M. Bailey
IRA Rollover Dated 01/22/98, 3820 E Southern Ave, Phoenix AZ 85040-3960--12.1%.
The following owned 5% or more of the outstanding shares of Class D on
February 28, 1998: Dean Witter InterCapital, Inc., Attn: Maurice Bendrihem, 2
World Trade Center 73rd Fl. New York, NY 10048-0203--99.86%.
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Manager or the Adviser, and the affiliated companies of either, and with the 11
TCW/DW Funds and with the 86 investment companies of which InterCapital serves
as investment manager (or investment adviser and administrator) (the "Dean
Witter Funds"), are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------
<S> <C>
John C. Argue (66) Of Counsel, Argue Pearson Harbison & Myers
Trustee (law firm); Director, Avery Dennison Corpora-
c/o Argue Pearson Harbison & Myers tion (manufacturer of self-adhesive products
801 South Flower Street and office supplies) and CalMat Company
Los Angeles, California (producer of aggregates, asphalt and ready
mixed concrete); 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
Convertible Securities Fund, Inc.; Director,
TCW Galileo Funds, Inc.; Director, Apex
Mortgage Capital, Inc. and Nationwide Health
Properties, Inc. (real estate investment
trusts); Trustee of the TCW/DW Funds.
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------
<S> <C>
Richard M. DeMartini* (45) President and Chief Operating Officer of Dean
Trustee Witter Capital, a division of DWR; Director
Two World Trade Center of DWR, the Manager, InterCapital,
New York, New York Distributors and Morgan Stanley Dean Witter
Trust FSB ("MSDW Trust"); Trustee of the
TCW/DW Funds; formerly Vice Chairman of the
Board of the National Association of
Securities Dealers, Inc.; formerly Chairman
of the Board of Directors of the NASDAQ
Market, Inc.
Charles A. Fiumefreddo* (64) Chairman, Chief Executive Officer and
Chairman of the Board, Chief Director of the Manager, InterCapital and
Executive Officer and Trustee Distributors; Executive Vice President and
Two World Trade Center Director of DWR; Chairman of the Board,
New York, New York Chief Executive Officer and Trustee of the
TCW/DW Funds; Chairman of the Board,
Director or Trustee, President and Chief
Executive Officer of the Dean Witter Funds;
Chairman and Director of MSDW Trust;
Director and/or officer of various MSDW
subsidiaries.
John R. Haire (73) Chairman of the Audit Committee and Chairman
Trustee of the Committee of the Independent Trustees
Two World Trade Center and Trustee of the TCW/DW Funds; Chairman of
New York, New York the Audit Committee and Chairman of the
Committee of Independent Directors or
Trustees of each of the Dean Witter Funds;
formerly President, Council for Aid to
Education (1978-1989) and Chairman and Chief
Executive Officer of Anchor Corporation, an
Investment Adviser (1964-1978).
Dr. Manuel H. Johnson (49) Senior Partner, Johnson Smick International,
Trustee Inc., a consulting firm; Trustee of the
c/o Johnson Smick International, Inc. TCW/DW Funds; Director or Trustee of the
1133 Connecticut Avenue, N.W. Dean Witter Funds; Chairman and Trustee of
Washington, D.C. the Financial Accounting Foundation
(oversight organization of the Financial
Accounting Standards Board); Co-Chairman and
a founder of the Group of Seven Council
(G7C), an international economic commission
(since 1990); Director of NASDAQ (since
June, 1995); Director of Greenwich Capital
Markets, Inc. (broker-dealer); formerly Vice
Chairman of the Board of Governors of the
Federal Reserve System (1986-1990) and
Assistant Secretary of the U.S. Treasury
(1982-1986).
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------
<S> <C>
Thomas E. Larkin, Jr.* (58) Executive Vice President and Director, The
President and Trustee TCW Group, Inc.; President and Director of
865 South Figueroa Street Trust Company of the West; Vice Chairman and
Los Angeles, California Director of TCW Asset Management Company;
Chairman of the Adviser; Member of the Board
of Trustees of the University of Notre Dame;
Director of Orthopaedic Hospital of Los Ange-
les; President and Director of TCW Galileo
Funds, Inc.; Senior Vice President of TCW
Convertible Securities Fund, Inc.; President
and Trustee of the TCW/DW Funds.
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a
Trustee private investment partnership; formerly
c/o Triumph Capital, L.P. Vice President, Bankers Trust Company and BT
237 Park Avenue Capital Corporation (1984-1988); Director of
New York, New York various business organizations; Trustee of
the TCW/DW Funds; Director or Trustee of the
Dean Witter Funds.
John L. Schroeder (67) Retired; Director or Trustee of the Dean
Trustee Witter Funds; Trustee of the TCW/DW Funds;
c/o Gordon Altman Butowsky Weitzen Director of Citizens Utilities Company;
Shalov & Wein formerly Executive Vice President and Chief
Counsel to the Independent Trustees Investment Officer of the Home Insurance
114 West 47th Street Company (August, 1991-September, 1995).
New York, New York
Marc I. Stern* (53) Vice President of the Fund; President and
Trustee Director, The TCW Group, Inc.; President and
865 South Figueroa Street Director of the Adviser; Vice Chairman and
Los Angeles, California Director of TCW Asset Management Company;
Executive Vice President and Director of
Trust Company of the West; Chairman and
Director of TCW Galileo Funds, Inc; Trustee
of the TCW/DW Funds; Chairman of TCW
Americas Development, Inc.; Chairman of TCW
Asia, Limited (since January 1993); Chairman
of TCW London International, Limited (since
March, 1993); Chairman of Apex Mortgage
Capital, Inc. (since 1995); formerly
President and Director of SunAmerica, Inc.
(financial services company); Director of
Qualcomm, Incorporated (wireless
communications); Director or Trustee of
various not-for-profit organizations.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- --------------------------------------------- ---------------------------------------------
<S> <C>
Barry Fink (43) Senior Vice President (since March, 1997) and
Vice President, Secretary and General Counsel Secretary and General Counsel (since
Two World Trade Center February, 1997) of InterCapital and the
New York, New York Manager; Senior Vice President (since March,
1997) and Assistant Secretary and Assistant
General Counsel (since February, 1997) of
Distributors; Assistant Secretary of DWR
(since August, 1996); Vice President,
Secretary and General Counsel of the Dean
Witter Funds and the TCW/DW Funds (since
February, 1997); previously First Vice
President (June 1993-February, 1997), Vice
President (until June, 1993) and Assistant
Secretary and Assistant General Counsel of
InterCapital and the Manager and Assistant
Secretary of the Dean Witter Funds and the
TCW/DW Funds.
Robert M. Hanisee (59) Managing Director of the Adviser; Managing
Vice President Director, Director of Research and Chairman
865 South Figueroa Street of the Equity Policy Committee of Trust
Los Angeles, California Company of the West and TCW Asset Management
Company.
Kevin A. Hunter (38) Managing Director of the Adviser, Trust Com-
Vice President pany of the West and TCW Asset Management
865 South Figueroa Street Company.
Los Angeles, California
Mark Attanasio (39) Group Managing Director of TCW Group Inc.;
Vice President formerly Co-Chief Executive Officer and Chief
865 South Figueroa Street Portfolio Strategist of Crescent Capital
Los Angeles, California Corporation (April 1991-April 1995).
Melissa Weiler (32) Senior Vice President of the Adviser, Trust
Vice President Company of the West and TCW Asset Management
865 South Figueroa Street Company; Vice President and Portfolio Manager
Los Angeles, California of Crescent Capital Management (an investment
adviser) (since February, 1992).
Thomas F. Caloia (52) First Vice President and Assistant Treasurer
Treasurer of the Manager and InterCapital and
Two World Trade Center Treasurer of the TCW/DW Funds and the Dean
New York, New York Witter Funds; previously Vice President of
InterCapital.
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in the
Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of
the Manager, InterCapital, Executive Vice President of Distributors and MSDW
Trust and Director of MSDW Trust, Mitchell M. Merin, President and Chief
Strategic Officer of InterCapital and DWSC, Executive Vice President of
Distributors and MSDW Trust and Director of MSDW Trust, Executive Vice
President, Chief Administrative Officer and Director of DWR and Director of SPS
Transaction Services, Inc. and various other MSDW subsidiaries, and Robert S.
Giambrone, Senior Vice President of InterCapital, DWSC, Distributors and MSDW
Trust, are Vice Presidents of the Fund, and Marilyn K. Cranney, First Vice
President and Assistant General Counsel of the Manager and InterCapital and,
Lou Anne D. McInnis, Carsten Otto and Ruth Rossi, Vice Presidents and Assistant
General Counsels
9
<PAGE>
of the Manager and InterCapital and Frank Bruttomesso and Todd Lebo, Staff
Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same individuals
also serve as trustees for all of the TCW/DW Funds. As of the date of this
Statement of Additional Information, there are a total of 11 TCW/DW Funds. As
of February 28, 1998, the TCW/DW Funds had total net assets of approximately
$4.3 billion and approximately a quarter of a million shareholders.
Five Trustees (56% of the total number) have no affiliation or business
connection with TCW Funds Management, Inc. or Dean Witter Services Company Inc.
or any of their affiliated persons and do not own any stock or other securities
issued by MSDW or TCW, the parent companies of Dean Witter Services Company
Inc. and TCW Funds Management, Inc., respectively. These are the
"disinterested" or "independent" Trustees. The other four Trustees (the
"management Trustees") are affiliated with either Dean Witter Services Company
Inc. or TCW. Four of the five independent Trustees are also Independent
Trustees of the Dean Witter Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The TCW/DW Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1997,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at the offices of the Manager or Adviser and some outside
those offices. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading among
Funds in the same complex; and approving fidelity bond and related insurance
coverage and allocations, as well as other matters that arise from time to
time. The Independent Trustees are required to select and nominate individuals
to fill any Independent Trustee vacancy on the Board of any Fund that has a Rule
12b-1 plan of distribution. Each of the open-end TCW/DW Funds has such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
10
<PAGE>
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT COMMITTEE
The Chairman of the Committees maintains an office at the Funds'
headquarters in New York. He is responsible for keeping abreast of regulatory
and industry developments and the Funds' operations and management. He screens
and/or prepares written materials and identifies critical issues for the
Independent Trustees to consider, develops agendas for Committee meetings,
determines the type and amount of information that the Committees will need to
form a judgment on various issues, and arranges to have that information
furnished to Committee members. He also arranges for the services of independent
experts and consults with them in advance of meetings to help refine reports and
to focus on critical issues. Members of the Committees believe that the person
who serves as Chairman of both Committees and guides their efforts is pivotal to
the effective functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Adviser and the Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination of
chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the TCW/DW Funds and as Chairman of the Committee of the Independent
Trustees and the Audit Committee and Independent Director or Trustee of the Dean
Witter Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the TCW/DW Funds avoids the duplication
of effort that would arise from having different groups of individuals serving
as Independent Trustees for each of the Funds or even of sub-groups of Funds.
They believe that having the same individuals serve as Independent Trustees of
all the Funds tends to increase their knowledge and expertise regarding matters
which affect the Fund complex generally and enhances their ability to negotiate
on behalf of each Fund with the Fund's service providers. This arrangement also
precludes the possibility of separate groups of Independent Trustees arriving
at conflicting decisions regarding operations and management of the Funds and
avoids the cost and confusion that would likely ensue. Finally, having the same
Independent Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $2,225 plus a per
meeting fee of $200 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). 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 or the
Adviser or an affiliated company of either receive no compensation or expense
reimbursement from the Fund. The Trustees of the TCW/DW Funds do not have
retirement or deferred compensation plans.
11
<PAGE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended January 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------------------------------------------------------------------------- ---------------
<S> <C>
John C. Argue.................................................................................... $ 5,425
John R. Haire.................................................................................... 7,575
Dr. Manuel H. Johnson............................................................................ 5,425
Michael E. Nugent................................................................................ 5,625
John L. Schroeder................................................................................ 5,625
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 14 TCW/DW Funds and, in the case of Messrs. Haire, Johnson, Nugent and
Schroeder, the 84 Dean Witter Funds that were in operation at December 31,
1997, and, in the case of Mr. Argue, TCW Galileo Funds, Inc. and TCW Convertible
Securities Fund, Inc. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the Dean Witter Funds are included solely because of a limited
exchange privilege between various TCW/DW Funds and five Dean Witter Money
Market Funds. With respect to Mr. Argue, TCW Galileo Funds, Inc. and TCW
Convertible Securities Fund, Inc. are included solely because the Fund's
Adviser, TCW Funds Management, Inc., also serves as Adviser to those investment
companies.
CASH COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
FOR SERVICE AS TO 84 DEAN
FOR SERVICE AS CHAIRMAN OF WITTER FUNDS,
CHAIRMAN OF COMMITTEES OF 14 TCW/DW
FOR SERVICE AS COMMITTEES OF INDEPENDENT FUNDS AND
DIRECTOR OR INDEPENDENT DIRECTORS/ TCW GALILEO
FOR SERVICE AS TRUSTEE AND TRUSTEES AND TRUSTEES AND FUNDS, INC.
TRUSTEE AND COMMITTEE FOR SERVICE AS AUDIT AUDIT AND TCW
COMMITTEE MEMBER OF 84 DIRECTOR OF TCW COMMITTEES OF COMMITTEES OF CONVERTIBLE
NAME OF INDEPENDENT MEMBER OF 14 DEAN WITTER GALILEO FUNDS, 14 TCW/DW 84 DEAN SECURITIES
TRUSTEE TCW/DW FUNDS FUNDS INC. FUNDS WITTER FUNDS FUND, INC.
- ------------------------ ---------------- ---------------- ---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Argue........... $ 71,125 -- $43,250 -- -- $114,375
John R. Haire........... 73,725 $149,702 -- $ 25,350 $157,463 406,240
Dr. Manuel H. Johnson... 71,125 145,702 -- -- -- 216,827
Michael E. Nugent....... 73,725 149,702 -- -- -- 223,427
John L. Schroeder....... 73,725 149,702 -- -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds have adopted a retirement program under which an Independent
Trustee who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or Trustee
of any Dean Witter Fund that has adopted the retirement program (each such Fund
referred to as an "Adopting Fund" and each such Trustee referred to as an
"Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her
Eligible Compensation plus 0.4166666% of such Eligible Compensation for each
full month of service as an Independent Director or Trustee of any Adopting
Fund in excess of five years up to a maximum of 50.0% after ten years of
service. The foregoing percentages may be changed by the Board.(1)"Eligible
Compensation" is one-fifth of the total com-
- ------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment
of benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.
12
<PAGE>
pensation 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.
Haire, Johnson, Nugent and Schroeder by the 57 Dean Witter Funds for the year
ended December 31, 1997, and the estimated retirement benefits for Messrs.
Haire, Johnson, Nugent and Schroeder, to commence upon their retirement, from
the 57 Dean Witter Funds as of December 31, 1997.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
ANNUAL
BENEFITS
ESTIMATED UPON
CREDITED YEARS ESTIMATED RETIREMENT
OF SERVICE AT PERCENTAGE OF RETIREMENT BENEFITS FROM ALL
RETIREMENT ELIGIBLE ACCRUED AS EXPENSES ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION BY ALL ADOPTING FUNDS FUNDS(2)
- --------------------------- ------------------ ----------------- --------------------- ----------
<S> <C> <C> <C> <C>
John R. Haire.............. 10 50.0% $(19,823)(3) $127,897
Dr. Manuel H. Johnson...... 10 50.0 12,832 47,025
Michael E. Nugent.......... 10 50.0 22,546 47,025
John L. Schroeder.......... 8 41.7 39,350 39,504
</TABLE>
- ---------------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(3) This number reflects the extension of Mr. Haire's term as Director or
Trustee until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service.
13
<PAGE>
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which may
be invested in by the Fund are guaranteed by the U.S. Government. Such values
and yield will fluctuate with changes in prevailing interest rates and other
factors. Generally, as prevailing interest rates rise, the value of any U.S.
Government securities held by the Fund will fall. Such securities with longer
maturities generally tend to produce higher yields and are subject to greater
market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities. The Fund is not limited as to the
maturities of the U.S. Government securities in which it may invest.
MONEY MARKET SECURITIES
As stated in the Prospectus, the U.S. money market instruments which the
Fund may purchase include U.S. Government securities, bank obligations,
Eurodollar certificates of deposit, obligations of savings institutions, fully
insured certificates of deposit and commercial paper. Such securities are
limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit 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 (investments in Eurodollar certificates may be affected by changes in
currency rates or exchange control regulations, or changes in governmental
administration or economic or monetary policy in the United States and abroad);
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by Federal deposit insurance);
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 15% or less of the Fund's net assets in all such
obligations and in all illiquid assets, in the aggregate; and
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or by Moody's Investors Service, Inc. or, if not
rated, issued by a company having an outstanding debt issue rated at least AAA
by Standard & Poor's or Aaa by Moody's.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested
or used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date
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of purchase. The collateral will be maintained in a segregated account and will
be marked to market daily to determine that the value of the collateral, as
specified in the agreement, does not decrease below the purchase price plus
accrued interest. If such decrease occurs, additional collateral will be
requested and, when received, added to the account to maintain full
collateralization. The Fund will accrue interest from the institution until the
time when the repurchase is to occur. Although such date is deemed by the Fund
to be the maturity date of a repurchase agreement, the maturities of securities
subject to repurchase agreements are not subject to any limits and may exceed
one year.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Adviser subject
to procedures established by the Board of Trustees of the Fund. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Fund could suffer a loss. It is the current
policy of the Fund not to invest in repurchase agreements that do not mature
within seven days if any such investment, together with any other illiquid
assets held by the Fund, amounts to more than 15% of its net assets. For the
fiscal year ended January 31, 1998, the Fund did not enter into repurchase
agreements in an amount exceeding 5% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
From time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis and may purchase
or sell securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date.
While the Fund will only purchase securities on a when-issued, delayed delivery
or forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase or sell
securities on a when-issued, delayed delivery or forward commitment basis, the
Fund will record the transaction and thereafter reflect the value, each day, of
such security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase or sale price. The Fund will also
establish a segregated account with the Fund's custodian bank in which it will
continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis; subject to this
requirement, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. The Adviser does not believe that the
Fund's net asset value or income will be adversely affected by its purchase of
securities on such basis. For the fiscal year ended January 31, 1998, the Fund
did not purchase securities on a when-issued and delayed delivery 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, leveraged buyout
or debt restructuring. The commitment for the purchase of any such security
will not be recognized in the portfolio of the Fund until the Adviser determines
that issuance of the security is probable. At such time, the Fund will record
the transaction and, in determining its net asset value, will reflect the value
of the security daily. At such time, the Fund will
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also establish a segregated account with its custodian bank in which it will
continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are not
issued the Fund will have lost an investment opportunity. The Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Adviser
does not believe that the net asset value of the Fund will be adversely
affected by its purchase of securities on such basis. The Fund may also sell
securities on a "when, as and if issued" basis provided that the issuance of
the security will result automatically from the exchange or conversion of a
security owned by the Fund at the time of the sale. During the fiscal year
ended January 31, 1998, the Fund did not purchase any securities on a when, as
and if issued basis.
OPTIONS AND FUTURES TRANSACTIONS
As discussed in the Prospectus, the Fund may write covered call options
against securities held in its portfolio and covered put options on eligible
portfolio securities and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of
its investments (or anticipated investments) by purchasing put and call options
on portfolio (or eligible portfolio) securities (and the currencies in which
they are denominated) and engaging in transactions involving futures contracts
and options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills are listed on
several securities exchanges and are written in over-the-counter transactions
("OTC Options"). Listed options are issued or guaranteed by the exchange on
which they trade or by a clearing corporation such as the Options Clearing
Corporation ("OCC"). Ownership of a listed call option gives the Fund the right
to buy from the OCC 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 or currency) 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 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 to the OCC or other clearing corporation
or exchange at the stated exercise price. Upon notice of exercise of the put
option, the writer of the option 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 exercise price.
OTC OPTIONS. Exchange-listed options are issued by the OCC or other
clearing corporation or exchange which assures that all transactions in such
options are properly executed. OTC options are purchased from or sold (written)
to dealers or financial institutions which have entered into direct agreements
with the Fund. With OTC options, such variables as expiration date, exercise
price and premium will be agreed upon between the Fund and the transacting
dealer, without the intermediation of a third party such as the OCC. If the
transacting dealer fails to make or take delivery of the securities or amount
of foreign currency underlying an option it has written, in accordance with the
terms of that option, the Fund would lose the premium paid for the option as
well as any anticipated benefit of the transaction. The Fund will engage in OTC
option transactions only with 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.
COVERED CALL WRITING. As stated in the Prospectus, the Fund is permitted
to write covered call options on portfolio securities and on the U.S. Dollar,
without limit, in order to aid in achieving its investment objective.
Generally, a call option is "covered" if the Fund owns, or has the right to
acquire, without additional cash consideration (or for additional cash
consideration held for the Fund
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by its Custodian in a segregated account) the underlying security (currency)
subject to the option except that in the case of call options on U.S. Treasury
Bills, the Fund might own U.S. Treasury Bills of a different series from those
underlying the call option, but with a principal amount and value corresponding
to the exercise price and a maturity date no later than that of the security
(currency) deliverable under the call option. A call option is also covered if
the Fund holds a call on the same security as the underlying security
(currency) of the written option, where the exercise price of the call used for
coverage is equal to or less than the exercise price of the call written or
greater than the exercise price of the call written if the mark to market
difference is maintained by the Fund in cash, U.S. Government securities or
other liquid portfolio securities which the Fund holds in a segregated account
maintained with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by
the Fund if the securities (currencies) underlying the option are ultimately
sold (exchanged) by the Fund at a loss. Furthermore, a premium received on a
call written on a foreign currency will ameliorate any potential loss of value
on the portfolio security due to a decline in the value of the currency.
However, during the option period, the covered call writer has, in return for
the premium or the option, given up the opportunity for capital appreciation
above the exercise price should the market price of the underlying security (or
the exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received will fluctuate with varying economic market conditions. 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.
As regards listed options and certain OTC options, during the option
period, the Fund may be required, at any time, to deliver the underlying
security (currency) against payment of the exercise price on any calls it has
written (exercise of certain listed and OTC options may be limited to specific
expiration dates). This obligation is terminated upon the expiration of the
option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit
on an outstanding call option, to prevent an underlying security (currency)
from being called, to permit the sale of an underlying security (or the
exchange of the underlying currency) or to enable the Fund to write another
call option on the underlying security (currency) with either a different
exercise price or expiration date or both. The Fund may realize a net gain or
loss from a closing purchase transaction depending upon whether the amount of
the premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be wholly or partially offset by unrealized
appreciation in the market value of the underlying security (currency).
Conversely, a gain resulting from a closing purchase transaction could be
offset in whole or in part or exceeded by a decline in the market value of the
underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the
amount of the premium on the option less the commission paid. Such a gain,
however, may be offset by depreciation in the market value of the underlying
security (currency) during the option period. If a call option is exercised, the
Fund realizes a gain or loss from the sale of the underlying security
(currency) equal to the difference between the purchase price of the underlying
security (currency) and the proceeds of the sale of the security (currency)
plus the premium received on the option less the commission paid.
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Options written by the Fund will normally have expiration dates of 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. See "Risks of Options and Futures
Transactions," below.
COVERED PUT WRITING. As stated in the Prospectus, as a writer of a covered
put option, the Fund incurs an obligation to buy the security underlying the
option from the purchaser of the put, at the option's exercise price at any
time during the option period, at the purchaser's election (certain listed and
OTC put options written by the Fund will be exercisable by the purchaser only
on a specific date). A put is "covered" if, at all times, the Fund maintains,
in a segregated account maintained on its behalf at the Fund's Custodian, cash,
U.S. Government securities or other liquid portfolio securities in an amount
equal to at least the exercise price of the option, at all times during the
option period. Similarly, a short put position could be covered by the Fund by
its purchase of a put option on the same security (currency) as the underlying
security of the written option, where the exercise price of the purchased
option is equal to or more than the exercise price of the put written or less
than the exercise price of the put written if the marked to market difference
is maintained by the Fund in cash, U.S. Government Securities or other liquid
portfolio securities which the Fund holds in a segregated account maintained at
its Custodian. In writing puts, the Fund assumes the risk of loss should the
market value of the underlying security (currency) decline below the exercise
price of the option (any loss being decreased by the receipt of the premium on
the option written). In the case of listed options, 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 (currency). The operation of and
limitations on covered put options in other respects are substantially
identical to those of call options.
The Fund will write put options for three purposes: (1) to receive the
income derived from the premiums paid by purchasers; (2) when the Adviser
wishes to purchase the security (or a security denominated in the currency
underlying the option) underlying the option at a price lower than its current
market price, in which case it will write the covered put at an exercise price
reflecting the lower purchase price sought; and (3) to close out a long put
option position. The potential gain on a covered put option is limited to the
premium received on the option (less the commissions paid on the transaction)
while the potential loss equals the differences between the exercise price of
the option and the current market price of the underlying securities
(currencies) when the put is exercised, offset by the premium received (less
the commissions paid on the transaction). The aggregate value of the
obligations underlying the puts, determined as of the date the options are
sold, will not exceed 50% of the Fund's net assets.
PURCHASING CALL AND PUT OPTIONS. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing or, in the case of a
call option on foreign currency, to hedge against an adverse exchange rate move
of the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The purchase
of the call option to effect a closing transaction on a call written over-the-
counter may be a listed or an OTC option. In either case, the call purchased is
likely to be on the same securities (currencies) and have the same terms as the
written option. If purchased over-the-counter, the option would generally be
acquired from the dealer or financial institution which purchased the call
written by the Fund.
The Fund may purchase put options on securities (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater than the premium paid for the option, the Fund
would incur no additional loss. In addition, the Fund may sell a put option
which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and
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other transaction costs paid on the put option which is sold. And such gain or
loss could be offset in whole or in part by a change in the market value of the
underlying security (currency). If a put option purchased by the Fund expired
without being sold or exercised, the premium would be lost.
RISKS OF OPTIONS TRANSACTIONS. 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 writer has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation
under the option and must deliver or receive the underlying securities at the
exercise price.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. If a covered call
option writer is unable to effect a closing purchase transaction or to purchase
an offsetting OTC option, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call option
writer may not be able to sell an underlying security at a time when it might
otherwise be advantageous to do so. A secured put option writer who is unable
to effect a closing purchase transaction or to purchase an offsetting OTC
option would continue to bear the risk of decline in the market price of the
underlying security until the option expires or is exercised. In addition, a
secured put writer would be unable to utilize the amount held in cash or U.S.
Government or other liquid portfolio securities as security for the put option
for other investment purposes until the exercise or expiration of the option.
As discussed in the Prospectus, 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, as such options will
generally only be closed out by entering into a closing purchase transaction
with the purchasing dealer. However, the Fund may be able to purchase an
offsetting option which does not close out its position as a writer but
constitutes an asset of equal value to the obligation under the option written.
If the Fund is not able to either enter into a closing purchase transaction or
purchase an offsetting position, it will be required to maintain the securities
subject to the call, or the collateral underlying the put, even though it might
not be advantageous to do so, until a closing transaction can be entered into
(or the option is exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on
an Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
Exchanges to discontinue the trading of options (or a particular class or
series of options), in which event the secondary market on that Exchange (or in
that class or series of options) would cease to exist, although outstanding
options on that Exchange that had been issued by the OCC as a result of trades
on that Exchange would generally continue to be exercisable in accordance with
their terms.
In the event of the bankruptcy of a broker through which the Fund engages
in transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
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Each of the Exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different Exchanges or are held or written on one or more accounts or
through one or more brokers). An Exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
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.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes").
STOCK INDEX OPTIONS. Options on stock indexes are similar to options on
stock except that, rather than the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the case of a
call, or less than, in the case of a put, the exercise price of the option. This
amount of cash is equal to such difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple (the "multiplier"). The multiplier for an index option
performs a function similar to the unit of trading for a stock option. It
determines the total
dollar value per contract of each point in the difference between the exercise
price of an option and the current level of the underlying index. A multiplier
of 100 means that a one-point difference will yield $100. Options on different
indexes may have different multipliers. The writer of the option is obligated,
in return for the premium received, to make delivery of this amount. Unlike
stock options, all settlements are in cash and a gain or loss depends on price
movements in the stock market generally (or in a particular segment of the
market) rather than the price movements in individual stocks. Currently,
options are traded on the S&P 100 Index and the S&P 500 Index on the Chicago
Board Options Exchange, the Major Market Index and the Computer Technology
Index, Oil Index and Institutional Index on the American Stock Exchange and the
NYSE Index and NYSE Beta Index on the New York Stock Exchange, The Financial
News Composite Index on the Pacific Stock Exchange and the Value Line Index,
National O-T-C Index and Utilities Index on the Philadelphia Stock Exchange,
each of which and any similar index on which options are traded in the future
which include stocks that are not limited to any particular industry or segment
of the market is referred to as a "broadly based stock market index." The Fund
will invest only in broadly based indexes. Options on broad-based stock indexes
provide the Fund with a means of protecting the Fund against the risk of market
wide price movements. If the Adviser anticipates a market decline, the Fund
could purchase a stock index put option. If the expected market decline
materialized, the resulting decrease in the value of the Fund's portfolio would
be offset to the extent of the increase in the value of the put option. If the
Adviser anticipates a market rise, the Fund may purchase a stock index call
option to enable the Fund to participate in such rise until completion of
anticipated common stock purchases by the Fund. Purchases and sales of stock
index options also enable the Adviser to more speedily achieve changes in the
Fund's equity positions.
The Fund will write put options on stock indexes only if such positions are
covered by cash, U.S. Government securities or other liquid portfolio
securities equal to the aggregate exercise price of the puts, or by a put
option on the same stock index with a strike price no lower than the strike
price of the put option sold by the Fund, which cover is held for the Fund in a
segregated account maintained for it by the Fund's Custodian. All call options
on stock indexes written by the Fund will be covered either by a portfolio of
stocks substantially replicating the movement of the index underlying the call
option or by holding a separate call option on the same stock index with a
strike price no higher than the strike price of the call option sold by the
Fund.
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RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, call writers such as the Fund cannot provide in advance for
their potential settlement obligations by acquiring and holding the underlying
securities. A call writer can offset some of the risk of its writing position
by holding a diversified portfolio of stocks similar to those on which the
underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk 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 has been assigned
until the next business day, at the earliest. The time lag between exercise and
notice of assignment poses no risk for the writer of a covered call on a
specific underlying security, such as a common stock, because there the
writer's obligation is to deliver the underlying security, not to pay its value
as of a fixed time in the past. So long as the writer already owns the
underlying security, it can satisfy its settlement obligations by simply
delivering it, and the risk that its value may have declined since the exercise
date is borne by the exercising holder. In contrast, even if the writer of an
index call holds stocks that exactly match the composition of the underlying
index, it will not be able to satisfy its assignment obligations by delivering
those stocks against payment of the exercise price. Instead, it will be
required to pay cash in an amount based on the closing index value on the
exercise date; and by the time it learns that it has been assigned, the index
may have declined, with a corresponding decrease in the value of its stock
portfolio. This "timing risk" is an inherent limitation on the ability of index
call writers to cover their risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If such a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is
interrupted, or if trading is interrupted in stocks accounting for a
substantial portion of the value of an index, the trading of options on that
index will ordinarily be halted. If the trading of options on an underlying
index is halted, an exchange may impose restrictions prohibiting the exercise
of such options.
FUTURES CONTRACTS. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and index futures contracts ("futures
contracts"), that are traded on commodity exchanges, on such underlying
securities as U.S. Treasury bonds, notes and bills and/or any foreign government
fixed-income security ("interest rate" futures), on various currencies
("currency futures") and on such indexes of securities as may exist or come
into being ("index" futures).
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the Adviser anticipates that interest rates may rise and, concomitantly, the
price of certain of its portfolio securities fall, the Fund may sell an
interest rate futures contract. If declining interest rates are anticipated,
the Fund may purchase an interest rate futures contract to protect against a
potential increase in the price of securities the Fund intends to purchase.
Subsequently, appropriate securities may be purchased by the Fund in an orderly
fashion; as securities are purchased, corresponding futures positions would be
terminated by offsetting sales of contracts.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated 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
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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 to the above, 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 interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. 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.
INTEREST RATE FUTURES CONTRACTS. When the Fund enters into an interest
rate futures contract, it is initially required to deposit with the Fund's
Custodian, in a segregated account in the name of the broker performing the
transaction, an "initial margin" of cash or U.S. Government securities or other
liquid portfolio securities equal to approximately 2% of the contract amount.
Initial margin requirements are established by the Exchanges on which futures
contracts trade and may, from time to time, change. In addition, brokers may
establish margin deposit requirements in excess of those required by the
Exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing
of funds by a brokers' client but is, rather, a good faith deposit on the
futures contract which will be returned to the Fund upon the proper termination
of the futures contract. The margin deposits made are marked to market daily
and the Fund may be required to make subsequent deposits called "variation
margin," with the Fund's futures contract clearing broker, which are reflective
of price fluctuations in the futures contract.
INDEX FUTURES CONTRACTS. As discussed in the Prospectus, the Fund may
invest in index futures contracts. An index futures contract sale creates an
obligation by the Fund, as seller, to deliver cash at a specified future time.
An index futures contract purchase would create an obligation by the Fund, as
purchaser, to take delivery of cash at a specified future time. Futures
contracts on indexes do not require the physical delivery of securities, but
provide for a final cash settlement on the expiration date which reflects
accumulated profits and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms
through which it effects index futures contracts in a manner similar to that
described above for interest rate futures contracts. In addition, due to
current industry practice, daily variations in gains and losses on open
contracts are required to be reflected in cash in the form of variation margin
payments. The Fund may be required to make additional margin payments during
the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) 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
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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 case of a call, or is less than, in the case of a
put, the exercise price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Adviser
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, it
might write a call option on an interest rate futures contract, the underlying
security of which correlates with the portion of the portfolio the Adviser
seeks to hedge. Any premiums received in the writing of options on futures
contracts may, of course, provide a further hedge against losses resulting from
price declines in portions of the Fund's portfolio.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS ON FUTURES. The Fund may not
enter into futures contracts or purchase related options thereon if,
immediately thereafter, the amount committed to margin plus the amount paid for
premiums for unexpired options on futures contracts exceeds 5% of the value of
the Fund's total assets, after taking into account unrealized gains and
unrealized losses on such contracts it has entered into, provided, however,
that in the case of an option that is in-the-money (the exercise price of the
call (put) option is less (more) than the market price of the underlying
security) at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. However, there is no overall limitation on the percentage
of the Fund's assets which may be subject to a hedge position. Except as
described above, there are no other limitations on the use of futures and
options thereon by the Fund.
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.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. As stated
in the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities (or the currency in which they are
denominated) held by the Fund. However, it is possible that the futures market
may advance and the value of securities (or the currency in which they are
denominated) held in the portfolio of the Fund may decline. If this occurred,
the Fund would lose money on the futures contract and also experience a decline
in value of its portfolio securities. However, while this could occur for a
very brief period or to a very small degree, over time the value of a
diversified portfolio will tend to move in the same direction as the futures
contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Fund may determine not to invest in the securities as planned and will realize
a loss on the futures contract that is not offset by a reduction in the price
of the securities.
If the Fund has sold a call option on a futures contract, it will cover
this position by holding in a segregated account maintained at its Custodian,
cash, U.S. Government Securities or other liquid portfolio securities equal in
value (when added to any initial or variation margin on deposit) to the market
value of the securities (currencies) underlying the futures contract or the
exercise price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract it
will hold cash, U.S. Government securities or other liquid portfolio securities
equal to the purchase price of the contract (less the amount of initial or
variation margin on deposit) in a segregated account maintained for the Fund by
its Custodian. Alternatively, the Fund could cover its long position by
purchasing a put
23
<PAGE>
option on the same futures contract with an exercise price as high or higher
than the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may
move on any day. If the price moves equal the daily limit on successive days,
then it may prove impossible to liquidate a futures position until the daily
limit moves have ceased. In the event of adverse price movements, the Fund
would continue to be required to make daily cash payments of variation margin
on open futures positions. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In addition,
the Fund may be required to take or make delivery of the instruments underlying
interest rate futures contracts it holds at a time when it is disadvantageous
to do so. The inability to close out options and futures positions could also
have an adverse impact on the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on
foreign commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage
commissions, clearing costs and other transaction costs may be higher on foreign
exchanges. Greater margin requirements may limit the Fund's ability to enter
into certain commodity transactions on foreign exchanges. Moreover, differences
in clearance and delivery requirements on foreign exchanges may occasion delays
in the settlement of the Fund's transactions 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. Similarly in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with
brokers or financial institutions deemed creditworthy by the Adviser.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to
futures contracts (and thereby the futures contract prices) may correlate
imperfectly with the behavior of the cash prices of the Fund's portfolio
securities (and the currencies in which they are denominated). Another such risk
is that prices of interest rate futures contracts may not move in tandem with
the changes in prevailing interest rates against which the Fund seeks a hedge.
A correlation may also be distorted by the fact that the futures market is
dominated by short-term traders seeking to profit from the difference between a
contract or security price objective and their cost of borrowed funds. Such
distortions are generally minor and would diminish as the contract approached
maturity.
As stated in the Prospectus, there may exist an imperfect correlation
between the price movements of futures contracts purchased by the Fund and the
movements in the prices of the securities (currencies) which are the subject of
the hedge. If participants in the futures market elect to close out their
contracts through offsetting transactions rather than meet margin deposit
requirements, distortions in the normal relationship between the debt
securities or currency markets and futures markets could result. Price
distortions could also result if investors in futures contracts opt to make or
take delivery of underlying securities rather than engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market
24
<PAGE>
and because of the imperfect correlation between movements in the prices of
securities and movements in the prices of futures contracts, a correct forecast
of interest rate trends may still not result in a successful hedging
transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to
make or take delivery of the underlying securities (currencies) at a time when
it may be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes").
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not
result in a loss, as in the instance where there is no movement in the prices
of the futures contract or underlying securities.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to
notice provisions described below), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account pursuant
to applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is that
the Fund continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. The Fund will not lend its
portfolio securities if such loans are not permitted by the laws or regulations
of any state in which its shares are qualified for sale and will not lend more
than 25% of the value of its total assets. A loan may be terminated by the
borrower on one business day's notice, or by the Fund on two business days'
notice. If the borrower fails to deliver the loaned securities within two days
after receipt of notice, the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the 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. The creditworthiness of firms to which
the Fund lends its portfolio securities will be monitored on an ongoing basis
by the Adviser pursuant to procedures adopted and reviewed, on an ongoing
basis, by the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment
in such loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
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PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 100%. A 100% turnover rate would occur, for example, if 100% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund.
The Fund may not:
1.Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
2.Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the
Fund may invest in the securities of companies which operate, invest in, or
sponsor such programs.
3.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).
4.Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in
restriction (3). 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.
5.Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts or options thereon; (d) borrowing money in
accordance with restrictions described above; or (e) lending portfolio
securities.
6.Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
7.Make short sales of securities.
8.Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit
or payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
9.Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell futures contracts or options on futures.
10.Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security. (The Fund may invest in restricted
securities subject to the non-fundamental limitations contained in the
Prospectus.)
11.Invest for the purpose of exercising control or management of any
other issuer.
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<PAGE>
In addition, as a nonfundamental policy, the Fund may not 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, (b) 10% of the Fund's total assets taken at market value,
would be invested in such securities and (c) 3% of any one such company's voting
securities would be owned by the Fund.
As a non-fundamental policy, the Fund may not invest in other investment
companies in reliance on Sections 12(d)(1)(F), 12(d)(1)(G) or 12(d)(1)(J) of
the Act.
If (except with respect to Restriction 3) a percentage restriction is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from a change in values of portfolio securities or amount
of total or net assets will not be considered a violation of any of the
foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In addition, securities may be purchased at
times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
Futures transactions will usually be effected through a broker and a commission
will be charged. On occasion, the Fund may also purchase certain money market
instruments directly from an issuer, in which case no commissions or discounts
are paid. During the fiscal years ended January 31, 1996, 1997 and 1998, the
Fund paid $6,583, $10,668 and $11,602, respectively, in brokerage commissions.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Adviser from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Adviser relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
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<PAGE>
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions. If
the Adviser believes such prices and executions are obtainable from more than
one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Adviser. Such services may include, but are not
limited to, any one or more of the following: reports on industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, computer
terminals and various trading and/or quotation equipment. They also include
advice from broker-dealers as to the value of securities, availability of
securities, availability of buyers, and availability of sellers. In addition,
they include recommendations as to purchase and sale of individual securities
and timing of such transactions. The Fund will not purchase at a higher price
or sell at a lower price in connection with transactions affected with a
dealer, acting as principal, who furnishes research services to the Fund than
would be the case if no weight were given by the Fund to the dealer's
furnishing of such services. During the fiscal year ended January 31, 1998, the
Fund directed the payment of $731 in brokerage commissions in connection with
transactions in the aggregate amount of $588,847 to brokers because of research
services provided.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser in the management of accounts of some
of its other clients and may not in all cases benefit the Fund directly. While
the receipt of such information and services is useful in varying degrees and
would generally reduce the amount of research or services otherwise performed
by the Adviser and thereby reduce its expenses, it is of indeterminable value
and the advisory fee paid to the Adviser is not reduced by any amount that may
be attributable to the value of such services. During the fiscal year ended
January 31, 1998, the Fund purchased convertible corporate bonds and
convertible preferred stock issued by Merrill Lynch & Co., Inc., Morgan Stanley
Group Inc. and Salomon Inc. which issuers were among the top ten brokers or the
ten dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At January 31, 1998, the Fund held convertible
preferred stock of Merrill Lynch & Co., Inc. with a market value of $392,150,
convertible corporate bonds and convertible preferred stock of Morgan Stanley
Group, Inc. with a market value of $1,272,177 and convertible preferred stock
of Salomon Inc. with a market value of $319,448.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR, Morgan Stanley & Co. Incorporated and other affiliated
brokers and dealers. In order for an affiliated broker or dealer to effect any
portfolio transactions 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 Board of
Trustees of the Fund, including a majority of the Trustees who are not
"interested" persons of the Fund, as defined in the Act, have adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to an affiliated broker or dealer are consistent
with the foregoing standard. During the fiscal years ended January 31, 1996 and
1997, the Fund paid no brokerage commissions to an affiliated broker or dealer.
During the period June 1, 1997 through January 31, 1998, the Fund paid a
total of $1,283 in brokerage commissions to Morgan Stanley & Co., Inc., 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. The brokerage commissions paid to Morgan Stanley & Co., Inc.
represented approximately 11.06% 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 12.38% of the aggregate dollar
value of all portfolio transactions of the Fund during the period for which
commissions were paid.
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THE DISTRIBUTOR
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As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund, and may enter into selected broker-dealer agreements
with others. The Distributor, a Delaware corporation, is a wholly-owned
subsidiary of MSDW. The Trustees of the Fund, including a majority of the
Independent Trustees, approved, at their meeting on June 30, 1997, the current
Distribution Agreement appointing the Distributor exclusive distributor of the
Fund's shares and providing for the Distributor to bear distribution expenses
not borne by the Fund. By its terms, the Distribution Agreement has an initial
term ending April 30, 1998, and provides that it will remain in effect from year
to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and Distributor have agreed to indemnify each
other against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. Under the Distribution Agreement, the Distributor uses
its best efforts in rendering services to the Fund, but in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of its
obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
PLAN OF DISTRIBUTION. The Fund has adopted a Plan of Distribution pursuant
to Rule 12b-1 under the 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%, 0.75% and 0.75% of the average
daily net assets of Class A, Class B and Class C, respectively. The Distributor
also receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus). The Distributor has informed the Fund that it and/or DWR
received (a) approximately $0, $7,489 and $356 in contingent deferred sales
charges from Class A, Class B and Class C, respectively, for the fiscal year
ended January 31, 1998, and (b) approximately $808 in front-end sales charges
from Class A for the fiscal year ended January 31, 1998, none of which was
retained by the Distributor.
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 under
the Plan equal to 0.20% of the average daily net assets of Class B and 0.25% of
the average daily net assets of Class C are currently each characterized as a
"service fee" under the Rules of the Association of the National Association of
Securities Dealers (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 an "asset-based sales charge" as such is defined by the
aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Board of Trustees, including
all of the Trustees of the Fund who are not "interested persons" of the Fund (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Plan (the "Independent 12b-1 Trustees"), cast in person at a
meeting called for the purpose of voting on the Plan, on January 22, 1993, and
by InterCapital as the then sole shareholder on January 23, 1993. At their
meeting held on April 28, 1993, the Trustees, including a majority of the
Independent 12b-1 Trustees, approved certain technical amendments to the Plan in
connection with amendments adopted by the National Association of Securities
Dealers, Inc. to its Rules of the Association. At their meeting
29
<PAGE>
held on June 30, 1997, the Trustees, including a majority of the Independent
12b-1 Trustees, approved amendments to the Plan to reflect the multiple-class
structure for the Fund, which took effect on July 28, 1997.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. In the Trustees' quarterly reviews of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein. Class C shares of the Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended January
31, 1998, of $437,111. This amount is equal to payments required to be paid
monthly by the Fund which were computed at the annual rate of 0.75% of the
Fund's average daily net assets of Class C. The 12b-1 fee is treated by the Fund
as an expense in the year it is accrued. This amount represents amounts paid by
Class C only; there were no Class A or Class B shares outstanding on such date.
For the fiscal period July 28, 1997 through January 31, 1998, Class A and Class
B shares of the Fund accrued payments under the Plan amounting to $23 and
$21,976, respectively, which amounts are equal to 0.25% and 0.75% of the average
daily net assets of Class A and Class B, respectively, for such period.
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 of shares, each with a distribution arrangement as set forth in the
Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 4.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.20% of the current value of
the respective accounts for which they are the account executives 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 401(k) and other
plans qualified under Section 401(a) of the Internal Revenue Code ("Qualified
Retirement Plans") for which Morgan Stanley Dean Witter Trust FSB ("MSDW Trust")
serves as Trustee or DWR's Retirement Plan Services serves as recordkeeper
pursuant to a written Recordkeeping Services Agreement, InterCapital compensates
DWR's account executives by paying them, from its own funds, a gross sales
credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 4.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.20% of the current value of the respective accounts for
which they are the account executives of record in all cases. In the case of
Class B shares purchased on or after July 28, 1997 by Qualified Retirement Plans
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, DWR
compensates its account executives by paying them, from its own funds, a gross
sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives 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 a residual of up to 0.75% of the current value of
the respective accounts for which they are the account executives of record.
With respect to Class D shares other than shares held by participants in the
InterCapital mutual fund asset allocation program, InterCapital compensates
DWR's account executives 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.
InterCapital also compensates DWR's account executives by paying them, from its
own funds, an annual residual commission, currently a residual of up to 0.10% of
the current value of the respective accounts for which they are the account
executives of record (not including accounts of participants in the InterCapital
mutual fund asset allocation program).
30
<PAGE>
The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund-associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund 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 0.75%, 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 account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Trustees, including,
a majority of the Independent 12b-1 Trustees. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(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
the Class for the fiscal year ended January 31, 1998 to the Distributor. The
Distributor estimates it has spent, pursuant to the Plan, $84,445 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) 53.15% ($44,883)--advertising and
promotional expenses; (ii) 0.02% ($13)--printing of prospectuses for
distribution to other than current shareholders; and (iii) 46.83%
($39,549)--other expenses, including the gross sales credit and the carrying
charges of which 0.21% ($82) represents carrying charges, 40.32% ($15,945)
represents commission credits to DWR branch offices for payments of commissions
to account executives and 59.47% ($23,522) represents overhead and other branch
office distribution-related expenses. The term "overhead and other branch office
distribution-related expenses" represents (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of Mutual
Fund sales coordinators to promote the sale of Fund shares; and (d) other
expenses relating to branch promotion of Fund share sales. The amounts accrued
by Class A for distribution during the fiscal period July 28, 1997 through
January 31, 1998 were for expenses which relate to compensation of sales
personnel and associated overhead expenses.
31
<PAGE>
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
contingent deferred sales charges paid by investors upon redemption of shares.
The Distributor has advised the Fund that in the case of Class B shares, such
excess amount, including the carrying charge designed to approximate the
opportunity costs incurred by DWR which arise from it having advanced monies
without having received the amount of any sales charges imposed at the time of
sale of the Fund's Class B shares, totalled $55,344 at January 31, 1998. 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 contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
Any cumulative expenses incurred, but not yet recovered through distribution
fees or contingent deferred sales charges, may or may not be recovered through
future distribution fees or contingent deferred sales charges.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that DWR,
InterCapital, the Distributor or the Manager or certain of their employees, may
be deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
Under its terms, the Plan had an initial term ending April 30, 1993, and
provides that it will continue from year to year thereafter, provided such
continuance is approved annually by a vote of the Trustees in the manner
described above. Prior to the Board's approval of amendments to the Plan to
reflect the multiple class structure for the Fund, the most recent continuance
of the Plan for one year, until April 30, 1998, was approved by the Board of
Trustees of the Fund, including a majority of the Independent 12b-1 Trustees, at
a Board meeting held on April 24, 1997. Prior to approving the continuation of
the Plan, the Board requested and received from the Distributor and reviewed all
the information which it 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; and
(3) what services had been provided and were continuing to be provided under the
Plan by the Distributor, DWR and other selected broker-dealers to the Fund and
its shareholders. Based upon their review, the Trustees of the Fund, including
each of the Independent 12b-1 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. This determination was
based upon the conclusion of the Trustees that the Plan provides an effective
means of stimulating sales of shares of the Fund and of reducing or avoiding net
redemptions and the potentially adverse effects that may occur therefrom. 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 of the shareholders of the
affected Class or Classes of the Fund, and all material amendments of 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 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the 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 12b-1 Trustees.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As stated in the Prospectus, short-term debt securities with remaining
maturities of 60 days or less at the time of purchase are valued at amortized
cost, unless the Trustees determine such does not reflect the securities'
32
<PAGE>
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. Other short-term debt securities will be valued
on a mark-to-market basis until such time as they reach a remaining maturity of
60 days, whereupon they will be valued at amortized cost using their value on
the 61st day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair value
as determined by the Trustees. Listed options on debt securities are valued at
the latest sale price on the exchange on which they are listed unless no sales
of such options have taken place that day, in which case they will be valued at
the mean between their latest bid and asked prices. Unlisted options on debt
securities and all options on equity securities are valued at the mean between
their latest bid and asked prices. Futures are valued at the latest sale price
on the commodities exchange on which they trade unless the Trustees determine
that such price does not reflect their market value, in which case they will be
valued at their fair value as determined by the Trustees. All other securities
and other assets are valued at their fair value as determined in good faith
under procedures established by and under the supervision of the Trustees.
The net asset value per share for each Class of shares of the Fund is
determined once daily at 4:00 p.m., New York time (or, on days when the New York
Stock Exchange closes prior to 4:00 p.m., at such earlier time), on each day
that the New York Stock Exchange is open. The New York Stock Exchange currently
observes the following holidays: New Year's Day, Reverend Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
RIGHT OF ACCUMULATION. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other TCW/DW Funds which are multiple class funds
("TCW/DW Multi-Class Funds") purchased at a price including a front-end sales
charge having a current value of $5,000, and purchases $20,000 of additional
shares of the Fund, the sales charge applicable to the $20,000 purchase would be
4.0% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent") fails to confirm the investor's represented holdings.
LETTER OF INTENT. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.
33
<PAGE>
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other TCW/DW Multi-Class
Funds held by the shareholder which were previously purchased at a price
including a front-end sales charge (including shares of the Fund, other TCW/DW
Multi-Class Funds or "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") acquired in exchange for those shares, and including in each case
shares acquired through reinvestment of dividends and distributions) will be
added to the cost or net asset value of shares of the Fund owned by the
investor. However, shares of "Exchange Funds" and the purchase of shares of
other TCW/DW Funds will not be included in determining whether the stated goal
of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years). However, no
CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not
exceed: (a) the current net asset value of shares purchased more than six years
(or, in the case of shares held by certain Qualified Retirement Plans, three
years) prior to the redemption, plus (b) the current net asset value of shares
purchased through reinvestment of dividends or distributions of the Fund or
another TCW/DW Fund (see "Shareholder Services--Targeted Dividends"), plus (c)
increases in the net asset value of the investor's shares above the total amount
of payments for the purchase of Fund shares made during the preceding six
(three) years. The CDSC will be paid to the Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will be
the amount which represents the net asset value of the investor's shares
purchased more than six (three) years prior to the redemption and/or shares
purchased through reinvestment of dividends or distributions. A portion of the
amount redeemed which exceeds an amount which represents both such increase in
value and the value of shares purchased more than six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years) prior to the
redemption and/or shares purchased through reinvestment of dividends or
distributions will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
34
<PAGE>
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ------------------------------------------------------------------------------------------------------- -------------------------
<S> <C>
First.................................................................................................. 5.0%
Second................................................................................................. 4.0%
Third.................................................................................................. 3.0%
Fourth................................................................................................. 2.0%
Fifth.................................................................................................. 2.0%
Sixth.................................................................................................. 1.0%
Seventh and thereafter................................................................................. None
</TABLE>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after July 28, 1997 by Qualified Retirement
Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services
serves as recordkeeper pursuant to a written Recordkeeping Services Agreement.
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE OF
PAYMENT MADE AMOUNT REDEEMED
- ------------------------------------------------------------------------------------------------------- -------------------------
<S> <C>
First.................................................................................................. 2.0%
Second................................................................................................. 2.0%
Third.................................................................................................. 1.0%
Fourth and thereafter.................................................................................. None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
SHAREHOLDER INVESTMENT ACCOUNT. Upon purchase of shares of the Fund, a
Shareholder Investment Account is opened for the investor on the books of the
Fund, maintained by the Transfer Agent. This is an open account in which shares
owned by the investor are credited by the Transfer Agent in lieu of issuance of
a share certificate. If a share certificate is desired, it must be requested in
writing for each transaction. Certificates are issued only for full shares and
may be redeposited in the account at any time. There is no charge to the
investor for issuance of a certificate. No certificates will be issued for
fractional shares or to shareholders who have elected the Systematic Withdrawal
Plan for withdrawing cash from their accounts. Whenever a shareholder-instituted
transaction takes place in the Shareholder Investment Account, the shareholder
will be mailed a confirmation of the transaction from the Fund or from DWR or
another selected broker-dealer.
AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All dividends and
capital gains distributions are automatically paid in full and fractional shares
of the applicable Class of the Fund, unless the shareholder requests that they
be paid in cash. Each purchase of shares of the Fund is made upon the condition
that the Transfer Agent is thereby automatically appointed as agent of the
investor to receive all dividends and capital
35
<PAGE>
gains distributions on shares owned by the investor. Such dividends and
distributions will be paid in shares of the applicable Class of the Fund (or in
cash if the shareholder so requests) at the net asset value per share as of the
close of business on the record date. At any time an investor may request the
Transfer Agent in writing to have subsequent dividends and/or capital gains
distributions paid in cash rather than shares. To assume sufficient time to
process the change, such request should be received by the Transfer Agent at
least five (5) business days prior to the record date for which it commences to
take effect. In case of recently purchased shares for which registration
instructions have not been received on the record date, cash payments will be
made to DWR or another selected broker-dealer, and will be forwarded to the
shareholder, upon receipt of proper instructions. It has been and remains the
Fund's policy and practice that, if checks for dividends or distributions paid
in cash remain uncashed, no interest will accrue on amounts represented by such
uncashed checks.
EASYINVEST.-SM- Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected (subject to any applicable sales charges). For
further information or to subscribe to EasyInvest, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent.
INVESTMENT OF DISTRIBUTIONS RECEIVED IN CASH. As discussed in the
Prospectus, any shareholder who receives a cash payment representing a dividend
or capital gains distribution may invest such dividend or distribution in shares
of the applicable Class at the net asset value per share, without the imposition
of a CDSC upon redemption, by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date. If the shareholder returns
the proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset value
per share next determined after receipt of the check or the proceeds by the
Transfer Agent.
DIRECT INVESTMENTS THROUGH TRANSFER AGENT. As discussed in the Prospectus,
a shareholder may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to TCW/DW Income and Growth Fund, and indicating the selected
Class, directly to the Transfer Agent. In the case of Class A shares, after
deduction of any applicable sales charge, the balance will be applied to the
purchase of Fund shares, and, in the case of shares of the other Classes, the
entire amount will be applied to the purchase of Fund shares, at the net asset
value per share next computed after receipt of the check of purchase payment by
the Transfer Agent. The shares so purchased will be credited to the investor's
account.
TARGETED DIVIDENDS-SM-. In states where it is legally permissible to do so,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end TCW/DW Fund other
than TCW/DW Income and Growth Fund or in another Class of TCW/DW Income and
Growth Fund. Such investment will be made as described above for automatic
investment in shares of the applicable Class of the Fund, at the net asset value
per share of the selected TCW/DW Fund as of the close of business of the payment
date of the dividend or distribution, and will begin to earn dividends, if any,
in the selected TCW/DW Fund on the next business day. To participate in the
Targeted Dividends program, shareholders should contact their DWR or other
selected broker-dealer account executive or the Transfer Agent. Shareholders of
the Fund must be shareholders of the selected Class of the TCW/DW Fund targeted
to receive investments from dividends at the time they enter the Targeted
Dividends program. Investors should review the prospectus of the targeted TCW/DW
Fund before entering the program.
SYSTEMATIC WITHDRAWAL PLAN. As discussed in the Prospectus, a systematic
withdrawal plan is available for shareholders who own or purchase shares of the
Fund having a minimum value of $10,000 based upon the then current net asset
value. The plan provides for monthly or quarterly (March, June, September and
December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an
36
<PAGE>
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly or quarterly amount.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of the sales charges which may be applicable
to purchases and redemptions of shares (see "Purchase of Fund Shares").
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of the
relevant month or quarter and normally a check for the proceeds will be mailed
by the Transfer Agent within five business days after the date of redemption.
The Withdrawal Plan may be terminated at any time by the Fund.
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her DWR or other selected broker-dealer account executive or by written
notification to the Transfer Agent. In addition, the party and/or the address to
which checks are mailed may be changed by written notification to the Transfer
Agent, with signature guarantees required in the manner described above. The
shareholder may also terminate the Withdrawal Plan at any time by written notice
to the Transfer Agent. In the event of such termination, the account will be
continued as a regular shareholder investment account. The shareholder may also
redeem all or part of the shares held in the Withdrawal Plan account (see
"Repurchases and Redemptions" in the Prospectus) at any time. Shareholders
wishing to enroll in the Withdrawal Plan should contact their account executive
or the Transfer Agent.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund
may exchange their shares for shares of the same Class of shares of any other
TCW/DW Multi-Class Fund without the imposition of any exchange fee. Shares may
also be exchanged for TCW/DW North American Government Income Trust and five
money market funds for which InterCapital serves as investment manager (the
foregoing six funds are hereinafter collectively referred to as the "Exchange
Funds"). Exchanges may be made after the shares of the fund acquired by purchase
(not by exchange or dividend reinvestment) have been held for thirty days. There
is no waiting period for exchanges of shares acquired by exchange or dividend
reinvestment. An exchange will be treated for federal income tax purposes the
same as a repurchase or redemption of shares, on which the shareholder may
realize a capital gain or loss.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, except for other TCW/DW Funds and the five money market funds
listed in the Prospectus.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written
37
<PAGE>
notification to the contrary. For telephone exchanges, the exact registration of
the existing account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a TCW/DW Multi-
Class Fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a TCW/DW Multi-Class Fund. However, in the case of
shares exchanged into an Exchange Fund, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the CDSC)
will be given in an amount equal to the Exchange Fund 12b-1 distribution fees
which are attributable to those shares. Shareholders acquiring shares of an
Exchange Fund pursuant to this exchange privilege may exchange those shares back
into a TCW/DW Multi-Class Fund from the Exchange Fund, with no charge being
imposed on such exchange. The holding period previously frozen when shares were
first exchanged for shares of an Exchange Fund resumes on the last day of the
month in which shares of a TCW/ DW Multi-Class Fund are reacquired. A CDSC is
imposed only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a TCW/DW Multi-Class Fund.
When shares initially purchased in a TCW/DW Multi-Class Fund are exchanged
for shares of a TCW/DW Multi-Class Fund or shares of an Exchange Fund, the date
of purchase of the shares of the fund exchanged into, for purposes of the CDSC
upon redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments between
funds for purposes of the CDSC, the amount which represents the current net
asset value of shares at the time of the exchange which were (i) purchased more
than one, three or six years (depending on the CDSC schedule applicable to the
shares) prior to the exchange and (ii) originally acquired through reinvestment
of dividends or distributions (all such shares called "Free Shares"), will be
exchanged first. After an exchange, all dividends earned on shares in the
Exchange Fund will be considered Free Shares. If the exchanged amount exceeds
the value of such Free Shares, an exchange is made, on a block-by-block basis,
of non-Free Shares held for the longest period of time. Shares equal to any
appreciation in the value of non-Free Shares exchanged will be treated as Free
Shares, and the amount of the purchase payments for the non-Free Shares of the
fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the CDSC Fund Prospectus under
the caption "Purchase of Fund Shares," any applicable CDSC will be imposed upon
the ultimate redemption of shares of any fund, regardless of the number of
exchanges since those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer.
38
<PAGE>
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence of
its correspondents or for losses in transit. The Fund shall not be liable for
any default or negligence of the Transfer Agent, the Distributor or any selected
broker-dealer, if any, in the performance of such functions.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of the shares of any
other fund and the general administration of the Exchange Privilege. No
commission or discounts will be paid to the Distributor or any selected
broker-dealer for any transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege Account of each Class is $5,000 for Dean Witter Liquid Asset
Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter California
Tax-Free Daily Income Trust and Dean Witter New York Municipal Money Market
Trust, although those funds may, at their discretion, accept initial investments
of as low as $1,000. The minimum initial investment for the Exchange Privilege
Account of each Class for Dean Witter U.S. Government Money Market Trust and all
TCW/DW Funds is $1,000.) Upon exchange into a money market fund, the shares of
that fund will be held in a special Exchange Privilege Account separately from
accounts of those shareholders who have acquired their shares directly from that
fund. As a result, certain services normally available to shareholders of money
market funds, including the check writing feature, will not be available for
funds held in that account.
The Fund, each of the other TCW/DW Funds and each of the money market funds
may limit the number of times this Exchange Privilege may be exercised by any
investor within a specified period of time. Also, the Exchange Privilege may be
terminated or revised at any time by any of the TCW/DW Funds or the money market
funds, upon such notice as may be required by applicable regulatory agencies
(presently sixty days for termination or material revision), provided that six
months' prior written notice of termination will be given to the shareholders
who hold shares of Exchange Funds, pursuant to this Exchange Privilege, and
provided further that the Exchange Privilege may be terminated or materially
revised at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange Commission
by order so permits (provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist), or (e), if the Fund would be unable to invest
amounts effectively in accordance with its investment objective(s), policies and
restrictions. Shareholders maintaining margin accounts with DWR or another
selected broker-dealer are referred to their account executive regarding
restrictions on exchange of shares of the Fund pledged in the margin account.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other selected broker-dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
REDEMPTION. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an accompanying
stock power, and the request for redemption, must be signed by the shareholder
or shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent to
the Fund's Transfer Agent, which will redeem the shares at their net asset value
next computed (see "Purchase of Fund Shares") after it receives the request, and
certificate, if any, in good order. Any redemption request received after such
39
<PAGE>
computation will be redeemed at the next determined net asset value. The term
"good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by the
Transfer Agent, and bear signature guarantees when required by the Fund or the
Transfer Agent. If redemption is requested by a corporation, partnership, trust
or fiduciary, the Transfer Agent may require that written evidence of authority
acceptable to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
prospectus.
REPURCHASE. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by DWR
and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
PAYMENT FOR SHARES REPURCHASED OR REDEEMED. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
ordinarily made by check within seven days after receipt by the Transfer Agent
of the certificate and/or written request in good order. Such payment may be
postponed or the right of redemption suspended at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check and the check has not yet cleared, payment of
redemption proceeds may be delayed until the check has cleared (not more than
fifteen days from the time of receipt of the check by the Transfer Agent). It
has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts
represented by such uncashed checks. Shareholders maintaining margin accounts
with DWR or another selected broker-dealer are referred to their account
executive regarding restrictions on redemption of shares of the Fund pledged in
the margin account.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the 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.
REINSTATEMENT PRIVILEGE. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within 35 days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
40
<PAGE>
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to distribute
or to retain all or part of any net long-term capital gains in any year for
reinvestment. If any such gains are retained, the Fund will pay federal income
tax thereon, and shareholders will be required to include such undistributed
gains in their taxable income and will be able to claim their share of the tax
paid by the Fund as a credit against their individual federal income tax.
Because the Fund intends to distribute all of its net investment income and
net capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from net
investment income or net short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior calendar
year.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have been held by the Fund for more than
twelve months. Gains or losses on the sale of securities held for twelve months
or less will be short-term gains or losses.
The Fund's transactions, if any, in options and futures contracts may be
subject to special provisions of the Internal Revenue Code that, among other
things, may affect the character of gains and losses realized by the Fund (i.e.,
may affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These rules also (a) could require the Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out) and (b) may cause the Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction. The Treasury intends to issue regulations to
permit shareholders to take into account their proportionate share of the Fund's
capital gains distributions that will be subject to a reduced rate under the
Taxpayer Relief Act of 1997. The Taxpayer Relief Act reduces the maximum tax on
long-term capital gains from 28% to 20%; however, it also lengthens the required
holding period to obtain the lower rate from more than 12 months to more than 18
months. The lower rates do not apply to collectibles and certain other assets.
Additionally, the maximum capital gain rate for assets that are held more than
five years and that are acquired after December 31, 2000 is 18%.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable at either ordinary or capital gain rates.
Therefore, an
41
<PAGE>
investor should consider the tax implications of purchasing Fund shares
immediately prior to a dividend or distribution record date.
Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent the
aggregate dividends received by the Fund would be eligible for the deduction if
the Fund were the shareholder claiming the dividends received deduction. The
amount of dividends paid by the Fund which may qualify for the dividends
received deduction is limited to the aggregate amount of qualifying dividends
which the Fund derives from its portfolio investments which the Fund has held
for a minimum period, usually 46 days within a 90-day period beginning 45 days
before the ex-dividend date of each qualifying dividend. Shareholders must meet
a similar holding period with respect to their shares to claim the dividends
received deduction with respect to any distribution of qualifying dividends. Any
distributions made by the Fund will not be eligible for the dividends received
deduction with respect to shares which are held by the shareholder for 45 days
or less. Any long-term capital gain distributions will also not be eligible for
the dividends received deduction. The ability to take the dividends received
deduction will also be limited in the case of a Fund shareholder which incurs or
continues indebtedness which is directly attributable to its investment in the
Fund.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes, including
information as to the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the portion eligible for the dividends received
deduction. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of redemptions
and repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"yield" and/or its "total return" in advertisements and sales literature. These
figures are computed separately for Class A, Class B, Class C and Class D
shares. Prior to July 28, 1997 the Fund offered only one Class of shares.
Because all shares of the Fund held prior to such time (other than shares which
were acquired in exchange for shares of TCW/DW Funds offered with a CDSC and
shares acquired through reinvestment of dividends and distributions thereon)
have been designated Class C, certain historical performance data may be
restated to reflect the 1.0% CDSC imposed on most Class C shares redeemed within
one year after purchase.
Yield is calculated for any 30-day period as follows: the amount of interest
and/or dividend income for each security in the Fund's portfolio is determined
in accordance with regulatory requirements; the total for the entire portfolio
constitutes the Fund's gross income for the period. Expenses accrued during the
period are subtracted to arrive at "net investment income" of each Class. The
resulting amount is divided by the product of the maximum offering price per
share on the last day of the period multiplied by the average number of shares
of the applicable Class outstanding during the period that were entitled to
dividends. This amount is added to 1 and raised to the sixth power. 1 is then
subtracted from the result and the difference is multiplied by 2 to arrive at
the annualized yield. The Fund's yield for the 30-day period ended January 31,
1998 was 4.78% for Class A, 4.53% for Class B, 4.53% for Class C and 5.25% for
Class D.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any CDSC at the end of the one, five or 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, taking a root of the quotient (where the
root is
42
<PAGE>
equivalent to the number of years in the period) and subtracting 1 from the
result. The average annual total returns for Class C shares of the Fund for the
fiscal year ended January 31, 1998 and for the period from March 31, 1993
(commencement of operations) through January 31, 1998 were 13.03% and 11.51%,
respectively.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class A, Class B and Class D for specified periods by
determining the aggregate percentage rate which will result in the ending value
of a hypothetical $1,000 investment made at the beginning of the period. For the
purpose of this calculation, it is assumed that all dividends and distributions
are reinvested. The formula for computing aggregate total return involves a
percentage obtained by dividing the ending value by the initial $1,000
investment and subtracting 1 from the result. The ending redeemable value for
Class A reflects the imposition of the maximum front-end sales charge for Class
A. The ending redeemable value for Class B is reduced by any CDSC at the end of
the period. Based on the foregoing calculations, the total returns for the
period July 28, 1997 through January 31, 1998 were 1.52%, 0.89% and 6.21% for
Class A, Class B and Class D, respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, year-by-year or
other types of total return figures. Such 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 upon the foregoing calculation, the
average total returns of Class C for the fiscal year ended January 31, 1998 and
for the period March 31, 1993 through January 31, 1998 were 14.03% and 11.51%,
respectively. In addition, the Fund may compute its aggregate total return for
specified periods by determining the aggregate percentage rate which will result
in the ending value of a hypothetical $1,000 investment made at the beginning of
the period. For the purpose of this calculation, it is assumed that all
dividends and distributions are reinvested. The formula for computing aggregate
total return involves a percentage obtained by dividing the ending value
(without reduction for any sales charge) by the initial $1,000 investment and
subtracting 1 from the result. Based on the foregoing calculation, the Fund's
total returns for Class C for the fiscal year ended January 31, 1998 and for the
period from March 31, 1993 through January 31, 1998 were 14.03% and 69.38%,
respectively. Based on the foregoing calculations, the total returns for Class
A, Class B and Class D for the period July 28, 1997 through January 31, 1998
were 6.03%, 5.80% and 6.21%, 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 multiplying by
$9,575, $48,250 and $97,250 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 the Fund at
inception would have grown to the following amounts at January 31, 1998.
<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 $ 10,152 $ 51,159 $ 103,114
Class B.............................................................. 7/28/97 10,580 52,900 105,800
Class C.............................................................. 3/31/93 16,938 84,690 169,380
Class D.............................................................. 7/28/97 10,621 53,105 106,210
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
43
<PAGE>
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. The Trustees were elected by InterCapital in January, 1993 as the then
sole shareholder of the Fund or, in the case of Messrs. Schroeder and Stern, by
the other Trustees on April 20, 1995. The Trustees themselves have the power to
alter the number and the terms of office of the Trustees, and they may at any
time lengthen their own terms or make their terms of unlimited duration and
appoint their own successors, provided that always at least a majority of the
Trustees has been elected by the shareholders of the Fund. Under certain
circumstances the Trustees may be removed by action of the Trustees. The
shareholders also have the right to remove the Trustees following a meeting
called for that purpose requested in writing by the record holders of not less
than ten percent of the Fund's outstanding shares. The voting rights of
shareholders are not cumulative, so that holders of more than 50 percent of the
shares voting can, if they choose, elect all Trustees being selected, while the
holders of the remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series. The Trustees presently have not authorized any such
additional series or classes of shares other than as set forth in the
Prospectus.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his duties. It
also provides that all third persons shall look solely to the Fund's property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liabilities
in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration, subject to the provisions in
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
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.
Such balances may, at times, be substantial.
Morgan Stanley Dean Witter Trust FSB, Harborside Financial Center, Plaza
Two, Jersey City, New Jersey 07311 is the Transfer Agent of the Fund's shares
and Dividend Disbursing Agent for payment of dividends and distributions on Fund
shares and Agent for shareholders under various investment plans described
herein. Morgan Stanley Dean Witter Trust FSB is an affiliate of Dean Witter
Services Company Inc., the Fund's Manager, and of Dean Witter Distributors Inc.,
the Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, Morgan
Stanley Dean Witter Trust FSB'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 Morgan Stanley Dean Witter Trust FSB receives a per
shareholder account fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
44
<PAGE>
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on January 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the Manager,
is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended January 31,
1998 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 Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
45
<PAGE>
TCW/DW INCOME AND GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW INCOME AND 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 Income and Growth Fund (the
"Fund") at January 31, 1998, 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 presented, 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 January 31, 1998 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provide
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
MARCH 13, 1998
46
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (35.6%)
ADVERTISING (1.0%)
$ 425 Omicom Group, Inc. - 144A*...................................................... 4.25% 01/03/07 $ 589,534
-----------
AEROSPACE (1.2%)
345 Hexcel Corp..................................................................... 7.00 08/01/03 569,343
100 Titan Corp...................................................................... 8.25 11/01/03 168,518
-----------
737,861
-----------
AUTO PARTS (0.6%)
345 Tower Automotive, Inc. - 144A*.................................................. 5.00 08/01/04 365,114
-----------
BUSINESS SERVICES (1.1%)
390 COREStaff, Inc.................................................................. 2.94 08/15/04 318,107
290 Personnel Group of America - 144A*.............................................. 5.75 07/01/04 345,622
-----------
663,729
-----------
COMMERCIAL SERVICES (4.2%)
775 Cendant Corp.................................................................... 4.75 03/01/03 1,031,835
155 CUC International, Inc.......................................................... 3.00 02/15/02 195,542
1,075 CUC International, Inc. - 144A*................................................. 3.00 02/15/02 1,356,177
-----------
2,583,554
-----------
DRUGS (1.4%)
810 Athena Neurosciences, Inc. - 144A*.............................................. 4.75 11/15/04 860,123
-----------
ELECTRONICS - INSTRUMENTATION (0.4%)
215 Thermo Instrument Systems, Inc.................................................. 4.00 01/15/05 219,771
-----------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (1.2%)
725 Xilinx, Inc. - 144A*............................................................ 5.25 11/01/02 724,377
-----------
FINANCIAL SERVICES (1.1%)
335 Morgan Stanley Group, Inc.+ (exchangeable into Boeing Co. common stock)......... 0.00 09/30/00 365,545
260 Morgan Stanley Group, Inc.+ (exchangeable into Johnson & Johnson Co. common
stock)........................................................................ 2.00 03/29/02 314,506
-----------
680,051
-----------
HEALTHCARE (0.5%)
225 Sunrise Assisted Living, Inc. - 144A*........................................... 5.50 06/15/02 287,021
-----------
HEALTHCARE SERVICES (3.1%)
530 Alternative Living Services, Inc................................................ 5.25 12/15/02 617,450
375 Assisted Living Concepts, Inc................................................... 6.00 11/01/02 399,375
545 Omnicare, Inc. - 144A*.......................................................... 5.00 12/01/07 551,131
280 Quintiles Transportational Corp. - 144A*........................................ 4.25 05/31/00 319,998
-----------
1,887,954
-----------
HOTELS (0.5%)
330 Signature Resorts, Inc.......................................................... 5.75 01/15/07 335,983
-----------
INSURANCE (0.4%)
220 American International Group, Inc............................................... 2.25 07/30/04 227,700
-----------
LEISURE (0.1%)
65 Speedway Motorsports, Inc....................................................... 5.75 09/30/03 65,105
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MEDICAL SERVICES (0.6%)
$ 320 Occusystems, Inc................................................................ 6.00% 12/15/01 $ 396,160
-----------
OIL SERVICES (1.3%)
700 Baker Hughes, Inc............................................................... 0.00 05/05/08 565,048
260 Halter Marine Group, Inc. - 144A*............................................... 4.50 09/15/04 248,235
-----------
813,283
-----------
PAPER PRODUCTS (0.5%)
325 Metsa-Serla OY - 144A* (Finland)................................................ 4.375 10/15/02 304,688
-----------
PHARMACEUTICALS (1.4%)
530 Sandoz Capital BVI, Ltd. - 144A* (Switzerland).................................. 2.00 10/06/02 853,306
-----------
POLLUTION CONTROL (3.3%)
690 Thermo Electron Corp. - 144A*................................................... 4.25 01/01/03 794,901
1,145 U.S. Filter Corp................................................................ 4.50 12/15/01 1,242,691
-----------
2,037,592
-----------
REAL ESTATE INVESTMENT TRUST (0.8%)
210 LTC Properties, Inc............................................................. 8.50 01/01/01 274,355
200 LTC Properties, Inc............................................................. 8.25 07/01/01 234,782
-----------
509,137
-----------
RESTAURANTS (0.1%)
145 Einstein/Noah Bagel Corp. - 144A*............................................... 7.25 06/01/04 89,545
-----------
RETAIL (3.8%)
285 Charming Shoppes, Inc........................................................... 7.50 07/15/06 255,360
1,045 Costco Companies, Inc. - 144A*.................................................. 0.00 08/19/17 619,536
530 Home Depot, Inc................................................................. 3.25 10/01/01 737,919
565 Staples, Inc. - 144A*........................................................... 4.50 10/01/00 728,087
-----------
2,340,902
-----------
TECHNOLOGY (1.5%)
310 Adaptec, Inc. - 144A*........................................................... 4.75 02/01/04 265,224
595 Safeguard Scientifics, Inc. - 144A*............................................. 6.00 02/01/06 653,851
-----------
919,075
-----------
TELECOMMUNICATIONS (4.0%)
1,280 Motorola, Inc................................................................... 0.00 09/27/13 1,006,436
415 Premiere Technologies - 144A*................................................... 5.75 07/01/04 420,905
280 SmarTalk TeleServices, Inc. - 144A*............................................. 5.75 09/15/04 342,084
610 Tel-Save Holdings, Inc. - 144A*................................................. 5.00 12/15/04 669,475
-----------
2,438,900
-----------
TRANSPORTATION (0.4%)
250 Blue Bird Body Co. (Series B)................................................... 10.75 11/15/06 274,375
-----------
WASTE MANAGEMENT (1.1%)
635 USA Waste Services, Inc......................................................... 4.00 02/01/02 684,613
-----------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $19,520,391)...................................................................... 21,889,453
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (39.1%)
AEROSPACE (0.2%)
$ 150 Wyman-Gordon Co................................................................. 8.00% 12/15/07 $ 152,625
-----------
AUTO PARTS (0.5%)
250 Hayes Wheels International, Inc. - 144A*........................................ 11.00 07/15/06 282,500
-----------
BANKS (1.3%)
75 Chevy Chase Savings Bank........................................................ 9.25 12/01/05 78,375
125 Chevy Chase Savings Bank, F.S.B................................................. 9.25 12/01/08 130,625
375 First Nationwide Escrow......................................................... 12.25 05/15/01 416,250
175 First Nationwide Escrow......................................................... 10.625 10/01/03 196,437
-----------
821,687
-----------
BROADCAST MEDIA (0.4%)
100 JCAC, Inc....................................................................... 10.125 06/15/06 110,500
125 Outdoor Communications, Inc..................................................... 9.25 08/15/07 130,937
-----------
241,437
-----------
BUILDING & CONSTRUCTION (0.5%)
50 D.R. Horton, Inc................................................................ 8.375 06/15/04 52,000
250 Johns Manville International Group.............................................. 10.875 12/15/04 278,437
-----------
330,437
-----------
BUILDING MATERIALS (1.3%)
200 American Standard Co............................................................ 7.375 02/01/08 199,500
500 K Hovnanian Enterprises......................................................... 11.25 04/15/02 522,500
100 MDC Holdings, Inc............................................................... 8.375 02/01/08 100,500
-----------
822,500
-----------
BUSINESS SERVICES (1.1%)
631 American Pad & Paper Co......................................................... 13.00 11/15/05 668,860
-----------
BUSINESS SERVICES - DISTRIBUTORS (1.2%)
150 Coinmach Corp. - 144A*.......................................................... 11.75 11/15/05 168,000
350 Iron Mountain, Inc.............................................................. 10.125 10/01/06 384,125
168 Pierce Leahy Corp............................................................... 11.125 07/15/06 192,150
-----------
744,275
-----------
CABLE & TELECOMMUNICATIONS (1.0%)
200 Adelphia Communications Corp. (Series B)........................................ 9.25 10/01/02 208,500
100 Adelphia Communications Corp. - 144A*........................................... 8.375 02/01/08 100,000
25 Cablevision Systems Corp........................................................ 9.875 05/15/06 27,562
50 Cablevision Systems Corp. (Series B)............................................ 8.125 08/15/09 52,625
60 Paging Network, Inc............................................................. 10.125 08/01/07 62,700
150 Paging Network, Inc............................................................. 10.00 10/15/08 156,562
-----------
607,949
-----------
CABLE/CELLULAR (0.2%)
100 Comcast Cellular Holdings, Inc. (Series B)...................................... 9.50 05/01/07 106,750
-----------
CHEMICALS (0.7%)
375 NL Industries, Inc.............................................................. 11.75 10/15/03 418,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMERCIAL SERVICES (1.4%)
$ 100 Intermedia Communications, Inc. - 144A*......................................... 8.875% 11/01/07 $ 105,750
150 Intermedia Communications, Inc.................................................. 8.50 01/15/08 155,250
150 MasTec, Inc. - 144A*............................................................ 7.75 02/01/08 150,375
400 NEXTLINK Communications, Inc.................................................... 9.625 10/01/07 424,000
-----------
835,375
-----------
COMMUNICATIONS EQUIPMENT (0.4%)
175 Globalstar L.P./Capital Corp.................................................... 11.25 06/15/04 177,625
50 Globalstar L.P./Capital Corp. - 144A*........................................... 10.75 11/01/04 49,000
-----------
226,625
-----------
CONSUMER - NONCYCLICAL (2.1%)
50 Amscan Holdings, Inc. - 144A*................................................... 9.875 12/15/07 52,375
190 Cott Corp. (Canada)............................................................. 9.375 07/01/05 198,550
175 Holmes Products Corp. - 144A*................................................... 9.875 11/15/07 181,125
475 International Home Foods, Inc................................................... 10.375 11/01/06 527,250
100 Revlon Consumer Products, Inc. - 144A*.......................................... 8.125 02/01/06 100,375
250 Revlon Consumer Products, Inc. - 144A*.......................................... 8.625 02/01/08 250,938
-----------
1,310,613
-----------
CONTAINERS (1.1%)
125 Graham Packaging Corp. - 144A*.................................................. 8.75 01/15/08 126,250
275 Plastic Containers, Inc. (Series B)............................................. 10.00 12/15/06 308,000
225 U.S. Can Corp................................................................... 10.125 10/15/06 236,250
-----------
670,500
-----------
ENERGY (1.5%)
250 Chesapeake Energy Corp.......................................................... 12.00 03/01/01 262,188
175 National Energy Group, Inc. (Series D) - 144A*.................................. 10.75 11/01/06 182,000
275 Transamerican Energy - 144A*.................................................... 11.50 06/15/02 280,500
100 Trico Marine Services, Inc. (Series B).......................................... 8.50 08/01/05 100,500
75 Trico Marine Services, Inc. (Series C) - 144A*.................................. 8.50 08/01/05 75,375
-----------
900,563
-----------
ENTERTAINMENT & LEISURE TIME (0.3%)
75 Livent, Inc. - 144A*............................................................ 9.375 10/15/04 76,875
100 Regal Cinemas, Inc. - 144A*..................................................... 8.50 10/01/07 102,000
-----------
178,875
-----------
ENTERTAINMENT/GAMING (1.1%)
125 Grand Casinos, Inc.............................................................. 10.125 12/01/03 135,938
500 Showboat, Inc................................................................... 9.25 05/01/08 540,000
-----------
675,938
-----------
FINANCE (0.2%)
100 Nationwide Credit, Inc. - 144A*................................................. 10.25 01/15/08 102,000
-----------
FINANCE - LEASING (0.8%)
190 Williams Scotsman, Inc. - 144A*................................................. 9.875 06/01/07 199,500
295 Xerox Credit Corp............................................................... 2.875 07/01/02 297,646
-----------
497,146
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCIAL - MISCELLANEOUS (0.1%)
$ 65 North Atlantic Trading.......................................................... 11.00% 06/15/04 $ 67,600
-----------
FINANCIAL SERVICES (0.7%)
400 American Annuity Group, Inc..................................................... 11.125 02/01/03 412,716
-----------
FOOD SERVICES (0.5%)
135 Jitney-Jungle Stores of America, Inc............................................ 12.00 03/01/06 153,563
75 Jitney-Jungle Stores of America, Inc. - 144A*................................... 10.375 09/15/07 79,313
50 Quality Food Centers, Inc. (Series B)........................................... 8.70 03/15/07 56,000
-----------
288,876
-----------
FOREST PRODUCTS, PAPER & PACKING (0.7%)
125 Paperboard Industrial International, Inc. - 144A*............................... 8.375 09/15/07 129,375
175 Riverwood International Corp.................................................... 10.625 08/01/07 182,875
125 SD Warren Co. (Series B)........................................................ 12.00 12/15/04 139,531
-----------
451,781
-----------
HEALTH SERVICES (0.5%)
285 Integrated Health Services - 144A*.............................................. 9.50 09/15/07 302,100
-----------
HEALTHCARE (1.5%)
200 Alliance Imaging, Inc........................................................... 9.625 12/15/05 209,000
375 Dade International, Inc. (Series B)............................................. 11.125 05/01/06 416,250
150 Fisher Scientific International, Inc............................................ 9.00 02/01/08 153,938
150 Physician Sales & Service, Inc. - 144A*......................................... 8.50 10/01/07 155,250
-----------
934,438
-----------
HOME BUILDING (0.4%)
250 U.S. Home Corp.................................................................. 9.75 06/15/03 261,563
-----------
HOSPITAL MANAGEMENT & HEALTH MAINTENANCE
ORGANIZATIONS (0.3%)
200 Extendicare Health Services, Inc. - 144A*....................................... 9.35 12/15/07 209,000
-----------
INDUSTRIALS (0.5%)
265 Diamond Offshore Drilling, Inc.................................................. 3.75 02/15/07 334,202
-----------
LODGING (0.4%)
250 Signature Resorts, Inc. - 144A*................................................. 9.75 10/01/07 256,250
-----------
MANUFACTURING (3.3%)
335 Communications & Power Industries, Inc. (Series B).............................. 12.00 08/01/05 375,200
100 Desa International, Inc. - 144A*................................................ 9.875 12/15/07 104,250
50 Doskocil Manufacturing Co., Inc. - 144A*........................................ 10.125 09/15/07 52,500
50 Foamex L.P. - 144A*............................................................. 9.875 06/15/07 51,500
100 International Wire Group - 144A*................................................ 11.75 06/01/05 111,000
500 Jordan Telecom Products - 144A*................................................. 9.875 08/01/07 530,000
250 Packaged Ice, Inc............................................................... 9.75 02/01/05 253,125
225 Telex Communications, Inc. - 144A*.............................................. 10.50 05/01/07 230,625
100 United Defense Industrial, Inc. - 144A*......................................... 8.75 11/15/07 101,750
225 Viasystems, Inc. - 144A*........................................................ 9.75 06/01/07 236,250
-----------
2,046,200
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
MEDIA (0.1%)
$ 50 Lamar Advertising Co............................................................ 9.625% 12/01/06 $ 54,625
-----------
MEDIA GROUP (3.9%)
125 Ackerly Communications, Inc. (Series B)......................................... 10.75 10/01/03 133,125
500 Adams Outdoor Advertising L.P................................................... 10.75 03/15/06 557,500
50 Chancellor Media Corp........................................................... 9.375 10/01/04 52,875
425 Chancellor Media Corp. - 144A*.................................................. 8.125 12/15/07 429,782
545 Garden State Newspapers, Inc.................................................... 12.00 07/01/04 616,531
575 Heritage Media Services, Inc.................................................... 11.00 06/15/02 598,719
25 Outdoor Systems, Inc............................................................ 8.875 06/15/07 26,375
-----------
2,414,907
-----------
METALS & MINING (0.2%)
150 Wheeling-Pittsburgh Corp. - 144A*............................................... 9.25 11/15/07 147,000
-----------
OIL - EXPLORATION & PRODUCTION (0.6%)
375 Magnum Hunter Resources - 144A*................................................. 10.00 06/01/07 384,375
-----------
PACKAGING & BOTTLING (0.1%)
50 Huntsman Packaging Corp. - 144A*................................................ 9.125 10/01/07 52,000
-----------
PAPER & FOREST PRODUCTS (1.3%)
435 Malette, Inc. (Canada).......................................................... 12.25 07/15/04 490,463
300 Stone Container Corp............................................................ 10.75 10/01/02 317,250
-----------
807,713
-----------
PUBLISHING (1.0%)
250 American Media Operations, Inc.................................................. 11.625 11/15/04 271,250
75 Primedia, Inc................................................................... 10.25 06/01/04 81,000
250 Von Hoffman Press, Inc. - 144A*................................................. 10.375 05/15/07 270,000
-----------
622,250
-----------
REAL ESTATE INVESTMENT TRUST (0.6%)
305 Trizec Finance Ltd. (Canada).................................................... 10.875 10/15/05 346,556
-----------
RESTAURANTS (0.2%)
100 Perkins Family Restaurants, L.P. - 144A*........................................ 10.125 12/15/07 105,000
-----------
RETAIL (2.4%)
100 Cole National Group, Inc. - 144A*............................................... 8.625 08/15/07 100,500
346 Guitar Center Management........................................................ 11.00 07/01/06 390,980
100 Leslie's Poolmart - 144A*....................................................... 10.375 07/15/04 104,000
600 Michaels Stores, Inc............................................................ 10.875 06/15/06 672,000
200 Zale Corp. - 144A*.............................................................. 8.50 10/01/07 204,000
-----------
1,471,480
-----------
TELECOMMUNICATIONS (0.5%)
250 STC Broadcasting, Inc........................................................... 11.00 03/15/07 277,500
-----------
TELEPHONES (0.5%)
250 Sprint Spectrum L.P............................................................. 11.00 08/15/06 287,500
-----------
TRANSPORTATION (1.1%)
75 Atlas Air, Inc.................................................................. 10.75 08/01/05 80,625
550 Moran Transportation Co......................................................... 11.75 07/15/04 610,500
-----------
691,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
UTILITIES (0.4%)
$ 25 Cal Energy Co., Inc............................................................. 9.50% 09/15/06 $ 27,000
75 Cal Energy Co., Inc............................................................. 7.63 10/15/07 73,784
125 California Energy Co., Inc...................................................... 10.25 01/15/04 134,375
-----------
235,159
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $23,102,687)...................................................................... 24,056,696
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (12.6%)
BANKS (1.3%)
10,600 National Australia Bank, Ltd. $1.969 (Australia) (Units)++.............................. 302,757
15,400 WBK Trust (STRYPES) $3.35............................................................... 529,375
-----------
832,132
-----------
BROADCAST MEDIA (0.8%)
6,400 Evergreen Media Corp. $3.00 - 144A*..................................................... 475,200
-----------
BUSINESS SERVICES (0.4%)
6,600 Vanstar Financing Trust $3.375 - 144A*.................................................. 251,203
-----------
CABLE & TELECOMMUNICATIONS (3.3%)
17,700 Houston Industries, Inc. $3.22.......................................................... 1,044,300
3,100 TCI Pacific Communications, Inc. $5.00 (exchangeable into Tele-Communications (Class A)
common stock)......................................................................... 500,845
7,200 U.S. West Inc. (Series D) $2.25......................................................... 459,000
-----------
2,004,145
-----------
FINANCIAL (1.0%)
6,600 Morgan Stanley Group, Inc. $3.99+ (exchangeable into Cisco Systems Inc. common stock)... 592,126
-----------
FINANCIAL SERVICES (1.4%)
1,500 American Bankers Insurance Group, Inc. (Series B) $3.125................................ 170,250
12,400 Merrill Lynch & Co., Inc. $3.12 (STRYPES) (exchangeable into Cox Communications Inc.
common stock)......................................................................... 392,150
8,100 Salomon, Inc. $7.625 (exchangeable into Financial Security Assurance Holdings, Ltd.
common stock)......................................................................... 319,448
-----------
881,848
-----------
HOTELS (0.6%)
4,900 Host Marriott Financial Trust $3.375 - 144A*............................................ 264,708
2,000 Host Marriott Financial Trust $3.375.................................................... 108,044
-----------
372,752
-----------
MEDICAL SERVICES (0.5%)
6,100 Laboratory Corp. of America (Series A) $4.25............................................ 308,050
-----------
OIL & GAS PRODUCTS (0.5%)
4,200 Occidental Petroleum Corp. (Series A) $3.00 (exchangeable into Canadian Occidental
Petroleum common stock)............................................................... 325,500
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
OIL - INTEGRATED (0.5%)
5,300 Unocal Corp. $3.125..................................................................... $ 285,209
-----------
OIL SERVICES (0.6%)
8,000 EVI, Inc. $2.50 - 144A*................................................................. 339,808
-----------
PACKAGING & BOTTLING (0.2%)
2,600 Crown Cork & Seal Co., Inc. $1.885...................................................... 120,412
-----------
PUBLISHING (0.5%)
6,000 Golden Books Financing Trust $4.375 - 144A*............................................. 338,250
-----------
RESTAURANTS (0.5%)
5,900 Apple South, Inc. $3.50 - 144A*......................................................... 295,000
-----------
RETAIL (0.5%)
5,600 Kmart Financing I $3.875................................................................ 288,400
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $6,543,330)............................................................ 7,710,035
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- --------- ----------
<C> <S> <C> <C>
WARRANT (a)
ENTERTAINMENT/GAMING
4,685 Fitzgeralds Gaming Corp. - 144A*
(IDENTIFIED COST $21,083)................................................. 12/19/98 9,370
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<C> <S> <C> <C>
SHORT-TERM INVESTMENTS (12.2%)
U.S. GOVERNMENT AGENCY (b) (8.9%)
$ 5,500 Federal Farm Credit Bank 5.40% due 02/12/98
(AMORTIZED COST $5,490,925)........................................................... 5,490,925
-----------
REPURCHASE AGREEMENT (3.3%)
2,038 The Bank of New York 5.375% due 02/02/98
(dated 01/30/98; proceeds $2,038,026)
(IDENTIFIED COST $2,037,114) (C)...................................................... 2,037,114
-----------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $7,528,039)......................................................................... 7,528,039
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1998, CONTINUED
<TABLE>
<C> <S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $56,715,530) (D).......................................................... 99.5 % 61,193,593
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............................................. 0.5 304,726
------ ------------
NET ASSETS................................................................................. 100.0 % $ 61,498,319
------ ------------
------ ------------
</TABLE>
- ---------------------
STRYPES Structured yield product exchangeable for stock.
* Resale is restricted to qualified institutional investors.
+ Issuer is an affiliate of the Fund's Manager, Dean Witter Services
Company Inc.
++ Consists of more than one class of securities traded together as a
unit; stocks with attached warrants.
(a) Non-income producing security.
(b) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(c) Collateralized by $2,019,974 U.S. Treasury Note 6.75% due 05/31/99
valued at $2,077,856.
(d) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$5,017,178 and the aggregate gross unrealized depreciation is $539,115,
resulting in net unrealized appreciation of $4,478,063.
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $56,715,530).............................. $61,193,593
Cash........................................................................................... 2,440
Receivable for:
Interest................................................................................... 732,483
Investments sold........................................................................... 214,637
Shares of beneficial interest sold......................................................... 133,629
Dividends.................................................................................. 22,405
Deferred organizational expenses............................................................... 6,434
Prepaid expenses and other assets.............................................................. 69,330
-----------
TOTAL ASSETS.............................................................................. 62,374,951
-----------
LIABILITIES:
Payable for:
Investments purchased...................................................................... 733,752
Plan of distribution fee................................................................... 39,176
Management fee............................................................................. 23,516
Investment advisory fee.................................................................... 15,677
Shares of beneficial interest repurchased.................................................. 2,979
Accrued expenses and other payables............................................................ 61,532
-----------
TOTAL LIABILITIES......................................................................... 876,632
-----------
NET ASSETS................................................................................ $61,498,319
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ 55,656,448
Net unrealized appreciation.................................................................... 4,478,063
Accumulated undistributed net investment income................................................ 272,740
Accumulated undistributed net realized gain.................................................... 1,091,068
-----------
NET ASSETS................................................................................ $61,498,319
-----------
-----------
CLASS A SHARES:
Net Assets..................................................................................... $27,856
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 2,401
NET ASSET VALUE PER SHARE................................................................. $11.60
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET
ASSET VALUE)............................................................................ $12.12
-----------
-----------
CLASS B SHARES:
Net Assets..................................................................................... $6,596,905
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 568,689
NET ASSET VALUE PER SHARE................................................................. $11.60
-----------
-----------
CLASS C SHARES:
Net Assets..................................................................................... $54,862,923
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 4,726,879
NET ASSET VALUE PER SHARE................................................................. $11.61
-----------
-----------
CLASS D SHARES:
Net Assets..................................................................................... $10,635
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 916
NET ASSET VALUE PER SHARE................................................................. $11.61
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1998*
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest........................................................................................ $3,703,196
Dividends....................................................................................... 479,318
----------
TOTAL INCOME............................................................................... 4,182,514
----------
EXPENSES
Plan of distribution fee (Class A shares)....................................................... 23
Plan of distribution fee (Class B shares)....................................................... 21,976
Plan of distribution fee (Class C shares)....................................................... 437,111
Management fee.................................................................................. 275,518
Investment advisory fee......................................................................... 183,678
Professional fees............................................................................... 60,242
Transfer agent fees and expenses................................................................ 58,786
Shareholder reports and notices................................................................. 47,076
Organizational expenses......................................................................... 39,801
Registration fees............................................................................... 35,768
Trustees' fees and expenses..................................................................... 32,904
Custodian fees.................................................................................. 20,884
Other........................................................................................... 15,526
----------
TOTAL EXPENSES............................................................................. 1,229,293
----------
NET INVESTMENT INCOME...................................................................... 2,953,221
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain............................................................................... 4,031,439
Net change in unrealized appreciation........................................................... 950,969
----------
NET GAIN................................................................................... 4,982,408
----------
NET INCREASE.................................................................................... $7,935,629
----------
----------
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued by July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, JANUARY 31,
1998* 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................................................... $2,953,221 $3,001,268
Net realized gain............................................................... 4,031,439 3,798,985
Net change in unrealized appreciation........................................... 950,969 475,436
-------------- --------------
NET INCREASE............................................................... 7,935,629 7,275,689
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares.............................................................. (582) --
Class B shares.............................................................. (144,769) --
Class C shares.............................................................. (2,979,361) (3,008,077)
Class D shares.............................................................. (290) --
Net realized gain
Class A shares.............................................................. (1,133) --
Class B shares.............................................................. (298,812) --
Class C shares.............................................................. (3,495,390) (2,721,147)
Class D shares.............................................................. (491) --
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.......................................... (6,920,828) (5,729,224)
-------------- --------------
Net increase (decrease) from transactions in shares of beneficial interest...... (457,056) 1,763,514
-------------- --------------
NET INCREASE............................................................... 557,745 3,309,979
NET ASSETS:
Beginning of period............................................................. 60,940,574 57,630,595
-------------- --------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $272,740 AND $443,330,
RESPECTIVELY)............................................................... $61,498,319 $60,940,574
-------------- --------------
-------------- --------------
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
57
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998
1. ORGANIZATIONAL AND ACCOUNTING POLICIES
TCW/DW Income and 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 to generate
high total return by providing a high level of current income and the potential
for capital appreciation. The Fund seeks to achieve its objective by investing
in bonds or preferred stock convertible into common stock, other fixed income
securities, common stocks and U.S. Government securities. The Fund was organized
as a Massachusetts business trust on November 23, 1992 and commenced operations
on March 31, 1993. On July 28, 1997, the Fund commenced offering three
additional classes of shares, with the then current shares, other than shares
which were acquired in exchange for shares of Funds for which Dean Witter
Services Company Inc. serves as Manager and TCW Funds Management, Inc. serves as
Adviser ("TCW/DW Funds") offered with a contingent deferred sales charge
("CDSC") and shares acquired through reinvestment of dividends and distributions
thereon, designated Class C shares. Shares held prior to July 28, 1997 which
were acquired in exchange for shares of a TCW/DW Fund sold with a CDSC,
including shares acquired through reinvestment of dividends and distributions
thereon, have been designated 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, 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, 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
58
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998, CONTINUED
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); (4) certain portfolio securities may be valued by an outside
pricing service approved by the Trustees. The pricing service may utilize a
matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the securities valued by
such pricing service; (5) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities 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.
Discounts are accreted over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. 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"
59
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998, CONTINUED
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 -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc. (the "Manager") paid the organizational
expenses of the Fund in the amount of approximately $206,000 of which $200,000
have been reimbursed. Such expenses have been deferred and are being amortized
on the straight-line method over a period not to exceed five years from the
commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager a management fee,
accrued daily and payable monthly, by applying the following annual rates to the
net assets of the Fund determined as of the close of each business day: 0.45% to
the portion of daily net assets not exceeding $500 million and 0.42% to the
portion of the daily net assets exceeding $500 million.
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 the Adviser an
advisory fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.30% to the portion of daily net assets not exceeding $500
million and 0.28% to the portion of the daily net assets exceeding $500 million.
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
60
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998, CONTINUED
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Manager. The Fund has adopted a Plan of
Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. 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 -- 0.75% of the average daily
net assets of Class B, and (iii) Class C -- up to 0.75% 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 Distributor for
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, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and
Distributor, and others who engage in or support distribution of the shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of these shares to other than current shareholders; and the
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
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 $55,344, at January 31, 1998.
61
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998, CONTINUED
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 0.75% 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 account executives may be reimbursed in the subsequent
calendar year. For the period ended January 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
0.75%, respectively.
The Distributor has informed the Fund that for the period ended January 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $7,489 and $356, respectively
and received $808 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.
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 January 31, 1998 aggregated
$55,824,587 and $65,551,624, respectively. Included in the aforementioned are
purchases and sales of Morgan Stanley Group, Inc., an affiliate of the Manager
since May 31, 1997, of $55,188 and $607,506, respectively, as well as a net
realized gain of $64,691.
For the period May 31, 1997 through January 31, 1998, the Fund incurred
brokerage commissions of $1,283 with Morgan Stanley & Co., Inc., an affiliate of
the Manager since May 31, 1997, for portfolio transactions executed on behalf of
the Fund. At January 31, 1998, the Fund's payable for investments purchased
included unsettled trades with Morgan Stanley & Co., Inc. of $55,188. The Funds'
interest and dividend income included $7,250 and $27,770, respectively, for
income from Morgan Stanley Group, Inc. securities.
Dean Witter Trust FSB, an affiliate of the Manager and Distributor, is the
Fund's transfer agent. At January 31, 1998, the Fund had transfer agent fees and
expenses payable of approximately $760.
62
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1998, CONTINUED
6. SHARES OF BENEFICIAL INTEREST+
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1998 JANUARY 31, 1997
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 2,751 $ 33,065 -- --
Reinvestment of dividends and distributions...................... 142 1,614 -- --
Redeemed......................................................... (492) (5,989) -- --
------------ -------------- ------------ ------------
Net increase -- Class A.......................................... 2,401 28,690 -- --
------------ -------------- ------------ ------------
CLASS B SHARES*
Sold............................................................. 209,588 2,492,309 -- --
Reinvestment of dividends and distributions...................... 32,187 368,173 -- --
Redeemed......................................................... (89,344) (1,054,299) -- --
------------ -------------- ------------ ------------
Net increase -- Class B.......................................... 152,431 1,806,183 -- --
------------ -------------- ------------ ------------
CLASS C SHARES
Sold............................................................. 912,536 10,493,055 1,635,756 $ 18,613,081
Reinvestment of dividends and distributions...................... 485,664 5,548,520 431,286 4,808,760
Redeemed......................................................... (1,590,764) (18,344,299) (1,909,009) (21,658,327)
------------ -------------- ------------ ------------
Net increase (decrease) -- Class C............................... (192,564) (2,302,724) 158,033 1,763,514
------------ -------------- ------------ ------------
CLASS D SHARES*
Sold............................................................. 848 10,014 -- --
Reinvestment of dividends and distributions...................... 68 781 -- --
------------ -------------- ------------ ------------
Net increase -- Class D.......................................... 916 10,795 -- --
------------ -------------- ------------ ------------
Net increase (decrease) in Fund.................................. (36,816) $ (457,056) 158,033 $ 1,763,514
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
</TABLE>
- ---------------------
+ On July 28, 1997, 416,258, shares representing $4,916,004 were transferred to
Class B.
* For the period July 28, 1997 (issue date) through January 31, 1998.
63
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 31,
1993*
FOR THE YEAR ENDED JANUARY 31, THROUGH
------------------------------------------------------- JANUARY 31,
1998**++ 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 11.42 $ 11.13 $ 9.77 $ 10.98 $ 10.00
---------- ---------- ---------- ---------- ------
Net investment income................... 0.57 0.60 0.59 0.59 0.45
Net realized and unrealized gain
(loss)................................. 0.96 0.84 1.37 (1.20) 1.02
---------- ---------- ---------- ---------- ------
Total from investment operations........ 1.53 1.44 1.96 (0.61) 1.47
---------- ---------- ---------- ---------- ------
Less dividends and distributions from:
Net investment income................ (0.60) (0.60) (0.60) (0.55) (0.39)
Net realized gain.................... (0.74) (0.55) -- (0.05) (0.10)
---------- ---------- ---------- ---------- ------
Total dividends and distributions....... (1.34) (1.15) (0.60) (0.60) (0.49)
---------- ---------- ---------- ---------- ------
Net asset value, end of period.......... $ 11.61 $ 11.42 $ 11.13 $ 9.77 $ 10.98
---------- ---------- ---------- ---------- ------
---------- ---------- ---------- ---------- ------
TOTAL INVESTMENT RETURN+................ 14.03% 13.46% 20.52% (5.59)% 15.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.01% 2.02% 2.21% 2.04% 1.57%(2)(3)
Net investment income................... 4.84% 5.19% 5.41% 5.83% 5.62%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $54,863 $60,941 $57,631 $55,335 $64,370
Portfolio turnover rate................. 96% 102% 79% 88% 84%(1)
Average commission rate paid............ $0.0169 $0.0540 -- -- --
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares which were acquired in
exchange for shares of Funds for which Dean Witter Services Company Inc
serves as Manager and TCW Fund's Management, Inc. serves as Adviser
("TCW/DW Funds") offered with a contingent deferred sales charge ("CDSC")
and shares acquired through reinvestment of dividends and distributions
thereon, have been designated Class C shares. Shares held prior to July 28,
1997 which were acquired in exchange for shares of a TCW/DW Fund sold with
a CDSC, including shares acquired through reinvestment of dividends and
distributions thereon, have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Manager and Investment Adviser had not reimbursed all expenses and
waived the management fee, the above annualized expense and net investment
income ratios would have been 2.00% and 5.18%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
64
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 11.81
------
Net investment income....................................... 0.31
Net realized and unrealized gain............................ 0.38
------
Total from investment operations............................ 0.69
------
Less dividends and distributions from:
Net investment income.................................... (0.33)
Net realized gain........................................ (0.57)
------
Total dividends and distributions........................... (0.90)
------
Net asset value, end of period.............................. $ 11.60
------
------
TOTAL INVESTMENT RETURN+.................................... 6.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.54%(2)
Net investment income....................................... 5.04%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $28
Portfolio turnover rate..................................... 96%
Average commission rate paid................................ $0.0169
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 11.81
------
Net investment income....................................... 0.28
Net realized and unrealized gain............................ 0.38
------
Total from investment operations............................ 0.66
------
Less dividends and distributions from:
Net investment income.................................... (0.30)
Net realized gain........................................ (0.57)
------
Total dividends and distributions........................... (0.87)
------
Net asset value, end of period.............................. $ 11.60
------
------
TOTAL INVESTMENT RETURN+.................................... 5.80%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.02%(2)
Net investment income....................................... 4.58%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $6,597
Portfolio turnover rate..................................... 96%
Average commission rate paid................................ $0.0169
</TABLE>
- ---------------------
* The date the shares were first issued. Class B participants who held shares
prior to July 28, 1997 should refer to the Financial Highlights of Class C
to obtain the historical per share and ratio information of their shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
65
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JANUARY 31,
1998++
- ------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $ 11.81
------
Net investment income....................................... 0.32
Net realized and unrealized gain............................ 0.39
------
Total from investment operations............................ 0.71
------
Less dividends and distributions from:
Net investment income.................................... (0.34)
Net realized gain........................................ (0.57)
------
Total dividends and distributions........................... (0.91)
------
Net asset value, end of period.............................. $ 11.61
------
------
TOTAL INVESTMENT RETURN+.................................... 6.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.27%(2)
Net investment income....................................... 5.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $11
Portfolio turnover rate..................................... 96%
Average commission rate paid................................ $0.0169
</TABLE>
- ---------------------
* The date the 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.
SEE NOTES TO FINANCIAL STATEMENTS
66
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FEDERAL TAX NOTICE (UNAUDITED)
1998 FEDERAL TAX NOTICE
For the year ended January 31, 1998, the Fund paid to shareholders the following
per share amounts from long-term capital gains. These distributions are taxable
as 28% rate gains or 20% rate gains, as indicated below:
<TABLE>
<CAPTION>
PER SHARE
--------------------------
CLASS CLASS CLASS CLASS
A B C D
----- ----- ----- -----
<S> <C> <C> <C> <C>
Portion of long-term
capital gains taxable as:
28% rate gain.......... $0.16 $0.16 $0.22 $0.16
20% rate gain.......... 0.31 0.31 0.31 0.31
----- ----- ----- -----
Total long-term capital
gains.................... $0.47 $0.47 $0.53 $0.47
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
For the year ended January 31, 1998, 11.01% of the income dividends qualified
for the dividends received deduction available to corporations.
67
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) FINANCIAL STATEMENTS
(1) Financial statements and schedules, included in Prospectus (Part A):
Page
in Prospectus
-------------
Financial Highlights for the period March 31, 1993
(commencement of operations) through January 31,
1994 and for the years ended January 31, 1995,
1996, 1997 and 1998 (Class C)......................... 7
Financial Highlights for the period July 28, 1997
through January 31, 1998 ( Classes A, B and D)........ 8
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page in SAI
-----------
Portfolio of Investments at January 31, 1998.......... 47
Statement of Assets and Liabilities at
January 31, 1998...................................... 56
Statement of Operations for the year ended
January 31, 1998...................................... 56
Statement of Changes in Net Assets for the years ended
January 31, 1997 and 1998............................. 57
Notes to Financial Statements at January 31, 1998..... 58
Financial Highlights for the period March 31, 1993
(commencement of operations) through January 31, 1994
and for the years ended January 31, 1995, 1996, 1997
and 1998 (Class C).................................... 64
Financial Highlights for the period July 28, 1997
through January 31, 1998 ( Classes A, B and D)........ 65
(3) Financial statements included in Part C:
None
<PAGE>
(b) EXHIBITS:
Exhibit
Number Description
------ -----------
2. - By-Laws of the Registrant, Amended and Restated as of October 23, 1997
8.- Form of Transfer Agency and Services Agreement between Registrant and
Dean Witter Trust FSB
11.- Consent of Independent Accountants
16.- Schedules for Computation of Performance Quotations
27.- Financial Data Schedules
Other- Power of Attorney
- ----- -----------------
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
Item 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class at February 28, 1998
-------------- ------------------------
<S> <C> <C>
Class A 6
Class B 512
Class C 3,333
Class D 2
</TABLE>
Item 27. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Management or either Co-Advisory Agreements,
none of the Manager, the Advisers
2
<PAGE>
or any trustee, officer, employee or agent of the Registrant shall be liable for
any action or failure to act, except in the case of bad faith, willful
misfeasance, gross negligence or reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of the Registrant
in connection with the successful defense of any action, suit or proceeding) is
asserted against the Registrant by such trustee, officer or controlling person
in connection with the shares being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Manager, Registrant's Trustees, and
other registered investment management companies managed by the Manager,
maintains insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the request of
Registrant as a trustee, director, officer, employee or agent of another trust
or corporation, against any liability asserted against him and incurred by him
or arising out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant itself
is not permitted to indemnify him.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
The TCW Funds Management, Inc. ("TCW") is a 100% owned subsidiary of The
TCW Group, Inc., a Nevada corporation. TCW presently serves as investment
adviser to: (1) TCW Funds, Inc., a diversified open-end management investment
company; (2) TCW Convertible Securities Fund, Inc., a diversified closed-end
management investment company; (3) TCW/DW North American Government Income
Trust, an open-end, non-diversified management company; (4) TCW/DW Income and
Growth Fund, an open-end, non-diversified management company; (5) TCW/DW Latin
American Growth Fund, an open-end, non-diversified management company; (6)
TCW/DW Small Cap Growth Fund, an open-end non-diversified management company;
(7) TCW/DW Term Trust 2000, a closed-end, diversified management company; (8)
TCW/DW Term Trust 2002, a closed-end diversified management company; (9) TCW/DW
Term Trust 2003, a closed-end diversified management company; (10) TCW/DW
Emerging Markets Opportunities Trust, an open-end, non-diversified management
company; (11) TCW/DW Total Return Trust, an open-end non-diversified management
investment company; (12) TCW/DW Mid-Cap Equity Trust, an open-end, diversified
management investment company; and (13) TCW/DW Global Telecom Trust, an open-end
diversified management investment company. TCW also serves as investment
adviser or sub-adviser to other investment companies, including foreign
investment companies. The list required by this Item 28 of the officers and
directors of TCW together with information as to any other business, profession,
vocation or employment of a substantive nature
3
<PAGE>
engaged in by TCW and such officers and directors during the past two years, is
incorporated by reference to Form ADV (File No. 801-29075) filed by TCW pursuant
to the Investment Advisers Act.
Item 29. PRINCIPAL UNDERWRITERS.
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation,
is the principal underwriter of the Registrant. Distributors is also the
principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Short-Term U.S. Treasury Trust
(34) Dean Witter Diversified Income Trust
(35) Dean Witter Health Sciences Trust
(36) Dean Witter Global Dividend Growth Securities
(37) Dean Witter American Value Fund
(38) Dean Witter U.S. Government Money Market Trust
(39) Dean Witter Global Short-Term Income Fund Inc.
(40) Dean Witter Variable Investment Series
4
<PAGE>
(41) Dean Witter Value-Added Market Series
(42) Dean Witter Short-Term Bond Fund
(43) Dean Witter International SmallCap Fund
(44) Dean Witter Hawaii Municipal Trust
(45) Dean Witter Balanced Growth Fund
(46) Dean Witter Balanced Income Fund
(47) Dean Witter Intermediate Term U.S. Treasury Trust
(48) Dean Witter Global Asset Allocation Fund
(49) Dean Witter Mid-Cap Growth Fund
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Information Fund
(52) Dean Witter Japan Fund
(53) Dean Witter Income Builder Fund
(54) Dean Witter Special Value Fund
(55) Dean Witter Financial Services Trust
(56) Dean Witter Market Leader Trust
(57) Dean Witter S&P 500 Index Fund
(58) Dean Witter Fund of Funds
(59) Morgan Stanley Dean Witter Competitive Edge Fund
(60) Morgan Stanley Dean Witter Growth Fund
(61) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(1) TCW/DW North American Government Income Trust
(2) TCW/DW Latin American Growth Fund
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Small Cap Growth Fund
(5) TCW/DW Total Return Trust
(6) TCW/DW Mid-Cap Equity Trust
(7) TCW/DW Global Telecom Trust
(8) TCW/DW Emerging Markets Opportunities Trust
(a) The following information is given regarding directors and officers of Dean
Witter Distributors Inc. ("Distributors"). The principal address of
Distributors is Two World Trade Center, New York, New York 10048.
<TABLE>
<CAPTION>
POSITION AND OFFICE WITH DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- --------------------------------------
<S> <C>
Charles A. Fiumefreddo Chairman, Chief Executive Officer and Director of
Distributors and Chairman, Chief Executive Officer
and Trustee of the Registrant.
Philip J. Purcell Director of Distributors.
Richard M. DeMartini Director of Distributors and Trustee of the
Registrant.
James F. Higgins Director of Distributors.
5
<PAGE>
POSITION AND OFFICE WITH DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- --------------------------------------
Thomas C. Schneider Executive Vice President, Chief Financial Officer
and Director of Distributors.
Christine A. Edwards Executive Vice President, Secretary, Chief Legal
Officer and Director of Distributors.
Mitchell M. Merin Executive Vice President of Distributors and Vice
President Of the Registrant
Robert Scanlan Executive Vice President of Distributors and Vice
President of the Registrant.
Robert S. Giambrone Senior Vice President of Distributors and Vice
President of the Registrant.
Barry Fink Senior Vice President, Assistant General Counsel
and Assistant Secretary of Distributors and Vice
President, Secretary and General Counsel of the
Registrant.
Frederick K. Kubler Senior Vice President, Assistant Secretary and
Chief Compliance Officer of Distributors.
Michael T. Gregg Vice President and Assistant Secretary of
Distributors.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Thomas F. Caloia Assistant Treasurer of Distributors and Treasurer
of the Registrant.
Michael Interrante Assistant Treasurer of Distributors.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained by the Manager at its offices, except records relating to holders of
shares issued by the Registrant, which are maintained by the Registrant's
Transfer Agent, at its place of business as shown in the prospectus.
Item 31. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
6
<PAGE>
Item 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders,
upon request and without charge.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 31st day of March, 1998.
TCW/DW INCOME AND GROWTH FUND
By /s/ Barry Fink
-------------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 7 has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/Charles A. Fiumefreddo 3/31/98
-------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By /s/Thomas F. Caloia
--------------------------
Thomas F. Caloia 3/31/98
(3) Majority of the Trustees Trustee
Charles A. Fiumefreddo (Chairman)
Thomas E. Larkin, Jr.
Richard M. DeMartini
Marc I. Stern
By /s/Barry Fink 3/31/98
---------------------------
Barry Fink
Attorney-in-Fact
John C. Argue Michael E. Nugent
John R. Haire John L. Schroeder
Manuel H. Johnson
By /s/David M. Butowsky 3/31/98
-------------------------
David M. Butowsky
Attorney-in-Fact
TO: Carol - 367-5990
RE: TCW Inc. & Co.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
EXHIBIT INDEX
Exhibit No. Description
- ----------- ------------
2.--- By-Laws of the Registrant, Amended and Restated as of October 23,
1997
8.--- Form of Transfer Agency and Services Agreement between Registrant and
Dean Witter Trust FSB
11.--- Consent of Independent Accountants
16.--- Schedules for Computation of Performance Quotations
27.--- Financial Data Schedules
Other-Power of Attorney
<PAGE>
BY-LAWS
OF
TCW/DW INCOME AND GROWTH FUND
AMENDED AND RESTATED AS OF OCTOBER 23, 1997
ARTICLE I
DEFINITIONS
The terms "COMMISSION," "DECLARATION," "DISTRIBUTOR," "INVESTMENT ADVISER,"
"MAJORITY SHAREHOLDER VOTE," "1940 ACT," "SHAREHOLDER," "SHARES," "TRANSFER
AGENT," "TRUST," "TRUST PROPERTY," and "TRUSTEES" have the respective meanings
given them in the Declaration of Trust of TCW/DW Income and Growth Fund dated
November 20, 1992.
ARTICLE II
OFFICES
SECTION 2.1. PRINCIPAL OFFICE. Until changed by the Trustees, the principal
office of the Trust in the Commonwealth of Massachusetts shall be in the City of
Boston, County of Suffolk.
SECTION 2.2. OTHER OFFICES. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and without
the Commonwealth as the Trustees may from time to time designate or the business
of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. PLACE OF MEETINGS. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. MEETINGS. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders of
Shares entitled to vote as otherwise required by Section 16(c) of the 1940 Act
and to the extent required by the corporate or business statute of any state in
which the Shares of the Trust are sold, as made applicable to the Trust by the
provisions of Section 2.3 of the Declaration. Such request shall state the
purpose or purposes of such meeting and the matters proposed to be acted on
thereat. Except to the extent otherwise required by Section 16(c) of the 1940
Act, as made applicable to the Trust by the provisions of Section 2.3 of the
Declaration, the Secretary shall inform such Shareholders of the reasonable
estimated cost of preparing and mailing such notice of the meeting, and upon
payment to the Trust of such costs, the Secretary shall give notice stating the
purpose or purposes of the meeting to all entitled to vote at such meeting. No
meeting need be called upon the request of the holders of Shares entitled to
cast less than a majority of all votes entitled to be cast at such meeting, to
consider any matter which is substantially the same as a matter voted upon at
any meeting of Shareholders held during the preceding twelve months.
SECTION 3.3. NOTICE OF MEETINGS. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety (90)
days before such meeting to each Shareholder entitled to vote at such meeting.
Such notice shall be deemed to be given when deposited in the United States
mail, postage prepaid, directed to the Shareholder at his address as it appears
on the records of the Trust.
SECTION 3.4. QUORUM AND ADJOURNMENT OF MEETINGS. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares
<PAGE>
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business. In the absence of a quorum, the Shareholders present or
represented by proxy and entitled to vote thereat shall have the power to
adjourn the meeting from time to time. The Shareholders present in person or
represented by proxy at any meeting and entitled to vote thereat also shall have
the power to adjourn the meeting from time to time if the vote required to
approve or reject any proposal described in the original notice of such meeting
is not obtained (with proxies being voted for or against adjournment consistent
with the votes for and against the proposal for which the required vote has not
been obtained). The affirmative vote of the holders of a majority of the Shares
then present in person or represented by proxy shall be required to adjourn any
meeting. Any adjourned meeting may be reconvened without further notice or
change in record date. At any reconvened meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 3.5. VOTING RIGHTS, PROXIES. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or Officers of the Trust.
SECTION 3.6. VOTE REQUIRED. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. INSPECTORS OF ELECTION. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees in
advance of the convening of the meeting or at the meeting by the person acting
as chairman. The Inspectors of Election shall determine the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. On request of
the chairman of the meeting, or of any Shareholder or his proxy, the Inspectors
of Election shall make a report in writing of any challenge or question or
matter determined by them and shall execute a certificate of any facts found by
them.
SECTION 3.8. INSPECTION OF BOOKS AND RECORDS. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as are
granted to Shareholders under Section 32 of the Corporations Law of the State of
Massachusetts.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other electronic
means.
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ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or special meetings of the Trustees. Regular meetings of the
Trustees may be held at such time and place as shall be determined from time to
time by the Trustees without further notice. Special meetings of the Trustees
may be called at any time by the Chairman and shall be called by the Chairman or
the Secretary upon the written request of any two (2) Trustees.
SECTION 4.2. NOTICE OF SPECIAL MEETINGS. Written notice of special meetings
of the Trustees, stating the place, date and time thereof, shall be given not
less than two (2) days before such meeting to each Trustee, personally, by
telegram, by mail, or by leaving such notice at his place of residence or usual
place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail, postage prepaid, directed to the Trustee at
his address as it appears on the records of the Trust. Subject to the provisions
of the 1940 Act, notice or waiver of notice need not specify the purpose of any
special meeting.
SECTION 4.3. TELEPHONE MEETINGS. Subject to the provisions of the 1940 Act,
any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means constitutes presence in
person at the meeting.
SECTION 4.4. QUORUM, VOTING AND ADJOURNMENT OF MEETINGS. At all meetings of
the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of a majority of the Trustees present shall be the act of the
Trustees, unless the concurrence of a greater proportion is expressly required
for such action by law, the Declaration or these By-Laws. If at any meeting of
the Trustees there be less than a quorum present, the Trustees present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. ACTION BY TRUSTEES WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to vote
upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Trust or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfer of securities standing in the name of the Trust shall
be executed, by the Chairman, the President, any Vice President or the Treasurer
or by any one or more officers or agents of the Trust as shall be designated for
that purpose by vote of the Trustees; notwithstanding the above, nothing in this
Section 4.7 shall be deemed to preclude the electronic authorization, by
designated persons, of the Trust's Custodian (as described herein in Section
9.1) to transfer assets of the Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND
AGENTS. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
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(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees, judgments,
fines, and amounts paid in settlement, actually and reasonably incurred by him
in connection with the action, suit, or proceeding, if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor by
reason of the fact that he is or was a Trustee, officer, employee, or agent of
the Trust. The indemnification shall be against expenses, including attorneys'
fees actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust;
except that no indemnification shall be made in respect of any claim, issue, or
matter as to which the person has been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Trust, except to the extent
that the court in which the action or suit was brought, or a court of equity in
the county in which the Trust has its principal office, determines upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, the person is fairly and reasonably entitled to
indemnity for those expenses which the court shall deem proper, provided such
Trustee, officer, employee or agent is not adjudged to be liable by reason of
his willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
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(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by the
Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately will be
found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to be
a Trustee, officer, employee, or agent and inure to the benefit of the heirs,
executors and administrators of such person; provided that no person may satisfy
any right of indemnity or reimbursement granted herein or to which he may be
otherwise entitled except out of the property of the Trust, and no Shareholder
shall be personally liable with respect to any claim for indemnity or
reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
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The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees at
the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. ADVISORY COMMITTEE. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. COMMITTEE ACTION WITHOUT MEETING. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. EXECUTIVE OFFICERS. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The executive officers of the Trust shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
provided, that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless he has knowledge thereof.
SECTION 6.6. THE CHAIRMAN. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders and
of the Trustees; he shall have general and active management of the business of
the Trust, shall see that all orders and resolutions of the Trustees are
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carried into effect, and, in connection therewith, shall be authorized to
delegate to the President or to one or more Vice Presidents such of his powers
and duties at such times and in such manner as he may deem advisable; he shall
be a signatory on all Annual and Semi-Annual Reports as may be sent to
shareholders, and he shall perform such other duties as the Trustees may from
time to time prescribe.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. THE PRESIDENT. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. THE VICE PRESIDENTS. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there be more than one, the Vice Presidents
in the order of their seniority as may be determined from time to time by the
Trustees or the Chairman, shall, in the absence or disability of the President,
exercise the powers and perform the duties of the President, and he or they
shall perform such other duties as the Trustees or the Chairman may from time to
time prescribe.
SECTION 6.9. THE ASSISTANT VICE PRESIDENTS. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform such
duties and have such powers as may be assigned them from time to time by the
Trustees or the Chairman.
SECTION 6.10. THE SECRETARY. The Secretary shall attend all meetings of the
Trustees and all meetings of the Shareholders and record all the proceedings of
the meetings of the Shareholders and of the Trustees in a book to be kept for
that purpose, and shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
Shareholders and special meetings of the Trustees, and shall perform such other
duties and have such powers as the Trustees, or the Chairman, may from time to
time prescribe. He shall keep in safe custody the seal of the Trust and affix or
cause the same to be affixed to any instrument requiring it, and, when so
affixed, it shall be attested by his signature or by the signature of an
Assistant Secretary.
SECTION 6.11. THE ASSISTANT SECRETARIES. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by the
Trustees or the Chairman, shall, in the absence or disability of the Secretary,
perform the duties and exercise the powers of the Secretary and shall perform
such duties and have such other powers as the Trustees or the Chairman may from
time to time prescribe.
SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the Chairman, whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition of
the Trust; and he shall perform such other duties as the Trustees, or the
Chairman, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the Chairman, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Trustees, or the
Chairman, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
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Inasmuch as the computation of net income and net profits from the sales of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. CERTIFICATES OF SHARES. Certificates for Shares of each series
or class of Shares shall be in such form and of such design as the Trustees
shall approve, subject to the right of the Trustees to change such form and
design at any time or from time to time, and shall be entered in the records of
the Trust as they are issued. Each such certificate shall bear a distinguishing
number; shall exhibit the holder's name and certify the number of full Shares
owned by such holder; shall be signed by or in the name of the Trust by the
Chairman, the President, or a Vice President, and countersigned by the Secretary
or an Assistant Secretary or the Treasurer and an Assistant Treasurer of the
Trust; shall be sealed with the seal; and shall contain such recitals as may be
required by law. Where any certificate is signed by a Transfer Agent or by a
Registrar, the signature of such officers and the seal may be facsimile, printed
or engraved. The Trust may, at its option, determine not to issue a certificate
or certificates to evidence Shares owned of record by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose facsimile
signature or signatures shall appear therein had not ceased to be such officer
or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. LOST, STOLEN, DESTROYED AND MUTILATED CERTIFICATES. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give to
the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may be
authorized or required to countersign such new certificate or certificates, a
bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be against
them or any of them on account of or in connection with the alleged loss, theft
or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a bank
or trust company having capital, surplus and undivided profits of at least five
million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. CENTRAL CERTIFICATE SYSTEM. Subject to such rules, regulations
and orders as the Commission may adopt, the Trustees may direct the custodian to
deposit all or any part of the securities owned by the Trust in a system for the
central handling of securities established by a national securities exchange or
a national securities association registered with the Commission under the
Securities Exchange Act of 1934, or such other person as may be permitted by the
Commission, or otherwise in accordance with the 1940 Act, pursuant to which
system all securities of any particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of such securities, provided that
all such deposits shall be subject to withdrawal only upon the order of the
Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these By-Laws,
a waiver thereof in writing, signed by the person or persons entitled to such
notice and filed with the records of the meeting, whether before or after the
holding thereof, or actual attendance at the meeting of shareholders, Trustees
or committee, as the case may be, in person, shall be deemed equivalent to the
giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. LOCATION OF BOOKS AND RECORDS. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. RECORD DATE. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. The record date, in
any case, shall not be more than one hundred eighty (180) days, and in the case
of a meeting of Shareholders not less than ten (10) days, prior to the date on
which such meeting is to be held or the date on which such other particular
action requiring determination of Shareholders is to be taken, as the case may
be. In the case of a meeting of Shareholders, the meeting date set forth in the
notice to Shareholders accompanying the proxy statement shall be the date used
for purposes of calculating the 180 day or 10 day period, and any adjourned
meeting may be reconvened without a change in record date. In lieu of fixing a
record date, the Trustees may provide that the transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If the
transfer books are closed for the purpose of determining Shareholders entitled
to notice of a vote at a meeting of Shareholders, such books shall be closed for
at least ten (10) days immediately preceding the meeting.
SECTION 11.3. SEAL. The Trustees shall adopt a seal, which shall be in such
form and shall have such inscription thereon as the Trustees may from time to
time provide. The seal of the Trust may be affixed to any document, and the seal
and its attestation may be lithographed, engraved or otherwise printed on any
document with the same force and effect as if it had been imprinted and attested
manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
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SECTION 11.4. FISCAL YEAR. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time to
time.
SECTION 11.5. ORDERS FOR PAYMENT OF MONEY. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer or
officers or such other person or persons as the Trustees may from time to time
designate, or as may be specified in or pursuant to the agreement between the
Trust and the bank or trust company appointed as Custodian of the securities and
funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing TCW/DW Income and Growth Fund, dated
November 20, 1992, a copy of which is on file in the office of the Secretary of
the Commonwealth of Massachusetts, provides that the name TCW/DW Income and
Growth Fund refers to the Trustees under the Declaration collectively as
Trustees, but not as individuals or personally; and no Trustee, Shareholder,
officer, employee or agent of TCW/DW Income and Growth Fund shall be held to any
personal liability, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of said TCW/DW Income and Growth Fund, but the Trust Estate only shall
be liable.
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
WITH
DEAN WITTER TRUST FSB
[open-end funds]
97NYC13142
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article 1 Terms of Appointment................................... 1
Article 2 Fees and Expenses...................................... 2
Article 3 Representations and Warranties of DWTFSB............... 3
Article 4 Representations and Warranties of the Fund............. 3
Article 5 Duty of Care and Indemnification....................... 3
Article 6 Documents and Covenants of the Fund and DWTFSB......... 4
Article 7 Duration and Termination of Agreement.................. 5
Article 8 Assignment............................................. 5
Article 9 Affiliations........................................... 6
Article 10 Amendment.............................................. 6
Article 11 Applicable Law......................................... 6
Article 12 Miscellaneous.......................................... 6
Article 13 Merger of Agreement.................................... 7
Article 14 Personal Liability..................................... 7
</TABLE>
i
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 23rd day of October, 1997 by
and between each of the Funds listed on the signature pages hereof, each of such
Funds acting severally on its own behalf and not jointly with any of such other
Funds (each such Fund hereinafter referred to as the "Fund"), each such Fund
having its principal office and place of business at Two World Trade Center, New
York, New York, 10048, and DEAN WITTER TRUST FSB ("DWTFSB"), a federally
chartered savings bank, having its principal office and place of business at
Harborside Financial Center, Plaza Two, Jersey City, New Jersey 07311.
WHEREAS, the Fund desires to appoint DWTFSB as its transfer agent, dividend
disbursing agent and shareholder servicing agent and DWTFSB desires to accept
such appointment;
NOW THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1 TERMS OF APPOINTMENT; DUTIES OF DWTFSB
1.1 Subject to the terms and conditions set forth in this Agreement, the
Fund hereby employs and appoints DWTFSB to act as, and DWTFSB agrees to act as,
the transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent in connection with any accumulation, open-account or
similar plans provided to the holders of such Shares ("Shareholders") and set
out in the currently effective prospectus and statement of additional
information ("prospectus") of the Fund, including without limitation any
periodic investment plan or periodic withdrawal program.
1.2 DWTFSB agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and DWTFSB, DWTFSB shall:
(i) Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefor to the
custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate number of
Shares and issue certificates therefor or hold such Shares in book form
in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to
be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and distributions
declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain pursuant
to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934 Act")
a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding.
DWTFSB shall also provide to the Fund on a regular basis the total number
of Shares that are authorized, issued and outstanding and shall notify
the Fund in case any proposed issue of Shares by the Fund would result in
an overissue. In case any issue of Shares
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would result in an overissue, DWTFSB shall refuse to issue such Shares
and shall not countersign and issue any certificates requested for such
Shares. When recording the issuance of Shares, DWTFSB shall have no
obligation to take cognizance of any Blue Sky laws relating to the issue
of sale of such Shares, which functions shall be the sole responsibility
of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), DWTFSB shall:
(i) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or
similar plans (including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited to,
maintaining all Shareholder accounts, preparing Shareholder meeting
lists, mailing proxies, receiving and tabulating proxies, mailing
shareholder reports and prospectuses to current Shareholders, withholding
taxes on U.S. resident and non-resident alien accounts, preparing and
filing appropriate forms required with respect to dividends and
distributions by federal tax authorities for all Shareholders, preparing
and mailing confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity
statements for Shareholders and providing Shareholder account
information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor the total
number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to DWTFSB in writing those transactions and assets to be
treated as exempt from Blue Sky reporting for each State; and
(ii) verify the inclusion on the system prior to activation of each
State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of
DWTFSB for the Fund's status under the securities laws of any State or
other jurisdiction is limited to the inclusion on the system of each
State as to which the Fund has informed DWTFSB that shares may be sold in
compliance with state securities laws and the reporting of purchases and
sales in each such State to the Fund as provided above and as agreed from
time to time by the Fund and DWTFSB.
(d) DWTFSB shall provide such additional services and functions not
specifically described herein as may be mutually agreed between DWTFSB and
the Fund. Procedures applicable to such services may be established from
time to time by agreement between the Fund and DWTFSB.
Article 2 FEES AND EXPENSES
2.1 For performance by DWTFSB pursuant to this Agreement, each Fund agrees
to pay DWTFSB an annual maintenance fee for each Shareholder account and certain
transactional fees, if applicable, as set out in the respective fee schedule
attached hereto as Schedule A. Such fees and out-of-pocket expenses and advances
identified under Section 2.2 below may be changed from time to time subject to
mutual written agreement between the Fund and DWTFSB.
2.2 In addition to the fees paid under Section 2.1 above, the Fund agrees to
reimburse DWTFSB for out of pocket expenses in connection with the services
rendered by DWTFSB hereunder. In addition, any other expenses incurred by DWTFSB
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses within a
reasonable period of time following the mailing of the respective billing
notice. Postage for mailing of dividends, proxies, Fund reports and other
mailings to all Shareholder accounts shall be advanced to DWTFSB by the Fund
upon request prior to the mailing date of such materials.
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Article 3 REPRESENTATIONS AND WARRANTIES OF DWTFSB
DWTFSB represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal office is in
New Jersey.
3.2 It is and will remain registered with the U.S. Securities and Exchange
Commission ("SEC") as a Transfer Agent pursuant to the requirements of Section
17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter and By-Laws to
enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to authorize it to
enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to DWTFSB that:
4.1 It is a corporation duly organized and existing and in good standing
under the laws of Delaware or Maryland or a trust duly organized and existing
and in good standing under the laws of Massachusetts, as the case may be.
4.2 It is empowered under applicable laws and by its Articles of
Incorporation or Declaration of Trust, as the case may be, and under its By-Laws
to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to enter into and
perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under the Investment
Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933 (the "1933
Act") is currently effective and will remain effective, and appropriate state
securities law filings have been made and will continue to be made, with respect
to all Shares of the Fund being offered for sale.
Article 5 DUTY OF CARE AND INDEMNIFICATION
5.1 DWTFSB shall not be responsible for, and the Fund shall indemnify and
hold DWTFSB harmless from and against, any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of DWTFSB or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of this
Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by DWTFSB or its agents or subcontractors of
information, records and documents which (i) are received by DWTFSB or its
agents or subcontractors and furnished to it by or on behalf of the Fund,
and (ii) have been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by DWTFSB or its agents or
subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities or Blue Sky
laws of any State or other jurisdiction that notice of
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offering of such Shares in such State or other jurisdiction or in violation
of any stop order or other determination or ruling by any federal agency or
any State or other jurisdiction with respect to the offer or sale of such
Shares in such State or other jurisdiction.
5.2 DWTFSB shall indemnify and hold the Fund harmless from or against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by DWTFSB as a result of the lack of good faith, negligence or willful
misconduct of DWTFSB, its officers, employees or agents.
5.3 At any time, DWTFSB may apply to any officer of the Fund for
instructions, and may consult with legal counsel to the Fund, with respect to
any matter arising in connection with the services to be performed by DWTFSB
under this Agreement, and DWTFSB and its agents or subcontractors shall not be
liable and shall be indemnified by the Fund for any action taken or omitted by
it in reliance upon such instructions or upon the opinion of such counsel.
DWTFSB, its agents and subcontractors shall be protected and indemnified in
acting upon any paper or document furnished by or on behalf of the Fund,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instruction, information, data, records or documents
provided to DWTFSB or its agents or subcontractors by machine readable input,
telex, CRT data entry or other similar means authorized by the Fund, and shall
not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. DWTFSB, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signature of the officers of the Fund, and the proper countersignature
of any former transfer agent or registrar, or of a co-transfer agent or
co-registrar.
5.4 In the event either party is unable to perform its obligations under the
terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.5 Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
5.6 In order that the indemnification provisions contained in this Article 5
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6 DOCUMENTS AND COVENANTS OF THE FUND AND DWTFSB
6.1 The Fund shall promptly furnish to DWTFSB the following, unless
previously furnished to Dean Witter Trust Company, the prior transfer agent of
the Fund:
(a) If a corporation:
(i) A certified copy of the resolution of the Board of Directors of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and By-Laws of
the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Directors, with a certificate of the Secretary
of the Fund as to such approval;
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(b) If a business trust:
(i) A certified copy of the resolution of the Board of Trustees of
the Fund authorizing the appointment of DWTFSB and the execution and
delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws of the
Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund
and signature cards bearing the signature of any officer of the Fund or
any other person authorized to sign written instructions on behalf of the
Fund;
(iv) A specimen of the certificate for Shares of the Fund in the form
approved by the Board of Trustees, with a certificate of the Secretary of
the Fund as to such approval;
(c) The current registration statements and any amendments and
supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating to
Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as DWTFSB deems to be
appropriate or necessary for the proper performance of its duties.
6.2 DWTFSB hereby agrees to establish and maintain facilities and procedures
reasonably acceptable to the Fund for safekeeping of Share certificates, check
forms and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices.
6.3 DWTFSB shall prepare and keep records relating to the services to be
performed hereunder, in the form and manner as it may deem advisable and as
required by applicable laws and regulations. To the extent required by Section
31 of the 1940 Act, and the rules and regulations thereunder, DWTFSB agrees that
all such records prepared or maintained by DWTFSB relating to the services
performed by DWTFSB hereunder are the property of the Fund and will be
preserved, maintained and made available in accordance with such Section 31 of
the 1940 Act, and the rules and regulations thereunder, and will be surrendered
promptly to the Fund on and in accordance with its request.
6.4 DWTFSB and the Fund agree that all books, records, information and data
pertaining to the business of the other party which are exchanged or received
pursuant to the negotiation or the carrying out of this Agreement shall remain
confidential and shall not be voluntarily disclosed to any other person except
as may be required by law or with the prior consent of DWTFSB and the Fund.
6.5 In case of any request or demands for the inspection of the Shareholder
records of the Fund, DWTFSB will endeavor to notify the Fund and to secure
instructions from an authorized officer of the Fund as to such inspection.
DWTFSB reserves the right, however, to exhibit the Shareholder records to any
person whenever it is advised by its counsel that it may be held liable for the
failure to exhibit the Shareholder records to such person.
Article 7 DURATION AND TERMINATION OF AGREEMENT
7.1 This Agreement shall remain in full force and effect until August 1,
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days written notice,
and by DWTFSB on 90 days written notice, to the other party without payment of
any penalty.
7.3 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and other materials will be
borne by the Fund. Additionally, DWTFSB reserves the right to charge for any
other reasonable fees and expenses associated with such termination.
Article 8 ASSIGNMENT
8.1 Except as provided in Section 8.3 below, neither this Agreement nor any
rights or obligations hereunder may be assigned by either party without the
written consent of the other party.
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8.2 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
8.3 DWTFSB may, in its sole discretion and without further consent by the
Fund, subcontract, in whole or in part, for the performance of its obligations
and duties hereunder with any person or entity including but not limited to
companies which are affiliated with DWTFSB; PROVIDED, HOWEVER, that such person
or entity has and maintains the qualifications, if any, required to perform such
obligations and duties, and that DWTFSB shall be as fully responsible to the
Fund for the acts and omissions of any agent or subcontractor as it is for its
own acts or omissions under this Agreement.
Article 9 AFFILIATIONS
9.1 DWTFSB may now or hereafter, without the consent of or notice to the
Fund, function as transfer agent and/or shareholder servicing agent for any
other investment company registered with the SEC under the 1940 Act and for any
other issuer, including without limitation any investment company whose adviser,
administrator, sponsor or principal underwriter is or may become affiliated with
Morgan Stanley, Dean Witter, Discover & Co. or any of its direct or indirect
subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or Trustees (as the case
may be), officers, employees, agents and shareholders of the Fund, and the
directors, officers, employees, agents and shareholders of the Fund's investment
adviser and/or distributor, are or may be interested in DWTFSB as directors,
officers, employees, agents and shareholders or otherwise, and that the
directors, officers, employees, agents and shareholders of DWTFSB may be
interested in the Fund as Directors or Trustees (as the case may be), officers,
employees, agents and shareholders or otherwise, or in the investment adviser
and/or distributor as directors, officers, employees, agents, shareholders or
otherwise.
Article 10 AMENDMENT
10.1 This Agreement may be amended or modified by a written agreement
executed by both parties and authorized or approved by a resolution of the Board
of Directors or the Board of Trustees (as the case may be) of the Fund.
Article 11 APPLICABLE LAW
11.1 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New York.
Article 12 MISCELLANEOUS
12.1 In the event that one or more additional investment companies managed
or administered by Dean Witter InterCapital Inc. or any of its affiliates
("Additional Funds") desires to retain DWTFSB to act as transfer agent, dividend
disbursing agent and/or shareholder servicing agent, and DWTFSB desires to
render such services, such services shall be provided pursuant to a letter
agreement, substantially in the form of Exhibit A hereto, between DWTFSB and
each Additional Fund.
12.2 In the event of an alleged loss or destruction of any Share
certificate, no new certificate shall be issued in lieu thereof, unless there
shall first be furnished to DWTFSB an affidavit of loss or non-receipt by the
holder of Shares with respect to which a certificate has been lost or destroyed,
supported by an appropriate bond satisfactory to DWTFSB and the Fund issued by a
surety company satisfactory to DWTFSB, except that DWTFSB may accept an
affidavit of loss and indemnity agreement executed by the registered holder (or
legal representative) without surety in such form as DWTFSB deems appropriate
indemnifying DWTFSB and the Fund for the issuance of a replacement certificate,
in cases where the alleged loss is in the amount of $1,000 or less.
12.3 In the event that any check or other order for payment of money on the
account of any Shareholder or new investor is returned unpaid for any reason,
DWTFSB will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of such
non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as DWTFSB may, in its sole discretion,
deem appropriate or as the Fund and, if applicable, the Distributor may instruct
DWTFSB.
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12.4 Any notice or other instrument authorized or required by this Agreement
to be given in writing to the Fund or to DWTFSB shall be sufficiently given if
addressed to that party and received by it at its office set forth below or at
such other place as it may from time to time designate in writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To DWTFSB:
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 MERGER OF AGREEMENT
13.1 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
Article 14 PERSONAL LIABILITY
14.1 In the case of a Fund organized as a Massachusetts business trust, a
copy of the Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Board of Trustees of the Fund as
Trustees and not individually and that the obligations of this instrument are
not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Agreement to be executed in their names and on their behalf by and through their
duly authorized officers, as of the day and year first above written.
DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Dean Witter California Tax-Free Daily Income Trust
8. Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
EQUITY FUNDS
10. Dean Witter American Value Fund
11. Dean Witter Mid-Cap Growth Fund
12. Dean Witter Dividend Growth Securities Inc.
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13. Dean Witter Capital Growth Securities
14. Dean Witter Global Dividend Growth Securities
15. Dean Witter Income Builder Fund
16. Dean Witter Natural Resource Development Securities Inc.
17. Dean Witter Precious Metals and Minerals Trust
18. Dean Witter Developing Growth Securities Trust
19. Dean Witter Health Sciences Trust
20. Dean Witter Capital Appreciation Fund
21. Dean Witter Information Fund
22. Dean Witter Value-Added Market Series
23. Dean Witter World Wide Investment Trust
24. Dean Witter European Growth Fund Inc.
25. Dean Witter Pacific Growth Fund Inc.
26. Dean Witter International SmallCap Fund
27. Dean Witter Japan Fund
28. Dean Witter Utilities Fund
29. Dean Witter Global Utilities Fund
30. Dean Witter Special Value Fund
31. Dean Witter Financial Services Trust
32. Dean Witter Market Leader Trust
33. Dean Witter Managers' Select Fund
34. Dean Witter Fund of Funds
35. Dean Witter S&P 500 Index Fund
BALANCED FUNDS
36. Dean Witter Balanced Growth Fund
37. Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
38. Dean Witter Strategist Fund
39. Dean Witter Global Asset Allocation Fund
FIXED INCOME FUNDS
40. Dean Witter High Yield Securities Inc.
41. Dean Witter High Income Securities
42. Dean Witter Convertible Securities Trust
43. Dean Witter Intermediate Income Securities
44. Dean Witter Short-Term Bond Fund
45. Dean Witter World Wide Income Trust
46. Dean Witter Global Short-Term Income Fund Inc.
47. Dean Witter Diversified Income Trust
48. Dean Witter U.S. Government Securities Trust
49. Dean Witter Federal Securities Trust
50. Dean Witter Short-Term U.S. Treasury Trust
51. Dean Witter Intermediate Term U.S. Treasury Trust
52. Dean Witter Tax-Exempt Securities Trust
53. Dean Witter National Municipal Trust
55. Dean Witter Limited Term Municipal Trust
55. Dean Witter California Tax-Free Income Fund
56. Dean Witter New York Tax-Free Income Fund
57. Dean Witter Hawaii Municipal Trust
58. Dean Witter Multi-State Municipal Series Trust
59. Dean Witter Select Municipal Reinvestment Fund
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SPECIAL PURPOSE FUNDS
60. Dean Witter Retirement Series
61. Dean Witter Variable Investment Series
62. Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
63. TCW/DW Core Equity Trust
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Balanced Fund
69. TCW/DW Total Return Trust
70. TCW/DW Global Telecom Trust
71. TCW/DW Strategic Income Trust
72. TCW/DW Mid-Cap Equity Trust
By: __________________________________
Barry Fink
Vice President and General Counsel
ATTEST:
_____________________________
Assistant Secretary
DEAN WITTER TRUST FSB
By: __________________________________
John Van Heuvelen
President
ATTEST:
_____________________________
Executive Vice President
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EXHIBIT A
Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (INSET NAME OF INVESTMENT COMPANY) a (Massachusetts
business trust/Maryland corporation) (the "Fund"), desires to employ and appoint
Dean Witter Trust FSB ("DWTFSB") to act as transfer agent for each series and
class of shares of the Fund, whether now or hereafter authorized or issued
("Shares"), dividend disbursing agent and shareholder servicing agent, registrar
and agent in connection with any accumulation, open-account or similar plan
provided to the holders of Shares, including without limitation any periodic
investment plan or periodic withdrawal plan.
The Fund hereby agrees that, in consideration for the payment by the Fund to
DWTFSB of fees as set out in the fee schedule attached hereto as Schedule A,
DWTFSB shall provide such services to the Fund pursuant to the terms and
conditions set forth in the Transfer Agency and Service Agreement annexed
hereto, as if the Fund was a signatory thereto.
Please indicate DWTFSB's acceptance of employment and appointment by the
Fund in the capacities set forth above by so indicating in the space provided
below.
Very truly yours,
(NAME OF FUND)
By: _________________________________
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
DEAN WITTER TRUST FSB
By: __________________________________
Its: _________________________________
Date: ________________________________
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SCHEDULE A
Fund: TCW/DW Income and Growth Fund
Fees: (1) Annual maintenance fee of $13.20 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
f:\schedA\71
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 7 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated March
13, 1998, relating to the financial statements and financial highlights of
TCW/DW Income and Growth Fund, which appears in such Statement of Additional
Information, and to the incorporation by reference of our report into the
Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Financial Highlights" in such
Prospectus and to the references to us under the headings "Independent
Accountants" and "Experts" in the Statement of Additional Information.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 30, 1998
<PAGE>
TCW/DW INCOME & GROWTH FUND
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
01/31/98
CLASS A
YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the
period
6
YIELD = 2 { [ ((138.65 - 33.82) / 2187.424 X 12.155) +1] -1}
= 4.78%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW INCOME and GROWTH FUND(A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | ERV |
T = | \ | ---------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ ---------- ------------ --------- ----------------
<S> <C> <C> <C> <C>
28-Jul-97 $1,015.20 1.52% 0.51 NA
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | EV |
t = | \ | ---------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ ---------- ----------- --------- ----------------
<S> <C> <C> <C> <C>
28-Jul-97 $ 1,060.30 6.03% 0.51 NA
</TABLE>
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT-G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- -------------------- ---------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 6.03 $10,152 $51,159 $103,114
</TABLE>
*INITIAL INVESTMENT $9,575, $48,250 & 97,250 RESPECTIVELY REFLECTS A 4.25%, 3.5%
& 2.75% SALES CHARGE
<PAGE>
TCW/DW INCOME & GROWTH FUND
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
01/31/98
CLASS B
YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the
period
6
YIELD = 2 { [ ((36385.86 - 11488.39) / 572918.224 X 11.631046) +1] -1}
= 4.53%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW INCOME and GROWTH FUND(B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | ERV |
T = | \ | ---------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 TOTAL RETURN YEARS - n COMPOUND RETURN - T
- ------------ --------- ------------ --------- -------------------
<S> <C> <C> <C> <C>
28-Jul-97 $1,008.90 0.89% 0.51 NA
</TABLE>
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | EV |
t = | \ | ---------- | - 1
| \ | P |
| \| | |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
28-Jul-97 $1,058.00 5.80% 0.51 NA
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT-G $100,000 INVESTMENT - G
- ------------ ----------- ---------------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
28-Jul-97 5.80 $10,580 $52,900 $105,800
</TABLE>
<PAGE>
TCW/DW INCOME & GROWTH FUND
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
01/31/98
CLASS C
YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the
period
6
YIELD = 2 { [ ((302674.02 - 95581.08) /4763015.178 X 11.637468) +1] -1}
= 4.53%
<PAGE>
SCHEDULE FOR RESTATED COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW INCOME and GROWTH FUND - CLASS C
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | ERV |
T = | \ | ---------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
<TABLE>
<CAPTION>
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 YEARS - n TOTAL RETURN - T
- ------------ --------- --------- ----------------
<S> <C> <C> <C>
31-Jan-97 $1,130.30 1 13.03%
31-Mar-93 $1,693.80 4.8378 11.51%
</TABLE>
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | | |
| /\ n | EV |
t = | \ | ---------- | - 1
| \ | P |
| \| | |
|_ _|
EV
TR = ---------- 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
<TABLE>
<CAPTION>
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
<S> <C> <C> <C> <C>
31-Jan-97 $1,140.30 14.03% 1 14.03%
31-Mar-93 $1,693.80 69.38% 4.84 11.51%
</TABLE>
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT - G $100,000 INVESTMENT - G
- ------------ ----------- --------------------------------------------------- -----------------------
<S> <C> <C> <C> <C>
31-Mar-93 69.38 $16,938 $84,690 $169,380
</TABLE>
<PAGE>
TCW/DW INCOME & GROWTH FUND
SCHEDULE OF COMPUTATION OF YIELD QUOTATION
01/31/98
CLASS D
YIELD = 2 { [ ((a-b) /cd) +1] -1}
WHERE: a = Dividends and interest earned during the period
b = Expenses accrued for the period
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends
d = The maximum offering price per share on the last day of the
period
6
YIELD = 2 { [ ((58.01 -11.86) /916.063 X 11.646433) +1] -1}
= 5.25%
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW INCOME and GROWTH FUND(D)
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
<TABLE>
<CAPTION>
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
28-Jul-97 $1,062.10 6.21% 0.51 NA
</TABLE>
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT- G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ------------------------------------------------- ----------------------
<S> <C> <C> <C> <C>
28-Jul-97 6.21 $10,621 $53,105 $106,210
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> TCW/DW INCOME & GROWTH - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 56,715,530
<INVESTMENTS-AT-VALUE> 61,193,593
<RECEIVABLES> 1,103,154
<ASSETS-OTHER> 78,204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,374,951
<PAYABLE-FOR-SECURITIES> 733,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,880
<TOTAL-LIABILITIES> 876,632
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,657,639
<SHARES-COMMON-STOCK> 2,401
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 271,549
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,091,068
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,478,063
<NET-ASSETS> 27,856
<DIVIDEND-INCOME> 479,318
<INTEREST-INCOME> 3,703,196
<OTHER-INCOME> 0
<EXPENSES-NET> 1,229,293
<NET-INVESTMENT-INCOME> 2,953,221
<REALIZED-GAINS-CURRENT> 4,031,439
<APPREC-INCREASE-CURRENT> 950,969
<NET-CHANGE-FROM-OPS> 7,935,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 582
<DISTRIBUTIONS-OF-GAINS> 1,133
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,751
<NUMBER-OF-SHARES-REDEEMED> 492
<SHARES-REINVESTED> 142
<NET-CHANGE-IN-ASSETS> 557,745
<ACCUMULATED-NII-PRIOR> 443,330
<ACCUMULATED-GAINS-PRIOR> 855,455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,229,293
<AVERAGE-NET-ASSETS> 18,187
<PER-SHARE-NAV-BEGIN> 11.81
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> .39
<PER-SHARE-DIVIDEND> (.33)
<PER-SHARE-DISTRIBUTIONS> (.57)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.60
<EXPENSE-RATIO> 1.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> TCW/DW INCOME & GROWTH - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 56,715,530
<INVESTMENTS-AT-VALUE> 61,193,593
<RECEIVABLES> 1,103,154
<ASSETS-OTHER> 78,204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,374,951
<PAYABLE-FOR-SECURITIES> 733,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,880
<TOTAL-LIABILITIES> 876,632
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,657,639
<SHARES-COMMON-STOCK> 568,689
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 271,549
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,091,068
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,478,063
<NET-ASSETS> 6,596,905
<DIVIDEND-INCOME> 479,318
<INTEREST-INCOME> 3,703,196
<OTHER-INCOME> 0
<EXPENSES-NET> 1,229,293
<NET-INVESTMENT-INCOME> 2,953,221
<REALIZED-GAINS-CURRENT> 4,031,439
<APPREC-INCREASE-CURRENT> 950,969
<NET-CHANGE-FROM-OPS> 7,935,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 144,769
<DISTRIBUTIONS-OF-GAINS> 298,812
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 209,588
<NUMBER-OF-SHARES-REDEEMED> 89,344
<SHARES-REINVESTED> 32,187
<NET-CHANGE-IN-ASSETS> 557,745
<ACCUMULATED-NII-PRIOR> 443,330
<ACCUMULATED-GAINS-PRIOR> 855,455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,229,293
<AVERAGE-NET-ASSETS> 5,749,881
<PER-SHARE-NAV-BEGIN> 11.81
<PER-SHARE-NII> .28
<PER-SHARE-GAIN-APPREC> .38
<PER-SHARE-DIVIDEND> (.30)
<PER-SHARE-DISTRIBUTIONS> (.57)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.60
<EXPENSE-RATIO> 2.02
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> TCW/DW INCOME & GROWTH - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 56,715,530
<INVESTMENTS-AT-VALUE> 61,193,593
<RECEIVABLES> 1,103,154
<ASSETS-OTHER> 78,204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,374,951
<PAYABLE-FOR-SECURITIES> 733,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,880
<TOTAL-LIABILITIES> 876,632
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,657,639
<SHARES-COMMON-STOCK> 4,726,879
<SHARES-COMMON-PRIOR> 5,335,701
<ACCUMULATED-NII-CURRENT> 271,549
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,091,068
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,478,063
<NET-ASSETS> 54,862,923
<DIVIDEND-INCOME> 479,318
<INTEREST-INCOME> 3,703,196
<OTHER-INCOME> 0
<EXPENSES-NET> 1,229,293
<NET-INVESTMENT-INCOME> 2,953,221
<REALIZED-GAINS-CURRENT> 4,031,439
<APPREC-INCREASE-CURRENT> 950,969
<NET-CHANGE-FROM-OPS> 7,935,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,979,361
<DISTRIBUTIONS-OF-GAINS> 3,495,390
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 912,536
<NUMBER-OF-SHARES-REDEEMED> 1,590,764
<SHARES-REINVESTED> 485,664
<NET-CHANGE-IN-ASSETS> 557,745
<ACCUMULATED-NII-PRIOR> 443,330
<ACCUMULATED-GAINS-PRIOR> 855,455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,229,293
<AVERAGE-NET-ASSETS> 58,122,262
<PER-SHARE-NAV-BEGIN> 11.42
<PER-SHARE-NII> .57
<PER-SHARE-GAIN-APPREC> .96
<PER-SHARE-DIVIDEND> (.60)
<PER-SHARE-DISTRIBUTIONS> (.74)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 2.01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> TCW/DW INCOME & GROWTH - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<INVESTMENTS-AT-COST> 56,715,530
<INVESTMENTS-AT-VALUE> 61,193,593
<RECEIVABLES> 1,103,154
<ASSETS-OTHER> 78,204
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 62,374,951
<PAYABLE-FOR-SECURITIES> 733,752
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 142,880
<TOTAL-LIABILITIES> 876,632
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 55,657,639
<SHARES-COMMON-STOCK> 916
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 271,549
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,091,068
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,478,063
<NET-ASSETS> 10,635
<DIVIDEND-INCOME> 479,318
<INTEREST-INCOME> 3,703,196
<OTHER-INCOME> 0
<EXPENSES-NET> 1,229,293
<NET-INVESTMENT-INCOME> 2,953,221
<REALIZED-GAINS-CURRENT> 4,031,439
<APPREC-INCREASE-CURRENT> 950,969
<NET-CHANGE-FROM-OPS> 7,935,629
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 290
<DISTRIBUTIONS-OF-GAINS> 491
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 848
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 68
<NET-CHANGE-IN-ASSETS> 557,745
<ACCUMULATED-NII-PRIOR> 443,330
<ACCUMULATED-GAINS-PRIOR> 855,455
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 459,196
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,229,293
<AVERAGE-NET-ASSETS> 10,384
<PER-SHARE-NAV-BEGIN> 11.81
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> .39
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> (.57)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that WAYNE E. HEDIEN, whose signature
appears below, constitutes and appoints David M. Butowsky, Ronald Feiman and
Stuart Strauss, or any of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution among himself and each of the persons
appointed herein, for him and in his name, place and stead, in any and all
capacities, to sign any amendments to any registration statement of ANY OF THE
DEAN WITTER FUNDS SET FORTH ON SCHEDULE A ATTACHED HERETO, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
Dated: September 1, 1997
/s/ WAYNE E. HEDIEN
--------------------------------------
Wayne E. Hedien
97nyc12127
<PAGE>
SCHEDULE A
1. Active Assets Money Trust
2. Active Assets Tax-Free Trust
3. Active Assets Government Securities Trust
4. Active Assets California Tax-Free Trust
5. Dean Witter New York Municipal Money Market Trust
6. Dean Witter American Value Fund
7. Dean Witter Tax-Exempt Securities Trust
8. Dean Witter Tax-Free Daily Income Trust
9. Dean Witter Capital Growth Securities
10. Dean Witter U.S. Government Money Market Trust
11. Dean Witter Precious Metals and Minerals Trust
12. Dean Witter Developing Growth Securities Trust
13. Dean Witter World Wide Investment Trust
14. Dean Witter Value-Added Market Series
15. Dean Witter Utilities Fund
16. Dean Witter Strategist Fund
17. Dean Witter California Tax-Free Daily Income Trust
18. Dean Witter Convertible Securities Trust
19. Dean Witter Intermediate Income Securities
20. Dean Witter World Wide Income Trust
21. Dean Witter S&P 500 Index Fund
22. Dean Witter U.S. Government Securities Trust
23. Dean Witter Federal Securities Trust
24. Dean Witter Multi-State Municipal Series Trust
25. Dean Witter California Tax-Free Income Fund
26. Dean Witter New York Tax-Free Income Fund
27. Dean Witter Select Municipal Reinvestment Fund
28. Dean Witter Variable Investment Series
29. High Income Advantage Trust
30. High Income Advantage Trust II
31. High Income Advantage Trust III
32. InterCapital Insured Municipal Bond Trust
33. InterCapital Insured Municipal Trust
34. InterCapital Insured Municipal Income Trust
35. InterCapital Quality Municipal Investment Trust
36. InterCapital Quality Municipal Income Trust
37. Dean Witter Government Income Trust
38. Municipal Income Trust
39. Municipal Income Trust II
40. Municipal Income Trust III
41. Municipal Income Opportunities Trust
42. Municipal Income Opportunities Trust II
43. Municipal Income Opportunities Trust III
44. Municipal Premium Income Trust
45. Prime Income Trust
46. Dean Witter Short-Term U.S. Treasury Trust
47. Dean Witter Diversified Income Trust
48. InterCapital California Insured Municipal Income Trust
49. Dean Witter Health Sciences Trust
50. Dean Witter Global Dividend Growth Securities
51. InterCapital Quality Municipal Securities
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52. InterCapital California Quality Municipal Securities
53. InterCapital New York Quality Municipal Securities
54. Dean Witter Retirement Series
55. Dean Witter Limited Term Municipal Trust
56. Dean Witter Short-Term Bond Fund
57. Dean Witter Global Utilities Fund
58. InterCapital Insured Municipal Securities
59. InterCapital Insured California Municipal Securities
60. Dean Witter High Income Securities
61. Dean Witter National Municipal Trust
62. Dean Witter International SmallCap Fund
63. Dean Witter Mid-Cap Growth Fund
64. Dean Witter Select Dimensions Investment Series
65. Dean Witter Global Asset Allocation Fund
66. Dean Witter Balanced Growth Fund
67. Dean Witter Balanced Income Fund
68. Dean Witter Intermediate Term U.S. Treasury Trust
69. Dean Witter Hawaii Municipal Trust
70. Dean Witter Japan Fund
71. Dean Witter Capital Appreciation Fund
72. Dean Witter Information Fund
73. Dean Witter Fund of Funds
74. Dean Witter Special Value Fund
75. Dean Witter Income Builder Fund
76. Dean Witter Financial Services Trust
77. Dean Witter Market Leader Trust
78. Dean Witter Managers' Select Fund
79. Dean Witter Liquid Asset Fund Inc.
80. Dean Witter Natural Resource Development Securities Inc.
81. Dean Witter Dividend Growth Securities Inc.
82. Dean Witter European Growth Fund Inc.
83. Dean Witter Pacific Growth Fund Inc.
84. Dean Witter High Yield Securities Inc.
85. Dean Witter Global Short-Term Income Fund Inc.
86. InterCapital Income Securities Inc.
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