<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 26, 1999
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 / /
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 8 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 /X/
AMENDMENT NO. 9 /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)
___ immediately upon filing pursuant to paragraph (b)
___ on (date) pursuant to paragraph (b)
_X_ 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; Back Cover
2. ......................................... Investment Objective: Principal Investment Strategies, Principal
Risks, Past Performance
3. ......................................... Fees and Expenses
4. ......................................... Investment Objective: Principal Investment Strategies; Principal
Risks; Additional Investment Strategy Information; Additional Risk
Information
5. ......................................... Not Applicable
6. ......................................... Fund Management
7. ......................................... Pricing Fund Shares; Buying and Selling Shares; How to Exchange
Shares; How to Sell Shares; Distributions; Tax Consequences
8. ......................................... Share Class Arrangments
9. ......................................... Financial Highlights
PART B STATEMENT OF ADDITIONAL INFORMATION
</TABLE>
Information required to be included in Part B is set forth under the
appropriate caption in Part B of this Registration Statement.
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 - MAY , 1999
TCW/DW
INCOME AND GROWTH FUND
[COVER PHOTO]
A MUTUAL FUND THAT SEEKS TO GENERATE HIGH TOTAL
RETURN BY PROVIDING A HIGH LEVEL OF CURRENT INCOME
AND THE POTENTIAL FOR CAPITAL APPRECIATION
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the
adequacy of this PROSPECTUS. Any representation to the contrary is a criminal
offense.
<PAGE>
CONTENTS
<TABLE>
<S> <C> <C>
The Fund Investment Objective.................................. 1
Principal Investment Strategies....................... 1
Principal Risks....................................... 2
Past Performance...................................... 4
Fees and Expenses..................................... 5
Additional Investment Strategy Information............ 6
Additional Risk Information........................... 7
Fund Management....................................... 8
Shareholder Information Pricing Fund Shares................................... 10
How to Buy Shares..................................... 10
How to Exchange Shares................................ 12
How to Sell Shares.................................... 13
Distributions......................................... 15
Tax Consequences...................................... 15
Share Class Arrangements.............................. 16
Financial Highlights ...................................................... 23
THIS PROSPECTUS CONTAINS IMPORTANT INFORMATION ABOUT THE FUND.
PLEASE READ IT CAREFULLY AND KEEP IT FOR FUTURE REFERENCE.
</TABLE>
FUND CATEGORY
---------------------------
/ / Growth
/X/ GROWTH AND INCOME
/ / Income
/ / Money Market
<PAGE>
(SIDEBAR)
TOTAL RETURN
AN INVESTMENT OBJECTIVE HAVING THE GOAL OF SELECTING SECURITIES TO PAY OUT
INCOME AND THAT HAVE THE POTENTIAL TO RISE IN VALUE.
(END SIDEBAR)
THE FUND
ICON INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
TCW/DW Income and Growth Fund is a non-diversified mutual fund that seeks to
generate high total return by providing a high level of current income and
the potential for capital appreciation. There is no guarantee that the Fund
will achieve this objective.
ICON PRINCIPAL INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------
The Fund will normally invest at least 65% of its assets in the following
types of securities (in order of preference): corporate bonds or preferred
stock convertible into common stock referred to as "convertible securities;"
other fixed-income securities, such as bonds and preferred stocks; common
stocks; and U.S. government securities that are issued or guaranteed by the
United States, its agencies or instrumentalities. The Fund will invest at
least 50% of its assets in a combination of equity securities and
fixed-income securities with equity components such as convertible
securities and warrants. [All fixed-income securities without an equity
component will have a weighted average life or a maturity date of ten years
or less.] The Fund's "Adviser," TCW Funds Management, Inc., invests the
Fund's assets in accordance with its views of market, economic and political
conditions.
The Fund may invest in convertible securities and other fixed-income
securities rated below investment grade. Securities below investment grade
are commonly known as "junk bonds." However, the Fund will invest only in
convertible and other fixed-income securities that are rated at least in the
second highest junk bond category by either Standard & Poor's or Moody's
Investors Service or, if not rated, are 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.
Fixed-income securities are debt securities such as bonds, notes or
commercial paper. The issuer of the debt security borrows money from the
investor who buys the security. Most debt securities pay either fixed or
adjustable rates of interest at regular intervals until they mature, at
which point investors get their principal back. The Fund's fixed-income
investments may include zero coupon securities, which are purchased at a
discount and make no interest payments until maturity.
Common stock is a share ownership or equity interest in a corporation. It
may or may not pay dividends, as some companies reinvest all of their
profits back into their businesses, while others pay out some of their
profits to shareholders as dividends. A convertible security is a bond,
preferred stock or other security that may be converted into a prescribed
amount of common stock at a particular time and price.
1
<PAGE>
In pursuing the Fund's investment objective, the Adviser has considerable
leeway in deciding which investments it buys, holds or sells on a day-to-day
basis -- and which trading strategies it uses. For example, the Adviser in
its discretion may determine to use some permitted trading strategies while
not using others. In addition to the securities described above, the Fund
may invest in foreign securities, warrants and stock rights, and options and
futures.
ICON PRINCIPAL RISKS
- --------------------------------------------------------------------------------
The Fund's share price will fluctuate with changes in the market value of
the Fund's portfolio securities. When you sell Fund shares, they may be
worth less than what you paid for them and, accordingly, you can lose money
investing in this Fund.
CONVERTIBLE SECURITIES. The Fund's investments in convertible securities
subject the Fund to the risks associated with both fixed-income securities
and common stocks. To the extent that a convertible security's investment
value is greater than its conversion value, its price will be likely to
increase when interest rates fall and decrease when interest rates rise, as
with a fixed-income security. If the conversion value exceeds the investment
value, the price of the convertible security will tend to fluctuate directly
with the price of the underlying equity security.
FIXED-INCOME SECURITIES. Principal risks of investing in the Fund are
associated with its fixed-income investments. All fixed-income securities,
such as corporate bonds, are subject to two types of risk: credit risk and
interest rate risk. Credit risk refers to the possibility that the issuer of
a security will be unable to make interest payments and/or repay the
principal on its debt.
Interest rate risk refers to fluctuations in the value of a fixed-income
security resulting from changes in the general level of interest rates. When
the general level of interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. (Zero coupon securities are
typically subject to greater price fluctuations than comparable securities
that pay current interest.) As merely illustrative of the relationship
between fixed-income securities and interest rates, the following table
shows how interest rates affect bond prices.
<TABLE>
<CAPTION>
PRICE PER $1,000 OF A BOND IF
INTEREST RATES:
-------------------------------------
INCREASE DECREASE
HOW INTEREST RATES AFFECT BOND PRICES ----------------- -----------------
- ----------------------------------------------------------
BOND MATURITY COUPON 1% 2% 1% 2%
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
1 year N/A $ 1,000 $ 1,000 $ 1,000 $ 1,000
- ------------------------------------------------------------------------------
5 years 4.25% $ 967 $ 934 $ 1,038 $ 1,076
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10 years 4.75% $ 930 $ 867 $ 1,074 $ 1,155
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30 years 5.25% $ 865 $ 756 $ 1,166 $ 1,376
- ------------------------------------------------------------------------------
</TABLE>
Coupons reflect yields on Treasury securities as of December 31, 1998. The
table is not representative of price changes for mortgage-backed or
asset-backed securities principally because of prepayment risk, and it is
not representative of high yield securities. In addition, the table is an
illustration and does not represent expected yields or share price changes
of any Morgan Stanley Dean Witter mutual fund.
2
<PAGE>
JUNK BONDS. The Fund's investments in "junk bonds" pose significant risks.
The prices of these securities are likely to be more sensitive to adverse
economic changes or individual corporate developments than higher rated
securities. During an economic downturn or substantial period of rising
interest rates, junk bond issuers and, in particular, highly leveraged
issuers may experience financial stress that would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. In the
event of a default, the Fund may incur additional expenses to seek recovery.
The Rule 144A securities could have the effect of increasing the level of
Fund illiquidity to the extent the Fund may be unable to find qualified
institutional buyers interested in purchasing the securities. In addition,
periods of economic uncertainty and change probably would result in an
increased volatility of market prices of junk bonds and a corresponding
volatility in the Fund's net asset value.
COMMON STOCKS. Another principal risk of investing in the Fund is associated
with its common stock investments. In general, stock values fluctuate in
response to activities specific to the company as well as general market,
economic and political conditions. Stock can fluctuate widely in response to
these factors.
NON-DIVERSIFIED STATUS. The Fund is a "non-diversified" mutual fund and, as
such, its investments are not required to meet certain diversification
requirements under federal law. Compared with "diversified" funds, the Fund
may invest a greater percentage of its assets in the acquires of an
individual corporation or governmental entity. Thus, the Fund's assets may
be concentrated in fewer securities than other funds. A decline in the value
of those investments would cause the Fund's overall value to decline to a
greater degree.
The performance of the Fund also will depend on whether the Adviser is
successful in pursuing the Fund's investment strategy. The Fund is also
subject to other risks from its permissible investments including the risks
associated with its investments in foreign securities, warrants and stock
rights.
Shares of the Fund are not bank deposits and are not guaranteed or insured
by any bank, governmental entity, or the FDIC.
3
<PAGE>
(SIDEBAR)
ANNUAL TOTAL RETURNS
THIS CHART SHOWS HOW THE PERFORMANCE OF THE FUND'S CLASS C SHARES HAS VARIED
FROM YEAR TO YEAR OVER THE LIFE OF THE FUND.
AVERAGE ANNUAL
TOTAL RETURNS
THIS TABLE COMPARES THE FUND'S AVERAGE ANNUAL RETURNS WITH THOSE OF A BROAD
MEASURE OF MARKET PERFORMANCE OVER TIME. THE FUND'S RETURNS INCLUDE THE MAXIMUM
APPLICABLE SALES CHARGE FOR EACH CLASS AND ASSUME YOU SOLD YOUR SHARES AT THE
END OF EACH PERIOD.
(END SIDEBAR)
ICON PAST PERFORMANCE
- --------------------------------------------------------------------------------
The bar chart and table below provide some indication of the risks of
investing in the Fund. The Fund's past performance does not indicate how the
Fund will perform in the future.
ANNUAL TOTAL RETURNS - CALENDAR YEARS
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
1993* 11.60%
94 -3.26%
95 18.87%
96 13.11%
97 15.48%
98 06.30%
</TABLE>
The bar chart reflects the performance of Class C shares; the performance of the
other Classes will differ because the Classes have different ongoing fees. The
performance information in the bar chart does not reflect the deduction of sales
charges; if these amounts were reflected, returns would be less than shown. *For
the period March 31, 1993 to December 31, 1993.
During the periods shown in the bar chart, the highest return for a calendar
quarter was 9.59% (quarter ended December 31, 1998) and the lowest return for a
calendar quarter was -7.76% (quarter ended September 30, 1998).
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED THE 1998 CALENDAR YEAR)
- ---------------------------------------------------------------------------------
PAST 1 YEAR PAST 5 YEARS LIFE OF FUND
(SINCE 3/31/93)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------
Class A 2.38% -- --
- ---------------------------------------------------------------------------------
Class B(1) 1.52% -- --
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Class C(1) 5.33% 9.81% 10.57%
- ---------------------------------------------------------------------------------
Class D 7.10% -- --
- ---------------------------------------------------------------------------------
S&P 500(2) 28.58% 24.05% 21.73%
- ---------------------------------------------------------------------------------
Lehman Brothers
Government/Corporate Bond Index(3) 9.47% 7.30% 7.42%
- ---------------------------------------------------------------------------------
Lipper Flexible Income Funds
Average(4) 3.67% 5.58% 6.57%
- ---------------------------------------------------------------------------------
</TABLE>
1 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 Morgan Stanley Dean Witter Services
Company Inc. serves as manager and the Adviser serves as investment adviser
("TCW/DW Funds") offered with a contingent deferred sales charge ("CDSC")
have been designated Class C shares. Shares held prior to July 28, 1997
that were acquired in exchange for shares of a TCW/DW Fund sold with a CDSC
have been designated Class B shares.
2 The S&P 500 is the Standard & Poor's 500 Composite Stock Price Index, a
widely recognized, unmanaged index of common stock prices. The performance
of the Index does not include expenses or fees, and should not be
considered an investment.
3 The Lehman Brothers Government/Corporate Bond Index tracks the performance
of government and corporate obligations, including U.S. government agency
and U.S. Treasury securities and corporate and yankee bonds with maturities
of one to ten years. The performance of the Index does not include expenses
or fees. The Index is unmanaged and should not be considered an investment.
4 The Lipper Flexible Income Funds Average tracks the performance of funds
that emphasize income generation by investing at least 85% of their assets
in debt issues and preferred and convertible securities, as reported by
Lipper Analytical Services. The Index is unmanaged and should not be
considered an investment.
4
<PAGE>
(SIDEBAR)
SHAREHOLDER FEES
THESE FEES ARE PAID DIRECTLY FROM YOUR INVESTMENT.
ANNUAL FUND
OPERATING EXPENSES
THESE EXPENSES ARE DEDUCTED FROM THE FUND'S ASSETS AND ARE BASED ON EXPENSES
PAID FOR THE FISCAL YEAR ENDED JANUARY 31, 1999.
(END SIDEBAR)
ICON FEES AND EXPENSES
- --------------------------------------------------------------------------------
The Fund offers four Classes of shares: Classes A, B, C and D. Each Class
has a different combination of fees, expenses and other features. The table
below briefly describes the fees and expenses that you may pay if you buy
and hold shares of the Fund. The Fund does not charge account or exchange
fees. See the "Share Class Arrangements" section for further fee and expense
information.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
<S> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
SHAREHOLDER FEES
- ---------------------------------------------------------------------------------------------------
Maximum sales charge (load) imposed on purchases (as a
percentage of offering price) 4.25%(1) None None None
- ---------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load)
(as a percentage based on the lesser of
the offering price or net asset value at
redemption) None(2) 5.00%(3) 1.00%(4) None
- ---------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
- ---------------------------------------------------------------------------------------------------
Management and Advisory fee 0.75% 0.75% 0.75% 0.75%
- ---------------------------------------------------------------------------------------------------
Distribution and service (12b-1) fees 0.23% 0.75% 0.74% None
- ---------------------------------------------------------------------------------------------------
Other expenses 0.58% 0.58% 0.58% 0.58%
- ---------------------------------------------------------------------------------------------------
Total annual Fund operating expenses 1.56% 2.08% 2.07% 1.33%
- ---------------------------------------------------------------------------------------------------
</TABLE>
1 Reduced for purchases of $25,000 and over.
2 Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on sales made
within one year after purchase, except for certain specific circumstances.
3 The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter. See "Share Class Arrangements" for a complete discussion of the
CDSC.
4 Only applicable to sales made within one year after purchase.
EXAMPLE
This example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund, your investment has
a 5% return each year, and the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, the tables below show
your costs at the end of each period based on these assumptions depending
upon whether or not you sell your shares at the end of each period.
<TABLE>
<CAPTION>
IF YOU SOLD YOUR SHARES: IF YOU HELD YOUR SHARES:
----------------------------------------- -----------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------- -----------------------------------------
CLASS A $577 $897 $1,239 $2,203 $577 $897 $1,239 $2,203
- ---------------------------------------------------------- -----------------------------------------
CLASS B $711 $952 $1,319 $2,410 $211 $652 $1,119 $2,410
- ---------------------------------------------------------- -----------------------------------------
CLASS C $310 $649 $1,114 $2,400 $210 $649 $1,114 $2,400
- ---------------------------------------------------------- -----------------------------------------
CLASS D $135 $421 $ 729 $1,601 $135 $421 $ 729 $1,601
- ---------------------------------------------------------- -----------------------------------------
</TABLE>
5
<PAGE>
ICON ADDITIONAL INVESTMENT STRATEGY INFORMATION
- --------------------------------------------------------------------------------
The Fund's investment objective is to seek to generate high total return by
providing a high level of current income and the potential for capital
appreciation. This section provides additional information concerning the
Fund's principal strategies.
FOREIGN SECURITIES. The Fund may invest up to 25% of its assets in
non-dollar denominated foreign securities (this restriction does not apply
to securities of Canadian issuers registered under the Securities Exchange
Act or American depository receipts for which there is no percentage
limitation). 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 equity
securities. Interest and dividends on Eurodollar securities are payable in
U.S. dollars outside of the United States. The Fund may invest any amount of
its assets in Eurodollar convertible securities that are convertible into
U.S. or foreign equity securities listed, or represented by American
depository receipts listed, on a U.S. stock exchange.
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 and stock
rights are, in effect, an option to purchase equity securities at a specific
price, generally valid for a specific period of time. The Fund may acquire
warrants and stock rights attached to other securities without reference to
the percentage limitations.
OPTIONS AND FUTURES. The Fund may invest in put and call options and futures
with respect to financial instruments, stock and interest rate indexes, and
the U.S. dollar. Options and futures may be used to facilitate allocation of
the Fund's investments among asset classes, to increase or decrease the
Fund's exposure to the stock or bond markets, to generate income or to seek
to protect against a decline in securities or currency prices or an increase
in prices of securities or currencies that may be purchased.
DEFENSIVE INVESTING. The Fund may take temporary "defensive" positions in
attempting to respond to adverse market conditions. The Fund may invest any
amount of its assets in cash or money market instruments in a defensive
posture when the Adviser believes it is advisable to do so. Although taking
a defensive posture is designed to protect the Fund from an anticipated
market downturn, it could have the effect of reducing the benefit from any
upswing in the market.
PORTFOLIO TURNOVER. The Fund may engage in active and frequent trading of
portfolio securities to achieve its principal investment strategies. The
portfolio turnover rate is not expected to exceed 150% annually under normal
circumstances. A high turnover rate will increase Fund brokerage costs. It
also may increase the Fund's capital gains, which are passed along to Fund
shareholders as distributions. This, in turn, may increase your tax
liability as a Fund shareholder. See the sections on "Distributions" and
"Tax Consequences."
6
<PAGE>
The percentage limitations relating to the composition of the Fund's
portfolio apply at the time the Fund acquires an investment. Subsequent
percentage changes that result from market fluctuations or changes in assets
will not require the Fund to sell any portfolio security. The Fund may
change its principal investment strategies without shareholder approval;
however, you would be notified of any changes.
ICON ADDITIONAL RISK INFORMATION
- --------------------------------------------------------------------------------
This section provides additional information regarding the principal risks
of investing in the Fund.
FOREIGN SECURITIES. The Fund's investments in foreign securities (including
depository receipts) involve risks that are in addition to the risks
associated with domestic securities. One additional risk is currency risk.
While the price of Fund shares is quoted in U.S. dollars, the Fund generally
converts U.S. dollars to a foreign market's local currency to purchase a
security in that market. If the value of that local currency falls relative
to the U.S. dollar, the U.S. dollar value of the foreign security will
decrease. This is true even if the foreign security's local price remains
unchanged.
Foreign securities also have risks related to economic and political
developments abroad, including expropriations, confiscatory taxation,
exchange control regulation, limitations on the use or transfer of Fund
assets and any effects of foreign social, economic or political instability.
Foreign companies, in general, are not subject to the regulatory
requirements of U.S. companies and, as such, there may be less publicly
available information about these companies. Moreover, foreign accounting,
auditing and financial reporting standards generally are different from
those applicable to U.S. companies. Finally, in the event of a default of
any foreign debt obligations, it may be more difficult for the Fund to
obtain or enforce a judgment against the issuers of the securities.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to
less government and exchange scrutiny and regulation than their U.S.
counterparts.
Many European countries have adopted or are in the process of adopting a
single European currency, referred to as the "euro." The consequences of the
euro conversion for foreign exchange rates, interest rates and the value of
European securities the Fund may purchase are presently unclear. The
consequences may adversely affect the value and/or increase the volatility
of securities held by the Fund.
WARRANTS AND STOCK RIGHTS. The value of a warrant and/or stock right tends
to fluctuate based on the value of the underlying common stock and is
subject to similar risks.
OPTIONS AND FUTURES. If the Fund invests in options and/or futures, its
participation in these markets would subject the Fund's portfolio to certain
risks. The Adviser's predictions of movements in the direction of the stock
or interest rate markets may be inaccurate, and the adverse consequences to
the Fund (e.g., a reduction in the Fund's net asset value or a reduction in
the amount of income available for distribution) may leave the Fund in a
worse position than if these strategies were not used. Other risks
7
<PAGE>
(SIDEBAR)
MORGAN STANLEY DEAN WITTER ADVISORS INC.
THE MANAGER IS A WHOLLY OWNED SUBSIDIARY OF MORGAN STANLEY DEAN WITTER ADVISORS
INC., WHICH IS WIDELY RECOGNIZED AS A LEADER IN THE MUTUAL FUND INDUSTRY.
TOGETHER, THE MANAGER AND MORGAN STANLEY DEAN WITTER ADVISORS INC. HAVE MORE
THAN $126.2 BILLION IN ASSETS UNDER MANAGEMENT OR ADMINISTRATION AS OF FEBRUARY
28, 1999.
(END SIDEBAR)
inherent in the use of options and futures include, for example, the
possible imperfect correlation between the price of options and futures
contracts and movements in the prices of the securities being hedged, and
the possible absence of a liquid secondary market for any particular
instrument. Certain options may be over-the-counter options, which are
options negotiated with dealers; there is no secondary market for these
investments.
YEAR 2000. The Fund could be adversely affected if the computer systems
necessary for the efficient operation of Morgan Stanley Dean Witter Services
Company Inc. (the "Manager"), the Adviser and the Fund's other service
providers, as well as the markets and individual and governmental issuers in
which the Fund invests do not properly process and calculate date-related
information from and after January 1, 2000. While year 2000-related computer
problems could have a negative effect on the Fund, the Manager, Adviser and
affiliates are working hard to avoid any problems and to obtain assurances
from their service providers that they are taking similar steps.
ICON FUND MANAGEMENT
- --------------------------------------------------------------------------------
The Fund has retained the Manager -- Morgan Stanley Dean Witter Services
Company Inc. -- to provide administrative services and manage its business
affairs (other than providing investment advice). The Fund has contracted
with the Adviser -- TCW Funds Management, Inc. -- to invest the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. The Manager is a wholly-owned subsidiary of Morgan
Stanley Dean Witter Advisors Inc., which is in turn a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co., a preeminent global
financial services firm that maintains leading market positions in each of
its three primary businesses: securities, asset management and credit
services. The Manager's main business office is located at Two World Trade
Center, New York, NY 10048.
The Adviser, together with its affiliated companies, manages more than $55
billion primarily for institutional investors. The Adviser is a wholly-owned
subsidiary of the TCW Group, Inc. Its main business address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017.
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 its affiliates since April 1995. Prior to April 1995, he was
Co-Chief Executive Officer and Chief Portfolio Strategist of Crescent
Corporation.
8
<PAGE>
Ms. Weiler has been a portfolio manager with affiliates of The TCW Group,
Inc. since April 1995, and prior to that was a Vice President and portfolio
manager of Crescent Capital Corporation.
The Fund pays the Manager and Adviser a monthly management or advisory fee
as full compensation for the services and facilities furnished to the Fund,
and for Fund expenses assumed by the Manager and Adviser. The fee is based
on the Fund's average daily net assets. For the fiscal year ended January
31, 1999 the Fund accrued aggregate total compensation to the Manager and
the Adviser of 0.75% of the Fund's average daily net assets (0.45% to the
Manager and 0.30% to the Adviser).
On February 25, 1999, the Board of Trustees of the Fund approved an
agreement and plan of reorganization between the Fund and Morgan Stanley
Dean Witter Income Builder Fund ("Income Builder"), pursuant to which
substantially all of the assets of the Fund would be combined with those of
Income Builder and shareholders of the Fund would become shareholders of
Income Builder. The reorganization is subject to the approval of
shareholders of the Fund at a special meeting of shareholders scheduled to
be held on June 8, 1999. A proxy statement formally detailing the proposal,
the reasons for the Trustees' actions and information concerning Income
Builder has been distributed to shareholders of the Fund.
9
<PAGE>
(SIDEBAR)
CONTACTING A FINANCIAL ADVISOR
IF YOU ARE NEW TO THE TCW/DW FUNDS FAMILY AND WOULD LIKE TO CONTACT A FINANCIAL
ADVISOR, CALL (800) THE-DEAN FOR THE TELEPHONE NUMBER OF THE MORGAN STANLEY DEAN
WITTER OFFICE NEAREST YOU. YOU MAY ALSO ACCESS OUR OFFICE LOCATOR ON OUR
INTERNET SITE AT: WWW.DEANWITTER.COM/FUNDS
(END SIDEBAR)
SHAREHOLDER INFORMATION
ICON PRICING FUND SHARES
- --------------------------------------------------------------------------------
The price of Fund shares (excluding sales charges), called "net asset
value," is based on the value of the Fund's portfolio securities. The
net asset value of each Class, however, will differ because the
Classes have different ongoing distribution fees.
The net asset value per share of the Fund is determined once daily at
4:00 p.m. Eastern time, on each day that the New York Stock Exchange
is open (or, on days when the New York Stock Exchange closes prior to
4:00 p.m., at such earlier time). Shares will not be priced on days
that the New York Stock Exchange is closed.
The value of the Fund's portfolio securities is based on the
securities' market price when available. When a market price is not
readily available, including circumstances under which the Adviser
determines that a security's market price is not accurate, a
portfolio security is valued at its fair value, as determined under
procedures established by the Fund's Board of Trustees. In these
cases, the Fund's net asset value will reflect certain portfolio
securities' fair value rather than their market price. In addition,
if the Fund holds securities primarily listed on foreign exchanges,
the value of the Fund's portfolio securities may change on days when
you will not be able to purchase or sell your shares.
An exception to the Fund's general policy of using market prices
concerns its short-term debt portfolio securities. Debt securities
with remaining maturities of sixty days or less at the time of
purchase are valued at amortized cost. However, if the cost does not
reflect the securities' market value, these securities will be valued
at their fair value.
ICON HOW TO BUY SHARES
- --------------------------------------------------------------------------------
You may open a new account to buy Fund shares or buy additional
Fund shares for an existing account by contacting your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative. Your Financial Advisor will assist you,
step-by-step, with the procedures to invest in the Fund. You may
also purchase shares directly by calling the Fund's transfer agent
and requesting an application.
Because every investor has different immediate financial needs and
long-term investment goals, the Fund offers investors four Classes
of shares: Classes A, B, C and D. Class D shares are only offered
to a limited group of investors. Each Class of shares offers a
distinct structure of sales charges, distribution and service fees,
and other features that are designed to address a variety of needs.
Your Financial Advisor or other authorized financial representative
can help you decide which Class may be most appropriate for you.
When purchasing Fund shares, you must specify which Class of shares
you wish to purchase.
10
<PAGE>
When you buy Fund shares, the shares are purchased at the next share
price calculated (less any applicable front-end sales charge for
Class A shares) after we receive your investment order in proper
(SIDEBAR) form.
EASYINVEST-SM-
A PURCHASE PLAN THAT ALLOWS YOU TO TRANSFER MONEY AUTOMATICALLY FROM YOUR
CHECKING OR SAVINGS ACCOUNT OR FROM A MONEY MARKET FUND ON A SEMI-MONTHLY,
MONTHLY OR QUARTERLY BASIS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL
ADVISOR FOR FURTHER INFORMATION ABOUT THIS SERVICE.
(END SIDEBAR)
<TABLE>
<CAPTION>
MINIMUM INVESTMENT AMOUNTS
- ------------------------------------------------------------------------------------------------
MINIMUM INVESTMENT
----------------------
INVESTMENT OPTIONS INITIAL ADDITIONAL
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
Regular Accounts: $ 1,000 $ 100
- ------------------------------------------------------------------------------------------------
Individual Retirement Accounts: Regular IRAs $ 1,000 $ 100
Educational IRAs $500 $ 100
- ------------------------------------------------------------------------------------------------
EASYINVEST-SM- (Automatically from your checking
or savings account or Money Market
Fund) $100* $ 100*
- ------------------------------------------------------------------------------------------------
</TABLE>
* Provided your schedule of investments totals $1,000 in twelve months.
There is no minimum investment amount if you purchase Fund shares
through: (1) the Morgan Stanley Dean Witter Advisors' mutual fund
asset allocation plan, (2) a program, approved by the Fund's
distributor, in which you pay an asset-based fee for advisory,
administrative and/or brokerage services, or (3) employer-sponsored
employee benefit plan accounts.
INVESTMENT OPTIONS FOR CERTAIN INSTITUTIONAL AND OTHER
INVESTORS/CLASS D SHARES. To be eligible to purchase Class D Shares,
you must qualify under one of the investor categories specified in
the "Share Class Arrangements" section of this PROSPECTUS.
THREE DAY SETTLEMENT. Fund shares are sold through the Fund's
distributor, Morgan Stanley Dean Witter Distributors Inc., on a
normal three business day basis; that is, your payment for Fund
shares is due on the third business day (settlement day) after you
place a purchase order.
SUBSEQUENT INVESTMENTS SENT DIRECTLY TO THE FUND. In addition to
buying additional Fund shares for an existing account by contacting
your Morgan Stanley Dean Witter Financial Advisor, you may send a
check directly to the Fund. To buy additional shares in this manner:
- Write a "letter of instruction" to the Fund specifying the name(s)
on the account, the account number, the social security or tax
identification number, the Class of shares you wish to purchase and
the investment amount (which would include any applicable front-end
sales charge). The letter must be signed by the account owner(s).
- Make out a check for the total amount payable to: TCW/DW Income and
Growth Fund.
- Mail the letter and check to Morgan Stanley Dean Witter Trust FSB
at P.O. Box 1040, Jersey City, NJ 07303.
11
<PAGE>
ICON HOW TO EXCHANGE SHARES
- --------------------------------------------------------------------------------
PERMISSIBLE FUND EXCHANGES. You may exchange shares of any Class of
the Fund for the same class of any other continuously offered TCW/DW
Multi-Class Fund advised by the Adviser and managed by the Manager,
without the imposition of an exchange fee. You may also exchange Fund
shares, without the imposition of an exchange fee, for shares of
TCW/DW North American Government Income Trust, and five Money Market
Funds for which Morgan Stanley Dean Witter Advisors serves as
Investment Manager.
Exchanges may be made after shares of the Fund acquired by purchase
have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
The current Prospectus for each Fund describes its investment
objective(s), policies and investment minimums, and should be read
before investment.
EXCHANGE PROCEDURES. You can process an exchange by contacting your
Morgan Stanley Dean Witter Financial Advisor or other authorized
financial representative. Otherwise, you must forward an exchange
privilege authorization form to the Fund's transfer agent -- Morgan
Stanley Dean Witter Trust FSB -- and then write the transfer agent or
call (800) 869-NEWS to place an exchange order. You can obtain an
exchange privilege authorization form by contacting your Financial
Advisor or other authorized financial representative or by calling
(800) 869-NEWS. If you hold share certificates, no exchanges may be
processed until we have received all applicable share certificates.
An exchange to any Fund (except a Money Market Fund) is made on the
basis of the next calculated net asset values of the Funds involved
after the exchange instructions are accepted. When exchanging into a
Money Market Fund, the Fund's shares are sold at their next
calculated net asset value and the Money Market Fund's shares are
purchased at their net asset value on the following business day.
The Fund may terminate or revise the exchange privilege upon required
notice. Certain services normally available to shareholders of Money
Market Funds, including the check writing privilege, are not
available for Money Market Fund shares you acquire in an exchange.
TELEPHONE EXCHANGES. For your protection when calling Morgan Stanley
Dean Witter Trust FSB, we will employ reasonable procedures to
confirm that exchange instructions communicated over the telephone
are genuine. These procedures may include requiring various forms of
personal identification such as name, mailing address, social
security or other tax identification number. Telephone instructions
also may be recorded.
Telephone instructions will be accepted if received by the Fund's
transfer agent between 9:00 a.m. and 4:00 p.m. Eastern time, on any
day the New York Stock Exchange is open for business. During periods
of drastic economic or market changes, it is possible that the
telephone exchange procedures may be difficult to implement, although
this has not been the case with the Fund in the past.
12
<PAGE>
MARGIN ACCOUNTS. If you have pledged your Fund shares in a margin
account, contact your Morgan Stanley Dean Witter Financial Advisor or
other authorized financial representative regarding restrictions on
the exchange of such shares.
TAX CONSIDERATIONS OF EXCHANGES. If you exchange shares of the Fund
for shares of another Fund there are important tax considerations.
For tax purposes, the exchange out of the Fund is considered a sale
of Fund shares -- and the exchange into the other Fund is considered
a purchase. As a result, you may realize a capital gain or loss.
You should review the "Tax Consequences" section and consult your own
tax professional about the tax consequences of an exchange.
FREQUENT EXCHANGES. A pattern of frequent exchanges may result in the
Fund limiting or prohibiting, at its discretion, additional purchases
and/or exchanges. The Fund will notify you in advance of limiting
your exchange privileges.
CDSC CALCULATIONS ON EXCHANGES. See the "Share Class Arrangements"
section of this Prospectus for a further discussion of how applicable
contingent deferred sales charges (CDSCs) are calculated for shares
of one Fund that are exchanged for shares of another.
FOR FURTHER INFORMATION REGARDING EXCHANGE PRIVILEGES, YOU SHOULD
CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR OR CALL
(800) 869-NEWS.
ICON HOW TO SELL SHARES
- --------------------------------------------------------------------------------
You can sell some or all of your Fund shares at any time. If you sell
Class A, Class B or Class C shares, your net sale proceeds are
reduced by the amount of any applicable CDSC. Your shares will be
sold at the next share price calculated after we receive your order
to sell as described below.
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Contact your To sell your shares, simply call your Morgan Stanley Dean
Financial Advisor Witter Financial Advisor or other authorized Financial
representative.
------------------------------------------------------------
ICON
Payment will be sent to the address to which the account is
registered or deposited in your brokerage account.
- --------------------------------------------------------------------------------
By Letter You can also sell your shares by writing a "letter of
instruction" that includes:
ICON
- your account number;
- the dollar amount or the number of shares you wish to
sell;
- the Class of shares you wish to sell; and
- the signature of each owner as it appears on the account.
------------------------------------------------------------
If you are requesting payment to anyone other than the
registered owner(s) or that payment be sent to any address
other than the address of the registered owner(s) or
pre-designated bank account, you will need a signature
guarantee.You can obtain a signature guarantee from an
eligible guarantor acceptable to Morgan Stanley Dean Witter
Trust FSB. (You should contact Morgan Stanley Dean Witter
Trust FSB at (800) 869-NEWS for a determination as to
whether a particular institution is an eligible guarantor.)
A notary public CANNOT provide a signature guarantee.
Additional documentation may be required for shares held by
a corporation, partnership, trustee or executor.
------------------------------------------------------------
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
OPTIONS PROCEDURES
<S> <C>
- --------------------------------------------------------------------------------
Mail the letter to Morgan Stanley Dean Witter Trust FSB at
P.O. Box 983, Jersey City, New Jersey 07303. If you hold
share certificates, you must return the certificates, along
with the letter and any required additional documentation.
------------------------------------------------------------
A check will be mailed to the name(s) and address in which
the account is registered, or otherwise according to your
instructions.
- --------------------------------------------------------------------------------
Systematic If your investment in all of the TCW/DW family of Funds has
Withdrawal Plan a total market value of at least $10,000, you may elect to
withdraw amounts of $25 or more, or in any whole percentage
of a Fund's balance (provided the amount is at least $25),
on a monthly, quarterly, semi-annual basis, from any Fund
with a balance of at least $1,000. Each time you add a Fund
to the plan, you must meet the plan requirements.
------------------------------------------------------------
Amounts withdrawn are subject to any applicable CDSC. A CDSC
may be waived under certain circumstances. See the Class B
waiver categories listed in the "Share Class Arrangements"
section of this Prospectus.
------------------------------------------------------------
To sign up for the systematic withdrawal plan, contact your
Morgan Stanley Dean Witter Financial Advisor or call (800)
869-NEWS. You may terminate or suspend your plan at any
time. Please remember that withdrawals from the plan are
sales of shares, not Fund "distributions," and ultimately
may exhaust your account balance. The Fund may terminate or
revise the plan at any time.
ICON
------------------------------------------------------------
</TABLE>
(SIDEBAR)
SYSTEMATIC WITHDRAWAL PLAN
THIS PLAN ALLOWS YOU TO WITHDRAW MONEY AUTOMATICALLY FROM YOUR FUND ACCOUNT AT
REGULAR INTERVALS. CONTACT YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR
MORE DETAILS.
(END SIDEBAR)
PAYMENT FOR SOLD SHARES. After we receive your complete instruction
to sell as described above, a check will be mailed to you within
seven days, although we will attempt to make payment within one
business day. Payment may also be sent to your brokerage account.
Payment may be postponed or the right to sell your shares suspended,
however, under unusual circumstances. If you request to sell shares
that were recently purchased by check, payment of the sale proceeds
may be delayed for the minimum time needed to verify that the check
has been honored (not more than fifteen days from the time we receive
the check).
TAX CONSIDERATIONS. Normally, your sale of Fund shares is subject to
federal and state income tax. You should review the "Tax
Consequences" section of this PROSPECTUS and consult your own tax
professional about the tax consequences of a sale.
REINSTATEMENT PRIVILEGE. If you sell Fund shares and have not
previously exercised the reinstatement privilege, you may, within 35
days after the date of sale, invest any portion of the proceeds in
the same Class of Fund shares at their net asset value and receive a
pro rata credit for any CDSC paid in connection with the sale.
INVOLUNTARY SALES. The Fund reserves the right, on sixty days'
notice, to sell the shares of any shareholder (other than shares held
in an IRA or 403(b) Custodial Account) whose shares, due to sales by
the shareholder, have a value below $100, or in the case of an
account opened through EASYINVEST -SM-, if after 12 months the
shareholder has invested less than $1,000 in the account.
14
<PAGE>
However, before the Fund sells your shares in this manner, we will
notify you and allow you sixty days to make an additional investment
in an amount that will increase the value of your account to at least
the required amount before the sale is processed. No CDSC will be
imposed on any involuntary sale.
MARGIN ACCOUNTS. Certain restrictions may apply to Fund shares
pledged in margin accounts with Dean Witter Reynolds or another
authorized broker-dealer of Fund shares. If you hold Fund shares in
this manner, please contact your Morgan Stanley Dean Witter Financial
Advisor or other authorized Financial representative for more
(SIDEBAR) details.
TARGETED DIVIDENDS-SM-
YOU MAY SELECT TO HAVE YOUR FUND DISTRIBUTIONS AUTOMATICALLY INVESTED IN OTHER
CLASSES OF FUND SHARES OR CLASSES OF ANOTHER TCW/DW FUND THAT YOU OWN. CONTACT
YOUR MORGAN STANLEY DEAN WITTER FINANCIAL ADVISOR FOR FURTHER INFORMATION ABOUT
THIS SERVICE.
(END SIDEBAR)
ICON DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund passes substantially all of its earnings from income and
capital gains along to its investors as "distributions." The Fund
earns income from stocks and interest from fixed-income
investments. These amounts are passed along to Fund shareholders as
"income dividend distributions." The Fund realizes capital gains
whenever it sells securities for a higher price than it paid for
them. These amounts may be passed along as "capital gain
distributions."
The Fund declares income dividends separately for each class.
Distributions paid on Class A and Class D shares usually will be
higher than for Class B and Class C because distribution fees that
Class B and Class C pay are higher. Normally, income dividends are
distributed to shareholders quarterly and capital gains are
distributed annually in December. The Fund, however, may retain and
reinvest any long-term capital gains. The Fund may at times make
payments from sources other than income or capital gains that
represent a return of a portion of your investment.
Distributions are reinvested automatically in additional shares of
the same Class and automatically credited to your account, unless
you request in writing that all distributions be paid in cash. If
you elect the cash option, the Fund will mail a check to you no
later than seven business days after the distribution is declared.
No interest will accrue on uncashed checks. If you wish to change
how your distributions are paid, your request should be received by
the Fund's transfer agent, Morgan Stanley Dean Witter Trust FSB, at
least five business days prior to the record date of the
distributions.
ICON TAX CONSEQUENCES
- --------------------------------------------------------------------------------
As with any investment, you should consider how your Fund
investment will be taxed. The tax information in this PROSPECTUS is
provided as general information. You should consult your own tax
professional about the tax consequences of an investment in the
Fund.
15
<PAGE>
Unless your investment in the Fund is through a tax-deferred
retirement account, such as a 401(k) plan or IRA, you need to be
aware of the possible tax consequences when:
- The Fund makes distributions; and
- You sell Fund shares, including an exchange to another Fund.
TAXES ON DISTRIBUTIONS. Your distributions are normally subject to
federal and state income tax when they are paid, whether you take
them in cash or reinvest them in Fund shares. A distribution also
may be subject to local income tax. Any income dividend
distributions and any short-term capital gain distributions are
taxable to you as ordinary income. Any long-term capital gain
distributions are taxable as long-term capital gains, no matter how
long you have owned shares in the Fund.
Every January, you will be sent a statement (IRS Form 1099-DIV)
showing the taxable distributions paid to you in the previous year.
The statement provides full information on your dividends and
capital gains for tax purposes.
TAXES ON SALES. Your sale of Fund shares normally is subject to
federal and state income tax and may result in a taxable gain or
loss to you. A sale also may be subject to local income tax. Your
exchange of Fund shares for shares of another Fund is treated for
tax purposes like a sale of your original shares and a purchase of
your new shares. Thus, the exchange may, like a sale, result in a
taxable gain or loss to you and will give you a new tax basis for
your new shares.
When you open your Fund account, you should provide your social
security or tax identification number on your investment
application. By providing this information, you will avoid being
subject to a federal backup withholding tax of 31% on taxable
distributions and redemption proceeds. Any withheld amount would be
sent to the IRS as an advance tax payment.
ICON SHARE CLASS ARRANGEMENTS
- --------------------------------------------------------------------------------
The Fund offers several Classes of shares having different
distribution arrangements designed to provide you with different
purchase options according to your investment needs. Your Morgan
Stanley Dean Witter Financial Advisor or other authorized financial
representative can help you decide which Class may be appropriate
for you.
The general public is offered three Classes: Class A shares, Class
B shares and Class C shares, which differ principally in terms of
sales charges and ongoing expenses. A fourth Class, Class D shares,
is offered only to a limited category of investors. Shares that you
acquire through reinvested distributions will not be subject to any
front-end sales charge or CDSC - contingent deferred sales charge.
Sales personnel may receive different compensation for selling each
Class of shares. The sales charges applicable to each class provide
for the distribution financing of shares of that class.
16
<PAGE>
The chart below compares the sales charge and annual 12b-1 fee
applicable to each Class:
<TABLE>
<CAPTION>
CLASS SALES CHARGE ANNUAL 12B-1 FEE
<S> <C> <C>
- ------------------------------------------------------------------
A Maximum 4.25% initial sales charge
reduced for purchase of $25,000 or more;
shares sold without an initial sales
charge are generally subject to a 1.0%
CDSC during first year. 0.25%
- ------------------------------------------------------------------
B Maximum 5.0% CDSC during the first year
decreasing to 0% after six years. 0.75%
- ------------------------------------------------------------------
C 1.0% CDSC during first year. 0.75%
- ------------------------------------------------------------------
D None None
- ------------------------------------------------------------------
</TABLE>
(SIDEBAR)
FRONT-END SALES CHARGE
OR FSC
AN INITIAL SALES CHARGE YOU PAY WHEN PURCHASING CLASS A SHARES THAT IS BASED ON
A PERCENTAGE OF THE OFFERING PRICE. THE PERCENTAGE DECLINES BASED UPON THE
DOLLAR VALUE OF CLASS A SHARES YOU PURCHASE. WE OFFER THREE WAYS TO REDUCE YOUR
CLASS A SALES CHARGES - THE COMBINED PURCHASE PRIVILEGE, RIGHT OF ACCUMULATION
AND LETTER OF INTENT.
(END SIDEBAR)
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 purchases of $25,000 or more according to the schedule below.
Investments of $1 million or more are not subject to an initial sales
charge, but are generally subject to a contingent deferred sales
charge, or CDSC, of 1.0% on sales made within one year after the last
day of the month of purchase. The CDSC will be assessed in the same
manner and with the same CDSC waivers as with Class B shares. Class A
shares are also subject to a distribution (12b-1) fee of up to 0.25%
of the average daily net assets of the class.
The offering price of Class A shares includes a sales charge (expressed as a
percentage of the offering price) on a single transaction as shown in the
following table:
<TABLE>
<CAPTION>
FRONT-END SALES CHARGE
----------------------------------------------
PERCENTAGE OF PUBLIC APPROXIMATE PERCENTAGE
AMOUNT OF SINGLE TRANSACTION OFFERING PRICE OF 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 0.00% 0.00%
- ----------------------------------------------------------------------------------------
</TABLE>
The reduced sales charge schedule is applicable to purchases of Class
A shares in a single transaction by:
- A single account (including an individual, trust or fiduciary
account).
- Family member accounts (limited to husband, wife and children under
the age of 21).
- Pension, profit sharing or other employee benefit plans of
companies and their affiliates.
- Tax-exempt organizations.
- Groups organized for a purpose other than to buy mutual fund
shares.
17
<PAGE>
COMBINED PURCHASE PRIVILEGE. You also will have the benefit of
reduced sales charges by combining purchases of Class A shares of the
Fund in a single transaction with purchases of Class A shares of
other TCW/DW multi-class Funds.
RIGHT OF ACCUMULATION. You also may benefit from a reduction of sales
charges if the cumulative net asset value of Class A shares of the
Fund purchased in a single transaction, together with shares of other
TCW/DW Funds you currently own which were previously purchased at a
price including a front-end sales charge (including shares acquired
through reinvestment of distributions), amounts to $25,000 or more.
Also, if you have a cumulative net asset value of all your Class A
and Class D shares equal to at least $5 million (or $25 million for
certain employee benefit plans), you are eligible to purchase Class D
shares of any TCW/DW Fund subject to the Fund's minimum initial
investment requirement.
You must notify your Morgan Stanley Dean Witter Financial Advisor or
other authorized Financial representative (or Morgan Stanley Dean
Witter Trust FSB if you purchase directly through the Fund), at the
time a purchase order is placed, that the purchase qualifies for the
reduced charge under the Right of Accumulation. Similar notification
must be made in writing when an order is placed by mail. The reduced
sales charge will not be granted if: (i) notification is not
furnished at the time of the order; or (ii) a review of the records
of Dean Witter Reynolds or other authorized dealer of Fund shares or
the Fund's transfer agent does not confirm your represented holdings.
LETTER OF INTENT. The schedule of reduced sales charges for larger
purchases also will be available to you if you enter into a written
"letter of intent." A letter of intent provides for the purchase of
Class A shares of the Fund or other TCW/DW Multi-Class Funds. The
initial purchase under a letter of intent must be at least 5% of the
stated investment goal. To determine the applicable sales charge
reduction, you may also include: (1) the cost of shares of other
TCW/DW Multi-Class Funds which were previously purchased at a price
including a front-end sales charge during the 90-day period prior to
the distributor receiving the letter of intent, and (2) the cost of
shares of other Funds you currently own acquired in exchange for
shares of Funds purchased during that period at a price including a
front-end sales charge. You can obtain a letter of intent by
contacting your Morgan Stanley Dean Witter Financial Advisor or other
authorized financial representative, or by calling (800) 869-NEWS. If
you do not achieve the stated investment goal within the
thirteen-month period, you are required to pay the difference between
the sales charges otherwise applicable and sales charges actually
paid.
OTHER FRONT-END SALES CHARGE WAIVERS. In addition to investments of
$1 million or more, your purchase of Class A shares is not subject to
a front-end sales charge (or a CDSC upon sale) if your account
qualifies under one of the following categories:
- A trust for which Morgan Stanley Dean Witter Trust FSB provides
discretionary trustee services.
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or
transfer restrictions on termination) approved by the Fund's
distributor pursuant to which they pay an asset-based fee for
investment advisory, administrative and/or brokerage services.
18
<PAGE>
- Employer-sponsored employee benefit plans, whether or not qualified
under the Internal Revenue Code, for which Morgan Stanley Dean
Witter Trust FSB serves as trustee or Dean Witter Reynolds'
Retirement Plan Services serves as recordkeeper under a written
Recordkeeping Services Agreement ("MSDW Eligible Plans") which have
at least 200 eligible employees.
- A MSDW Eligible Plan whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible
employees.
- A client of a Morgan Stanley Dean Witter Financial Advisor who
joined us from another investment firm within six months prior to
the date of purchase of Fund shares, and you used the proceeds from
the sale of shares of a proprietary mutual fund of that Financial
Advisor's previous firm that imposed either a front-end or deferred
sales charge to purchase Class A shares, provided that: (1) you
sold the shares not more than 60 days prior to the purchase of Fund
shares, and (2) the sale proceeds were maintained in the interim in
(SIDEBAR) cash or a money market fund.
CONTINGENT DEFERRED SALES
CHARGE OR CDSC
A FEE YOU PAY WHEN YOU SELL SHARES OF CERTAIN TCW/DW FUNDS PURCHASED WITHOUT AN
INITIAL SALES CHARGE. THIS FEE DECLINES THE LONGER YOU HOLD YOUR SHARES AS SET
FORTH IN THE TABLE.
(END SIDEBAR)
CLASS B SHARES Class B shares are offered at net asset value with no
initial sales charge but are subject to a contingent deferred sales
charge, or CDSC, as set forth in the table below. For the purpose of
calculating the CDSC, shares are deemed to have been purchased on the
last day of the month during which they were purchased.
<TABLE>
<CAPTION>
CDSC AS A PERCENTAGE
YEAR SINCE PURCHASE 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>
Each time you place an order to sell or exchange shares, shares with
no CDSC will be sold or exchanged first, then shares with the lowest
CDSC will be sold or exchanged next. For any shares subject to a
CDSC, the CDSC will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being sold.
CDSC WAIVERS. A CDSC, if otherwise applicable, will be waived in the
case of:
- Sales of shares held at the time you die or become disabled (within
the definition in section 72(m)(7) of the Internal Revenue Code
which relates to the ability to engage in gainful employment), if
the shares are: (i) registered either in your name (not a trust) or
in the names of you and your spouse as joint tenants with right of
survivorship; or (ii) held in a qualified corporate or
self-employed retirement plan, IRA or 403(b) Custodial Account,
provided in either case that the sale is requested within one year
of your death or initial determination of disability.
19
<PAGE>
- Sales in connection with the following retirement plan
"distributions": (i) lump-sum or other distributions from a
qualified corporate or self-employed retirement plan following
retirement (or, in the case of a "key employee" of a "top heavy"
plan, following attainment of age 59 1/2); (ii) distributions from
an IRA or 403(b) Custodial Account following attainment of age 59
1/2; or (iii) a tax-free return of an excess IRA contribution (a
"distribution" does not include a direct transfer of IRA, 403(b)
Custodial Account or retirement plan assets to a successor
custodian or trustee).
- Sales of shares held for you as a participant in a MSDW Eligible
Plan.
- Sales of shares in connection with the Systematic Withdrawal Plan
of up to 12% annually of the value of each Fund from which plan
sales are made. The percentage is determined on the date you
establish the Systematic Withdrawal Plan and based on the next
calculated share price. You may have this CDSC waiver applied in
amounts up to 1% per month, 3% per quarter, 6% semi-annually or 12%
annually. Shares with no CDSC will be sold first, followed by those
with the lowest CDSC. As such, the waiver benefit will be reduced
by the amount of your shares that are not subject to a CDSC. If you
suspend your participation in the plan, you may later resume plan
payments without requiring a new determination of the account value
for the 12% CDSC waiver.
All waivers will be granted only following the Distributor receiving
confirmation of your entitlement. If you believe you are eligible for
a CDSC waiver, please contact your Financial Advisor or call (800)
869-NEWS.
DISTRIBUTION FEE. Class B shares are subject to an annual 12b-1 fee
of 0.75% of the average daily net assets of Class B.
CONVERSION FEATURE. After ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund with no initial sales
charge. The ten year period runs from the last day of the month in
which the shares were purchased, or in the case of Class B shares
acquired through an exchange, from the last day of the month in which
the original Class B shares were purchased; the shares will convert
to Class A shares based on their relative net asset values in the
month following the ten year period. At the same time, an equal
proportion of Class B shares acquired through automatically
reinvested distributions will convert to Class A shares on the same
basis. (Class B shares held before May 1, 1997, however, will convert
to Class A shares in May 2007.)
In the case of Class B shares held in a MSDW Eligible Plan, the plan
is treated as a single investor and all Class B shares will convert
to Class A shares on the conversion date of the Class B shares of a
TCW/DW Fund purchased by that plan.
Currently, the Class B share conversion is not a taxable event; the
conversion feature may be cancelled if it is deemed a taxable event
in the future by the Internal Revenue Service.
If you exchange your Class B shares for shares of one of the five
Money Market Funds for which Morgan Stanley Dean Witter Advisors
serves as Investment Manager or TCW/DW North American Government
Income Trust, the holding period for conversion is frozen as of the
last day of the month of the exchange and resumes on the last day of
the month you exchange back into Class B shares.
20
<PAGE>
EXCHANGING SHARES SUBJECT TO A CDSC. There are special considerations
when you exchange Fund shares that are subject to a CDSC. When
determining the length of time you held the shares and the
corresponding CDSC rate, any period (starting at the end of the
month) during which you held shares of a fund that does NOT charge a
CDSC WILL NOT BE COUNTED. Thus, in effect the "holding period" for
purposes of calculating the CDSC is frozen upon exchanging into a
Fund that does not charge a CDSC.
For example, if you held Class B shares of the Fund in a regular
account for one year, exchanged to Class B of another TCW/DW
Multi-Class Fund for another year, then sold your shares, a CDSC rate
of 4% would be imposed on the shares based on a two year holding
period -- one year for each Fund. However, if you had exchanged the
shares of the Fund for a Money Market Fund (which does not charge a
CDSC) instead of the TCW/DW Multi-Class Fund, then sold your shares,
a CDSC rate of 5% would be imposed on the shares based on a one year
holding period. The one year in the Money Market Fund would not be
counted. Nevertheless, if shares subject to a CDSC are exchanged for
a Fund that does not charge a CDSC, you will receive a credit when
you sell the shares equal to the distribution (12b-1) fees, if any,
you paid on those shares while in that Fund up to the amount of any
applicable CDSC.
In addition, shares that are exchanged into or from a TCW/DW
Multi-Class Fund subject to a higher CDSC rate will be subject to the
higher rate, even if the shares are re-exchanged into a Fund with a
lower CDSC rate.
CLASS C SHARES Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on sales made
within one year after the last day of the month of purchase. The CDSC
will be assessed in the same manner and with the same CDSC waivers as
with Class B shares.
DISTRIBUTION FEE. Class C shares are subject to an annual
distribution (12b-1) fee of up to 0.75% of the average daily net
assets of that Class. The Class C shares' distribution fee may cause
that Class to have higher expenses and pay lower dividends than Class
A or Class D shares. Unlike Class B shares, Class C shares have no
conversion feature and, accordingly, an investor that purchases Class
C shares may be subject to distribution (12b-1) fees applicable to
Class C shares for an indefinite period.
CLASS D SHARES Class D shares are offered without any sales charge on
purchases or sales and without any distribution (12b-1) fee. Class D
shares are offered only to investors meeting an initial investment
minimum of $5 million ($25 million for MSDW Eligible Plans) and the
following investor categories:
- Investors participating in Morgan Stanley Dean Witter Advisors'
mutual Fund asset allocation program (subject to all of its terms
and conditions, including mandatory sale or transfer restrictions
on termination) pursuant to which they pay an asset-based fee.
21
<PAGE>
- Persons participating in a fee-based investment program (subject to
all of its terms and conditions, including mandatory sale or
transfer restrictions on termination) approved by the Fund's
distributor pursuant to which they pay an asset-based fee for
investment advisory, administrative and/or brokerage services.
- Certain unit investment trusts sponsored by Dean Witter Reynolds.
- Certain other open-end investment companies whose shares are
distributed by the Fund's distributor.
MEETING CLASS D ELIGIBILITY MINIMUMS. To meet the $5 million ($25
million for MSDW Eligible Plans) initial investment to qualify to
purchase Class D shares you may combine: (1) purchases in a single
transaction of Class D shares of the Fund and other TCW/DW
Multi-Class Funds and/or (2) previous purchases of Class A shares of
TCW/DW Multi-Class Funds, TCW/DW North American Government Income
Trust and five Money Market Funds advised by Morgan Stanley Dean
Witter Advisors you currently own.
NO SALES CHARGES FOR REINVESTED CASH DISTRIBUTIONS If you receive a
cash payment representing an income dividend or capital gain and you
reinvest that amount in the applicable Class of shares by returning
the check within 30 days of the payment date, the purchased shares
would not be subject to an initial sales charge or CDSC.
PLAN OF DISTRIBUTION (RULE 12b-1 FEES) The Fund has adopted a Plan of
Distribution in accordance with Rule 12b-1 under the Investment
Company Act of 1940 with respect to the distribution of Class A,
Class B and Class C shares. The Plan allows the Fund to pay
distribution fees for the sale and distribution of these shares. It
also allows the Fund to pay for services to shareholders of Class A,
Class B and Class C shares. Because these fees are paid out of the
Fund's assets on an ongoing basis, over time these fees will increase
the cost of your investment in these Classes and may cost you more
than paying other types of sales charges.
22
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 fiscal years of the Fund. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate an investor would have earned or lost on
an investment in the Fund (assuming reinvestment of all dividends and
distributions).
This information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report,
which is available upon request.
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS C SHARES
- ----------------------------------------------------------------------------------------------------------------------------
FOR THE YEAR ENDED JANUARY 31, 1999++ 1998*++ 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.61 $11.42 $11.13 $9.77 $10.98
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income 0.53 0.57 0.60 0.59 0.59
Net realized and unrealized gain (loss) 0.43 0.96 0.84 1.37 (1.20)
------- ------- -------- -------- -----------
Total income (loss) from investment operations 0.96 1.53 1.44 1.96 (0.61)
- ----------------------------------------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.52 ) (0.60 ) (0.60 ) (0.60 ) (0.55)
Net realized gain (0.60 ) (0.74 ) (0.55 ) -- (0.05)
------- ------- -------- -------- -----------
Total dividends and distributions (1.12 ) (1.34 ) (1.15 ) (0.60 ) (0.60)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.45 $11.61 $ 11.42 $ 11.13 $ 9.77
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.81% 14.03% 13.46% 20.52% (5.59)%
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ----------------------------------------------------------------------------------------------------------------------------
Expenses 2.07 %(1) 2.01% 2.02% 2.21% 2.04%
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 4.65 %(1) 4.84% 5.19% 5.41% 5.83%
- ----------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period, in thousands $47,905 $54,863 $60,941 $57,631 $55,335
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate 103% 96% 102% 79% 88%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
* 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 Morgan Stanley 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
23
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES++
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: JANUARY 31, 1999 THROUGH JANUARY 31, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.60 $11.81
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.59 0.30
Net realized and unrealized gain 0.44 0.39
------ ------
Total income from investment
operations 1.03 0.69
- ---------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.59) (0.33)
Net realized gain (0.60) (0.57)
------ ------
Total dividends and distributions (1.19) (0.90)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $11.44 $11.60
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.45% 6.03%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 1.56%(3) 1.54%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 5.16%(3) 5.04%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $89 $28
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 103% 96%
- ---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES++
- ---------------------------------------------------------------------------------------------
SELECTED PER SHARE DATA:
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.60 $11.81
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.53 0.28
Net realized and unrealized gain 0.43 0.38
------ ------
Total income from investment
operations 0.96 0.66
- ---------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.52) (0.30)
Net realized gain (0.60) (0.57)
------ ------
Total dividends and distributions (1.12) (0.87)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $11.44 $11.60
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 8.85% 5.80%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 2.08%(3) 2.02%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 4.64%(3) 4.58%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $8,924 $6,597
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 103% 96%
- ---------------------------------------------------------------------------------------------
</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 data 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
24
<PAGE>
<TABLE>
<CAPTION>
CLASS D SHARES++
- ---------------------------------------------------------------------------------------------
FOR THE YEAR ENDED FOR THE PERIOD JULY 28, 1997*
SELECTED PER SHARE DATA: OCTOBER 31, 1998 THROUGH JANUARY 31, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------------------------
Net asset value, beginning of period $11.61 $11.81
- ---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.62 0.32
Net realized and unrealized gain 0.43 0.39
------ ------
Total income from investment
operations 1.05 0.71
- ---------------------------------------------------------------------------------------------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.61) (0.34)
Net realized gain (0.60) (0.57)
------ ------
Total dividends and distributions (1.21) (0.91)
- ---------------------------------------------------------------------------------------------
Net asset value, end of period $11.45 $11.61
- ---------------------------------------------------------------------------------------------
TOTAL RETURN+ 9.64% 6.21%(1)
- ---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS:
- ---------------------------------------------------------------------------------------------
Expenses 1.33%(3) 1.27%(2)
- ---------------------------------------------------------------------------------------------
Net investment income 5.39%(3) 5.33%(2)
- ---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------
Net assets, end of period, in
thousands $12 $11
- ---------------------------------------------------------------------------------------------
Portfolio turnover rate 103% 96%
- ---------------------------------------------------------------------------------------------
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
25
<PAGE>
NOTES
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26
<PAGE>
PROSPECTUS - , 1999
Additional information about the Fund's investments is available in the Fund's
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. In the Fund's ANNUAL REPORT, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year. The
Fund's STATEMENT OF ADDITIONAL INFORMATION also provides additional information
about the Fund. The STATEMENT OF ADDITIONAL INFORMATION is incorporated herein
by reference (legally is part of this PROSPECTUS). For a free copy of any of
these documents, to request other information about the Fund, or to make
shareholder inquiries, please call:
(800) 869-NEWS
You also may obtain information about the Fund by calling your Morgan Stanley
Dean Witter Financial Advisor or by visiting our Internet site at:
WWW.DEANWITTER.COM/FUNDS
Information about the Fund (including the STATEMENT OF ADDITIONAL INFORMATION)
can be viewed and copied at the Securities and Exchange Commission's Public
Reference Room in Washington, DC. Information about the Reference Room's
operations may be obtained by calling the SEC at (800) SEC-0330. Reports and
other information about the Fund are available on the SEC's Internet site
(www.sec.gov) and copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Section of the SEC, Washington,
DC 20549-6009.
TCW/DW
INCOME AND GROWTH FUND
[BACK COVER PHOTO]
TICKER SYMBOLS:
CLASS A: TIGAX CLASS C: TIGCX
- -------------------- --------------------
CLASS B: TIGBX CLASS D: TIGDX
- -------------------- --------------------
(TCW/DW INCOME AND GROWTH FUND;
INVESTMENT COMPANY ACT FILE NO. 811-7372)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION TCW/DW
MAY , 1999 INCOME AND
GROWTH FUND
- --------------------------------------------------------------------------------
This STATEMENT OF ADDITIONAL INFORMATION is not a PROSPECTUS. The PROSPECTUS
dated May , 1999 for TCW/DW Income and Growth Fund may be obtained without
charge from the Fund at its address or telephone number listed below or from
Dean Witter Reynolds at any of its branch offices.
TCW/DW Income and Growth Fund
Two World Trade Center
New York, New York 10048
(800) 869-NEWS
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
I. Fund History........................................................................ 4
II. Description of the Fund and Its Investments and Risks.............................. 4
A. Classification.................................................................... 4
B. Investment Strategies and Risks................................................... 4
C. Fund Policies/Investment Restrictions............................................. 12
III. Management of the Fund............................................................ 13
A. Board of Trustees................................................................. 13
B. Management Information............................................................ 13
C. Compensation...................................................................... 18
IV. Control Persons and Principal Holders of Securities................................ 20
V. Management, Investment Advice and Other Services.................................... 20
A. Manager........................................................................... 20
B. The Adviser....................................................................... 20
C. Principal Underwriter............................................................. 20
D. Services Provided by the Manager, the Adviser and Fund Expenses Paid by Third
Parties............................................................................. 21
E. Dealer Reallowances............................................................... 22
F. Rule 12b-1 Plan................................................................... 22
G. Other Service Providers........................................................... 26
VI. Brokerage Allocation and Other Practices........................................... 27
A. Brokerage Transactions............................................................ 27
B. Commissions....................................................................... 27
C. Brokerage Selection............................................................... 27
D. Directed Brokerage................................................................ 28
E. Regular Broker-Dealers............................................................ 28
VII. Capital Stock and Other Securities................................................ 28
VIII. Purchase, Redemption and Pricing of Shares....................................... 29
A. Purchase of Shares................................................................ 29
B. Offering Price.................................................................... 30
IX. Taxation of the Fund and Shareholders.............................................. 30
X. Underwriters........................................................................ 32
XI. Calculation of Performance Data.................................................... 32
XII. Financial Statements.............................................................. 34
</TABLE>
2
<PAGE>
GLOSSARY OF SELECTED DEFINED TERMS
- --------------------------------------------------------------------------------
The terms defined in this glossary are frequently used in this STATEMENT OF
ADDITIONAL INFORMATION (other terms used occasionally are defined in the text of
the document).
"ADVISER"--TCW Funds Management, Inc., a wholly-owned subsidiary of TCW.
"CUSTODIAN"--The Bank of New York.
"DEAN WITTER REYNOLDS"--Dean Witter Reynolds Inc., a wholly-owned broker-dealer
subsidiary of MSDW.
"DISTRIBUTOR"--Morgan Stanley Dean Witter Distributors Inc., a wholly-owned
broker-dealer subsidiary of MSDW.
"FINANCIAL ADVISORS"--Morgan Stanley Dean Witter authorized financial services
representatives.
"FUND"--TCW/DW Income and Growth Fund, a registered open-end investment company.
"INDEPENDENT TRUSTEES"--Trustees who are not "interested persons" (as defined by
the Investment Company Act) of the Fund.
"MANAGER"--Morgan Stanley Dean Witter Services Company Inc., a wholly-owned
subsidiary of Morgan Stanley Dean Witter Advisors Inc. The Manager may also be
referred to as MSDW Services Company.
"MORGAN STANLEY & CO."--Morgan Stanley & Co. Incorporated, a wholly-owned
broker-dealer subsidiary of MSDW.
"MORGAN STANLEY DEAN WITTER FUNDS"--Registered investment companies (i) for
which the MSDW Advisors serves as the investment advisor; and (ii) that hold
themselves out to investors as related companies for investment and investor
services.
"MSDW"--Morgan Stanley Dean Witter & Co., a preeminent global financial services
firm.
"MSDW ADVISORS"--Morgan Stanley Dean Witter Advisors, Inc., a wholly-owned
investment advisor subsidiary of MSDW.
"TCW"--The TCW Group, Inc., a preeminent investment management and investment
advisory services firm.
"TCW/DW FUNDS"--The registered investment companies managed by the Manager and
advised by the Adviser.
"TRANSFER AGENT"--Morgan Stanley Dean Witter Trust FSB, a wholly-owned transfer
agent subsidiary of MSDW.
"TRUSTEES"--The Board of Trustees of the Fund.
3
<PAGE>
I. FUND HISTORY
- --------------------------------------------------------------------------------
The Fund was organized under the laws of the Commonwealth of Massachusetts
on November 23, 1992 as a Massachusetts business trust.
II. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS
- --------------------------------------------------------------------------------
A. CLASSIFICATION
The Fund is an open-end, non-diversified management investment company whose
investment objective is to generate high total return by providing a high level
of current income and the potential for capital appreciation.
B. INVESTMENT STRATEGIES AND RISKS
The following discussion of the Fund's investment strategies and risks
should be read with the sections of the Fund's PROSPECTUS titled "Principal
Investment Strategies," "Principal Risks," "Additional Investment Strategy
Information" and "Additional Risk Information."
MONEY MARKET SECURITIES. In addition to the short-term fixed-income
securities in which the Fund may otherwise invest, the Fund may invest in
various money market securities for cash management purposes or when assuming a
temporary defensive position, which among others may include commercial paper,
bank acceptances, bank obligations, corporate debt securities, certificates of
deposit, U.S. Government securities and obligations of savings institutions and
repurchase agreements. Such securities are limited to:
U.S. GOVERNMENT SECURITIES. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
BANK OBLIGATIONS. Obligations (including certificates of deposit and
bankers' acceptances) of banks subject to regulation by the U.S. Government and
having total assets of $1 billion or more, and instruments secured by such
obligations, not including obligations of foreign branches of domestic banks
except to the extent below;
EURODOLLAR CERTIFICATES OF DEPOSIT. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more;
OBLIGATIONS OF SAVINGS INSTITUTIONS. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more;
FULLY INSURED CERTIFICATES OF DEPOSIT. Certificates of deposit of banks and
savings institutions having total assets of less than $1 billion, if the
principal amount of the obligation is federally insured by the Bank Insurance
Fund or the Savings Association Insurance Fund (each of which is administered by
the FDIC), limited to $100,000 principal amount per certificate and to 15% or
less of the Fund's total assets in all such obligations and in all illiquid
assets, in the aggregate;
COMMERCIAL PAPER. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation ("S&P") or the two highest grade by Moody's
Investor's Service, Inc. ("Moody's") or, if not rated, issued by a company
having an outstanding debt issue rated at least AAA by S&P or Aaa by Moody's;
and
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. When
cash may be available for only a few days, it may be invested by the Fund in
repurchase agreements until such time as it may otherwise be invested or used
for payments of obligations of the Fund. These agreements, which may be viewed
as a type of secured lending by the Fund, typically involve the acquisition, by
the Fund, of debt securities from a selling financial institution such as a
bank, savings and loan association or broker-dealer. The agreement provides that
the Fund will sell back to the institution, and that the institution will
4
<PAGE>
repurchase, the underlying security serving as collateral at a specified price
and at a fixed time in the future, usually not more than seven days from the
date of purchase. The collateral will be marked-to-market daily to determine
that the value of the collateral, as specified in the agreement, does not
decrease below the purchase price plus accrued interest. If such decrease
occurs, additional collateral will be requested and, when received, added to the
account to maintain full collateralization. The Fund will accrue interest from
the institution until the time when the repurchase is to occur. Although this
date is deemed by the Fund to be the maturity date of a repurchase agreement,
the maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Adviser subject to
procedures established by the Trustees. In addition, as described above, the
value of the collateral underlying the repurchase agreement will be at least
equal to the repurchase price, including any accrued interest earned on the
repurchase agreement. In the event of a default or bankruptcy by a selling
financial institution, the Fund will seek to liquidate such collateral. However,
the exercising of the Fund's right to liquidate such collateral could involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase were less than the repurchase price, the
Fund could suffer a loss. It is the current policy of the Fund not to invest in
repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 15% of its net assets.
OPTION AND FUTURES TRANSACTIONS. The Fund may engage in transactions in
listed and OTC options. Listed options are issued or guaranteed by the exchange
on which they are traded or by a clearing corporation such as the Options
Clearing Corporation ("OCC"). Ownership of a listed call option gives the Fund
the right to buy from the OCC (in the U.S.) or other clearing corporation or
exchange, the underlying security or currency covered by the option at the
stated exercise price (the price per unit of the underlying security) by filing
an exercise notice prior to the expiration date of the option. The writer
(seller) of the option would then have the obligation to sell to the OCC (in the
U.S.) or other clearing corporation or exchange, the underlying security or
currency at that exercise price prior to the expiration date of the option,
regardless of its then current market price. Ownership of a listed put option
would give the Fund the right to sell the underlying security or currency to the
OCC (in the U.S.) or other clearing corporation or exchange, at the stated
exercise price. Upon notice of exercise of the put option, the writer of the put
would have the obligation to purchase the underlying security or currency from
the OCC (in the U.S.) or other clearing corporation or exchange, at the exercise
price.
COVERED CALL WRITING. The Fund is permitted to write covered call options
on portfolio securities and on the U.S. dollar, without limit.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium;" i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (or currency) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (or currencies) underlying the option decline in value.
The Fund may be required, at any time during the option period, to deliver
the underlying security (or currency) against payment of the exercise price on
any calls it has written. This obligation is terminated upon the expiration of
the option period or at such earlier time when the writer effects a closing
purchase transaction. A closing purchase transaction is accomplished by
purchasing an option of the same series as the option previously written.
However, once the Fund has been assigned an exercise notice, the Fund will be
unable to effect a closing purchase transaction.
Options written by the Fund normally have expiration dates of from up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
(or currency) at the time the option is written.
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COVERED PUT WRITING. If the Fund writes a covered put option, the Fund
incurs an obligation to buy the security underlying the option from the
purchaser of the put, at the option's exercise price at any time during the
option period, at the purchaser's election. Through the writing of a put option,
the Fund would receive income from the premium paid by purchasers. The potential
gain on a covered put option is limited to the premium received on the option
(less the commissions paid on the transaction). During the option period, the
Fund may be required, at any time, to make payment of the exercise price against
delivery of the underlying security (or currency). The aggregate value of the
obligations underlying puts may not exceed 50% of the Fund's assets. The
operation of and limitations on covered put options in other respects are
substantially identical to those of call options.
PURCHASING CALL AND PUT OPTIONS. The Fund may purchase listed and OTC call
and put options in amounts equaling up to 5% of its total assets. The purchase
of a call option would enable the Fund, in return for the premium paid to lock
in a purchase price for a security or currency during the term of the option.
The purchase of a put option would enable the Fund, in return for a premium
paid, to lock in a price at which it may sell a security or currency during the
term of the option.
OTC OPTIONS. OTC options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with the Fund.
With OTC options, such variables as expiration date, exercise price and premium
will be agreed upon between the Fund and the transacting dealer, without the
intermediation of a third party such as the OCC. The Fund will engage in OTC
option transactions only with member banks of the Federal Reserve Bank System or
primary dealers in U.S. Government securities or with affiliates of such banks
or dealers. The Fund will engage in OTC option transactions only with member
banks of the Federal Reserve System or primary dealers in U.S. Government
securities or with affiliates of such banks or dealers which have capital of at
least $50 million or whose obligations are guaranteed by an entity having
capital of at least $50 million.
RISKS OF OPTIONS TRANSACTIONS. The successful use of options depends on the
ability of the Adviser to forecast correctly interest rates, currency exchange
rates and/or market movements. If the market value of the portfolio securities
(or the currencies in which they are denominated) upon which call options have
been written increases, the Fund may receive a lower total return from the
portion of its portfolio upon which calls have been written than it would have
had such calls not been written. During the option period, the covered call
writer has, in return for the premium on the option, given up the opportunity
for capital appreciation above the exercise price should the market price of the
underlying security (or the value of its denominated currency) increase, but has
retained the risk of loss should the price of the underlying security (or the
value of its denominated currency) decline. The covered put writer also retains
the risk of loss should the market value of the underlying security decline
below the exercise price of the option less the premium received on the sale of
the option. In both cases, the writer has no control over the time when it may
be required to fulfill its obligation as a writer of the option. Prior to
exercise or expiration, an option position can only be terminated by entering
into a closing purchase or sale transaction. Once an option writer has received
an exercise notice, it cannot effect a closing purchase transaction in order to
terminate its obligation under the option and must deliver or receive the
underlying securities at the exercise price.
The Fund's ability to close out its position as a writer of an option is
dependent upon the existence of a liquid secondary market on option exchanges.
There is no assurance that such a market will exist, particularly in the case of
OTC options.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. In the case of OTC
options, if the transacting dealer fails to make or take delivery of the
securities underlying an option it has written, in accordance with the terms of
that option, due to insolvency or otherwise, the Fund would lose the premium
paid for the option as well as any anticipated benefit of the transaction.
Each of the exchanges has established limitations governing the maximum
number of call or put options on the same underlying security which may be
written by a single investor, whether acting alone
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or in concert with others (regardless of whether such options are written on the
same or different exchanges or are held or written on one or more accounts or
through one or more brokers). An exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
STOCK INDEX OPTIONS. The Fund may invest in options on broadly based
indexes. Options on stock indexes are similar to options on stock except that,
rather than the right to take or make delivery of stock at a specified price, an
option on a stock index gives the holder the right to receive, upon exercise of
the option, an amount of cash if the closing level of the stock index upon which
the option is based is greater than, in the case of a call, or less than, in the
case of a put, the exercise price of the option. This amount of cash is equal to
such difference between the closing price of the index and the exercise price of
the option expressed in dollars times a specified multiple. The writer of the
option is obligated, in return for the premium received, to make delivery of
this amount.
RISKS OF OPTIONS ON INDEXES. Because exercises of stock index options are
settled in cash, the Fund could not, if it wrote a call option, provide in
advance for its potential settlement obligations by acquiring and holding the
underlying securities. A call writer can offset some of the risk of its writing
position by holding a diversified portfolio of stocks similar to those on which
the underlying index is based. However, most investors cannot, as a practical
matter, acquire and hold a portfolio containing exactly the same stocks as the
underlying index, and, as a result, bear a risk that the value of the securities
held will vary from the value of the index. Even if an index call writer could
assemble a stock portfolio that exactly reproduced the composition of the
underlying index, the writer still would not be fully covered from a risk
standpoint because of the "timing risk" inherent in writing index options.
When an index option is exercised, the amount of cash that the holder is
entitled to receive is determined by the difference between the exercise price
and the closing index level on the date when the option is exercised. As with
other kinds of options, the writer will not learn that it had been assigned
until the next business day, at the earliest. The time lag between exercise and
notice of assignment poses no risk for the writer of a covered call on a
specific underlying security, such as a common stock, because there the writer's
obligation is to deliver the underlying security, not to pay its value as of a
fixed time in the past. So long as the writer already owns the underlying
security, it can satisfy its settlement obligations by simply delivering it, and
the risk that its value may have declined since the exercise date is borne by
the exercising holder. In contrast, even if the writer of an index call holds
stocks that exactly match the composition of the underlying index, it will not
be able to satisfy its assignment obligations by delivering those stocks against
payment of the exercise price. Instead, it will be required to pay cash in an
amount based on the closing index value on the exercise date; and by the time it
learns that it has been assigned, the index may have declined, with a
corresponding decrease in the value of its stock portfolio. This "timing risk"
is an inherent limitation on the ability of index call writers to cover their
risk exposure by holding stock positions.
A holder of an index option who exercises it before the closing index value
for that day is available runs the risk that the level of the underlying index
may subsequently change. If a change causes the exercised option to fall
out-of-the-money, the exercising holder will be required to pay the difference
between the closing index value and the exercise price of the option (times the
applicable multiplier) to the assigned writer.
If dissemination of the current level of an underlying index is interrupted,
or if trading is interrupted in stocks accounting for a substantial portion of
the value of an index, the trading of options on that index will ordinarily be
halted. If the trading of options on an underlying index is halted, an exchange
may impose restrictions prohibiting the exercise of such options.
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FUTURES CONTRACTS. The Fund may purchase and sell interest rate, currency
and index futures contracts that are traded on U.S. commodity exchanges on such
underlying securities as U.S. Treasury bonds, notes, bills and GNMA Certificates
and/or any foreign government fixed-income security, on various currencies and
on such indexes of U.S. securities as may exist or come into existence.
A futures contract purchaser incurs an obligation to take delivery of a
specified amount of the obligation underlying the contract at a specified time
in the future for a specified price. A seller of a futures contract incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price. The purchase of a futures
contract enables the Fund, during the term of the contract, to lock in a price
at which it may purchase a security or currency and protect against a rise in
prices pending purchase of portfolio securities. The sale of a futures contract
enables the Fund to lock in a price at which it may sell a security or currency
and protect against declines in the value of portfolio securities.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio securities against changes in their prices.
If the Adviser anticipates that the prices of securities held by the Fund may
fall, the Fund may sell an index futures contract. Conversely, if the Fund
wishes to hedge against anticipated price rises in those securities which the
Fund intends to purchase, the Fund may purchase an index futures contract.
In addition, interest rate, index futures will be bought or sold in order to
close out a short or long position maintained by the Fund in a corresponding
futures contract.
Although most futures contracts call for actual delivery or acceptance of
securities, the contracts usually are closed out before the settlement date
without the making or taking of delivery. Index futures contracts provide for
the delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the open or close of the last trading day
of the contract and the futures contract price. A futures contract sale is
closed out by effecting a futures contract purchase for the same aggregate
amount of the specific type of security (currency) and the same delivery date.
If the sale price exceeds the offsetting purchase price, the seller would be
paid the difference and would realize a gain. If the offsetting purchase price
exceeds the sale price, the seller would pay the difference and would realize a
loss. Similarly, a futures contract purchase is closed out by effecting a
futures contract sale for the same aggregate amount of the specific type of
security (currency) and the same delivery date. If the offsetting sale price
exceeds the purchase price, the purchaser would realize a gain, whereas if the
purchase price exceeds the offsetting sale price, the purchaser would realize a
loss. There is no assurance that the Fund will be able to enter into a closing
transaction.
MARGIN. If the Fund enters into a futures contract, it is initially
required to deposit an "initial margin" of cash or U.S. Government securities or
other liquid portfolio securities ranging from approximately 2% to 5% of the
contract amount. Initial margin requirements are established by the exchanges on
which futures contracts trade and may, from time to time, change. In addition,
brokers may establish margin deposit requirements in excess of those required by
the exchanges.
Initial margin in futures transactions is different from margin in
securities transactions in that initial margin does not involve the borrowing of
funds by a broker's client but is, rather, a good faith deposit on the futures
contract which will be returned to the Fund upon the proper termination of the
futures contract. The margin deposits made are marked to market daily and the
Fund may be required to make subsequent deposits of cash or U.S. Government
securities, called "variation margin," which are reflective of price
fluctuations in the futures contract.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and write call and put
options on futures contracts and enter into closing transactions with respect to
such options to terminate an existing position. An option on a futures contract
gives the purchaser the right (in return for the premium paid), and the writer
the obligation, to assume a position in a futures contract (a long position if
the option is a call and a short position if the option is a put) at a specified
exercise price at any time during the term of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to
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the holder of the option is accompanied by delivery of the accumulated balance
in the writer's futures margin account, which represents the amount by which the
market price of the futures contract at the time of exercise exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of the
option on the futures contract.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
LIMITATIONS ON FUTURES CONTRACTS AND OPTIONS 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 net
assets which may be subject to a hedge position.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS. The prices
of securities and indexes subject to futures contracts (and thereby the futures
contract prices) may correlate imperfectly with the behavior of the cash prices
of the Fund's portfolio securities (and the currencies in which they are
denominated). Also, prices of futures contracts may not move in tandem with the
changes in prevailing interest rates, market movements and/or currency exchange
rates against which the Fund seeks a hedge. A correlation may also be distorted
(a) temporarily, by short-term traders' seeking to profit from the difference
between a contract or security price objective and their cost of borrowed funds;
(b) by investors in futures contracts electing to close out their contracts
through offsetting transactions rather than meet margin deposit requirements;
(c) by investors in futures contracts opting to make or take delivery of
underlying securities rather than engage in closing transactions, thereby
reducing liquidity of the futures market; and (d) temporarily, by speculators
who view the deposit requirements in the futures markets as less onerous than
margin requirements in the cash market. Due to the possibility of price
distortion in the futures market and because of the possible imperfect
correlation between movements in the prices of securities and movements in the
prices of futures contracts, a correct forecast of interest rate, currency
exchange rate and/or market movement trends by the Adviser may still not result
in a successful hedging transaction.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which the Fund may invest. In the event a
liquid market does not exist, it may not be possible to close out a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin. In addition,
limitations imposed by an exchange or board of trade on which futures contracts
are traded may compel or prevent the Fund from closing out a contract which may
result in reduced gain or increased loss to the Fund. The absence of a liquid
market in futures contracts might cause the Fund to make or take delivery of the
underlying securities (currencies) at a time when it may be disadvantageous to
do so.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In these situations, if the Fund has insufficient cash, it may have
to sell portfolio securities to meet daily variation margin requirements at a
time when it may be disadvantageous to do so. In addition, the Fund may be
required to take or make delivery of the instruments underlying interest rate
futures contracts it holds at a time when it is disadvantageous to do so. The
inability to close out options and futures positions could also have an adverse
impact on the Fund's ability to effectively hedge its portfolio.
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Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its margin deposits with the broker.
ZERO COUPON SECURITIES. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive their
full value at maturity. The interest earned on such securities is, implicitly,
automatically compounded and paid out at maturity. While such compounding at a
constant rate eliminates the risk of receiving lower yields upon reinvestment of
interest if prevailing interest rates decline, the owner of a zero coupon
security will be unable to participate in higher yields upon reinvestment of
interest received on interest-paying securities if prevailing interest rates
rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will not
receive current cash available for distribution to shareholders. In addition,
zero coupon securities are subject to substantially greater price fluctuations
during periods of changing prevailing interest rates than are comparable
securities which pay interest on a current basis. Current federal tax law
requires that a holder (such as the Fund) of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year
even though the Fund receives no interest payments in cash on the security
during the year.
LENDING PORTFOLIO SECURITIES. The Fund may lend its portfolio securities to
brokers, dealers and other financial institutions, provided that the loans are
callable at any time by the Fund, and are at all times secured by cash or cash
equivalents, which are maintained in a segregated account pursuant to applicable
regulations and that are equal to at least 100% of the market value, determined
daily, of the loaned securities. The advantage of these loans is that the Fund
continues to receive the income on the loaned securities while at the same time
earning interest on the cash amounts deposited as collateral, which will be
invested in short-term obligations. The Fund will not lend more than 25% of the
value of its total assets.
As with any extensions of credit, there are risks of delay in recovery and,
in some cases, even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities will
only be made to firms deemed by the Fund's management to be creditworthy and
when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of the rights
if the matters involved would have a material effect on the Fund's investment in
the loaned securities. The Fund will pay reasonable finder's, administrative and
custodial fees in connection with a loan of its securities.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. The
Fund may purchase securities on a when-issued or delayed delivery basis or may
purchase or sell securities on a forward commitment basis. When these
transactions are negotiated, the price is fixed at the time of the commitment,
but delivery and payment can take place a month or more after the date of
commitment.
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While the Fund will only purchase securities on a when-issued, delayed delivery
or forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. The securities so purchased or sold are subject to market fluctuation
and no interest or dividends accrue to the purchaser prior to the settlement
date.
At the time the Fund makes the commitment to purchase or sell securities on
a when-issued, delayed delivery or forward commitment basis, it will record the
transaction and thereafter reflect the value, each day, of such security
purchased, or if a sale, the proceeds to be received, in determining its net
asset value. At the time of delivery of the securities, their value may be more
or less than the purchase or sale price. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a when-issued, delayed
delivery or forward commitment basis may increase the volatility of its net
asset value. The Fund will also establish a segregated account on the Fund's
books in which it will continually maintain cash or cash equivalents or other
liquid portfolio securities equal in value to commitments to purchase securities
on a when-issued, delayed delivery or forward commitment basis.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
corporate reorganization or debt restructuring. The commitment for the purchase
of any such security will not be recognized in the portfolio of the Fund until
the Adviser determines that issuance of the security is probable. At that time,
the Fund will record the transaction and, in determining its net asset value,
will reflect the value of the security daily. At that time, the Fund will also
establish a segregated account on the Fund's books in which it will maintain
cash or cash equivalents or other liquid portfolio securities equal in value to
recognized commitments for such securities.
An increase in the percentage of the Fund's assets committed to the purchase
of securities on a "when, as and if issued" basis may increase the volatility of
its net asset value. The Fund may also sell securities on a "when, as and if
issued" basis provided that the issuance of the security will result
automatically from the exchange or conversion of a security owned by the Fund at
the time of sale.
PRIVATE PLACEMENTS AND RESTRICTED SECURITIES. The Fund may invest up to 15%
of its net assets in securities which are subject to restrictions on resale
because they have not been registered under the Securities Act of 1933 (the
"Securities Act"), or which are otherwise not readily marketable. (Securities
eligible for resale pursuant to Rule 144A under the Securities Act, and
determined to be liquid pursuant to the procedures discussed in the following
paragraph, are not subject to the foregoing restriction.) These securities are
generally referred to as "private placements" or "restricted securities."
Limitations on the resale of these securities may have an adverse effect on
their marketability, and may prevent the Fund from disposing of them promptly at
reasonable prices. The Fund may have to bear the expense of registering the
securities for resale and the risk of substantial delays in effecting the
registration.
Rule 144A permits the Fund to sell restricted securities to qualified
institutional buyers without limitation. The Adviser, pursuant to procedures
adopted by the Trustees, will make a determination as to the liquidity of each
restricted security purchased by the Fund. If a restricted security is
determined to be "liquid," the security will not be included within the category
"illiquid securities," which under current policy may not exceed 15% of the
Fund's net assets. However, investing in Rule 144A securities could have the
effect of increasing the level of Fund illiquidity to the extent the Fund, at a
particular point in time, may be unable to find qualified institutional buyers
interested in purchasing such securities.
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
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own computer systems to prepare for the year 2000 and expect that their systems
will be adapted before that date, but there can be no assurance that they will
be successful, or that interaction with other non-complying computer systems
will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic uncertainties.
Earnings of individual issuers will be affected by remediation costs, which may
be substantial and may be reported inconsistently in U.S. and foreign financial
statements. Accordingly, the Fund's investments may be adversely affected.
C. FUND POLICIES/INVESTMENT RESTRICTIONS
The investment objective, policies and restrictions listed below have been
adopted by the Fund as fundamental policies. Under the Investment Company Act of
1940 (the "Investment Company Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund.
The Investment Company Act defines a majority as the lesser of (a) 67% or more
of the shares present at a meeting of shareholders, if the holders of 50% of the
outstanding shares of the Fund are present or represented by proxy; or (b) more
than 50% of the outstanding shares of the Fund. For purposes of the following
restrictions: (i) all percentage limitations apply immediately after a purchase
or initial investment; and (ii) any subsequent change in any applicable
percentage resulting from market fluctuations or other changes in total or net
assets does not require elimination of any security from the portfolio.
The Fund will:
1. Seek to generate high total return by providing a high level of
current income and the potential for capital appreciation.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than 3 years
of continuous operation. This restriction does not apply to any obligation
of the United States Government, its agencies or instrumentalities.
3. Purchase or sell real estate or interests therein (including
limited partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
4. Purchase oil, gas or other mineral leases, rights or royalty
contracts, or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
these programs.
5. Purchase or sell commodities or commodities contracts except that
the Fund may purchase or sell futures contracts or options on futures.
6. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes, in amounts not exceeding 5% taken at the
lower of cost or current value of its total assets (not including the amount
borrowed).
7. Pledge its assets or assign or otherwise encumber them except to
secure permitted borrowings effected within the restrictions set forth in
restriction six. 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.
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8. Issue senior securities as defined in the Investment Company Act,
except insofar as the Fund may be deemed to have issued a senior security by
reason of: (a) entering into any repurchase agreement; (b) purchasing any
securities on a when-issued or delayed delivery basis; (c) purchasing or
selling any financial futures contracts or options thereon; (d) borrowing
money; or (e) lending portfolio securities.
9. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objectives and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
10. Make short sales of securities.
11. Purchase securities on margin, except for short-term loans as are
necessary for the clearance of portfolio securities. The deposit or payment
by the Fund of initial or variation margin in connection with futures
contracts or related options thereon is not considered the purchase of a
security on margin.
12. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act 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.)
13. Invest for the purpose of exercising control or management of any
other issuer.
As a non-fundamental policy, as to 75% of its total assets, the Fund may not
purchase more than 10% of the voting securities of any one issuer.
As a non-fundamental 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
Investment Company Act.
III. MANAGEMENT OF THE FUND
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A. BOARD OF TRUSTEES
The Board of Trustees of the Fund oversees the management of the Fund but
does not itself manage the Fund. The Trustees review various services provided
by or under the direction of the Adviser to ensure that the Fund's general
investment policies and programs are properly carried out. The Trustees also
conduct their review of the Manager to ensure that administrative services are
provided to the Fund in a satisfactory manner.
Under state law, the duties of the Trustees are generally characterized as a
duty of loyalty and a duty of care. The duty of loyalty requires a Trustee to
exercise his or her powers in the interest of the Fund and not the Trustee's own
interest or the interest of another person or organization. A Trustee satisfies
his or her duty of care by acting in good faith with the care of an ordinarily
prudent person and in a manner the Trustee reasonably believes to be in the best
interest of the Fund and its shareholders.
B. MANAGEMENT INFORMATION
TRUSTEES AND OFFICERS. The Board of the Fund consists of eight (8)
Trustees. These same individuals also serve as trustees for all of the TCW/DW
Funds. Four Trustees (50% of the total number) have no
13
<PAGE>
affiliation or business connection with the Manager or Adviser or any of their
affiliated persons and do not own any stock or other securities issued by the
Manager's parent company, MSDW or the Adviser's parent company, TCW. These are
the "disinterested" or "independent" Trustees. The other four Trustees (the
"Management Trustees") are affiliated with the Manager or Adviser. The four
Independent Trustees also serve as Independent Trustees of "Discover Brokerage
Index Series" a mutual fund for which the Manager is the investment advisor.
Three of the four Independent Trustees are also Independent Trustees of the
Morgan Stanley Dean Witter Funds.
The Trustees and executive officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Manager or the Adviser, and with the 84 Morgan Stanley Dean Witter Funds, the 11
TCW/DW Funds and Discover Brokerage Index Series are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
John C. Argue (67) ........................... Of Counsel, Argue Pearson Harbison & Myers (law firm); Trustee of
Trustee the TCW/DW Funds; Director, Avery Dennison Corporation
c/o Argue Pearson Harbison & Myers (manufacturer of self-adhesive products and office supplies);
801 South Flower Street Chairman, The Rio Hondo Memorial Foundation (charitable
Los Angeles, California foundation); advisory director, LAACO Ltd. (owner and operator of
private clubs and real estate); director or trustee of various
business and not-for-profit corporations; Director, TCW Galileo
Funds, Inc.; Director, TCW Convertible Securities Fund, Inc.;
Director, Apex Mortgage Capital, Inc. and Nationwide Health
Properties, Inc. (real estate investment trusts).
Richard M. DeMartini* (46) ................... President and Chief Operating Officer of Morgan Stanley Dean
Trustee Witter Individual Asset Management Group, a business unit of MSDW;
Two World Trade Center President and Chief Operating Officer of Dean Witter Reynolds;
New York, New York Trustee of the TCW/DW Funds and the Van Kampen American Capital
Funds; Director and/or officer of various MSDW subsidiaries;
formerly Vice Chairman of the Board of the National Association of
Securities Dealers, Inc.; and Chairman of the Board of Directors
of the NASDAQ Market, Inc.
Charles A. Fiumefreddo* (65) ................. Chairman, Chief Executive Officer and Trustee of the TCW/DW Funds;
Chairman of the Board, President, Chairman, Director or Trustee, President and Chief Executive
Chief Executive Officer and Trustee Officer of the Morgan Stanley Dean Witter Funds; Trustee of
Two World Trade Center Discover Brokerage Index Series; formerly Chairman, Chief
New York, New York Executive Officer and Director of the Manager, the Distributor and
MSDW Advisors; Executive Vice President and Director of Dean
Witter Reynolds; Chairman and Director of the Transfer Agent;
formerly Director and/or officer of various MSDW subsidiaries
(until June, 1998).
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
Dr. Manuel H. Johnson (50) ................... Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Co-Chairman and a founder of the Group of Seven Council
c/o Johnson Smick International, Inc. (G7C), an international economic commission; Trustee of the TCW/DW
1133 Connecticut Avenue, N.W. Funds; Director or Trustee of the Morgan Stanley Dean Witter
Washington, D.C. Funds; Trustee of Discover Brokerage Index Series; Director of
NASDAQ, Greenwich Capital Markets, Inc. (broker-dealer) and NVR,
Inc. (home construction); Chairman and Trustee of the Financial
Accounting Foundation (oversight organization of the Financial
Accounting Standards Board); formerly Vice Chairman of the Board
of Governors of the Federal Reserve System (1986-1990) and
Assistant Secretary of the U.S. Treasury.
Thomas E. Larkin, Jr.* (59) .................. Executive Vice President and Director, TCW; President and
President and Trustee Director, Trust Company of the West; Vice Chairman and Director of
865 South Figueroa Street TCW Asset Management Company; Vice Chairman and Director of the
Los Angeles, California Adviser; 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; Member of the Board of Trustees
of the University of Notre Dame; Director of Los Angeles
Orthopaedic Hospital Foundation.
Michael E. Nugent (62) ....................... General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; Trustee of the TCW/DW Funds; Director or Trustee of
c/o Triumph Capital, L.P. the Morgan Stanley Dean Witter Funds; Trustee of Discover
237 Park Avenue Brokerage Index Series; formerly Vice President, Bankers Trust
New York, New York Company and BT Capital Corporation (1984-1988); Director of
various business organizations.
John L. Schroeder (68) ....................... Retired; Trustee of the TCW/DW Funds; Director or Trustee of the
Trustee Morgan Stanley Dean Witter Funds; Trustee of Discover Brokerage
c/o Gordon Altman Butowsky Index Series; Director of Citizens Utilities Company; formerly
Weitzen Shalov & Wein Executive Vice President and Chief Investment Officer of the Home
Counsel to the Independent Trustees Insurance Company (August, 1991-September, 1995).
114 West 47th Street
New York, New York
Marc I. Stern* (54) .......................... President and Director, TCW; Chairman and Director of the Adviser;
Trustee Vice Chairman and Director of TCW Asset Management Company;
865 South Figueroa Street Executive Vice President and Director of Trust Company of the
Los Angeles, California West; Chairman and Director of the TCW Galileo Funds, Inc.;
Trustee of the TCW/DW Funds; formerly President and Director of
SunAmerica, Inc. (financial services company)(1988-1990); Director
of Qualcomm, Incorporated (wireless communications); director or
trustee of various not-for-profit organizations.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATIONS DURING LAST FIVE YEARS
- ---------------------------------------------- ------------------------------------------------------------------
<S> <C>
Barry Fink (44) .............................. Senior Vice President (since March, 1997), Secretary and General
Vice President, Counsel (since February, 1997) and Director (since July, 1998) of
Secretary and General Counsel the Manager and MSDW Advisors; Senior Vice President (since March,
Two World Trade Center 1997) and Assistant Secretary and Assistant General Counsel (since
New York, New York February, 1997) of the Distributor; Assistant Secretary of Dean
Witter Reynolds (since August, 1996); Vice President, Secretary
and General Counsel of the TCW/DW Funds and the Morgan Stanley
Dean Witter Funds (since February, 1997); Vice President,
Secretary and General Counsel of Discover Brokerage Index Series;
previously First Vice President (June, 1993-February, 1997), Vice
President and Assistant Secretary and Assistant General Counsel of
the Manager and MSDW Advisors and Assistant Secretary of the
TCW/DW Funds and the Morgan Stanley Dean Witter Funds.
Robert M. Hanisee (60) ....................... Managing Director of the Adviser; Managing Director, Director of
Vice President Research and Chairman of the Equity Policy Committee of Trust
865 South Figueroa Street Company of the West and TCW Asset Management Company.
Los Angeles, California
Kevin A. Hunter (39) ......................... Managing Director of the Adviser, Trust Company of the West and
Vice President TCW Asset Management Company.
865 South Figueroa Street
Los Angeles, California
Mark Attanasio (40) .......................... Group Managing Director of TCW; formerly Co-Chief Executive
Vice President Officer and Chief Portfolio Strategist of Crescent Capital
865 South Figueroa Street Corporation (April 1991-April 1995).
Los Angeles, California
Melissa Weiler (33) .......................... Senior Vice President of the Adviser, Trust Company of the West
Vice President and TCW Asset Management Company; formerly Vice President and
865 South Figueroa Street Portfolio Manager of Crescent Capital Management (an investment
Los Angeles, California adviser) (February, 1992-April 1995).
Thomas F. Caloia (53) ........................ First Vice President and Assistant Treasurer of the Manager and
Treasurer MSDW Advisors; Treasurer of the TCW/DW Funds, the Morgan Stanley
Two World Trade Center Dean Witter Funds and Discover Brokerage Index Series.
New York, New York
</TABLE>
- ------------
*Denotes Trustees who are "interested persons" of the Fund as defined by the
Investment Company Act.
In addition, MITCHELL M. MERIN, President and Chief Operating Officer of
Asset Management of MSDW, President, Chief Executive Officer and Director of the
Manager and MSDW Advisors, Chairman, Chief Executive Officer and Director of the
Distributor and the Transfer Agent, Executive Vice President and Director of
Dean Witter Reynolds, and Director of various MSDW subsidiaries, RONALD E.
ROBISON, Executive Vice President, Chief Administrative Officer and Director of
the Manager and MSDW Advisors and ROBERT S. GIAMBRONE, Senior Vice President of
the Manager, MSDW Advisors, the Distributor and the Transfer Agent and Director
of the Transfer Agent are Vice Presidents of the Fund.
16
<PAGE>
In addition, FRANK BRUTTOMESSO, MARILYN K. CRANNEY, LOU ANNE D. MCINNIS,
CARSTEN OTTO and RUTH ROSSI, First Vice Presidents and Assistant General
Counsels of the Manager and MSDW Advisors, and TODD LEBO, Vice President and
Assistant General Counsel of MSDW Advisors and the Manager, are Assistant
Secretaries of the Fund.
INDEPENDENT TRUSTEES AND THE COMMITTEES. Law and regulation establish both
general guidelines and specific duties for the Independent Trustees. The TCW/DW
Funds seek as Independent Trustees individuals of distinction and experience in
business and finance, government service or academia; these are people whose
advice and counsel are in demand by others and for whom there is often
competition. To accept a position on the Funds' Boards, such individuals may
reject other attractive assignments because the Funds make substantial demands
on their time. 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. In addition, three of the Trustees, including
two Independent Trustee, serve as members of the Derivatives Committee and the
Insurance Committee.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Each of the open-end TCW/DW Funds has a Rule 12b-1 plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of the services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
The Board of each Fund has a Derivatives Committee to approve parameters for
and monitor the activities of the Fund with respect to derivative investments,
if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to review
and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR TCW/DW
FUNDS. The Independent Trustees and the Funds' management believe that having
the same Independent Trustees for each of the TCW/DW Funds avoids the
duplication of effort that would arise from having different groups of
individuals serving as Independent Trustees for each of the Funds or even of
sub-groups of Funds. They believe that having the same individuals serve as
Independent Trustees of all the Funds tends to increase their knowledge and
expertise regarding matters which affect the Fund complex generally and enhances
their ability to negotiate on behalf of each Fund with the Fund's service
providers. This arrangement also precludes the possibility of separate groups of
Independent Trustees arriving at conflicting decisions regarding operations and
management of the Funds and avoids the cost and confusion that would likely
ensue. Finally, having the same Independent Trustees serve on all Fund Boards
enhances the ability of each Fund to obtain, at modest cost to each separate
Fund, the services of Independent Trustees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
TCW/DW Funds.
TRUSTEE AND OFFICER INDEMNIFICATION. The Fund's Declaration of Trust
provides that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, nor is any Trustee, officer,
17
<PAGE>
employee or agent liable to any third persons in connection with the affairs of
the Fund, except as such liability may arise from his/her or its own bad faith,
willful misfeasance, gross negligence or reckless disregard of his/her or its
duties. It also provides that all third persons shall look solely to the Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Declaration of Trust provides that a
Trustee, officer, employee or agent is entitled to be indemnified against all
liability in connection with the affairs of the Fund.
C. COMPENSATION
The Fund pays each Independent Trustee an annual fee of $2,225 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 additional 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, the
Adviser or an affiliated company receive no compensation or expenses reimbursed
from the Fund for their services as Trustee. The Trustees of the TCW/DW Funds do
not have retirement or deferred compensation plans.
The following table illustrates the compensation that the Fund paid to its
Independent Trustees for the fiscal year ended January 31, 1999.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- -------------------------------------------------------------- ---------------
<S> <C>
John C. Argue................................................. $5,600
Dr. Manuel H. Johnson......................................... 5,600
Michael E. Nugent............................................. 5,600
John L. Schroeder............................................. 5,800
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1998 for services
to the 11 TCW/DW Funds that were in operation at December 31, 1998, and, in the
case of Messrs. Johnson, Nugent and Schroeder, the 85 Morgan Stanley Dean Witter
Funds that were in operation at December 31, 1998; and, in the case of Mr.
Argue, TCW Galileo Funds, Inc. and TCW Convertible Securities Fund, Inc. With
respect to Messrs. Johnson, Nugent and Schroeder, the Morgan Stanley Dean Witter
Funds are included solely because of a limited exchange privilege between
various TCW/DW Funds and five Morgan Stanley Dean Witter Money Market Funds.
With respect to Mr. Argue, TCW Galileo Funds, Inc. and TCW Convertible
Securities Fund, Inc. are included solely because the Fund's Adviser, TCW Funds
Management, Inc., also serves as Advisor to those investment companies.
Effective May 1, 1999, Dr. Johnson serves as Chairman of the Audit Committee.
18
<PAGE>
CASH COMPENSATION FROM MORGAN STANLEY DEAN WITTER FUNDS AND TCW/DW FUNDS
<TABLE>
<CAPTION>
TOTAL CASH
COMPENSATION
FOR SERVICES
FOR SERVICE TO
AS DIRECTOR OR 85 MORGAN
TRUSTEE AND FOR SERVICE AS STANLEY DEAN
COMMITTEE MEMBER TRUSTEE AND WITTER FUNDS
OF 85 MORGAN COMMITTEE MEMBER AND 11
NAME OF STANLEY DEAN OF 11 TCW/DW TCW/DW
INDEPENDENT TRUSTEE WITTER FUNDS FUNDS FUNDS
- --------------------------- ---------------- ---------------- -------------
<S> <C> <C> <C>
John C. Argue.............. -- 62,331 $ 62,331
Dr. Manuel H. Johnson...... $128,400 62,331 190,731
Michael E. Nugent.......... 132,450 62,131 194,581
John L. Schroeder.......... 132,450 64,731 197,181
</TABLE>
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, 56 of the Morgan
Stanley Dean Witter Funds have adopted a retirement program under which an
Independent Trustee who retires after serving for at least five years (or such
lesser period as may be determined by the Board) as an Independent Director or
Trustee of any Morgan Stanley Dean Witter Fund that has adopted the retirement
program (each such Fund referred to as an "Adopting Fund" and each such Trustee
referred to as an "Eligible Trustee") is entitled to retirement payments upon
reaching the eligible retirement age (normally, after attaining age 72). Annual
payments are based upon length of service.
Currently, upon retirement, each Eligible Trustee is entitled to receive
from the Adopting Fund, commencing as of his or her retirement date and
continuing for the remainder of his or her life, an annual retirement benefit
(the "Regular Benefit") equal to 30.22% of his or her Eligible Compensation plus
0.5036667% of such Eligible Compensation for each full month of service as an
Independent Director or Trustee of any Adopting Fund in excess of five years up
to a maximum of 60.44% after ten years of service. The foregoing percentages may
be changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund in
the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are not secured or funded by the Adopting
Funds.
The following table illustrates the retirement benefits accrued to Messrs.
Johnson, Nugent and Schroeder by the 55 Morgan Stanley Dean Witter Funds for the
year ended December 31, 1998, and the estimated retirement benefits for the
Independent Trustees, to commence upon their retirement, from the 55 Morgan
Stanley Dean Witter Funds as of December 31, 1998.
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
FOR ALL ADOPTING FUNDS ESTIMATED
--------------------------------- RETIREMENT ANNUAL
ESTIMATED BENEFITS BENEFITS
CREDITED ACCRUED AS UPON
YEARS ESTIMATED EXPENSES RETIREMENT
OF SERVICE AT PERCENTAGE OF BY ALL FROM ALL
RETIREMENT ELIGIBLE ADOPTING ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- ------------------------------------------ --------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Dr. Manuel H. Johnson..................... 10 60.44% $ 14,047 $ 52,250
Michael E. Nugent......................... 10 60.44 25,336 52,250
John L. Schroeder......................... 8 50.37 45,117 44,343
</TABLE>
- ------------------------
(1) An Eligible Trustee may elect alternative payments of his or her retirement
benefits based upon the combined life expectancy of the Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement. In
addition, the Eligible Trustee may elect that the surviving spouse's
periodic payment of benefits will be equal to a lower percentage of the
periodic amount when both spouses were alive. The amount estimated to be
payable under this method, through the remainder of the later of the lives
of the Eligible Trustee and spouse, will be the actuarial equivalent of the
Regular Benefit.
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote 1 above.
19
<PAGE>
IV. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- --------------------------------------------------------------------------------
[5% ownership list]
As of the date of this STATEMENT OF ADDITIONAL INFORMATION, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1% of the Fund's shares of beneficial
interest outstanding.
V. MANAGEMENT, INVESTMENT ADVICE AND OTHER SERVICES
- --------------------------------------------------------------------------------
A. MANAGER
The Manager to the Fund is Morgan Stanley Dean Witter Services Company, a
Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048. The Manager is a wholly-owned subsidiary of Morgan Stanley Dean
Witter Advisors Inc., a Delaware corporation. Morgan Stanley Dean Witter
Advisors is a wholly-owned subsidiary of MSDW, a Delaware corporation. MSDW is a
preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses: securities, asset management
and credit services.
Pursuant to a Management Agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. The Fund pays the Manager monthly compensation calculated daily by
applying the 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. The management fee is allocated among the Classes pro rata based
on the net assets of the Fund attributable to each Class. For the fiscal years
ended January 31, 1997, 1998 and 1999, the Manager accrued total compensation
under the Management Agreement in the amounts of $260,240, $275,518 and
$265,123, respectively.
B. THE ADVISER
The Adviser to the Fund is TCW Funds Management, Inc., a wholly-owned
subsidiary of TCW, whose direct and indirect subsidiaries provide a variety of
trust, investment management and investment advisory services. The Adviser is
headquartered at 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017.
Pursuant to an investment advisory agreement (the "Advisory Agreement") with
the Adviser, the Fund has retained the Adviser to invest the Fund's assets,
including the placing of orders for the purchase and sale of portfolio
securities. 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. The advisory fee is allocated among the Classes pro rata based on
the net assets of the Fund attributable to each Class. For the fiscal years
ended January 31, 1997, 1998 and 1999, the Adviser accrued total compensation
under the Advisory Agreement in the amounts of $173,493, $183,678 and $176,749,
respectively.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership by Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW.
C. PRINCIPAL UNDERWRITER
The Fund's principal underwriter is the Distributor (which has the same
address as the Manager). In this capacity, the Fund's shares are distributed by
the Distributor. The Distributor has entered into a selected dealer agreement
with Dean Witter Reynolds, which through its own sales organization sells shares
of the Fund. In addition, the Distributor may enter into similar agreements with
other selected broker-dealers. The Distributor, a Delaware corporation, is a
wholly-owned subsidiary of MSDW.
20
<PAGE>
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. These expenses include the payment of commissions
for sales of the Fund's shares and incentive compensation to Financial Advisors.
The Distributor also pays certain expenses in connection with the distribution
of the Fund's shares, including the costs of preparing, printing and
distributing advertising or promotional materials, and the costs of printing and
distributing prospectuses and supplements thereto used in connection with the
offering and sale of the Fund's shares. The Fund bears the costs of initial
typesetting, printing and distribution of prospectuses and supplements thereto
to shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal and state securities laws and pays filing fees in
accordance with state securities laws.
The Fund and the Distributor have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
D. SERVICES PROVIDED BY THE MANAGER, THE ADVISER AND FUND EXPENSES PAID BY THIRD
PARTIES
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, the office
space, facilities, equipment, clerical help, bookkeeping and certain legal
services as the Fund may reasonably require in the conduct of its business,
including the preparation of prospectuses, proxy statements and reports required
to be filed with federal and state securities commissions (except insofar as the
participation or assistance of independent accountants and attorneys is, in the
opinion of the Manager, necessary or desirable). In addition, the Manager pays
the salaries of all personnel, including officers of the Fund, who are employees
of the Manager. The Manager also bears the cost of telephone service, heat,
light, power and other utilities provided to the Fund.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for any act or omission by the Manager or for any losses sustained by
the Fund or its investors.
The Management Agreement will remain in effect from year to year, provided
continuance of the Management Agreement is approved at least annually by the
vote of the holders of a majority, as defined in the Investment Company Act, of
the outstanding shares of the Fund, or by the Trustees; provided that in either
event such continuance is approved annually by the vote of a majority of the
Trustees. At a meeting held on April 22, 1999, the Board of Trustees, including
the Independent Trustees, approved continuance of the Management Agreement until
April 30, 2000 or until such time as a new investment advisory arrangements are
put in place.
Under the terms of the Advisory Agreement, the Adviser invests the Fund's
assets, including placing orders for the purchase and sale of portfolio
securities. The Adviser obtains and evaluates such information and advice
relating to the economy, securities markets, and specific securities as it
considers necessary or useful to continuously manage the assets of the Fund in a
manner consistent with its investment objective. In addition, the Adviser pays
the salaries of all personnel, including officers of the Fund, who are employees
of the Adviser.
The Advisory Agreement provides that in the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations thereunder,
the Adviser is not liable to the Fund or any of its investors for any act or
omission by the Adviser or for any losses sustained by the Fund or its
investors. The Advisory Agreement in no way restricts the Adviser from acting as
investment adviser to others.
The Advisory Agreement will continue from year to year 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
21
<PAGE>
outstanding shares of the Fund, or by the Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority of
the Independent Trustees of the Fund, which vote must be cast in person at a
meeting called for the purpose of voting on such approval. At a meeting held on
April 22, 1999, the Board of Trustees, including the Independent Trustees,
approved the continuance of the Advisory Agreement until April 30, 2000 or until
such time as new advisory arrangements are in place.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor,
will be paid by the Fund. These expenses will be allocated among the four
Classes of shares pro rata based on the net assets of the Fund attributable to
each Class, except as described below. Such expenses include, but are not
limited to: expenses of the Plan of Distribution pursuant to Rule 12b-1; charges
and expenses of any registrar, custodian, stock transfer and dividend disbursing
agent; brokerage commissions; taxes; engraving and printing share certificates;
registration costs of the Fund and its shares under federal and state securities
laws; the cost and expense of printing, including typesetting, and distributing
prospectuses of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and Trustees' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of Trustees or members of any advisory board or committee who are not
employees of the Manager or Adviser or any corporate affiliate of either; all
expenses incident to any dividend, withdrawal or redemption options; charges and
expenses of any outside service used for pricing of the Fund's shares; fees and
expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Manager or the Adviser (not including
compensation or expenses of attorneys who are employees of the Manager or the
Adviser); fees and expenses of the Fund's independent accountants; membership
dues of industry associations; interest on Fund borrowings; postage; insurance
premiums on property or personnel (including officers and Trustees) of the Fund
which inure to its benefit; extraordinary expenses (including, but not limited
to, legal claims and liabilities and litigation costs and any indemnification
relating thereto); and all other costs of the Fund's operation. The 12b-1 fees
relating to a particular Class will be allocated directly to that Class. In
addition, other expenses associated with a particular Class (except advisory or
custodial fees) may be allocated directly to that Class, provided that such
expenses are reasonably identified as specifically attributable to that Class
and the direct allocation to that Class is approved by the Trustees.
E. DEALER REALLOWANCES
Upon notice to selected broker-dealers, the Distributor may reallow up to
the full applicable front-end sales charge during periods specified in such
notice. During periods when 90% or more of the sales charge is reallowed, such
selected broker-dealers may be deemed to be underwriters as that term is defined
in the Securities Act.
F. RULE 12B-1 PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and payable monthly at
the following annual rates: 0.25%, 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
("FSCs") and of contingent deferred sales charges ("CDSCs") imposed on certain
redemptions of shares, which are separate and apart from payments made pursuant
to the Plan. The Distributor has informed the Fund that it and/or
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<PAGE>
Dean Witter Reynolds received the proceeds of CDSCs and FSCs, for the last three
fiscal years ended January 31, in approximate amounts as provided in the table
below (the Distributor did not retain any of these amounts).
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
Class A............................ FSCs:(1) $ 637 FSCs: $ 808 FSCs: N/A (2)
CDSCs: $ 0 CDSCs: $ 0 CDSCs: N/A
Class B............................ CDSCs: $ 38,754 CDSCs: $ 7,489 CDSCs: N/A (2)
Class C............................ CDSCs: $ 4,717 CDSCs: $ 356 CDSCs: N/A (3)
</TABLE>
- ------------------------
(1) FSCs apply to Class A only.
(2) This Class commenced operations on July 28, 1997.
(3) This Class did not impose a CDSC during the fiscal year ended January 31,
1997.
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year
pursuant to the Plan equal to 0.20% 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 National Association of
Securities Dealers, Inc. (of which the Distributor is a member). The "service
fee" is a payment made for personal service and/or the maintenance of
shareholder accounts. The remaining portion of the Plan fees payable by a Class,
if any, is characterized as an "asset-based sales charge" as such is defined by
the Rules of the Association.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each calendar quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. Class B shares of the Fund accrued amounts
payable to the Distributor under the Plan, during the fiscal year ended January
31, 1999, of $57,262. This amount is equal to 0.75% of the average daily net
assets of Class B for the fiscal year. For the fiscal year ended January 31,
1999, Class A and Class C shares of the Fund accrued payments under the Plan
amounting to $139 and $379,492, respectively, which amounts are equal to 0.23%
and 0.74% of the average daily net assets of Class A and Class C, respectively,
for the fiscal year.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes, each with a different distribution arrangement.
With respect to Class A shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from proceeds of the FSC, commissions for the
sale of Class A shares, currently a gross sales credit of up to 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 Financial Advisors or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored employee benefit
plans, whether or not qualified under the Internal Revenue Code, for which the
Transfer Agent serves as Trustee or Dean Witter Reynolds Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement ("MSDW Eligible Plans"), MSDW Advisors compensates Financial Advisors
by paying them, from its own funds, a gross sales credit of 1.0% of the amount
sold.
With respect to Class B shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class B shares, currently a gross sales credit of up to 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 (not
including reinvested dividends or distributions) of the amount sold in all
cases. In the case of Class B shares purchased on or after July 28, 1997 by MSDW
Eligible Plans, Dean Witter Reynolds compensates its Financial Advisors by
paying them, from its own funds, a gross sales credit of 3.0% of the amount
sold.
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<PAGE>
With respect to Class C shares, Dean Witter Reynolds compensates its
Financial Advisors by paying them, from its own funds, commissions for the sale
of Class C shares, currently a gross sales credit of up to 1.0% of the amount
sold and an annual residual commission, currently up to 0.75% of the current
value of the respective accounts for which they are the Financial Advisors of
record.
With respect to Class D shares other than shares held by participants in
MSDW Advisors' mutual fund asset allocation program, the MSDW Advisors
compensates Dean Witter Reynolds' Financial Advisors by paying them, from its
own funds, commissions for the sale of Class D shares, currently a gross sales
credit of up to 1.0% of the amount sold. There is a chargeback of 100% of the
amount paid if the Class D shares are redeemed in the first year and a
chargeback of 50% of the amount paid if the Class D shares are redeemed in the
second year after purchase. The Manager also compensates Dean Witter Reynolds'
Financial Advisors by paying them, from its own funds, an annual residual
commission, currently up to 0.10% of the current value of the respective
accounts for which they are the Financial Advisors of record (not including
accounts of participants in MSDW Advisors' mutual fund asset allocation
program).
The gross sales credit is a charge which reflects commissions paid by Dean
Witter Reynolds to its Financial Advisors and Dean Witter Reynolds'
Fund-associated distribution-related expenses, including sales compensation, and
overhead and other branch office distribution-related expenses including (a) the
expenses of operating Dean Witter Reynolds' branch offices in connection with
the sale of Fund shares, including lease costs, the salaries and employee
benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs of
client sales seminars; (c) travel expenses of mutual fund sales coordinators to
promote the sale of Fund shares; and (d) other expenses relating to branch
promotion of Fund sales.
The distribution fee that the Distributor receives from the Fund under the
Plan, in effect, offsets distribution expenses incurred under the Plan on behalf
of the Fund and, in the case of Class B shares, opportunity costs, such as the
gross sales credit and an assumed interest charge thereon ("carrying charge").
In the Distributor's reporting of the distribution expenses to the Fund, in the
case of Class B shares, such assumed interest (computed at the "broker's call
rate") has been calculated on the gross credit as it is reduced by amounts
received by the Distributor under the Plan and any contingent deferred sales
charges received by the Distributor upon redemption of shares of the Fund. No
other interest charge is included as a distribution expense in the Distributor's
calculation of its distribution costs for this purpose. The broker's call rate
is the interest rate charged to securities brokers on loans secured by
exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 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 Financial Advisors and other authorized financial
representatives, such amounts shall be determined at the beginning of each
calendar quarter by the Trustees, including, a majority of the Independent
Trustees. Expenses representing the service fee (for Class A) or a gross sales
credit or a residual to Financial Advisors and other authorized financial
representatives (for Class C) may be reimbursed without prior determination. In
the event that the Distributor proposes that monies shall be reimbursed for
other than such expenses, then in making quarterly determinations of the amounts
that may be reimbursed by the Fund, the Distributor will provide and the
Trustees will review a quarterly budget of projected distribution expenses to be
incurred on behalf of the Fund, together with a report explaining the purposes
and anticipated benefits of
24
<PAGE>
incurring such expenses. The Trustees will determine which particular expenses,
and the portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
that Class for the fiscal year ended January 31, 1999 to the Distributor. The
Distributor and Dean Witter Reynolds estimate that they have spent, pursuant to
the Plan, $346,890 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)
61.60% ($213,663)--advertising and promotional expenses; (ii) 2.21%
($7,683)--printing and mailing of prospectuses for distribution to other than
current shareholders; and (iii) 36.19% ($125,544)--other expenses, including the
gross sales credit and the carrying charge, of which 0.43% ($537) represents
carrying charges, 40.73% ($51,128) represents commission credits to Dean Witter
Reynolds branch offices and other selected broker-dealers for payments of
commissions to Financial Advisors and other authorized financial
representatives, and 58.84% ($73,879) represents overhead and other branch
office distribution-related expenses. The amounts accrued by Class A and Class C
for distribution during the fiscal year ended January 31, 1999 were for expenses
which relate to compensation of sales personnel and associated overhead
expenses.
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan; and (ii) the proceeds of CDSCs
paid by investors upon redemption of shares. For example, if $1 million in
expenses in distributing Class B shares of the Fund had been incurred and
$750,000 had been received as described in (i) and (ii) above, the excess
expense would amount to $250,000. The Distributor has advised the Fund that in
the case of Class B shares the excess distribution expenses, including the
carrying charge designed to approximate the opportunity costs incurred by Dean
Witter Reynolds which arise from it having advanced monies without having
received the amount of any sales charges imposed at the time of sale of the
Fund's Class B shares, totaled $221,765 as of January 31, 1999 (the end of the
Fund's fiscal year), which was equal to 2.49% of the net assets of Class B on
such date. Because there is no requirement under the Plan that the Distributor
be reimbursed for all distribution expenses with respect to Class B shares or
any requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of CDSCs paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees or
CDSCs, may or may not be recovered through future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to the
Plan in any calendar year in excess of 0.25% or 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 Morgan Stanley Dean Witter Financial Advisors
and other authorized financial representatives at the time of sale may be
reimbursed in the subsequent calendar year. The Distributor has advised the Fund
that unreimbursed expenses representing a gross sales commission credited to
Morgan Stanley Dean Witter Financial Advisors and other authorized financial
representatives at the time of sale totaled $5,305 in the case of Class C at
December 31, 1998 (the end of the calendar year), which amount was equal to
0.01% of the net assets of Class C on such date, and that there were no such
expenses that may be reimbursed in the subsequent year in the case of Class A on
such date. No interest or other financing charges will be incurred on any Class
A or Class C distribution expenses incurred by the Distributor under the Plan or
on any unreimbursed expenses due to the Distributor pursuant to the Plan.
No interested person of the Fund nor any Independent Trustee has any direct
financial interest in the operation of the Plan except to the extent that the
Distributor, the Manager, Dean Witter Reynolds, MSDW Advisors or certain of
their employees may be deemed to have such an interest as a result of benefits
derived from the successful operation of the Plan or as a result of receiving a
portion of the amounts expended thereunder by the Fund.
25
<PAGE>
On an annual basis, the Trustees, including a majority of the Independent
Trustees, consider whether the Plan should be continued. Prior to approving the
last continuation of the Plan, the Trustees requested and received from the
Distributor and reviewed all the information which they deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated; (2)
the benefits the Fund had obtained, was obtaining and would be likely to obtain
under the Plan, including that: (a) the Plan is essential in order to give Fund
investors a choice of alternatives for payment of distribution and service
charges and to enable the Fund to continue to grow and avoid a pattern of net
redemptions which, in turn, are essential for effective investment management;
and (b) without the compensation to individual brokers and the reimbursement of
distribution and account maintenance expenses of Dean Witter Reynolds' branch
offices made possible by the 12b-1 fees, Dean Witter Reynolds could not
establish and maintain an effective system for distribution, servicing of Fund
shareholders and maintenance of shareholder accounts; and (3) what services had
been provided and were continuing to be provided under the Plan to the Fund and
its shareholders. Based upon their review, the Trustees, including each of the
Independent Trustees, determined that continuation of the Plan would be in the
best interest of the Fund and would have a reasonable likelihood of continuing
to benefit the Fund and its shareholders. In the Trustees' quarterly review of
the Plan, they will consider its continued appropriateness and the level of
compensation provided therein.
The Plan may not be amended to increase materially the amount to be spent
for the services described therein without approval by the shareholders of the
affected Class or Classes of the Fund, and all material amendments to the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Investment Company
Act) on not more than thirty days' written notice to any other party to the
Plan. So long as the Plan is in effect, the election and nomination of
Independent Trustees shall be committed to the discretion of the Independent
Trustees.
G. OTHER SERVICE PROVIDERS
(1) TRANSFER AGENT/DIVIDEND-PAYING AGENT
Morgan Stanley Dean Witter Trust FSB is the Transfer Agent for the Fund's
shares and the Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans. The principal business address of the Transfer Agent is Harborside
Financial Center, Plaza Two, Jersey City, New Jersey 07311.
(2) CUSTODIAN AND INDEPENDENT ACCOUNTANTS
The Bank of New York, 90 Washington Street, New York, New York 10286, is the
Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
These balances may, at times, be substantial.
PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.
(3) AFFILIATED PERSONS
The Transfer Agent is an affiliate of the Manager, and of the Distributor.
As Transfer Agent and Dividend Disbursing Agent, the Transfer Agent's
responsibilities include maintaining shareholder accounts, disbursing cash
dividends and reinvesting dividends, processing account registration changes,
handling purchase and redemption transactions, mailing prospectuses and reports,
mailing and tabulating proxies, processing share certificate transactions, and
maintaining shareholder records and lists. For these services, the Transfer
Agent receives a per shareholder account fee from the Fund.
26
<PAGE>
VI. BROKERAGE ALLOCATION AND OTHER PRACTICES
- --------------------------------------------------------------------------------
A. BROKERAGE TRANSACTIONS
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the selection
of brokers and dealers to effect the transactions, and the negotiation of
brokerage commissions, if any. Purchases and sales of securities on a stock
exchange are effected through brokers who charge a commission for their
services. In the over-the-counter market, securities are generally traded on a
"net" basis with dealers acting as principal for their own accounts without a
stated commission, although the price of the security usually includes a profit
to the dealer. The Fund also expects that securities will be purchased at times
in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or discount.
On occasion, the Fund may also purchase certain money market instruments
directly from an issuer, in which case no commissions or discounts are paid.
For the fiscal years ended January 31, 1997, 1998 and 1999, the Fund paid a
total of $10,668, $11,602 and $15,685, respectively, in brokerage commissions.
B. COMMISSIONS
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through Dean Witter Reynolds, Morgan Stanley & Co. and other affiliated
brokers and dealers. In order for an affiliated broker or dealer to effect any
portfolio transactions on an exchange for the Fund, the commissions, fees or
other remuneration received by the affiliated broker or dealer must be
reasonable and fair compared to the commissions, fees or other remuneration paid
to other brokers in connection with comparable transactions involving similar
securities being purchased or sold on an exchange during a comparable period of
time. This standard would allow the affiliated broker or dealer to receive no
more than the remuneration which would be expected to be received by an
unaffiliated broker in a commensurate arm's-length transaction. Furthermore, the
Trustees, including the Independent Trustees, have adopted procedures which are
reasonably designed to provide that any commissions, fees or other remuneration
paid to an affiliated broker or dealer are consistent with the foregoing
standard. The Fund does not reduce the management fee it pays to the Manager by
any amount of the brokerage commissions it may pay to an affiliated broker or
dealer.
During the fiscal years ended January 31, 1997, 1998 and 1999, there were no
brokerage fees paid to Dean Witter Reynolds. During the period June 1, 1997
through January 31, 1998 and during the fiscal year ended January 31, 1999, the
Fund paid a total of $1,283 and $0, respectively, in brokerage commissions to
Morgan Stanley & Co., which broker-dealer became an affiliate of the Manager on
May 31, 1997 upon consummation of the merger of Dean Witter, Discover & Co. with
Morgan Stanley Group Inc. During the fiscal year ended January 31, 1999, the
brokerage commissions paid to Morgan Stanley & Co. represented approximately 0%
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 0% of the aggregate dollar value of all portfolio transactions of
the Fund during the year for which commissions were paid.
C. BROKERAGE SELECTION
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. 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
27
<PAGE>
charged by various brokers and on its judgment in evaluating the brokerage and
research services received from the broker effecting the transaction. These
determinations are necessarily subjective and imprecise, as in most cases an
exact dollar value for those services is not ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide the
most favorable prices and are capable of providing efficient executions. If the
Adviser believes the prices and executions are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the Fund or the Adviser. 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 information and services received by the Adviser from brokers
and dealers may be of benefit to the Adviser in the management of accounts of
some of its other clients and may not in all cases benefit the Fund directly.
The Adviser currently serves as investment advisor to a number of clients,
including other investment companies, and may in the future act as investment
advisor to others. It is the practice of the Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, various factors may be considered, including the
respective investment objectives, the relative size of portfolio holdings of the
same or comparable securities, the availability of cash for investment, the size
of investment commitments generally held and the opinions of the persons
responsible for managing the portfolios of the Fund and other client accounts.
D. DIRECTED BROKERAGE
During the fiscal year ended January 31, 1999, the Fund paid $2,547 in
brokerage commissions in connection with transactions in the aggregate amount of
$895,005 to brokers because of research services provided.
E. REGULAR BROKER-DEALERS
During the fiscal year ended January 31, 1999, the Fund purchased a
convertible bond and convertible preferred stocks issued by Merrill Lynch & Co.
Inc. and held a convertible bond and convertible preferred stocks issued by
Merrill Lynch & Co., Inc. which issuer was among the ten brokers or dealers
which executed transactions for or with the Fund in the largest dollar amounts
during the year. At January 31, 1999, the Fund held a convertible bond and
convertible preferred stocks issued by Merrill Lynch & Co. Inc. with market
values of $576,900 and $250,125, respectively.
VII. CAPITAL STOCK AND OTHER SECURITIES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
of beneficial interest held. The Fund is authorized to issue an unlimited number
of shares of beneficial interest. All shares of beneficial interest of the Fund
are of $0.01 par value and are equal as to earnings, assets and voting
privileges except that each Class will have exclusive voting privileges with
respect to matters relating to distribution expenses borne solely by such Class
or any other matter in which the interests of one Class differ from the
interests of any other Class. In addition, Class B shareholders will have the
right to vote on any proposed material increase in Class A's expenses, if such
proposal is submitted separately to Class A shareholders. Also, Class A, Class B
and Class C bear expenses related to the distribution of their respective
shares.
28
<PAGE>
The Fund's Declaration of Trust permits the Trustees to authorize the
creation of additional series of shares (the proceeds of which would be invested
in separate, independently managed portfolios) and additional Classes of shares
within any series. The Trustees have not presently authorized any such
additional series or Classes of shares other than as set forth in the
Prospectus.
The Fund is not required to hold annual meetings of shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call special meetings of shareholders for action by shareholder
vote as may be required by the Investment Company Act or the Declaration of
Trust. Under certain circumstances, the Trustees may be removed by action of the
Trustees or by the shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for the obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that notice
of such Fund obligations include such disclaimer, and provides for
indemnification out of the Fund's property for any shareholder held personally
liable for the obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund itself would be unable to meet its obligations.
Given the above limitations on shareholder personal liability, and the nature of
the Fund's assets and operations, the possibility of the Fund being unable to
meet its obligations is remote and thus, in the opinion of Massachusetts counsel
to the Fund, the risk to Fund shareholders of personal liability is remote.
The Trustees themselves have the power to alter the number and the terms of
office of the Trustees (as provided for in the Declaration of Trust), and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration and appoint their own successors, provided that always at
least a majority of the Trustees has been elected by the shareholders of the
Fund.
VIII. PURCHASE, REDEMPTION AND PRICING OF SHARES
- --------------------------------------------------------------------------------
A. PURCHASE OF SHARES
Information concerning how Fund shares are offered to the public (and how
they are redeemed and exchanged) is provided in the Fund's PROSPECTUS.
TRANSFER AGENT AS AGENT. With respect to the redemption or repurchase of
Fund shares, the application of proceeds to the purchase of new shares in the
Fund or any other TCW/DW Multi-Class Fund, any shares of TCW/DW North American
Government Income Trust or any shares of five Morgan Stanley Dean Witter money
market funds and the general administration of the exchange privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
authorized broker-dealer, if any, in the performance of such functions. With
respect to exchanges, redemptions or repurchases, the Transfer Agent shall be
liable for its own negligence and not for the default or negligence of its
correspondents or for losses in transit. The Fund shall not be liable for any
default or negligence of the Transfer Agent, the Distributor or any authorized
broker-dealer.
The Distributor and any authorized broker-dealer have appointed the Transfer
Agent to act as their agent in connection with the application of proceeds of
any redemption of Fund shares to the purchase of shares of any other
continuously offered TCW/DW Multi-Class Fund, any shares of TCW/DW North
American Government Income Trust or any shares of five Morgan Stanley Dean
Witter money market funds and the general administration of the exchange
privilege. No commission or discounts will be paid to the Distributor or any
authorized broker-dealer for any transaction pursuant to the exchange privilege.
TRANSFERS OF SHARES. In the event a shareholder requests a transfer of Fund
shares to a new registration, the shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same
29
<PAGE>
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.
B. OFFERING PRICE
The Fund's Class B, Class C and Class D shares are offered at net asset
value per share and the Class A shares are offered at net asset value per share
plus any applicable FSC which is distributed among the Fund's distributor, Dean
Witter Reynolds and other authorized dealers as described in Section "V.
Management, Investment Advice and Other Services--F. Rule 12b-1 Plan." The price
of Fund shares, called "net asset value," is based on the value of the Fund's
portfolio securities. Net asset value per share of each Class is calculated by
dividing the value of the portion of the Fund's securities and other assets
attributable to that Class, less the liabilities attributable to that Class, by
the number of shares of that Class outstanding. The assets of each Class of
shares are invested in a single portfolio. The net asset value of each Class,
however, will differ because the Classes have different ongoing fees.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange, prior to the
time when assets are valued; if there were no sales that day, the security is
valued at the latest bid price (in cases where a security is traded on more than
one exchange, the security is valued on the exchange designated as the primary
market pursuant to procedures adopted by the Trustees); and (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid price. When market quotations are not
readily available, including circumstances under which it is determined by the
Adviser that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the Fund's
Trustees. For valuation purposes, quotations of foreign portfolio securities,
other assets and liabilities and forward contracts stated in foreign currency
are translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange.
Short-term debt securities with remaining maturities of sixty days or less
at the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research evaluations by its staff, including
review of broker-dealer market price quotations in determining what it believes
is the fair valuation of the portfolio securities valued by such pricing
service.
Generally, trading in foreign securities, as well as corporate bonds, U.S.
Government securities and money market instruments, is substantially completed
each day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the Fund's
shares are determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events which may affect the values of such securities and such
exchange rates may occur between the times at which they are determined and the
close of the New York Stock Exchange and will therefore not be reflected in the
computation of the Fund's net asset value. If events that may affect the value
of such securities occur during such period, then these securities may be valued
at their fair value as determined in good faith under procedures established by
and under the supervision of the Trustees.
IX. TAXATION OF THE FUND AND SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund generally will make two basic types of distributions: ordinary
dividends and long-term capital gain distributions. These two types of
distributions are reported differently on a shareholder's income tax return and
they are also subject to different rates of tax. The tax treatment of the
investment activities of the Fund will affect the amount and timing and
character of the distributions made by the Fund. Tax issues relating to the Fund
are not generally a consideration for shareholders such as tax
30
<PAGE>
exempt entities and tax-advantaged retirement vehicles such as an IRA or 401(k)
plan. Shareholders are urged to consult their own tax professionals regarding
specific questions as to federal, state or local taxes.
INVESTMENT COMPANY TAXATION. The Fund intends to remain qualified as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986. As such, the Fund will not be subject to federal income tax on its net
investment income and capital gains, if any, to the extent that it distributes
such income and capital gains to its shareholders.
The Fund generally intends to distribute sufficient income and gains so that
the Fund will not pay corporate income tax on its earnings. The Fund also
generally intends to distribute to its shareholders in each calendar year a
sufficient amount of ordinary income and capital gains to avoid the imposition
of a 4% excise tax. However, the Fund may instead determine to retain all or
part of any net long-term capital gains in any year for reinvestment. In such
event, the Fund will pay federal income tax (and possibly excise tax) on such
retained gains.
Gains or losses on sales of securities by the Fund will be long-term capital
gains or losses if the securities have a tax holding period of more than one
year. Gains or losses on the sale of securities with a tax holding period of one
year or less will be short-term gains or losses.
Under certain tax rules, the Fund may be required to accrue a portion of any
discount at which certain securities are purchased as income each year even
though the Fund receives no payments in cash on the security during the year. To
the extent that the Fund invests in such securities, it would be required to pay
out such accrued discount as an income distribution in each year in order to
avoid taxation at the Fund level. Such distributions will be made from the
available cash of the Fund or by liquidation of portfolio securities if
necessary. If a distribution of cash necessitates the liquidation of portfolio
securities, the Adviser will select which securities to sell. The Fund may
realize a gain or loss from such sales. In the event the Fund realizes net
capital gains from such transactions, its shareholders may receive a larger
capital gain distribution, if any, than they would in the absence of such
transactions.
TAXATION OF DIVIDENDS AND DISTRIBUTIONS. Shareholders normally will have to
pay federal income taxes, and any state and/or local income taxes, on the
dividends and other distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income or
short-term capital gains, are taxable to the shareholder as ordinary income
regardless of whether the shareholder receives such payments in additional
shares or in cash.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. The Taxpayer Relief Act of 1997 reduced the
maximum tax on long-term capital gains applicable to individuals from 28% to
20%.
Shareholders are generally taxed on any ordinary dividend or capital gain
distributions from the Fund in the year they are actually distributed. However,
if any such dividends or distributions are declared in October, November or
December and paid in January then such amounts will be treated for tax purposes
as received by the shareholders on December 31, to shareholders of record of
such month.
Subject to certain exceptions, a corporate shareholder may be eligible for a
70% dividends received deduction to the extent that the Fund earns and
distributes qualifying dividends from its investments. Distributions of net
capital gains by the Fund will not be eligible for the dividends received
deduction.
Shareholders who are not citizens or residents of the United States and
certain foreign entities may be subject to withholding of United States tax on
distributions made by the Fund of investment income and short term capital
gains.
After the end of each calendar year, shareholders will be sent full
information on their dividends and capital gain distributions for tax purposes,
including the portion taxable as ordinary income, the portion taxable as
long-term capital gains and the amount of any dividends eligible for the federal
dividends received deduction for corporations.
31
<PAGE>
PURCHASES AND REDEMPTIONS AND EXCHANGES OF FUND SHARES. Any dividend or
capital gains distribution received by a shareholder from any investment company
will have the effect of reducing the net asset value of the shareholder's stock
in that company by the exact amount of the dividend or capital gains
distribution. Furthermore, such dividends and capital gains distributions are
subject to federal income taxes. If the net asset value of the shares should be
reduced below a shareholder's cost as a result of the payment of dividends or
the distribution of realized long-term capital gains, such payment or
distribution would be in part a return of the shareholder's investment but
nonetheless would be taxable to the shareholder. Therefore, an investor should
consider the tax implications of purchasing Fund shares immediately prior to a
distribution record date.
In general, a sale of shares results in capital gain or loss, and for
individual shareholders, is taxable at a federal rate dependent upon the length
of time the shares were held. A redemption of a shareholder's Fund shares is
normally treated as a sale for tax purposes. Fund shares held for a period of
one year or less will, for tax purposes, generally result in short-term gains or
losses and those held for more than one year generally result in long-term gain
or loss. Any loss realized by shareholders upon a redemption of shares within
six months of the date of their purchase will be treated as a long-term capital
loss to the extent of any distributions of net long-term capital gains with
respect to such shares during the six-month period.
Gain or loss on the sale or redemption of shares in the Fund is measured by
the difference between the amount received and the tax basis of the shares.
Shareholders should keep records of investments made (including shares acquired
through reinvestment of dividends and distributions) so they can compute the tax
basis of their shares. Under certain circumstances a shareholder may compute and
use an average cost basis in determining the gain or loss on the sale or
redemption of shares.
Exchanges of Fund shares for shares of any other continuously offered TCW/DW
Multi-Class Fund, TCW/DW North American Government Income Trust or five money
market funds for which Morgan Stanley Dean Witter Advisors Inc. serves as
investment manager are also subject to similar tax treatment. Such an exchange
is treated for tax purposes as a sale of the original shares in the first fund,
followed by the purchase of shares in the second fund.
If a shareholder realizes a loss on the redemption or exchange of a fund's
shares and reinvests in that fund's shares within 30 days before or after the
redemption or exchange, the transactions may be subject to the "wash sale"
rules, resulting in a postponement of the recognition of such loss for tax
purposes.
X. UNDERWRITERS
- --------------------------------------------------------------------------------
The Fund's shares are offered to the public on a continuous basis. The
Distributor, as the principal underwriter of the shares, has certain obligations
under the Distribution Agreement concerning the distribution of the shares.
These obligations and the compensation the Distributor receives are described
above in the sections titled "Principal Underwriter" and "Rule 12b-1 Plans".
XI. CALCULATION OF PERFORMANCE DATA
- --------------------------------------------------------------------------------
From time to time, the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A, Class
B, Class C and Class D shares. The Fund's "average annual total return"
represents an annualization of the Fund's total return over a particular period
and is computed by finding the annual percentage rate which will result in the
ending redeemable value of a hypothetical $1,000 investment made at the
beginning of a one, five or ten year period, or for the period from the date of
commencement of operations, if shorter than any of the foregoing. The ending
redeemable value is reduced by any contingent deferred sales charge ("CDSC") at
the end of the one, five, ten year or other period. For the purpose of this
calculation, it is assumed that all dividends and distributions are reinvested.
The formula for computing the average annual total return involves a percentage
obtained by dividing the ending redeemable value by the amount of the initial
investment
32
<PAGE>
(which in the case of Class A shares is reduced by the Class A initial sales
charge), taking a root of the quotient (where the root is equivalent to the
number of years in the period) and subtracting 1 from the result. The average
annual total returns for Class C for the one year, five year and the life of the
Fund (which commenced on March 31, 1993) periods ended January 31, 1999 were
7.83%, 9.88% and 11.04%, respectively. The average annual total returns of Class
A for the fiscal year ended January 31, 1999 and for the period July 28, 1997
(inception of the Class) through January 31, 1999 were 4.80% and 7.23%,
respectively. The average annual total returns of Class B for the fiscal year
ended January 31, 1999 and for the period July 28, 1997 (inception of the Class)
through January 31, 1999 were 3.92% and 7.33%, respectively. The average annual
total returns of Class D for the fiscal year ended January 31, 1999 and for the
period July 28, 1997 (inception of the Class) through January 31, 1999 were
9.64% and 10.60%, respectively.
In addition, the Fund may advertise its total return for each Class over
different periods of time by means of aggregate, average, year-by-year or other
types of total return figures. These calculations may or may not reflect the
imposition of the maximum front-end sales charge for Class A or the deduction of
the CDSC for each of Class B and Class C which, if reflected, would reduce the
performance quoted. For example, the average annual total return of the Fund may
be calculated in the manner described above, but without deduction for any
applicable sales charge. Based on this calculation, the average annual total
returns of Class C for the one year, five year and the life of the Fund (which
commenced on March 31, 1993) periods ended January 31, 1999 were 8.81%, 9.88%
and 11.04%, respectively. The average annual total returns of Class A for the
fiscal year ended January 31, 1999 and for the period July 28, 1997 through
January 31, 1999 were 9.45% and 10.35%, respectively. The average annual total
returns of Class B for the fiscal year ended January 31, 1999 and for the period
July 28, 1997 through January 31, 1999 were 8.85% and 9.79%, respectively. The
average annual total returns of Class D for the fiscal year ended January 31,
1999 and for the period July 28, 1997 through January 31, 1999 were 9.64% and
10.60%, respectively.
In addition, the Fund may compute its aggregate total return for each Class
for specified periods by determining the aggregate percentage rate which will
result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed that
all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without reduction for any sales charge) by the initial $1,000 investment
and subtracting 1 from the result. Based on the foregoing calculation, the total
returns for Class C for the one year, five year and the life of the Fund (which
commenced on March 31, 1993) periods ended January 31, 1999 were 8.81%, 60.18%
and 84.30%, respectively. The total returns of Class A for the fiscal year ended
January 31, 1999 and for the period July 28, 1997 through January 31, 1999 were
9.45% and 16.04%, respectively. The total returns of Class B for the fiscal year
ended January 31, 1999 and for the period July 28, 1997 through January 31, 1999
were 8.85% and 15.16%, respectively. The total returns of Class D for the fiscal
year ended January 31, 1999 and for the period July 28, 1997 through January 31,
1999 were 9.64% and 16.44%, 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 each Class at
inception of the Class would have grown to the following amounts at January 31,
1999:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------------
CLASS DATE: $10,000 $50,000 $100,000
- ----------------------------------------------------------------- ---------- --------- --------- -----------
<S> <C> <C> <C> <C>
Class A.......................................................... 7/28/97 $ 11,112 $ 55,994 $ 112,859
Class B.......................................................... 7/28/97 11,516 57,580 115,160
Class C.......................................................... 3/31/93 18,430 92,150 184,300
Class D.......................................................... 7/28/97 11,644 58,220 116,440
</TABLE>
33
<PAGE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
XII. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
EXPERTS. The financial statements of the Fund for the fiscal year ended
January 31, 1999 included in this STATEMENT OF ADDITIONAL INFORMATION and
incorporated by reference in the PROSPECTUS are included herein in reliance on
the report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
*****
This STATEMENT OF ADDITIONAL INFORMATION and the PROSPECTUS do not contain
all of the information set forth in the REGISTRATION STATEMENT the Fund has
filed with the SEC. The complete REGISTRATION STATEMENT may be obtained from the
SEC.
34
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (40.7%)
AEROSPACE (0.5%)
$ 345 Hexcel Corp................................................. 7.00% 08/01/03 $ 310,500
-----------
ASSISTED LIVING SERVICES (2.8%)
580 Alternative Living Services, Inc............................ 5.25 12/15/02 635,465
350 Assisted Living Concepts, Inc............................... 6.00 11/01/02 282,625
360 Assisted Living Concepts, Inc. - 144A*...................... 5.625 05/01/03 288,000
145 Sunrise Assisted Living, Inc................................ 5.50 06/15/02 182,616
145 Sunrise Assisted Living, Inc. - 144A*....................... 5.50 06/15/02 182,616
-----------
1,571,322
-----------
AUTO PARTS: O.E.M. (1.1%)
300 Magna International, Inc. - 144A* (Canada).................. 4.875 02/15/05 305,439
300 Tower Automotive, Inc. - 144A*.............................. 5.00 08/01/04 339,000
-----------
644,439
-----------
BIOTECHNOLOGY (2.3%)
810 Athena Neurosciences, Inc. - 144A*.......................... 4.75 11/15/04 935,671
165 Centocor, Inc............................................... 4.75 02/15/05 173,611
180 Centocor, Inc. - 144A*...................................... 4.75 02/15/05 189,394
-----------
1,298,676
-----------
BOOKS/MAGAZINES (1.0%)
895 News America Holdings, Inc.................................. 0.00 03/11/13 566,848
-----------
BROADCASTING (2.9%)
1,400 Clear Channel Communications, Inc........................... 2.625 04/01/03 1,632,064
-----------
COMPUTER COMMUNICATIONS (1.5%)
115 Adaptec, Inc................................................ 4.75 02/01/04 95,572
265 Adaptec, Inc. - 144A*....................................... 4.75 02/01/04 220,231
380 Comverse Technology, Inc. - 144A*........................... 4.50 07/01/05 549,043
-----------
864,846
-----------
COMPUTER SOFTWARE (1.4%)
350 Hyperion Solutions Corp..................................... 4.50 03/15/05 261,149
260 Network Associates, Inc..................................... 0.00 02/13/18 133,429
745 Network Associates, Inc. - 144A*............................ 0.00 02/13/18 382,327
-----------
776,905
-----------
CONTRACT DRILLING (0.7%)
440 Diamond Offshore Drilling, Inc.............................. 3.75 02/15/07 409,820
-----------
DISCOUNT CHAINS (1.8%)
1,045 Costco Companies, Inc. - 144A*.............................. 0.00 08/19/17 1,006,042
-----------
DIVERSIFIED COMMERCIAL SERVICES (0.5%)
370 Metamor Worldwide, Inc...................................... 2.94 08/15/04 315,654
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
E.D.P. PERIPHERALS (0.7%)
$ 1,280 Western Digital Corp........................................ 0.00% 02/18/18 $ 392,000
-----------
ELECTRONIC COMPONENTS (1.6%)
1,925 Solectron Corp. - 144A*..................................... 0.00 01/27/19 909,389
-----------
ELECTRONIC DISTRIBUTORS (1.2%)
525 Safeguard Scientifics, Inc. - 144A*......................... 6.00 02/01/06 696,609
-----------
ENTERTAINMENT & LEISURE (0.9%)
180 Action Performance Companies - 144A*........................ 4.75 04/01/05 208,541
255 Speedway Motorsports, Inc................................... 5.75 09/30/03 279,743
-----------
488,284
-----------
FINANCE COMPANIES (1.6%)
890 Elan Finance Corp. - 144A*.................................. 0.00 12/14/18 500,376
295 Xerox Credit Corp........................................... 2.875 07/01/02 388,781
-----------
889,157
-----------
INSURANCE (3.2%)
285 American International Group, Inc........................... 2.25 07/30/04 374,687
845 Berkshire Hathaway, Inc. (exchangeable into Citigroup, Inc.
common stock)............................................. 1.00 12/02/01 1,449,378
-----------
1,824,065
-----------
INTERNATIONAL BANKS (0.7%)
430 UBS AG Stamford............................................. 0.00 12/11/03 409,575
-----------
INVESTMENT BANKERS/BROKERS/SERVICES (1.5%)
360 Merrill Lynch & Co., Inc.................................... 0.00 02/02/05 576,900
285 Morgan Stanley Group, Inc.+ (exchangeable into Boeing Co.
common stock)............................................. 0.00 09/30/00 270,573
-----------
847,473
-----------
MOTOR VEHICLES (0.5%)
250 Blue Bird Body Co. (Series B)............................... 10.75 11/15/06 261,250
-----------
OTHER CONSUMER SERVICES (0.5%)
345 Interim Services Inc........................................ 4.50 06/01/05 301,951
-----------
OTHER PHARMACEUTICALS (1.9%)
955 Sepracor, Inc. - 144A*...................................... 7.00 12/15/05 1,104,601
-----------
POLLUTION CONTROL EQUIPMENT (1.0%)
600 U.S. Filter Corp............................................ 4.50 12/15/01 573,588
-----------
SEMICONDUCTORS (1.9%)
480 Level One Communications, Inc............................... 4.00 09/01/04 762,710
310 ST Microelectronics N.V..................................... 0.00 06/10/08 315,620
-----------
1,078,330
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SERVICES TO THE HEALTH INDUSTRY (4.0%)
$ 800 Concentra Managed Care, Inc. - 144A*........................ 4.50% 03/15/03 $ 643,544
190 Omnicare, Inc............................................... 5.00 12/01/07 193,211
545 Omnicare, Inc. - 144A*...................................... 5.00 12/01/07 554,211
250 Quadramed Corp.............................................. 5.25 05/01/05 257,538
50 Quadramed Corp. - 144A*..................................... 5.25 05/01/05 51,508
265 Quintiles Transnational Corp................................ 4.25 05/31/00 347,025
160 Quintiles Transnational Corp. - 144A*....................... 4.25 05/31/00 209,525
-----------
2,256,562
-----------
TELECOMMUNICATIONS (1.5%)
445 Bell Atlantic Financial Services - 144A* (exchangeable into
Cable & Wireless Communications common stock)............. 4.25 09/15/05 513,085
310 Tele-Communications International, Inc...................... 4.50 02/15/06 358,050
-----------
871,135
-----------
WASTE MANAGEMENT (1.5%)
700 Waste Management, Inc....................................... 4.00 02/01/02 882,875
-----------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $20,639,328).................................................. 23,183,960
-----------
CORPORATE BONDS (40.3%)
ADVERTISING (1.5%)
100 Ackerley Group, Inc. - 144A*................................ 9.00 01/15/09 104,000
500 Adams Outdoor Advertising, L.P.............................. 10.75 03/15/06 543,750
145 Outdoor Communications, Inc................................. 9.25 08/15/07 157,687
25 Outdoor Systems, Inc........................................ 8.875 06/15/07 26,812
-----------
832,249
-----------
AEROSPACE (0.5%)
140 BE Aerospace, Inc. (Series B)............................... 8.00 03/01/08 137,900
125 Wyman-Gordon Co............................................. 8.00 12/15/07 124,687
-----------
262,587
-----------
AIR FREIGHT/DELIVERY SERVICES (0.1%)
75 Atlas Air, Inc.............................................. 10.75 08/01/05 79,500
-----------
AUTO PARTS: O.E.M. (0.7%)
250 Hayes Lemmerz International, Inc. - 144A*................... 8.25 12/15/08 253,125
25 Hayes Wheels International, Inc. (Series B)................. 9.125 07/15/07 26,375
100 Hayes Wheels International, Inc. (Series B*)................ 9.125 07/15/07 105,750
-----------
385,250
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BEVERAGES - NON-ALCOHOLIC (0.3%)
$ 165 Cott Corp. (Canada)......................................... 9.375% 07/01/05 $ 150,150
-----------
BOOKS/MAGAZINES (1.4%)
75 American Media Operations, Inc.............................. 11.625 11/15/04 78,750
425 Garden State Newspapers (Series B).......................... 8.75 10/01/09 435,625
50 Primedia, Inc............................................... 7.625 04/01/08 50,000
250 Von Hoffman Press, Inc. - 144A*............................. 10.375 05/15/07 257,187
-----------
821,562
-----------
BROADCASTING (0.8%)
50 Chancellor Media Corp....................................... 9.375 10/01/04 53,000
100 Chancellor Media Corp....................................... 9.00 10/01/08 110,250
275 STC Broadcasting, Inc....................................... 11.00 03/15/07 290,125
-----------
453,375
-----------
BUILDING MATERIALS (1.0%)
225 American Standard Co........................................ 7.375 02/01/08 226,125
250 Atrium Companies, Inc....................................... 10.50 11/15/06 253,125
50 MDC Holdings, Inc........................................... 8.375 02/01/08 49,687
50 Standard Pacific Corp. (Series A)........................... 8.00 02/15/08 48,750
-----------
577,687
-----------
CABLE TELEVISION (2.6%)
150 Adelphia Communications Corp. (Series B).................... 9.25 10/01/02 159,000
100 Adelphia Communications Corp. (Series B).................... 8.375 02/01/08 105,125
75 Century Communications...................................... 9.50 03/01/05 84,187
75 Century Communications...................................... 8.75 10/01/07 82,687
150 Classic Cable Inc. - 144A*.................................. 9.875 08/01/08 157,500
25 CSC Holdings, Inc........................................... 9.875 05/15/06 27,437
400 CSC Holdings, Inc........................................... 7.25 07/15/08 415,516
125 CSC Holdings, Inc........................................... 7.625 07/15/18 129,051
50 CSC Holdings, Inc. (Series B)............................... 8.125 08/15/09 55,160
250 Echostar DBS Corp. - 144A*.................................. 9.375 02/01/09 256,875
-----------
1,472,538
-----------
CANADIAN OIL & GAS (0.1%)
50 Gulf Canada Resources Ltd................................... 9.25 01/15/04 49,982
-----------
CASINO/GAMBLING (1.9%)
200 Boyd Gaming Corp............................................ 9.25 10/01/03 209,000
325 Hard Rock Hotel, Inc........................................ 9.25 04/01/05 324,188
275 Park Place Entertainment - 144A*............................ 7.875 12/15/05 275,000
75 Station Casinos, Inc........................................ 10.125 03/15/06 79,688
175 Station Casinos, Inc........................................ 9.75 04/15/07 184,188
-----------
1,072,064
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONSUMER SPECIALTIES (0.2%)
$ 125 Scotts Co. - 144A*.......................................... 8.625% 01/15/09 $ 129,375
-----------
CONSUMER SUNDRIES (0.8%)
350 Packaged Ice, Inc. (Series B)............................... 9.75 02/01/05 362,250
100 Protection One, Inc......................................... 7.375 08/15/05 101,346
-----------
463,596
-----------
CONSUMER/BUSINESS SERVICES (1.6%)
75 American Business Information, Inc. - 144A*................. 9.50 06/15/08 63,750
75 Coinmach Corp. (Series D)................................... 11.75 11/15/05 82,875
75 Pierce Leahy Command Co..................................... 8.125 05/15/08 75,000
325 Rental Service Corp......................................... 9.00 05/15/08 325,000
350 Safety-Kleen Services....................................... 9.25 06/01/08 364,000
-----------
910,625
-----------
CONTAINERS/PACKAGING (2.7%)
250 Ball Corp. - 144A*.......................................... 7.75 08/01/06 262,500
125 Ball Corp. - 144A*.......................................... 8.25 08/01/08 131,563
100 Consumers Packaging, Inc. - 144A*........................... 9.75 02/01/07 102,000
275 Huntsman Packaging Corp..................................... 9.125 10/01/07 275,000
275 Plastic Containers, Inc. (Series B)......................... 10.00 12/15/06 287,031
225 Riverwood International Corp................................ 10.625 08/01/07 228,375
225 U.S. Can Corp............................................... 10.125 10/15/06 237,375
-----------
1,523,844
-----------
DIVERSIFIED COMMERCIAL SERVICES (0.6%)
250 Iron Mountain, Inc.......................................... 10.125 10/01/06 272,500
75 Iron Mountain, Inc.......................................... 8.75 09/30/09 78,000
-----------
350,500
-----------
DIVERSIFIED MANUFACTURING (1.3%)
200 Ametek Inc.................................................. 7.20 07/15/08 200,548
60 GSI Group Inc............................................... 10.25 11/01/07 42,000
200 Insilco Corp. (Units) - 144A*++............................. 12.00 08/15/07 196,000
200 International Wire Group (Series B)......................... 11.75 06/01/05 213,000
100 Mark IV Industries, Inc..................................... 7.75 04/01/06 97,740
-----------
749,288
-----------
ELECTRONIC COMPONENTS (0.9%)
335 Communications & Power Industries, Inc. (Series B).......... 12.00 08/01/05 355,938
175 Viasystems, Inc............................................. 9.75 06/01/07 164,500
-----------
520,438
-----------
ENTERTAINMENT & LEISURE (0.1%)
75 Carmike Cinemas, Inc. - 144A*............................... 9.375 02/01/09 76,125
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
39
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCE COMPANIES (0.1%)
$ 65 Nationwide Credit, Inc...................................... 10.25% 01/15/08 $ 50,050
-----------
FINANCIAL SERVICES (0.1%)
75 Golden State Holdings....................................... 7.125 08/01/05 74,090
-----------
FOOD CHAINS (0.2%)
125 Jitney-Jungle Stores of America, Inc........................ 10.375 09/15/07 134,375
-----------
FOOD DISTRIBUTORS (0.1%)
75 Di Giorgio Corp............................................. 10.00 06/15/07 70,125
-----------
FOREST PRODUCTS (0.9%)
460 Tembec Finance Corp......................................... 9.875 09/30/05 483,000
-----------
HOME FURNISHINGS (0.9%)
300 Home Interiors & Gifts...................................... 10.125 06/01/08 300,000
200 Westpoint Stevens, Inc...................................... 7.875 06/15/08 206,500
-----------
506,500
-----------
HOSPITAL/NURSING MANAGEMENT (0.2%)
100 Tenet Healthcare Corp. - 144A*.............................. 8.125 12/01/08 102,750
-----------
HOTELS/RESORTS (0.8%)
75 HMH Properties, Inc. (Series B)............................. 7.875 08/01/08 72,750
50 Signature Resorts, Inc...................................... 9.25 05/15/06 46,500
400 Starwood Hotels & Resorts................................... 7.375 11/15/15 334,256
-----------
453,506
-----------
INDUSTRIAL SPECIALTIES (0.1%)
50 Foamex L.P.................................................. 9.875 06/15/07 52,000
-----------
INTERNET SERVICES (1.9%)
825 Verio Inc................................................... 10.375 04/01/05 849,750
200 Verio Inc. - 144A*.......................................... 11.25 12/01/08 212,000
-----------
1,061,750
-----------
MAJOR CHEMICALS (1.0%)
85 Geo Specialty Chemicals - 144A*............................. 10.125 08/01/08 83,725
100 Polymer Group Inc. (Series B)............................... 8.75 03/01/08 99,000
375 Texas Petrochemicals Corp................................... 11.125 07/01/06 367,500
-----------
550,225
-----------
MEDICAL SPECIALTIES (0.5%)
260 Dade International, Inc. (Series B)......................... 11.125 05/01/06 288,600
-----------
METALS FABRICATIONS (0.2%)
100 Neenah Corp. - 144A*........................................ 11.125 05/01/07 104,000
-----------
OIL & GAS PRODUCTION (0.4%)
275 Magnum Hunter Resources, Inc................................ 10.00 06/01/07 233,750
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
40
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
OTHER METALS/MINERALS (0.6%)
$ 100 Golden Northwest Aluminum - 144A*........................... 12.00% 12/15/06 $ 101,000
125 Metal Management, Inc....................................... 10.00 05/15/08 73,750
175 P&L Coal Holdings Corp. (Series B).......................... 8.875 05/15/08 180,906
-----------
355,656
-----------
OTHER TELECOMMUNICATIONS (1.9%)
150 Intermedia Communications, Inc. (Series B).................. 8.875 11/01/07 145,500
225 Intermedia Communications, Inc. (Series B).................. 8.50 01/15/08 214,875
225 MasTec, Inc. (Series B)..................................... 7.75 02/01/08 220,500
340 NEXTLINK Communications, Inc................................ 9.625 10/01/07 333,200
150 NEXTLINK Communications, Inc. - 144A*....................... 10.75 11/15/08 156,000
-----------
1,070,075
-----------
PACKAGED GOODS/COSMETICS (0.3%)
150 Revlon Consumer Products, Inc............................... 8.125 02/01/06 142,500
-----------
PACKAGED FOODS (0.9%)
475 International Home Foods, Inc............................... 10.375 11/01/06 516,563
-----------
PAPER (0.8%)
125 Paperboard Industrial International, Inc.................... 8.375 09/15/07 123,125
300 Stone Container Corp........................................ 10.75 10/01/02 312,375
-----------
435,500
-----------
PRINTING/FORMS (0.1%)
75 Big Flower Press Holdings - 144A*........................... 8.625 12/01/08 76,875
-----------
REAL ESTATE (0.5%)
300 Forest City Enterprises, Inc................................ 8.50 03/15/08 301,500
-----------
RENTAL/LEASING COMPANIES (0.7%)
100 Anthony Crane Rentals - 144A*............................... 10.375 08/01/08 95,000
290 Williams Scotsman, Inc...................................... 9.875 06/01/07 301,600
-----------
396,600
-----------
RESTAURANTS (0.4%)
105 American Restaurant Group, Inc. - 144A*..................... 11.50 02/15/03 94,500
150 Perkins Family Restaurants, L.P. (Series B)................. 10.125 12/15/07 160,500
-----------
255,000
-----------
RETAIL - SPECIALTY (2.6%)
225 Boyds Collection Ltd. - 144A*............................... 9.00 05/15/08 239,625
246 Guitar Center Management.................................... 11.00 07/01/06 260,453
575 Michaels Stores, Inc........................................ 10.875 06/15/06 609,500
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
41
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 100 Mrs. Fields Original Cookies - 144A*........................ 10.125% 12/01/04 $ 96,000
110 Purina Mills, Inc........................................... 9.00 03/15/10 106,700
175 Zale Corp. (Series B)....................................... 8.50 10/01/07 175,000
-----------
1,487,278
-----------
SERVICES TO THE HEALTH INDUSTRY (0.8%)
255 Integrated Health Services (Series A)....................... 9.50 09/15/07 244,800
225 Prime Medical Services Inc.................................. 8.75 04/01/08 218,250
-----------
463,050
-----------
SMALLER BANKS (0.3%)
50 Chevy Chase Savings Bank.................................... 9.25 12/01/05 50,500
100 Chevy Chase Savings Bank, F.S.B............................. 9.25 12/01/08 100,500
-----------
151,000
-----------
TELECOMMUNICATIONS (2.6%)
405 Jordan Telecom Products (Series B).......................... 9.875 08/01/07 400,950
75 Jordan Telecom Products (Series B).......................... 0.00 08/01/07 57,750
425 Level 3 Communications, Inc................................. 9.125 05/01/08 422,875
75 Metronet Communications..................................... 12.00 08/15/07 84,563
75 Metronet Communications - 144A*............................. 10.625 11/01/08 81,750
50 Qwest Communications International, Inc. - 144A*............ 7.50 11/01/08 52,750
200 Qwest Communications International, Inc. - 144A*............ 7.25 11/01/08 208,000
55 RCN Corp.................................................... 10.00 10/15/07 51,838
125 RCN Corp.................................................... 0.00 10/15/07 71,875
50 Worldwide Fiber, Inc. - 144A*............................... 12.50 12/15/05 51,375
-----------
1,483,726
-----------
TELECOMMUNICATIONS EQUIPMENT (0.1%)
125 SBA Communications Corp..................................... 0.00 03/01/08 75,313
-----------
UTILITIES (1.1%)
50 Cal Energy Co., Inc......................................... 7.63 10/15/07 54,469
100 CMS Energy Corp............................................. 7.50 01/15/09 102,757
150 Niagara Mohawk Power (Series F)............................. 7.625 10/01/05 158,499
175 Niagara Mohawk Power (Series G)............................. 7.75 10/01/08 195,164
125 Niagara Mohawk Power (Series H)............................. 0.00 07/01/10 100,716
-----------
611,605
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
42
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
WIRELESS COMMUNICATIONS (0.1%)
$ 60 Paging Network, Inc......................................... 10.125% 08/01/07 $ 57,300
20 Paging Network, Inc......................................... 10.00 10/15/08 19,000
-----------
76,300
-----------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $22,808,284).................................................. 22,943,997
-----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (16.7%)
BOOKS/MAGAZINES (0.7%)
15,200 Reader's Digest Association, Inc $1.93......................................... 426,550
-----------
CABLE TELEVISION (1.8%)
5,900 MediaOne Group, Inc. $2.25..................................................... 654,900
4,600 MediaOne Group, Inc. $3.63 (exchangeable into AirTouch Communications, Inc.
common stock)................................................................ 378,350
-----------
1,033,250
-----------
CONSUMER/BUSINESS SERVICES (0.3%)
6,000 Vanstar Financing Trust $3.375 - 144A*......................................... 153,618
-----------
CONTAINERS/PACKAGING (0.7%)
7,200 Sealed Air Corp. (Series A) $2.00.............................................. 382,500
-----------
DISCOUNT CHAINS (1.8%)
13,000 Dollar General $3.35 (STRYPES)................................................. 494,000
8,300 Kmart Financing I $3.875....................................................... 520,825
-----------
1,014,825
-----------
ELECTRIC UTILITIES (2.7%)
14,200 Houston Industries, Inc. $3.29 (exchangeable into Time Warner common stock).... 1,510,525
-----------
INSURANCE (0.2%)
9,500 Philadelphia Consolidated Holding Co. $0.70.................................... 95,000
-----------
INVESTMENT BANKERS/BROKERS/SERVICES (0.4%)
23,000 Merrill Lynch & Co., Inc. $5.75 (STRIDES) (exchangeable into Lucent
Technologies, Inc. common stock)............................................. 250,125
-----------
MEDICAL/NURSING SERVICES (0.5%)
6,600 Laboratory Corp. of America (Series A) $4.25................................... 300,300
-----------
MILITARY/GOV'T/TECHNICAL (0.8%)
7,600 Loral Space & Communications Ltd. (Series C) $3.00 (Bermuda)................... 461,578
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
OTHER CONSUMER SERVICES (1.7%)
3,700 Cendant Corp. $0.65............................................................ $ 114,236
22,300 Cendant Corp. $3.75............................................................ 848,794
-----------
963,030
-----------
RAILROADS (1.0%)
12,000 Union Pacific Capital Trust $3.125 - 144A*..................................... 595,872
-----------
REAL ESTATE INVESTMENT TRUST (0.7%)
5,500 Host Marriott Financial Trust $3.375........................................... 215,936
4,900 Host Marriott Financial Trust $3.375 - 144A*................................... 192,379
-----------
408,315
-----------
RENTAL/LEASING COMPANIES (1.0%)
10,900 United Rentals Trust $3.25 - 144A*............................................. 547,725
-----------
SMALLER BANKS (1.8%)
11,500 CNB Capital Trust $1.50........................................................ 305,469
11,600 National Australia Bank, Ltd. $1.97 (Australia) (Units)++...................... 352,350
11,700 WBK Trust $3.135 (STRYPES)..................................................... 380,250
-----------
1,038,069
-----------
TRANSPORTATION (0.6%)
10,800 Laidlaw One, Inc. $1.22 (Canada) (exchangeable into United States Filter common
stock)....................................................................... 322,650
-----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $8,030,024)................................................... 9,503,932
-----------
COMMON STOCK (0.0%)
CASINO/GAMBLING
4,685 Fitzgerald Gaming Corp. - 144A* (a)
(IDENTIFIED COST $21,129).................................................... 2,343
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1999, CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (0.5%)
REPURCHASE AGREEMENT
$ 257 The Bank of New York (dated 01/29/99; proceeds $257,274) (b)
(IDENTIFIED COST $257,174)........................................ 4.688% 02/01/99 $ 257,174
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $51,755,939) (C).......................................................... 98.2 % 55,891,406
OTHER ASSETS IN EXCESS OF LIABILITIES...................................................... 1.8 1,037,584
------ ------------
NET ASSETS................................................................................. 100.0 % $ 56,928,990
------ ------------
------ ------------
</TABLE>
- ---------------------
STRIDES Stock return income debt securities.
STRYPES Structured yield product exchangeable for stock.
* Resale is restricted to qualified institutional investors.
+ Issuer is an affiliate of the Fund's manager, Morgan Stanley Dean
Witter Services Company Inc.
++ Consists of one or more classes of securities traded together as a
unit; bonds with attached warrants.
(a) Non-income producing security.
(b) Collateralized by $244,235 U.S. Treasury Note 6.25% due 01/31/02 valued
at $262,317.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$5,588,230 and the aggregate gross unrealized depreciation is
$1,452,763, resulting in net unrealized appreciation of $4,135,467.
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $51,755,939)................................................................ $55,891,406
Receivable for:
Interest................................................................................... 792,883
Investments sold........................................................................... 504,015
Shares of beneficial interest sold......................................................... 134,609
Dividends.................................................................................. 55,888
Prepaid expenses and other assets.............................................................. 38,775
-----------
TOTAL ASSETS.............................................................................. 57,417,576
-----------
LIABILITIES:
Payable for:
Investments purchased...................................................................... 198,257
Shares of beneficial interest repurchased.................................................. 168,929
Plan of distribution fee................................................................... 35,930
Management fee............................................................................. 21,586
Investment advisory fee.................................................................... 14,391
Accrued expenses and other payables............................................................ 49,493
-----------
TOTAL LIABILITIES......................................................................... 488,586
-----------
NET ASSETS................................................................................ $56,928,990
-----------
-----------
COMPOSITION OF NET ASSETS:
Paid-in-capital................................................................................ $52,001,682
Net unrealized appreciation.................................................................... 4,135,467
Accumulated undistributed net investment income................................................ 345,102
Accumulated undistributed net realized gain.................................................... 446,739
-----------
NET ASSETS................................................................................ $56,928,990
-----------
-----------
CLASS A SHARES:
Net Assets..................................................................................... $88,622
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 7,746
NET ASSET VALUE PER SHARE................................................................. $11.44
-----------
-----------
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 4.44% OF NET
ASSET VALUE)............................................................................ $11.95
-----------
-----------
CLASS B SHARES:
Net Assets..................................................................................... $8,924,013
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 780,209
NET ASSET VALUE PER SHARE................................................................. $11.44
-----------
-----------
CLASS C SHARES:
Net Assets..................................................................................... $47,904,684
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 4,184,223
NET ASSET VALUE PER SHARE................................................................. $11.45
-----------
-----------
CLASS D SHARES:
Net Assets..................................................................................... $11,671
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)...................................... 1,019
NET ASSET VALUE PER SHARE................................................................. $11.45
-----------
-----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1999
<TABLE>
<S> <C>
NET INVESTMENT INCOME
INCOME
Interest........................................................................................ $3,377,654
Dividends....................................................................................... 579,076
----------
TOTAL INCOME............................................................................... 3,956,730
----------
EXPENSES
Plan of distribution fee (Class A shares)....................................................... 139
Plan of distribution fee (Class B shares)....................................................... 57,262
Plan of distribution fee (Class C shares)....................................................... 379,492
Management fee.................................................................................. 265,123
Investment advisory fee......................................................................... 176,749
Registration fees............................................................................... 103,293
Transfer agent fees and expenses................................................................ 57,991
Shareholder reports and notices................................................................. 55,268
Professional fees............................................................................... 39,846
Trustees' fees and expenses..................................................................... 32,239
Custodian fees.................................................................................. 23,676
Organizational expenses......................................................................... 6,434
Other........................................................................................... 20,551
----------
TOTAL EXPENSES............................................................................. 1,218,063
----------
NET INVESTMENT INCOME...................................................................... 2,738,667
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain............................................................................... 2,359,043
Net change in unrealized appreciation........................................................... (342,596)
----------
NET GAIN................................................................................... 2,016,447
----------
NET INCREASE.................................................................................... $4,755,114
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<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, 1999 JANUARY 31, 1998*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income..................................................................... $ 2,738,667 $ 2,953,221
Net realized gain......................................................................... 2,359,043 4,031,439
Net change in unrealized appreciation..................................................... (342,596) 950,969
---------------- ------------
NET INCREASE......................................................................... 4,755,114 7,935,629
---------------- ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares........................................................................ (3,154) (582)
Class B shares........................................................................ (352,662) (144,769)
Class C shares........................................................................ (2,309,542) (2,979,361)
Class D shares........................................................................ (572) (290)
Net realized gain
Class A shares........................................................................ (4,241) (1,133)
Class B shares........................................................................ (427,964) (298,812)
Class C shares........................................................................ (2,570,969) (3,495,390)
Class D shares........................................................................ (573) (491)
---------------- ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.................................................... (5,669,677) (6,920,828)
---------------- ------------
Net decrease from transactions in shares of beneficial interest........................... (3,654,766) (457,056)
---------------- ------------
NET INCREASE (DECREASE).............................................................. (4,569,329) 557,745
NET ASSETS:
Beginning of period....................................................................... 61,498,319 60,940,574
---------------- ------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF $345,102 AND $272,740,
RESPECTIVELY)......................................................................... $ 56,928,990 $ 61,498,319
---------------- ------------
---------------- ------------
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
48
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999
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 converted to multiple class share
structure.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by TCW Funds Management, Inc. (the "Adviser") that sale or bid prices
are not reflective of a security's market value, portfolio securities are valued
at their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt securities
for which market quotations are not readily available may be based upon current
market prices of
49
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999, CONTINUED
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"
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
50
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999, CONTINUED
income or distributions in excess of net realized capital gains. To the extent
they exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc.,
formerly Dean Witter InterCapital Inc., an affiliate of Morgan Stanley Dean
Witter Services 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 were fully amortized as of March 30, 1998.
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 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.
51
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999, CONTINUED
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 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 (1)
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes, including the payment of commissions for sales of
these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Manager and Distributor, and other
selected broker-dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $221,765 at January 31, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 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
52
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999, CONTINUED
that expenses representing a gross sales credit to Morgan Stanley Dean Witter
Financial Advisors or other selected broker-dealer representatives may be
reimbursed in the subsequent calendar year. For the year ended January 31, 1999,
the distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.23% and 0.74%, respectively.
The Distributor has informed the Fund that for the year ended January 31, 1999,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $38,754 and $4,717, respectively and
received $637 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, 1999 aggregated
$57,838,967 and $57,973,496, respectively.
Included in the aforementioned sales of portfolio securities are sales of
securities issued by Morgan Stanley Group Inc., an affiliate of the Manager and
Distributor of $730,509, as well as realized gain of $2,625. The Fund's interest
and dividend income included $3,736 and $19,751, respectively, for income from
Morgan Stanley Group, Inc. securities.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent.
6. SUBSEQUENT EVENT
On February 25, 1999, the Board of Trustees of the Fund and of Morgan Stanley
Dean Witter Income Builder Fund ("Income Builder") approved a reorganization
plan (the "Plan") whereby the Fund would be merged into Income Builder. The Plan
is subject to the consent of the Fund's shareholders. Under the terms of the
Plan, the assets of the Fund would be combined with the assets of Income Builder
and shareholders of the Fund would become shareholders of Income Builder,
receiving shares of the corresponding class of Income Builder equal to the value
of their holdings in the Fund.
53
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1999, CONTINUED
7. 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, 1999 JANUARY 31, 1998*
----------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 7,559 $ 87,012 2,751 $ 33,065
Reinvestment of dividends and distributions...................... 668 7,314 142 1,614
Redeemed......................................................... (2,882) (33,757) (492) (5,989)
------------ -------------- ------------ ------------
Net increase - Class A........................................... 5,345 60,569 2,401 28,690
------------ -------------- ------------ ------------
CLASS B SHARES
Sold............................................................. 487,673 5,560,583 209,588 2,492,309
Reinvestment of dividends and distributions...................... 58,170 642,767 32,187 368,173
Redeemed......................................................... (334,323) (3,763,607) (89,344) (1,054,299)
------------ -------------- ------------ ------------
Net increase - Class B........................................... 211,520 2,439,743 152,431 1,806,183
------------ -------------- ------------ ------------
CLASS C SHARES
Sold............................................................. 286,331 3,334,552 912,536 10,493,055
Reinvestment of dividends and distributions...................... 375,181 4,169,254 485,664 5,548,520
Redeemed......................................................... (1,204,168) (13,660,029) (1,590,764) (18,344,299)
------------ -------------- ------------ ------------
Net decrease - Class C........................................... (542,656) (6,156,223) (192,564) (2,302,724)
------------ -------------- ------------ ------------
CLASS D SHARES
Sold............................................................. -- -- 848 10,014
Reinvestment of dividends and distributions...................... 103 1,145 68 781
------------ -------------- ------------ ------------
Net increase - Class D........................................... 103 1,145 916 10,795
------------ -------------- ------------ ------------
Net decrease in Fund............................................. (325,688) $ (3,654,766) (36,816) $ (457,056)
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
</TABLE>
- ---------------------
* For Class A, B and D shares, for the period July 28, 1997 (issue date)
through January 31, 1998.
54
<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 YEAR ENDED JANUARY 31,
--------------------------------------------------------------------------
1999++ 1998*++ 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS C SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.... $ 11.61 $ 11.42 $ 11.13 $ 9.77 $ 10.98
---------- ---------- ---------- ---------- ------
Income (loss) from investment
operations:
Net investment income................ 0.53 0.57 0.60 0.59 0.59
Net realized and unrealized gain
(loss)............................... 0.43 0.96 0.84 1.37 (1.20)
---------- ---------- ---------- ---------- ------
Total income (loss) from investment
operations............................. 0.96 1.53 1.44 1.96 (0.61)
---------- ---------- ---------- ---------- ------
Less dividends and distributions from:
Net investment income................ (0.52) (0.60) (0.60) (0.60) (0.55)
Net realized gain.................... (0.60) (0.74) (0.55) -- (0.05)
---------- ---------- ---------- ---------- ------
Total dividends and distributions....... (1.12) (1.34) (1.15) (0.60) (0.60)
---------- ---------- ---------- ---------- ------
Net asset value, end of period.......... $ 11.45 $ 11.61 $ 11.42 $ 11.13 $ 9.77
---------- ---------- ---------- ---------- ------
---------- ---------- ---------- ---------- ------
TOTAL RETURN+........................... 8.81% 14.03% 13.46% 20.52% (5.59)%
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.07%(1) 2.01% 2.02% 2.21% 2.04%
Net investment income................... 4.65%(1) 4.84% 5.19% 5.41% 5.83%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $47,905 $54,863 $60,941 $57,631 $55,335
Portfolio turnover rate................. 103% 96% 102% 79% 88%
</TABLE>
- ---------------------
* 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 Morgan Stanley 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JANUARY 31, JANUARY 31,
1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 11.60 $ 11.81
------ ------
Income from investment operations:
Net investment income.................................... 0.59 0.30
Net realized and unrealized gain......................... 0.44 0.39
------ ------
Total income from investment operations..................... 1.03 0.69
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.59) (0.33)
Net realized gain........................................ (0.60) (0.57)
------ ------
Total dividends and distributions........................... (1.19) (0.90)
------ ------
Net asset value, end of period.............................. $ 11.44 $ 11.60
------ ------
------ ------
TOTAL RETURN+............................................... 9.45% 6.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.56%(3) 1.54%(2)
Net investment income....................................... 5.16%(3) 5.04%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $89 $28
Portfolio turnover rate..................................... 103% 96%
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 11.60 $ 11.81
------ ------
Income from investment operations:
Net investment income.................................... 0.53 0.28
Net realized and unrealized gain......................... 0.43 0.38
------ ------
Total income from investment operations..................... 0.96 0.66
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.52) (0.30)
Net realized gain........................................ (0.60) (0.57)
------ ------
Total dividends and distributions........................... (1.12) (0.87)
------ ------
Net asset value, end of period.............................. $ 11.44 $ 11.60
------ ------
------ ------
TOTAL RETURN+............................................... 8.85% 5.80%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.08%(3) 2.02%(2)
Net investment income....................................... 4.64%(3) 4.58%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $8,924 $6,597
Portfolio turnover rate..................................... 103% 96%
</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 data 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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR JULY 28, 1997*
ENDED THROUGH
JANUARY 31, JANUARY 31,
1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $ 11.61 $ 11.81
------ ------
Income from investment operations:
Net investment income.................................... 0.62 0.32
Net realized and unrealized gain......................... 0.43 0.39
------ ------
Total income from investment operations..................... 1.05 0.71
------ ------
Less dividends and distributions from:
Net investment income.................................... (0.61) (0.34)
Net realized gain........................................ (0.60) (0.57)
------ ------
Total dividends and distributions........................... (1.21) (0.91)
------ ------
Net asset value, end of period.............................. $ 11.45 $ 11.61
------ ------
------ ------
TOTAL RETURN+............................................... 9.64% 6.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.33%(3) 1.27%(2)
Net investment income....................................... 5.39%(3) 5.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $12 $11
Portfolio turnover rate..................................... 103% 96%
</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.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
57
<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, 1999, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at January 31, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As described in Note 6 to the financial statements, the Board of Trustees of the
Fund approved a reorganization plan, subject to shareholder approval, whereby
the Fund will be merged into Morgan Stanley Dean Witter Income Builder Fund.
PricewaterhouseCoopers LLP
1177 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
MARCH 12, 1999
58
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FEDERAL TAX NOTICE (UNAUDITED)
During the year ended January 31, 1999, the Fund paid to its shareholders $0.54
per share from long-term capital gains. For such period, 18.91% of the income
paid qualified for the dividends received deduction available to corporations.
59
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PART C OTHER INFORMATION
Item 23. EXHIBITS
2. Amended and Restated By-Laws of the Registrant dated
January 28, 1999.
8. Form of Amended and Restated Transfer Agency and Service
Agreement between the Registrant and Morgan Stanley Dean Witter
Trust FSB.
10. Consent of Independent Accountants.
14. Financial Data Schedules.
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None
Item 25. INDEMNIFICATION.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and under
Section 4.8 of the Registrant's By-Laws, the indemnification of the Registrant's
trustees, officers, employees and agents is permitted if it is determined that
they acted under the belief that their actions were in or not opposed to the
best interest of the Registrant, and, with respect to any criminal proceeding,
they had reasonable cause to believe their conduct was not unlawful. In
addition, indemnification is permitted only if it is determined that the actions
in question did not render them liable by reason of willful misfeasance, bad
faith or gross negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the Registrant. Trustees,
officers, employees and agents will be indemnified for the expense of litigation
if it is determined that they are entitled to indemnification against any
liability established in such litigation. The Registrant may also advance money
for these expenses provided that they give their undertakings to repay the
Registrant unless their conduct is later determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Management and Advisory Agreements, none of the
Manager, the Adviser or any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such
<PAGE>
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 26. 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/DW North American Government Income Trust, an open-end,
non-diversified management company; (2) TCW/DW Income and Growth Fund, an
open-end, non-diversified management company; (3) TCW/DW Latin American Growth
Fund, an open-end, non-diversified management company; (4) TCW/DW Small Cap
Growth Fund, an open-end non-diversified management company; (5) TCW/DW Term
Trust 2000, a closed-end, diversified management company; (6) TCW/DW Term Trust
2002, a closed-end diversified management company; (7) TCW/DW Term Trust 2003, a
closed-end diversified management company; (8) TCW/DW Emerging Markets
Opportunities Trust, an open-end, non-diversified management company; (9) TCW/DW
Total Return Trust, an open-end non-diversified management investment company;
(10) TCW/DW Mid-Cap Equity Trust, an open-end, diversified management investment
company; and (11) 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 26 of the officers and directors of
TCW together with information as to any other business, profession, vocation or
employment of a substantive nature 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 27. PRINCIPAL UNDERWRITERS
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation, is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
<TABLE>
<S><C>
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
2
<PAGE>
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter Aggressive Equity Fund
(6) Morgan Stanley Dean Witter American Value Fund
(7) Morgan Stanley Dean Witter Balanced Growth Fund
(8) Morgan Stanley Dean Witter Balanced Income Fund
(9) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(10) Morgan Stanley Dean Witter California Tax-Free Income Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "BEST IDEAS PORTFOLIO"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Utilities Fund
(24) Morgan Stanley Dean Witter Growth Fund
(25) Morgan Stanley Dean Witter Hawaii Municipal Trust
(26) Morgan Stanley Dean Witter Health Sciences Trust
(27) Morgan Stanley Dean Witter High Yield Securities Inc.
(28) Morgan Stanley Dean Witter Income Builder Fund
(29) Morgan Stanley Dean Witter Information Fund
(30) Morgan Stanley Dean Witter Intermediate Income Securities
(31) Morgan Stanley Dean Witter International SmallCap Fund
(32) Morgan Stanley Dean Witter Japan Fund
(33) Morgan Stanley Dean Witter Limited Term Municipal Trust
(34) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(35) Morgan Stanley Dean Witter Market Leader Trust
(36) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(37) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(38) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(39) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(40) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(41) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(42) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(43) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(44) Morgan Stanley Dean Witter Prime Income Trust
(45) Morgan Stanley Dean Witter Real Estate Fund
(46) Morgan Stanley Dean Witter S&P 500 Index Fund
(47) Morgan Stanley Dean Witter S&P 500 Select Fund
(48) Morgan Stanley Dean Witter Short-Term Bond Fund
(49) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(50) Morgan Stanley Dean Witter Special Value Fund
(51) Morgan Stanley Dean Witter Strategist Fund
(52) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
3
<PAGE>
(53) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(54) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(55) Morgan Stanley Dean Witter U.S. Government Securities Trust
(56) Morgan Stanley Dean Witter Utilities Fund
(57) Morgan Stanley Dean Witter Value-Added Market Series
(58) Morgan Stanley Dean Witter Value Fund
(59) Morgan Stanley Dean Witter Variable Investment Series
(60) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
</TABLE>
(b) The following information is given regarding directors and officers of MSDW
Distributors not listed in Item 26 above. The principal address of MSDW
Distributors is Two World Trade Center, New York, New York 10048. None of
the following persons has any position or office with the Registrant.
POSITION AND OFFICE WITH MSDW DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- --------------------------------------------------
Frank Bruttomesso Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
Thomas F. Caloia Assistant Treasurer of MSDW Distributors and
Treasurer of the Registrant.
Marilyn K. Cranney Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
Christine A. Edwards Director, Executive Vice President, Secretary, and
Chief Legal Officer of MSDW Distributors.
Barry Fink Senior Vice President, Assistant General
Counsel and Assistant Secretary of MSDW
Distributors and Vice President, Secretary and
General Counsel of the Registrant.
Robert S. Giambrone Senior Vice President of MSDW Distributors and
Vice President of the Registrant.
Michael T. Gregg Vice President and Assistant Secretary of
MSDW Distributors.
James F. Higgins Director of MSDW Distributors.
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Michael Interrante Assistant Treasurer of MSDW Distributors.
John B. Kemp President of Distributors.
Frederick K. Kubler Senior Vice President, Assistant Secretary
and Chief Compliance Officer of MSDW
Distributors.
Todd Lebo Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
Lou Anne D. McInnis Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
Mitchell M. Merin Director, Chief Executive Officer of MSDW
Distributors and Vice President of the Registrant
Carsten Otto Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
Philip J. Purcell Director of MSDW Distributors.
Ruth Rossi Assistant Secretary of MSDW Distributors and Vice
President of the Registrant
John Schaeffer Director of MSDW Distributors.
Charles Vadala Senior Vice President and Financial Principal of
MSDW Distributors
Item 28. 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 Investment 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 29. MANAGEMENT SERVICES
Registrant is not a party to any such management-related service contract.
Item 30. UNDERTAKINGS
None
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it 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 26th day of March, 1999.
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. 8 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 03/26/99
By: /s/ Charles A Fiumefreddo
--------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
03/26/99
By: /s/ Thomas F. Caloia
--------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Thomas E. Larkin, Jr.
Richard M. DeMartini
Marc I. Stern
By: /s/ Barry Fink 03/26/99
--------------------------------
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 03/26/99
--------------------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
TCW/DW INCOME AND GROWTH FUND
Exhibit Index
2. Amended and Restated By-Laws of the Registrant dated January 28, 1999.
8. Form of Amended and Restated Transfer Agency and Service Agreement
between the Registrant and Morgan Stanley Dean Witter Trust FSB.
10. Consent of Independent Accountants.
14. Financial Data Schedules.
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference.
<PAGE>
BY-LAWS
OF
TCW/DW INCOME AND GROWTH FUND
AMENDED AND RESTATED AS OF JANUARY 28, 1999
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, as amended from time to time.
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 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
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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 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 or her 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. Without limiting the manner in which a Shareholder may
authorize another person or persons to act for such Shareholder as proxy
pursuant hereto, the following shall constitute a valid means by which a
Shareholder may grant such authority:
(i) A Shareholder may execute a writing authorizing another person or
persons to act for such Shareholder as proxy. Execution may be accomplished
by the Shareholder or such Shareholder's authorized officer, director,
employee, attorney-in-fact or another agent signing such writing or causing
such person's signature to be affixed to such writing by any reasonable
means including, but not limited to, by facsimile or telecopy signature. No
written evidence of authority of a Shareholder's authorized officer,
director, employee, attorney-in-fact or other agent shall be required; and
(ii) A Shareholder may authorize another person or persons to act for such
Shareholder as proxy by transmitting or authorizing the transmission of a
telegram or cablegram or by other means of telephonic, electronic or
computer transmission to the person who will be the holder of the proxy or
to a proxy solicitation firm, proxy support service organization or like
agent duly authorized by the person who will be the holder of the proxy to
receive such transmission, provided that any such telegram or cablegram or
other means of telephonic, electronic or computer transmission must either
set forth or be submitted with information from which it can be determined
that the telegram, cablegram or other transmission was authorized by the
Shareholder.
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. In determining whether a telegram,
cablegram or other electronic transmission is valid, the chairman or inspector,
as the case may be, shall specify the information upon which he or she relied.
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. Proxy
solicitations may be made in writing or by using telephonic or other electronic
solicitation procedures that include appropriate methods of verifying the
identity of the Shareholder and confirming any instructions given thereby.
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
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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 Business Corporation Law of the
Commonwealth of Massachusetts.
SECTION 3.9. ACTION BY SHAREHOLDERS WITHOUT MEETING. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to be
taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. PRESENCE AT MEETINGS. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other electronic
means.
ARTICLE IV
TRUSTEES
SECTION 4.1. MEETINGS OF THE TRUSTEES. The Trustees may in their discretion
provide for regular or special meetings of the Trustees. Regular meetings of the
Trustees may be held at such time and place as 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
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<PAGE>
or permitted to be taken at any meeting of the Trustees may be taken without a
meeting if a consent in writing setting forth the action shall be signed by all
of the Trustees entitled to vote upon the action and such written consent is
filed with the minutes of proceedings of the Trustees.
SECTION 4.6. EXPENSES AND FEES. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and each
Trustee who is not an officer or employee of the Trust or of its investment
manager or underwriter or of any corporate affiliate of any of said persons
shall receive for services rendered as a Trustee of the Trust such compensation
as may be fixed by the Trustees. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity and receiving
compensation therefor.
SECTION 4.7. EXECUTION OF INSTRUMENTS AND DOCUMENTS AND SIGNING OF CHECKS
AND OTHER OBLIGATIONS AND TRANSFERS. All instruments, documents and other papers
shall be executed in the name and on behalf of the Trust and all checks, notes,
drafts and other obligations for the payment of money by the Trust shall be
signed, and all transfer of securities standing in the name of the Trust shall
be executed, by the Chairman, the President, any Vice President or the Treasurer
or by any one or more officers or agents of the Trust as shall be designated for
that purpose by vote of the Trustees; notwithstanding the above, nothing in this
Section 4.7 shall be deemed to preclude the electronic authorization, by
designated persons, of the Trust's Custodian (as described herein in Section
9.1) to transfer assets of the Trust, as provided for herein in Section 9.1.
SECTION 4.8. INDEMNIFICATION OF TRUSTEES, OFFICERS, EMPLOYEES AND AGENTS.
(a) The Trust shall indemnify any person who was or is a party or is threatened
to be made a party to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Trust) by reason of the fact that he is or
was a Trustee, officer, employee, or agent of the Trust. The indemnification
shall be against expenses, including attorneys' fees, judgments, fines, and
amounts paid in settlement, actually and reasonably incurred by him in
connection with the action, suit, or proceeding, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Trust, and, with respect to any criminal action 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.
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(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be indemnified
("indemnitee") was not liable by reason of disabling conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of
the Investment Company Act of 1940, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(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
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person may satisfy any right of indemnity or reimbursement granted herein or to
which he may be otherwise entitled except out of the property of the Trust, and
no Shareholder shall be personally liable with respect to any claim for
indemnity or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. EXECUTIVE AND OTHER COMMITTEES. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
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,
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acknowledge or verify any instrument in more than one capacity. The executive
officers of the Trust shall be elected annually by the Trustees and each
executive officer so elected shall hold office until his successor is elected
and has qualified.
SECTION 6.2. OTHER OFFICERS AND AGENTS. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. TERM AND REMOVAL AND VACANCIES. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. COMPENSATION OF OFFICERS. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. POWER AND DUTIES. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to these
By-Laws, or to the extent not so provided, as may be prescribed by the Trustees;
provided, that no rights of any third party shall be affected or impaired by any
such By-Law or resolution of the Trustees unless he has knowledge thereof.
SECTION 6.6. THE CHAIRMAN. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders and
of the Trustees; he shall have general and active management of the business of
the Trust, shall see that all orders and resolutions of the Trustees are carried
into effect, and, in connection therewith, shall be authorized to delegate to
the President or to one or more Vice Presidents such of his powers and duties at
such times and in such manner as he may deem advisable; he shall be a signatory
on all Annual and Semi-Annual Reports as may be sent to shareholders, and he
shall perform such other duties as the Trustees may from time to time prescribe.
(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.
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SECTION 6.12. THE TREASURER. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the Chairman, whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition of
the Trust; and he shall perform such other duties as the Trustees, or the
Chairman, may from time to time prescribe.
SECTION 6.13. THE ASSISTANT TREASURERS. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the Chairman, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Trustees, or the
Chairman, may from time to time prescribe.
SECTION 6.14. DELEGATION OF DUTIES. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
Inasmuch as the computation of net income and net profits from the sales of
securities or other properties for federal income tax purposes may vary from the
computation thereof on the records of the Trust, the Trustees shall have power,
in their discretion, to distribute as income dividends and as capital gain
distributions, respectively, amounts sufficient to enable the Trust to avoid or
reduce liability for federal income taxes.
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
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certificate, or his legal representative, to give to the Trust and to such
Registrar, Transfer Agent and/or Transfer Clerk as may be authorized or required
to countersign such new certificate or certificates, a bond in such sum and of
such type as they may direct, and with such surety or sureties, as they may
direct, as indemnity against any claim that may be against them or any of them
on account of or in connection with the alleged loss, theft or destruction of
any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. APPOINTMENT AND DUTIES. The Trust shall at times employ a bank
or trust company having capital, surplus and undivided profits of at least five
million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as may
be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver
the same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees.
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
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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.
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, together with all amendments thereto, 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
MORGAN STANLEY DEAN WITTER TRUST FSB
[open-end funds]
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment. . . . . . . . . . . . . . . . . . . . 1
Article 2 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 5
Article 3 Representations and Warranties of MSDW TRUST. . . . . . . . 6
Article 4 Representations and Warranties of the Fund. . . . . . . . . 7
Article 5 Duty of Care and Indemnification. . . . . . . . . . . . . . 7
Article 6 Documents and Covenants of the Fund and MSDW TRUST. . . . . 10
Article 7 Duration and Termination of Agreement . . . . . . . . . . . 13
Article 8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . 14
Article 9 Affiliations. . . . . . . . . . . . . . . . . . . . . . . . 14
Article 10 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 15
Article 11 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . 15
Article 12 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . 15
Article 13 Merger of Agreement . . . . . . . . . . . . . . . . . . . . 17
Article 14 Personal Liability. . . . . . . . . . . . . . . . . . . . . 17
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of June,
1998 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 MORGAN STANLEY DEAN WITTER TRUST FSB
("MSDW TRUST"), 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 MSDW TRUST as its transfer
agent, dividend disbursing agent and shareholder servicing agent and MSDW TRUST
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 MSDW TRUST
1.1 Subject to the terms and conditions set forth in
this Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and
MSDW TRUST 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
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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 MSDW TRUST agrees that it will perform the following
services:
(a) In accordance with procedures established from time
to time by agreement between the Fund and MSDW TRUST, MSDW TRUST 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;
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<PAGE>
(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. MSDW TRUST 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 would result in an overissue, MSDW
TRUST shall refuse to issue such Shares and shall not countersign and issue any
certificates requested for such Shares. When recording the issuance of Shares,
MSDW TRUST 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), MSDW TRUST shall:
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<PAGE>
(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 MSDW TRUST in writing those transactions
and assets to be treated as exempt from Blue Sky reporting for each State; and
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<PAGE>
(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 MSDW TRUST 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 MSDW TRUST 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 MSDW TRUST.
(d) MSDW TRUST shall provide such additional services
and functions not specifically described herein as may be mutually agreed
between MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
Article 2 FEES AND EXPENSES
2.1 For performance by MSDW TRUST pursuant to this
Agreement, each Fund agrees to pay MSDW TRUST 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 MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1
above, the Fund agrees to reimburse MSDW TRUST for out of pocket expenses in
connection with the services rendered
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<PAGE>
by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
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 MSDW
TRUST by the Fund upon request prior to the mailing date of such materials.
Article 3 REPRESENTATIONS AND WARRANTIES OF MSDW TRUST
MSDW TRUST 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.
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<PAGE>
Article 4 REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to MSDW TRUST 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 MSDW TRUST shall not be responsible for, and the
Fund shall indemnify and hold MSDW TRUST harmless from and against, any and all
losses, damages, costs,
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<PAGE>
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST 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 MSDW TRUST or its agents
or subcontractors of information, records and documents which (i) are received
by MSDW TRUST 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 MSDW TRUST
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 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.
-8-
<PAGE>
5.2 MSDW TRUST 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 MSDW TRUST as a result of the lack of
good faith, negligence or willful misconduct of MSDW TRUST, its officers,
employees or agents.
5.3 At any time, MSDW TRUST 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
MSDW TRUST under this Agreement, and MSDW TRUST 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. MSDW TRUST, 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 MSDW TRUST 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. MSDW TRUST, 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.
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<PAGE>
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 MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the
following, unless previously furnished to Dean Witter Trust Company, the prior
transfer agent of the Fund:
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<PAGE>
(a) If a corporation:
(i) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of MSDW TRUST 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;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of MSDW TRUST 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;
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<PAGE>
(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
MSDW TRUST deems to be appropriate or necessary for the proper performance of
its duties.
6.2 MSDW TRUST 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.
-12-
<PAGE>
6.3 MSDW TRUST 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, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST 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 MSDW TRUST 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 MSDW TRUST and the Fund.
6.5 In case of any request or demands for the inspection
of the Shareholder records of the Fund, MSDW TRUST will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. MSDW TRUST 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
-13-
<PAGE>
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 MSDW TRUST 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, MSDW TRUST 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.
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 MSDW TRUST 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 MSDW TRUST;
PROVIDED, HOWEVER, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations and duties, and
that MSDW TRUST
-14-
<PAGE>
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 MSDW TRUST 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 & 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 MSDW
TRUST as directors, officers, employees, agents and shareholders or otherwise,
and that the directors, officers, employees, agents and shareholders of MSDW
TRUST 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.
-15-
<PAGE>
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 Morgan Stanley Dean Witter Advisors Inc. or
any of its affiliates ("Additional Funds") desires to retain MSDW TRUST to act
as transfer agent, dividend disbursing agent and/or shareholder servicing agent,
and MSDW TRUST desires to render such services, such services shall be provided
pursuant to a letter agreement, substantially in the form of Exhibit A hereto,
between MSDW TRUST 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 MSDW TRUST 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 MSDW TRUST
and the Fund issued by a surety company satisfactory to MSDW TRUST, except that
MSDW TRUST may accept an affidavit of loss and indemnity agreement executed by
the registered holder (or legal representative) without surety in such form as
MSDW TRUST deems appropriate indemnifying MSDW TRUST 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
-16-
<PAGE>
account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST 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 MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to MSDW TRUST 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 MSDW TRUST:
Morgan Stanley 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.
-17-
<PAGE>
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.
MORGAN STANLEY DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
-18-
<PAGE>
EQUITY FUNDS
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
38. Morgan Stanley Dean Witter S&P 500 Select Fund
BALANCED FUNDS
39. Morgan Stanley Dean Witter Balanced Growth Fund
40. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
41. Morgan Stanley Dean Witter Strategist Fund
42. Dean Witter Global Asset Allocation Fund
-19-
<PAGE>
FIXED INCOME FUNDS
43. Morgan Stanley Dean Witter High Yield Securities Inc.
44. Morgan Stanley Dean Witter High Income Securities
45. Morgan Stanley Dean Witter Convertible Securities Trust
46. Morgan Stanley Dean Witter Intermediate Income Securities
47. Morgan Stanley Dean Witter Short-Term Bond Fund
48. Morgan Stanley Dean Witter World Wide Income Trust
49. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
50. Morgan Stanley Dean Witter Diversified Income Trust
51. Morgan Stanley Dean Witter U.S. Government Securities Trust
52. Morgan Stanley Dean Witter Federal Securities Trust
53. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
55. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
56. Morgan Stanley Dean Witter Limited Term Municipal Trust
57. Morgan Stanley Dean Witter California Tax-Free Income Fund
58. Morgan Stanley Dean Witter New York Tax-Free Income Fund
59. Morgan Stanley Dean Witter Hawaii Municipal Trust
60. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
61. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
62. Dean Witter Retirement Series
63. Morgan Stanley Dean Witter Variable Investment Series
64. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
65. TCW/DW North American Government Income Trust
66. TCW/DW Latin American Growth Fund
67. TCW/DW Income and Growth Fund
68. TCW/DW Small Cap Growth Fund
69. TCW/DW Total Return Trust
-20-
<PAGE>
70. TCW/DW Global Telecom Trust
71. TCW/DW Mid-Cap Equity Trust
72. TCW/DW Emerging Markets Opportunities Trust
By:
-------------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- -----------------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-------------------------------------
John Van Heuvelen
President
ATTEST:
- -----------------------------------
Executive Vice President
-21-
<PAGE>
EXHIBIT A
Morgan Stanley 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 Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") 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 MSDW TRUST of fees as set out in the fee schedule attached hereto as
Schedule A, MSDW TRUST 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.
-22-
<PAGE>
Please indicate MSDW TRUST'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:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
---------------------------
Its:
--------------------------
Date:
-------------------------
-23-
<PAGE>
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.
<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. 8 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
March 12, 1999, 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 headings "Custodian and
Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial
Highlights" in such Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
March 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> TCW/DW INCOME & GROWTH FUND - CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 51,755,939
<INVESTMENTS-AT-VALUE> 55,891,406
<RECEIVABLES> 1,487,395
<ASSETS-OTHER> 38,775
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,417,576
<PAYABLE-FOR-SECURITIES> (198,257)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (290,329)
<TOTAL-LIABILITIES> (488,586)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,001,682
<SHARES-COMMON-STOCK> 7,746
<SHARES-COMMON-PRIOR> 2,401
<ACCUMULATED-NII-CURRENT> 345,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 446,739
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,135,467
<NET-ASSETS> 88,622
<DIVIDEND-INCOME> 579,076
<INTEREST-INCOME> 3,377,654
<OTHER-INCOME> 0
<EXPENSES-NET> (1,218,063)
<NET-INVESTMENT-INCOME> 2,738,667
<REALIZED-GAINS-CURRENT> 2,359,043
<APPREC-INCREASE-CURRENT> (342,596)
<NET-CHANGE-FROM-OPS> 4,755,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,154)
<DISTRIBUTIONS-OF-GAINS> (4,241)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,559
<NUMBER-OF-SHARES-REDEEMED> (2,882)
<SHARES-REINVESTED> 668
<NET-CHANGE-IN-ASSETS> (4,569,329)
<ACCUMULATED-NII-PRIOR> 272,740
<ACCUMULATED-GAINS-PRIOR> 1,091,068
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (441,872)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,218,063)
<AVERAGE-NET-ASSETS> 61,073
<PER-SHARE-NAV-BEGIN> 11.60
<PER-SHARE-NII> 0.78
<PER-SHARE-GAIN-APPREC> 0.25
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> (0.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.44
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> TCW/DW INCOME & GROWTH FUND - CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 51,755,939
<INVESTMENTS-AT-VALUE> 55,891,406
<RECEIVABLES> 1,487,395
<ASSETS-OTHER> 38,775
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,417,576
<PAYABLE-FOR-SECURITIES> (198,257)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (290,329)
<TOTAL-LIABILITIES> (488,586)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,001,682
<SHARES-COMMON-STOCK> 780,209
<SHARES-COMMON-PRIOR> 568,689
<ACCUMULATED-NII-CURRENT> 345,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 446,739
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,135,467
<NET-ASSETS> 8,924,013
<DIVIDEND-INCOME> 579,076
<INTEREST-INCOME> 3,377,654
<OTHER-INCOME> 0
<EXPENSES-NET> (1,218,063)
<NET-INVESTMENT-INCOME> 2,738,667
<REALIZED-GAINS-CURRENT> 2,359,043
<APPREC-INCREASE-CURRENT> (342,596)
<NET-CHANGE-FROM-OPS> 4,755,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (352,662)
<DISTRIBUTIONS-OF-GAINS> (427,964)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 487,673
<NUMBER-OF-SHARES-REDEEMED> (334,323)
<SHARES-REINVESTED> 58,170
<NET-CHANGE-IN-ASSETS> (4,569,329)
<ACCUMULATED-NII-PRIOR> 272,740
<ACCUMULATED-GAINS-PRIOR> 1,091,068
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (441,872)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,218,063)
<AVERAGE-NET-ASSETS> 7,634,988
<PER-SHARE-NAV-BEGIN> 11.60
<PER-SHARE-NII> 0.58
<PER-SHARE-GAIN-APPREC> 0.38
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> (0.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.44
<EXPENSE-RATIO> 2.08
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 013
<NAME> TCW/DW INCOME & GROWTH FUND - CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 51,755,939
<INVESTMENTS-AT-VALUE> 55,891,406
<RECEIVABLES> 1,487,395
<ASSETS-OTHER> 38,775
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,417,576
<PAYABLE-FOR-SECURITIES> (198,257)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (280,329)
<TOTAL-LIABILITIES> (488,586)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,001,682
<SHARES-COMMON-STOCK> 4,184,223
<SHARES-COMMON-PRIOR> 4,726,879
<ACCUMULATED-NII-CURRENT> 345,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 446,739
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,135,467
<NET-ASSETS> 47,904,684
<DIVIDEND-INCOME> 579,076
<INTEREST-INCOME> 3,377,654
<OTHER-INCOME> 0
<EXPENSES-NET> (1,218,063)
<NET-INVESTMENT-INCOME> 2,738,667
<REALIZED-GAINS-CURRENT> 2,359,043
<APPREC-INCREASE-CURRENT> (342,596)
<NET-CHANGE-FROM-OPS> 4,755,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,309,542)
<DISTRIBUTIONS-OF-GAINS> (2,570,969)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 286,331
<NUMBER-OF-SHARES-REDEEMED> (1,204,168)
<SHARES-REINVESTED> 375,181
<NET-CHANGE-IN-ASSETS> (4,569,329)
<ACCUMULATED-NII-PRIOR> 272,740
<ACCUMULATED-GAINS-PRIOR> 1,091,068
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (441,872)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,218,063)
<AVERAGE-NET-ASSETS> 51,209,387
<PER-SHARE-NAV-BEGIN> 11.61
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.44
<PER-SHARE-DIVIDEND> (0.52)
<PER-SHARE-DISTRIBUTIONS> (0.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 2.07
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 014
<NAME> TCW/DW INCOME & GROWTH FUND - CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<INVESTMENTS-AT-COST> 51,755,939
<INVESTMENTS-AT-VALUE> 55,891,406
<RECEIVABLES> 1,487,395
<ASSETS-OTHER> 38,775
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 57,417,576
<PAYABLE-FOR-SECURITIES> (198,257)
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> (290,329)
<TOTAL-LIABILITIES> (488,586)
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 52,001,682
<SHARES-COMMON-STOCK> 1,019
<SHARES-COMMON-PRIOR> 916
<ACCUMULATED-NII-CURRENT> 345,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 446,739
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,135,467
<NET-ASSETS> 11,671
<DIVIDEND-INCOME> 579,076
<INTEREST-INCOME> 3,377,654
<OTHER-INCOME> 0
<EXPENSES-NET> (1,218,063)
<NET-INVESTMENT-INCOME> 2,738,667
<REALIZED-GAINS-CURRENT> 2,359,043
<APPREC-INCREASE-CURRENT> (342,596)
<NET-CHANGE-FROM-OPS> 4,755,114
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (572)
<DISTRIBUTIONS-OF-GAINS> (573)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 103
<NET-CHANGE-IN-ASSETS> (4,569,329)
<ACCUMULATED-NII-PRIOR> 272,740
<ACCUMULATED-GAINS-PRIOR> 1,091,068
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (441,872)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (1,218,063)
<AVERAGE-NET-ASSETS> 10,872
<PER-SHARE-NAV-BEGIN> 11.61
<PER-SHARE-NII> 0.63
<PER-SHARE-GAIN-APPREC> 0.42
<PER-SHARE-DIVIDEND> (0.61)
<PER-SHARE-DISTRIBUTIONS> (0.60)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 1.33
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
