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[LOGO]
BALANCED FUND
PROSPECTUS
NOVEMBER 29, 1996
TCW/DW Balanced Fund (the "Fund") is an open-end, diversified management
investment company, whose investment objective is to achieve high total return
through a combination of income and capital appreciation. The Fund seeks to
achieve its investment objective by investing in a diversified portfolio of
common stocks and investment grade fixed-income securities.
Shares of the Fund are sold and redeemed at net asset value. The Fund pays a
distribution fee of up to 1.0% of its average daily net assets in accordance
with a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company
Act of 1940.
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated November 29, 1996, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page. The
Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary 2
Summary of Fund Expenses 3
Financial Highlights 3
The Fund and its Management 4
Investment Objective and Policies 4
Special Risk Considerations 5
Investment Restrictions 9
Purchase of Fund Shares 9
Shareholder Services 11
Repurchases and Redemptions 13
Dividends, Distributions and Taxes 14
Performance Information 14
Additional Information 15
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
TCW/DW BALANCED FUND
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Dean Witter Distributors Inc.
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PROSPECTUS SUMMARY
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THE The Fund is organized as a Trust, commonly known as a Massachusetts business trust,
FUND and is an open- end, diversified management investment company investing in a
diversified portfolio of common stocks and investment grade fixed-income securities.
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SHARES Shares of beneficial interest with $0.01 par value (see page 15).
OFFERED
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OFFERING The price of the shares offered by this Prospectus is determined once daily as of 4:00
PRICE p.m., New York time, on each day that the New York Stock Exchange is open, and is
equal to the net asset value per share (see page 9).
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MINIMUM The minimum initial investment is $1,000 ($100 if the account is opened through
PURCHASE EasyInvest-SM-) and the minimum subsequent investment is $100 (see pages 9-10).
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INVESTMENT The investment objective of the Fund is to achieve high total return through a
OBJECTIVE combination of income and capital appreciation. (see page 4)
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MANAGER Dean Witter Services Company Inc. (the "Manager"), a wholly-owned subsidiary of Dean
Witter InterCapital Inc. ("InterCapital"), is the Fund's Manager. The Manager also
serves as Manager to thirteen other investment companies which are advised by TCW
Funds Management, Inc. (the "TCW/ DW Funds"). The Manager and InterCapital serve in
various investment management, advisory, management and administrative capacities to a
total of 100 investment companies and other portfolios with assets of approximately
$88.1 billion at October 31, 1996 (see page 4).
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ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser. In
addition to the Fund, the Adviser serves as investment adviser to thirteen other
TCW/DW Funds. As of September 30, 1996, the Adviser and its affiliates had
approximately $53 billion under management or committed to management in various
fiduciary or advisory capacities, primarily from institutional investors (see page 4).
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MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.45% of daily net assets.
AND ADVISORY The Adviser receives a monthly fee at an annual rate of 0.30% of daily net assets (see
FEES page 4).
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DIVIDENDS Income dividends are paid quarterly. Capital gains, if any, will be distributed no
AND CAPITAL less than annually. Dividends and capital gains distributions are automatically
GAINS reinvested in additional shares at net asset value unless the shareholder elects to
DISTRIBUTIONS receive cash (see page 14).
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REDEMPTION Shares are redeemable by the shareholder at net asset value. An account may be
involuntarily redeemed if the total value of the account is less than $100 or, if the
account was opened through EasyInvest-SM-, if after twelve months the shareholder has
invested less than $1,000 in the account (see page 13).
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PLAN The Fund is authorized to reimburse specific expenses incurred in promoting the
OF distribution of the Fund's shares, including personal services to shareholders and
DISTRIBUTION maintenance of shareholder accounts, in accordance with a Plan of Distribution
pursuant to Rule 12b-1 under the Investment Company Act of 1940. Reimbursement may in
no event exceed an amount equal to payments at an annual rate of 1.0% of average daily
net assets of the Fund (see page 10).
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RISK The net asset value of the Fund's shares will fluctuate with changes in the market
CONSIDERATIONS value of the Fund's portfolio securities. The Fund may invest a portion of its assets
in mortgage-backed and asset-backed securities, including up to 5% of its net assets
in collateralized mortgage obligations. Mortgage-backed securities are subject to
special risks including prepayments or refinancings of the assets underlying such
securities which may have an impact on the yield and the net asset value of the Fund's
shares (see pages 5-7). The Fund may invest up to 25% of its total assets in
non-dollar denominated foreign securities, which may entail special risks (see page
6). The Fund also may enter into reverse repurchase agreements and dollar rolls, may
purchase securities on a when-issued, delayed delivery or "when, as and if issued"
basis and may enter into forward foreign currency exchange contracts, which involve
certain additional risks (see pages 7-9).
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THE ABOVE IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION APPEARING
ELSEWHERE
IN THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL INFORMATION.
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder of the
Fund will incur. The expenses and fees set forth in the table are for the fiscal
year ended September 30, 1996.
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SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases............................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends.................................................... None
Deferred Sales Charge................................................................................... None
Redemption Fees......................................................................................... None
Exchange Fee............................................................................................ None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management and Advisory Fees............................................................................ 0.75%
12b-1 Fees*............................................................................................. 0.99%
Other Expenses.......................................................................................... 0.40%
Total Fund Operating Expenses........................................................................... 2.14%
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* A portion of the 12b-1 fee equal to 0.25% of the Fund's average daily net
assets is characterized as a service fee within the meaning of National
Association of Securities Dealers, Inc. ("NASD") guidelines (see "Purchase
of Fund Shares").
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EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
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You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:........... $ 22 $ 67 $ 115 $ 247
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THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management" and "Plan of Distribution" in this Prospectus.
Long-term shareholders of the Fund may pay more in distribution fees than
the economic equivalent of the maximum front-end sales charges permitted by the
NASD.
FINANCIAL HIGHLIGHTS
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The following per share data and ratios for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in conjunction
with the financial statements, notes thereto, and the unqualified report of
independent accountants which are contained in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to Shareholders, which may be obtained without
charge upon request to the Fund.
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FOR THE PERIOD
FOR THE YEAR OCTOBER 29, 1993*
FOR THE YEAR ENDED THROUGH
ENDED SEPTEMBER 30, SEPTEMBER 30,
SEPTEMBER 30, 1996 1995 1994
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.......................... $ 10.46 $ 9.43 $ 10.00
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Net investment income....................................... 0.15 0.20 0.10
Net realized and unrealized gain (loss)..................... 1.12 0.93 (0.58)
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Total from investment operations.............................. 1.27 1.13 (0.48)
Less dividends and distributions:
From net investment income.................................. -- (0.10) (0.09)
In excess of net investment income.......................... (0.10) -- --
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Net asset value, end of period................................ $ 11.63 $ 10.46 $ 9.43
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TOTAL INVESTMENT RETURN+........................................ 12.20% 11.97% (4.80)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses...................................................... 2.14% 2.11% 2.06%(2)
Net investment income......................................... 1.12% 1.88% 1.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands....................... $92,491 $106,716 $149,357
Portfolio turnover rate....................................... 117% 123% 113%(1)
Average commission rate paid.................................. $0.0583 -- --
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* COMMENCEMENT OF OPERATIONS.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
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THE FUND AND ITS MANAGEMENT
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TCW/DW Balanced Fund (the "Fund") is an open-end, diversified management
investment company. The Fund is a trust of the type commonly known as a
"Massachusetts business trust" and was organized under the laws of Massachusetts
on March 2, 1993.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The Manager
is a wholly-owned subsidiary of Dean Witter InterCapital Inc. ("InterCapital").
InterCapital is a wholly-owned subsidiary of Dean Witter, Discover & Co.
("DWDC"), a balanced financial services organization providing a broad range of
nationally marketed credit and investment products.
The Manager acts as manager to thirteen other TCW/ DW Funds. The Manager and
InterCapital act in various investment management, advisory, management and
administrative capacities to a total of 100 investment companies, thirty of
which are listed on the New York Stock Exchange, with combined assets of
approximately $85.1 billion as of October 31, 1996. InterCapital also manages
and advises portfolios of pension plans, other institutions and individuals
which aggregated approximately $3.0 billion at such date.
The Fund has retained the Manager to manage its business affairs, supervise
its overall day-to-day operations (other than providing investment advice) and
provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of TCW. The Adviser
serves as investment adviser to thirteen other TCW/DW Funds in addition to the
Fund. As of September 30, 1996, the Adviser and its affiliated companies had
approximately $53 billion under management or committed to management, primarily
from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager and
the Adviser to ensure that the Fund's general investment policies and programs
are being properly carried out and that administrative services are being
provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.45% to
the Fund's net assets. As compensation for its investment advisory services, the
Fund pays the Adviser monthly compensation calculated daily by applying an
annual rate of 0.30% to the Fund's net assets. The total of the management and
advisory fees paid by the Fund is higher than the advisory fees paid by most
other investment companies.
For the fiscal year ended September 30, 1996, the Fund accrued to the
Manager and the Adviser total compensation amounting to 0.45% and 0.30%,
respectively, of the Fund's average daily net assets. During the period, the
Fund's total expenses amounted to 2.14% of the Fund's average daily net assets.
INVESTMENT OBJECTIVE AND POLICIES
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The investment objective of the Fund is to achieve high total return through a
combination of income and capital appreciation. This objective is fundamental
and may not be changed without shareholder approval. There is no assurance that
the objective will be achieved.
The Fund seeks to obtain its objective by investing in a diversified
portfolio of common stocks and investment grade fixed-income securities. The
percentage of assets allocated between equity and fixed-income securities will
vary from time to time depending on the judgment of the Adviser as to general
economic and market conditions, changes in fiscal or monetary policies and
trends in yields and interest rates. However, under normal circumstances, it is
expected that common stocks will represent approximately 60-70% of the Fund's
total assets. In addition, the Fund under normal circumstances will maintain at
least 25% of its total assets in fixed-income securities.
The investments in the equity portion of the Fund's portfolio are determined
pursuant to a "top down" investment process ranging from the overall economic
outlook, to the development of industry/sector preferences, and, last, to
specific stock selections. The following disciplines generally apply with regard
to stock selection of the equity component of the Fund's portfolio: (i) no
single issuer's equity securities will represent at the time of purchase more
than 5% of the Fund's total assets; and (ii) at least 95% of the companies
represented will have minimum market capitalizations at the time of purchase in
excess of $1 billion. Subject to the Fund's investment objective, the Adviser
may modify the foregoing disciplines without notice.
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The fixed-income portion of the Fund's portfolio may consist of securities
issued or guaranteed by the U.S. Government (Treasury bills, notes and bonds),
investment grade corporate debt securities (including convertible securities),
mortgage-backed and asset-backed securities and money market securities (as
described below). All fixed-income securities in which the Fund invests will be
either issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or rated at least BBB by Standard & Poor's Corporation ("S&P")
or Baa by Moody's Investors Service, Inc. ("Moody's") or, if not rated,
determined by the Adviser to be of comparable quality.
Under normal circumstances, no more than 10% of the fixed-income portion of
the Fund's portfolio will be rated BBB by S&P or Baa by Moody's. Fixed-income
securities rated BBB by S&P or Baa by Moody's, which generally are regarded as
having an adequate capacity to pay interest and repay principal, have
speculative characteristics. Thus, changes in economic conditions are more
likely to lead to a weakened capacity to make principal and interest payments
than is the case with respect to higher rated securities. If a fixed-income
security held by the Fund is rated BBB or Baa and is subsequently downgraded by
a rating agency, the Fund will retain such security in its portfolio until the
Adviser determines that it is practicable to sell the security without undue
market or tax consequences to the Fund. In the event that such downgraded
securities constitute 5% or more of the Fund's net assets, the Adviser will seek
to sell immediately sufficient securities to reduce the total to below 5%. A
description of fixed-income securities ratings is contained in the Appendix to
the Statement of Additional Information.
PORTFOLIO CHARACTERISTICS
Although the Fund will invest primarily in equity securities and fixed-income
corporate debt securities, it may engage to a limited extent in certain
specialized investments and investment techniques which are described below.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. As stated above, the Fund may
invest in fixed-rate and adjustable-rate mortgage-backed securities
("Mortgage-Backed Securities").
There are currently three basic types of Mortgage-Backed Securities: (i)
those issued or guaranteed by the United States Government or one of its
agencies or instrumentalities, such as the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage Corporation ("FHLMC") (securities issued by GNMA, but
not those issued by FNMA or FHLMC, are backed by the "full faith and credit" of
the United States); (ii) those issued by private issuers that represent an
interest in or are collateralized by Mortgage-Backed Securities issued or
guaranteed by the United States Government or one of its agencies or
instrumentalities; and (iii) those issued by private issuers that represent an
interest in or are collateralized by whole mortgage loans or Mortgage-Backed
Securities without a government guarantee but usually having some form of
private credit enhancement. The Fund may also invest in adjustable-rate mortgage
securities, which are pass-through mortgage securities collateralized by
mortgages with adjustable rather than fixed rates.
The Fund may also invest up to 5% of its net assets in collateralized
mortgage obligations ("CMOs"), which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by GNMA, FNMA or FHLMC Certificates, but also may be
collateralized by whole loans or private mortgage pass-through securities. Types
of CMOs in which the Fund may invest may be issued either by the U.S. Government
or by private issuers.
The Fund may also invest in other asset-backed securities ("Asset-Backed
Securities"), which involve use of the securitization techniques utilized in
connection with Mortgage-Backed Securities in connection with other assets,
primarily automobile and credit card receivables and home equity loans.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or based on a specified formula.
Convertible securities rank senior to common stocks in a corporation's capital
structure and, therefore, entail less risk than the corporation's common stock.
The value of a convertible security is a function of its "investment value" (its
value as if it did not have a conversion privilege), and its "conversion value"
(the security's worth if it were to be exchanged for the underlying security, at
market value, pursuant to its conversion privilege).
To the extent that a convertible security's investment value is greater than
its conversion value, its price will be primarily a reflection of such
investment value and its price will be likely to increase when interest rates
fall and decrease when interest rates rise, as with a fixed-income security (the
credit standing of the issuer and other factors may also have an effect on the
convertible security's value). If the conversion value exceeds the investment
value, the price of the convertible security will rise above its investment
value and, in addition, may sell at some premium over its conversion value.
(This premium represents the price investors are willing to pay for the
privilege of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
SPECIAL RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in the
market value of the Fund's portfolio securities. The market value of the Fund's
portfolio securities will increase or decrease due to a variety of economic,
market and
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political factors, including movements in interest rates, which cannot be
predicted.
FOREIGN SECURITIES. The Fund may invest in securities of foreign companies.
The Fund will not invest more than 25% of the value of its total assets, at the
time of purchase, in non-dollar denominated foreign securities (other than
securities of Canadian issuers registered under the Securities Exchange Act of
1934 or American Depository Receipts, on which there is no such limit). The
Fund's investments in unlisted foreign securities are subject to the Fund's
overall policy limiting its investment in illiquid securities to 15% or less of
its net assets. The Fund currently does not intend to invest more than 25% of
its total assets in the securities of issuers in any one country outside the
United States.
Foreign securities investments may be affected by changes in currency rates
or exchange control regulations, changes in governmental administration or
economic or monetary policy (in the United States and abroad) or changed
circumstances in dealings between nations. Fluctuations in the relative rates of
exchange between the currencies of different nations will affect the value of
the Fund's investments denominated in foreign currency. Changes in foreign
currency exchange rates relative to the U.S. dollar will affect the U.S. dollar
value of the Fund's assets denominated in that currency and thereby impact upon
the Fund's total return on such assets.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer of
Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements of
U.S. companies and, as such, there may be less publicly available information
about such companies. Moreover, foreign companies are not subject to uniform
accounting, auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable securities
of U.S. issuers and, as such, their price changes may be more volatile.
Furthermore, foreign exchanges and broker-dealers are generally subject to less
government and exchange scrutiny and regulation than their American
counterparts. Brokerage commissions, dealer concessions and other transaction
costs may be higher on foreign markets than in the U.S. In addition, differences
in clearance and settlement procedures on foreign markets may occasion delays in
settlements of the Fund's trades effected in such markets. As such, the
inability to dispose of portfolio securities due to settlement delays could
result in losses to the Fund due to subsequent declines in value of such
securities and the inability of the Fund to make intended security purchases due
to settlement problems could result in a failure of the Fund to make potentially
advantageous investments.
The Fund may also invest up to 5% of its net assets in a type of Mexican
government money market securities known as Cetes, which are peso-denominated
discount debt securities having maturities of one year or less that are sold
through auctions regulated by Banco de Mexico. The Fund will invest in Cetes
only if they meet the rating standards for the fixed-income portion of the
Fund's portfolio.
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES. All fixed-income securities
are subject to two types of risks: the credit risk and the interest rate risk.
The credit risk relates to the ability of the issuer to meet interest or
principal payments or both as they come due. Generally, higher yielding fixed-
income securities are subject to a credit risk to a greater extent than lower
yielding fixed-income securities. The interest rate risk refers to the
fluctuations in the net asset value of any portfolio of fixed-income securities
resulting from the inverse relationship between price and yield of fixed-income
securities; that is, when the general level of interest rates rises, the prices
of outstanding fixed-income securities decline, and when interest rates fall,
prices rise.
Mortgage-Backed and Asset-Backed Securities have certain different
characteristics than traditional debt securities. Among the major differences
are that interest and principal payments are made more frequently, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Fund purchases such a security at a premium, a prepayment rate
that is faster than expected may reduce yield to maturity, while a prepayment
rate that is slower than expected may have the opposite effect of increasing
yield to maturity. Alternatively, if the Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments may reduce, yield to maturity.
Mortgage-Backed and Asset-Backed Securities, like all fixed income
securities, generally decrease in value as a result of increases in interest
rates. In addition, although generally the value of fixed-income securities
increases during periods of falling interest rates and, as stated above,
decreases during periods of rising interest rates, as a result of prepayments
and other factors, this is not always the case with respect to Mortgage-Backed
and Asset-Backed Securities.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of falling interest rates and
decrease during a period of rising interest rates. Accordingly, amounts
available for reinvestment by the Fund are likely to be greater during a period
of declining interest rates and, as a result, likely to be reinvested at lower
interest rates than during a period of rising interest rates. Mortgage-Backed
Securities generally decrease in value as a result of increases in interest
rates and may benefit less than other fixed-income
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securities from declining interest rates because of the risk of prepayment.
Asset-Backed Securities involve certain risks that are not posed by
Mortgage-Backed Securities, resulting mainly from the fact that Asset-Backed
Securities do not usually contain the complete benefit of a security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
There are certain risks associated specifically with CMOs, in which the Fund
may invest up to 5% of its net assets. CMOs issued by private entities are not
U.S. Government securities and are not guaranteed by any government agency,
although the securities underlying a CMO may be subject to a guarantee.
Therefore, if the collateral securing the CMO, as well as any third party credit
support or guarantees, is insufficient to make payment, the holder could sustain
a loss. Also, a number of different factors, including the extent of prepayment
of principal of the collateralized mortgage obligations, affect the availability
of cash for principal payments by the CMO issuer on any payment date and,
accordingly, affect the timing of principal payments on each CMO class. In
addition, CMO classes with higher yields tend to be more volatile with respect
to cash flow of the underlying mortgages; as a result, the market prices of
those classes tend to be more volatile.
The risks of other investment techniques which may be utilized by the Fund
are described under "Other Investment Policies" below.
OTHER INVESTMENT POLICIES
As stated above, the Fund may invest in money market instruments, which are
short-term (maturities of up to thirteen months) fixed-income securities issued
by private and governmental institutions. Money market instruments in which the
Fund may invest are securities issued or guaranteed by the U.S. Government or
its agencies (Treasury bills, notes and bonds); obligations of banks subject to
regulation by the U.S. Government and having total assets of $1 billion or more;
Eurodollar certificates of deposit; obligations of savings banks and savings and
loan associations having total assets of $1 billion or more; fully insured
certificates of deposit; and commercial paper rated within the two highest
grades by Moody's or S&P or, if not rated, issued by a company having an
outstanding debt issue rated AAA by S&P or Aaa by Moody's.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements, which
may be viewed as a type of secured lending by the Fund, and which typically
involve the acquisition by the Fund of debt securities from a selling financial
institution such as a bank, savings and loan association or broker-dealer. The
agreement provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security at a specified price and at
a fixed time in the future, usually not more than seven days from the date of
purchase. While repurchase agreements involve certain risks not associated with
direct investments in debt securities, including the risks of default or
bankruptcy of the selling financial institution, the Fund follows procedures
designed to minimize such risks. These procedures include effecting repurchase
transactions only with large, well-capitalized and well-established financial
institutions and maintaining adequate collateralization.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The Fund may also use
reverse repurchase agreements and dollar rolls with respect to up to 5% of its
total assets as part of its investment strategy. Reverse repurchase agreements
involve sales by the Fund of portfolio assets concurrently with an agreement by
the Fund to repurchase the same assets at a later date at a fixed price. The
Fund also may enter into dollar rolls in which the Fund sells securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type and coupon) securities on a specified future
date.
Reverse repurchase agreements and dollar rolls involve the risk that the
market value of the securities the Fund is obligated to repurchase under the
agreement may decline below the repurchase price. In the event the buyer of
securities under a reverse repurchase agreement or dollar roll files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds of the agreement
may be restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
Reverse repurchase agreements and dollar rolls are speculative techniques
involving leverage, and are considered borrowings by the Fund.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. When such transactions are negotiated,
the price is fixed at the time of the commitment, but delivery and payment can
take place a month or more after the date of the commitment. There is no overall
limit on the percentage of the Fund's assets which may be committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis. An increase in the percentage of the Fund's assets committed to the
purchase of securities on a when-issued, delayed delivery or forward commitment
basis may increase the volatility of the Fund's net asset value.
WHEN, AS AND IF ISSUED SECURITIES. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security depends
upon the occurrence of a subsequent event, such as approval of a merger,
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corporate reorganization, leveraged buyout or debt restructuring. If the
anticipated event does not occur and the securities are not issued, the Fund
will have lost an investment opportunity. There is no overall limit on the
percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage of
the Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund may
also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale.
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.
PRIVATE PLACEMENTS. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible for
resale pursuant to Rule 144A under the Securities Act, and determined to be
liquid pursuant to the procedures discussed in the following paragraph, are not
subject to the foregoing restriction.) These securities are generally referred
to as private placements or restricted securities. Limitations on the resale of
such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly at reasonable prices. The Fund
may have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as to
the liquidity of each restricted security purchased by the Fund. If a restricted
security is determined to be "liquid," such security will not be included within
the category "illiquid securities," which under current policy may not exceed
15% of the Fund's net assets. However, investing in Rule 144A Securities could
have the effect of increasing the level of Fund illiquidity to the extent the
Fund, at a particular point in time, may be unable to find qualified
institutional buyers interested in purchasing such securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. The Fund may enter into
forward foreign currency exchange contracts ("forward contracts") in connection
with its foreign securities investments.
A forward contract involves an obligation to purchase or sell a currency at
a future date, which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
The Fund may enter into forward contracts as a hedge against fluctuations in
future foreign exchange rates.
The Fund will enter into forward contracts under various circumstances. When
the Fund enters into a contract for the purchase or sale of a security
denominated in a foreign currency, it may, for example, desire to "lock in" the
price of the security in U.S. dollars or some other foreign currency which the
Fund is temporarily holding in its portfolio.
At other times, when, for example, the Adviser believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar or some other foreign currency, the Fund may enter into a forward
contract to sell, for a fixed amount of dollars or other currency, the amount of
foreign currency approximating the value of some or all of the Fund's securities
holdings (or securities which the Fund has purchased for its portfolio)
denominated in such foreign currency. Under identical circumstances, the Fund
may enter into a forward contract to sell, for a fixed amount of U.S. dollars or
other currency, an amount of foreign currency other than the currency in which
the securities to be hedged are denominated approximating the value of some or
all of the portfolio securities to be hedged. This method of hedging, called
"cross-hedging," will be selected by the Adviser when it is determined that the
foreign currency in which the portfolio securities are denominated has
insufficient liquidity or is trading at a discount as compared with some other
foreign currency with which it tends to move in tandem.
If the Fund enters into forward contract transactions and the currency in
which the Fund securities holdings (or anticipated portfolio securities) are
denominated rises in value with respect to the currency which is being purchased
(or sold), then the Fund will have realized fewer gains than had the Fund not
entered into the forward contracts. Moreover, the precise matching of the
forward contract amounts and the
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<PAGE>
value of the securities involved will not generally be possible, since the
future value of such securities in foreign currencies will change as a
consequence of market movements in the value of those securities between the
date the forward contract is entered into and the date it matures. The Fund is
not required to enter into such transactions with regard to its foreign
currency-denominated securities and will not do so unless deemed appropriate by
the Adviser.
FUTURES AND OPTIONS TRANSACTIONS. The Fund is authorized to engage in
futures and options transactions, although it has no current intention to do so
during the coming year.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to achieving
the Fund's investment objective. James A. Tilton, Managing Director of the
Adviser, is the primary portfolio manager of the equity portion of the Fund's
portfolio, and James M. Goldberg, Managing Director of the Adviser, is the
primary portfolio manager of the fixed-income portion of the Fund's portfolio.
Messrs. Tilton and Goldberg, who have been the primary portfolio managers of the
Fund since its inception, have been portfolio managers with affiliates of The
TCW Group, Inc. since 1980 and 1984, respectively.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager, and
others regarding economic developments and interest rate trends, and the
Adviser's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities are placed for the Fund with
a number of brokers and dealers, including DWR. The Fund may incur brokerage
commissions on transactions conducted through DWR. Under normal circumstances it
is not anticipated that the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 150% in any one year. The Fund will incur
brokerage costs commensurate with its portfolio turnover rate, and thus a higher
level (over 100%) of portfolio transactions will increase the Fund's overall
brokerage expenses. Short term gains and losses may result from such portfolio
transactions.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and, as such, may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which have
been adopted by the Fund as fundamental policies. Under the Investment Company
Act of 1940, as amended (the "Act"), a fundamental policy may not be changed
without the vote of a majority of the outstanding voting securities of the Fund,
as defined in the Act. For purposes of the following limitations: (i) all
percentage limitations apply immediately after a purchase or initial investment,
and (ii) any subsequent change in any applicable percentage resulting from
market fluctuations or other changes in total or net assets does not require
elimination of any security from the portfolio.
The Fund may not:
1. As to 75% of its total assets, invest more than 5% of the value of
its total assets in the securities of any one issuer (other than obligations
issued or guaranteed by the United States Government, its agencies or
instrumentalities).
2. As to 75% of its total assets, purchase more than 10% of the voting
securities of any issuer.
3. 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.
4. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
PURCHASE OF FUND SHARES
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The Fund offers its shares for sale to the public on a continuous basis.
Pursuant to a Distribution Agreement between the Fund and Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager, shares of
the Fund are distributed by the Distributor and offered by DWR and others (which
may include TCW Brokerage Services, an affiliate of the Adviser) which have
entered into selected dealer agreements with the Distributor ("Selected
Broker-Dealers"). The principal executive office of the Distributor is located
at Two World Trade Center, New York, New York 10048.
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<PAGE>
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW Balanced Fund, directly
to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box 1040, Jersey
City, NJ 07303 or by contacting an account executive of DWR or other Selected
Broker-Dealer. The minimum initial purchase in the case of investments through
EasyInvest-SM-, an automatic purchase plan (see "Shareholder Services"), is
$100, provided that the schedule of automatic investments will result in
investments totalling at least $1,000 within the first twelve months. In the
case of investments pursuant to Systematic Payroll Deduction Plans (including
Individual Retirement Plans), the Fund, in its discretion, may accept
investments without regard to any minimum amounts which would otherwise be
required if the Fund has reason to believe that additional investments will
increase the investment in all accounts under such Plans to at least $1,000.
Certificates for shares purchased will not be issued unless a request is made by
the shareholder in writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business day
(settlement date) after the order is placed with the Distributor. Since DWR and
other Selected Broker-Dealers forward investors' funds on settlement date, they
will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions.
The offering price will be the net asset value per share next determined
following receipt of an order (see "Determination of Net Asset Value"). Sales
personnel of a Selected Broker-Dealer are compensated for shares of the Fund
sold by them by the Distributor or any of its affiliates and/or by a Selected
Broker-Dealer. In addition, some sales personnel of the Selected Broker-Dealer
will receive various types of non-cash compensation as special sales incentives,
including trips, educational and/or business seminars and merchandise. The Fund
and the Distributor reserve the right to reject any purchase order.
PLAN OF DISTRIBUTION
The Fund has entered into a Plan of Distribution pursuant to Rule 12b-1 under
the Act with the Distributor whereby the expenses of certain activities and
services, including personal services to shareholders and maintenance of
shareholder accounts, in connection with the distribution of the Fund's shares
are reimbursed. The principal activities and services which may be provided by
DWR, its affiliates or any other Selected Broker-Dealer under the Plan include:
(1) compensation to, and expenses of, DWR account executives and others
including overhead and telephone expenses; (2) sales incentives and bonuses to
sales representatives and to marketing personnel in connection with promoting
sales of the Fund's shares; (3) expenses incurred in connection with promoting
sales of the Fund's shares; (4) preparing and distributing sales literature; and
(5) providing advertising and promotional activities, including direct mail
solicitation and television, radio, newspaper, magazine and other media
advertisements. Reimbursements for these services will be made in monthly
payments by the Fund, which will in no event exceed an amount equal to a payment
at the annual rate of 1.0% of the Fund's average daily net assets. A portion of
the amount payable pursuant to the Plan equal to 0.25% of the Fund's average
daily net assets is characterized as a service fee within the meaning of NASD
guidelines. The service fee relates to ongoing personal services to shareholders
and maintenance of shareholder accounts by DWR, its affiliates and any other
Selected Broker-Dealer. Expenses incurred pursuant to the Plan in any fiscal
year in excess of 1.0% of the Fund's average daily net assets will not be
reimbursed by the Fund through payments accrued in any subsequent fiscal year.
The Fund accrued $971,665 to the Distributor pursuant to the Plan for the fiscal
year ended September 30, 1996. This is an accrual at the annual rate of 0.99% of
the Fund's average daily net assets.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00 p.m.,
New York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the value of all assets of the Fund, subtracting all its
liabilities, dividing by the number of shares outstanding and adjusting to the
nearest cent. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by the
New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
stock exchange is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security, is
valued at the latest bid price (in cases where securities are traded on more
than one exchange, the securities are valued on the exchange designated as the
primary market pursuant to procedures adopted by the Trustees); and (2) all
other portfolio securities for which over-the-counter market quotations are
readily available are valued at the latest available bid price prior to the time
of valuation. When market quotations are not readily available, including
circumstances under which it is determined by the Adviser that sale or bid
prices are not reflective of a security's market value, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's Trustees. For
valuation purposes, quotations of foreign portfolio securities are translated
into U.S. dollar equivalents at the prevailing market rates prior to the close
of the New York Stock Exchange as of the morning of valuation. Dividends
receivable are accrued as of the ex-
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dividend date or as of the time that the relevant ex-dividend date and amounts
become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
Certain of the Fund's portfolio securities may be valued by an outside
pricing service approved by the Fund's Trustees. The pricing service may utilize
a matrix system incorporating security quality, maturity and coupon as the
evaluation model parameters, and/or research and evaluations by its staff,
including review of broker-dealer market price quotations, in determining what
it believes is the fair valuation of the portfolio securities valued by such
pricing service.
SHAREHOLDER SERVICES
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AUTOMATIC INVESTMENT OF DIVIDENDS AND DISTRIBUTIONS. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other TCW/DW Fund),
unless the shareholder requests that they be paid in cash. Each purchase of
shares of the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends and
distributions will be paid, at the net asset value per share, in shares of the
Fund (or in cash if the shareholder so requests) as of the close of business on
the record date. At any time an investor may request the Transfer Agent, in
writing, to have subsequent dividends and/or capital gains distributions paid to
him or her in cash rather than shares. In order to provide sufficient time to
process the change, such request should be received by the Transfer Agent at
least five business days prior to the record date of the dividend or
distribution. In the case of recently purchased shares for which registration
instructions have not been received on the record date, cash payments will be
made to DWR or other Selected Broker-Dealers, which will be forwarded to the
shareholder, upon the receipt of proper instructions.
INVESTMENT OF DIVIDENDS OR DISTRIBUTIONS RECEIVED IN CASH. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value per
share next determined after receipt by the Transfer Agent, by returning the
check or the proceeds to the Transfer Agent within 30 days after the payment
date.
EASYINVEST-SM-. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund.
SYSTEMATIC WITHDRAWAL PLAN. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset value.
The Withdrawal Plan provides for monthly or quarterly (March, June, September
and December) checks in any dollar amount, not less than $25, or in any whole
percentage of the account balance, on an annualized basis. Only shareholders
having accounts in which no share certificates have been issued will be
permitted to enroll in the Withdrawal Plan.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of the
above services.
TAX SHELTERED RETIREMENT PLANS. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of such
plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their DWR or other Selected
Broker-Dealer account executive or the Fund.
EXCHANGE PRIVILEGE
An "Exchange Privilege," that is, the privilege of exchanging shares of certain
investment companies for shares of the Fund, exists whereby shares of TCW/DW
Funds which are open-end investment companies sold with a contingent deferred
(at time of redemption) sales charge ("CDSC Funds") may be exchanged for shares
of the Fund, for shares of TCW/DW North American Government Income Trust and
TCW/DW Income and Growth Fund, and for shares of five money market funds for
which InterCapital serves as investment manager: Dean Witter Liquid Asset Fund
Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter Tax-Free Daily
Income Trust, Dean Witter California Tax-Free Daily Income Trust and Dean Witter
New York Municipal Money Market Trust (the foregoing eight investment companies,
including the Fund, are hereinafter collectively referred to as "Exchange
Funds").
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An exchange from a CDSC Fund to an Exchange Fund that is not a money market
fund is on the basis of the next calculated net asset value per share of each
fund after the exchange order is received. When exchanging into a money market
fund from a CDSC Fund, shares of the CDSC Fund are redeemed at their next
calculated net asset value and exchanged for shares of the money market fund at
their net asset value determined the following business day. Additionally,
shares of any Exchange Fund received in an exchange for shares of a CDSC Fund
(regardless of the type of fund originally purchased) may be redeemed and
exchanged for shares of an Exchange Fund or CDSC Fund. Any applicable contingent
deferred sales charge ("CDSC") will have to be paid upon ultimate redemption of
shares originally purchased from a CDSC Fund. During the period of time the
shares originally purchased from a CDSC Fund remain in the Exchange Fund, the
holding period (for the purpose of determining the rate of CDSC) is frozen so
that the charge is based upon the period of time the shareholder held shares of
a CDSC Fund. If those shares are subsequently reexchanged for shares of a CDSC
Fund, the holding period previously frozen when the first exchange was made
resumes on the last day of the month in which shares of a CDSC Fund are
reaquired. Thus, the CDSC is based upon the time (calculated as described above)
the shareholder was invested in a CDSC Fund. However, in the case of shares
exchanged into an Exchange Fund, upon a redemption of shares which results in a
CDSC being imposed, a credit (not to exceed the amount of the CDSC) will be
given in an amount equal to the Exchange Fund 12b-1 distribution fees which are
attributable to those shares (see "Purchase of Fund Shares -- Plan of
Distribution" in this Prospectus or the respective other Exchange Fund
prospectus for a description of Exchange Fund 12b-1 distribution fees).
Exchanges involving CDSC Funds may be made after the shares of the CDSC Fund
acquired by purchase (not by exchange or dividend reinvestment) have been held
for thirty days. There is no waiting period for exchanges of shares acquired by
exchange or dividend reinvestment.
Purchases and exchanges should be made for investment purposes only. A
pattern of frequent exchanges may be deemed by the Manager to be abusive and
contrary to the best interests of the Fund's other shareholders and, at the
Manager's discretion, may be limited by the Fund's refusal to accept additional
purchases and/or exchanges from the investor. Although the Fund does not have
any specific definition of what constitutes a pattern of frequent exchanges, and
will consider all relevant factors in determining whether a particular situation
is abusive and contrary to the best interests of the Fund and its other
shareholders, investors should be aware that the Fund, each of the other TCW/DW
Funds and each of the money market funds may in their discretion limit or
otherwise restrict the number of times this Exchange Privilege may be exercised
by any investor. Any such restriction will be made by the Fund on a prospective
basis only, upon notice to the shareholder not later than ten days following
such shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such TCW/DW Funds or
money market funds for which shares of the Fund have been exchanged, upon such
notice as may be required by applicable regulatory agencies. Shareholders
maintaining margin accounts with DWR or another Selected Broker-Dealer are
referred to their account executive regarding restrictions on exchange of shares
pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
and any other conditions imposed by each fund. An exchange will be treated for
federal income tax purposes the same as a repurchase or redemption of shares, on
which the shareholder may realize a capital gain or loss. However, the ability
to deduct capital losses on an exchange may be limited in situations where there
is an exchange of shares within ninety days after the shares are purchased. The
Exchange Privilege is only available in states where an exchange may legally be
made.
If DWR or another Selected Broker-Dealer is the current dealer of record and
its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege by
contacting their DWR or other Selected Broker-Dealer account executive (no
Exchange Privilege Authorization Form is required). Other shareholders (and
those shareholders who are clients of DWR or another Selected Broker-Dealer but
who wish to make exchanges directly by writing or telephoning the Transfer
Agent) must complete and forward to the Transfer Agent an Exchange Privilege
Authorization Form, copies of which may be obtained from the Transfer Agent, to
initiate an exchange. If the Authorization Form is used, exchanges may be made
in writing or by contacting the Transfer Agent at (800) 869-NEWS (toll free).
The Fund will employ reasonable procedures to confirm that exchange instructions
communicated over the telephone are genuine. The procedures include requiring
various forms of personal identification such as name, mailing address, social
security or other tax identification number and DWR or other Selected
Broker-Dealer account number (if any). Telephone instructions will also be
recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent transactions.
Telephone exchange instructions will be accepted if received by the Transfer
Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the New York
Stock Exchange is open. Any shareholder wishing to make an exchange who has
previously filed an Exchange Privilege Authorization Form and who is unable to
reach the Fund by telephone should contact his or her DWR or other Selected
Broker-Dealer account executive, if appropriate, or make a written exchange
request. Shareholders are advised that during periods of drastic economic or
market changes, it is possible that the telephone exchange procedures may be
difficult
12
<PAGE>
to implement, although this has not been the case in the past with other funds
managed by the Manager.
For further information regarding the Exchange Privilege, shareholders
should contact their DWR or other Selected Broker-Dealer account executive or
the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
REPURCHASES. DWR and other Selected Broker-Dealers are authorized to
repurchase shares represented by a share certificate which is delivered to any
of their offices. Shares held in a shareholder's account without a share
certificate may also be repurchased by DWR and other Selected Broker-Dealers
upon the telephonic request of the shareholder. The repurchase price is the net
asset value next determined (see "Purchase of Fund Shares -- Determination of
Net Asset Value") after such repurchase order is received by DWR or the other
Selected Broker-Dealer. The offers by DWR and other Selected Broker-Dealers to
repurchase shares from shareholders may be suspended by them at any time. In
that event, shareholders may redeem their shares through the Fund's Transfer
Agent as set forth below under "Redemptions."
REDEMPTIONS. Shares of the Fund can be redeemed for cash at any time at net
asset value per share next determined. If shares are held in a shareholder's
account at the Transfer Agent without a share certificate, a written request for
redemption must be sent to the Fund's Transfer Agent at P.O. Box 983, Jersey
City, NJ 07303. The share certificate, or an accompanying stock power, and the
request for redemption, must be signed by the shareholder or shareholders
exactly as the shares are registered. Each request for redemption, whether or
not accompanied by a share certificate, must be sent to the Fund's Transfer
Agent, which will redeem the shares at their net asset value next determined as
described under "Purchase of Fund Shares -- Determination of Net Asset Value"
after it receives the request, and certificate, if any, in good order. Any
redemption request received after such determination will be redeemed at the
next determined net asset value. The term "good order" means that the share
certificate, if any, and request for redemption are properly signed, accompanied
by any documentation required by the Transfer Agent, and bear signature
guarantees when required by the Fund or the Transfer Agent. If redemption is
requested by a corporation, partnership, trust or fiduciary, the Transfer Agent
may require that written evidence of authority acceptable to the Transfer Agent
be submitted before such request is accepted. With regard to shares of the Fund
acquired pursuant to the Exchange Privilege, any applicable contingent deferred
sales charge will be imposed upon the redemption of such shares (see "Purchase
of Fund Shares -- Exchange Privilege").
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
DWR or other Selected Broker-Dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
prospectus.
PAYMENT FOR SHARES REPURCHASED OR REDEEMED. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum time
needed to verify that the check used for investment has been honored (not more
than fifteen days from the time of receipt of the check by the Transfer Agent).
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions on
redemption of shares of the Fund pledged in the margin account.
REINSTATEMENT PRIVILEGE. A shareholder who has had his or her shares
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within 30 days after the date of the repurchase or redemption,
reinstate any portion or all of the proceeds of such repurchase or redemption in
shares of the Fund at net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent.
INVOLUNTARY REDEMPTION. The Fund reserves the right, on 60 days' notice, to
redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or Custodial Account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvest-SM-, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the
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Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the applicable
amount and allow him or her 60 days to make an additional investment in an
amount which will increase the value of his or her account to at least the
applicable amount or more before the redemption is processed.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS. The Fund intends to pay quarterly dividends
and to distribute substantially all of the Fund's net investment income. The
Fund intends to distribute net short-term and net long-term capital gains, if
any, at least once each year. The Fund may, however, determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment.
All dividends and any capital gains distributions will be paid in additional
Fund shares and automatically credited to the shareholder's account without
issuance of a share certificate unless the shareholder requests in writing that
all dividends and/or distributions be paid in cash. (See "Shareholders Services
- -- Automatic Investment of Dividends and Distributions.")
TAXES. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise continue to qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code, it
is not expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have to
pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions to
the extent that they are derived from net investment income or short-term
capital gains, are taxable to the shareholder as ordinary income regardless of
whether the shareholder receives such payments in additional shares or in cash.
Any dividends declared with a record date in the last quarter of any calendar
year which are paid in the following year prior to February 1 will be deemed
received by the shareholder in the prior calendar year. Dividend payments will
be eligible for the federal dividends received deduction available to the Fund's
corporate shareholders only to the extent the aggregate dividends received by
the Fund would be eligible for the deduction if the Fund were the shareholder
claiming the dividends received deduction. In this regard, a 46-day holding
period generally must be met.
Distributions of net long-term capital gains, if any, are taxable to
shareholders as long-term capital gains regardless of how long a shareholder has
held the Fund's shares and regardless of whether the distribution is received in
additional shares or in cash. Capital gains distributions are not eligible for
the dividends received deduction.
After the end of the year, shareholders will be sent full information on
their dividends and capital gains distributions for tax purposes. To avoid being
subject to a 31% federal backup withholding tax on taxable dividends, capital
gains distributions and the proceeds of redemptions and repurchases,
shareholders' taxpayer identification numbers must be furnished and certified as
to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "yield" and/or its "total return" in
advertisements and sales literature. Both the yield and the total return of the
Fund are based on historical earnings and are not intended to indicate future
performance. The yield of the Fund is computed by dividing the net investment
income of the Fund over a 30-day period by an average value (using the average
number of shares entitled to receive dividends and the net asset value per share
at the end of the period), all in accordance with applicable regulatory
requirements. Such amount is compounded for six months and then annualized for a
twelve-month period to derive the yield of the Fund.
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average annual
total return" of the Fund refers to a figure reflecting the average annualized
percentage increase (or decrease) in the value of an initial investment in the
Fund of $1,000 over a period of one, five and ten years or over the life of the
Fund, if less than any of the foregoing. Average annual total return reflects
all income earned by the Fund, any appreciation or depreciation of the Fund's
assets, all expenses incurred by the Fund and all sales charges which would be
incurred by redeeming shareholders, for the stated periods. It also assumes
reinvestment of all dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of
aggre-
14
<PAGE>
gate, average, and year-by-year or other types of total return figures. The Fund
may also advertise the growth of hypothetical investments of $10,000, $50,000
and $100,000 in shares of the Fund. The Fund from time to time may also
advertise its performance relative to certain performance rankings and indexes
compiled by independent organizations (such as mutual fund performance rankings
of Lipper Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges. There are
no conversion, pre-emptive or other subscription rights. In the event of
liquidation, each share of beneficial interest of the Fund is entitled to its
portion of all of the Fund's assets after all debts and expenses have been paid.
The shares do not have cumulative voting rights.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under certain
limited circumstances, be held personally liable as partners for obligations of
the Fund. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund, requires that Fund
obligations include such disclaimer, and provides for indemnification and
reimbursement of expenses out of the Fund's property for any shareholder held
personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitations on shareholder personal liability, and
the nature of the Fund's assets and operations, in the opinion of Massachusetts
counsel to the Fund, the risk to shareholders of personal liability is remote.
CODE OF ETHICS. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the
Adviser's officers, directors and certain other persons have a beneficial
interest to avoid any actual or potential conflict or abuse of their fiduciary
position. The Code of Ethics, as it pertains to the TCW/DW Funds, contains
several restrictions and procedures designed to eliminate conflicts of interest
including: (a) pre-clearance of personal investment transactions to ensure that
personal transactions by employees are not being conducted at the same time as
the Adviser's clients; (b) quarterly reporting of personal securities
transactions; (c) a prohibition against personally acquiring securities in an
initial public offering, entering into uncovered short sales and writing
uncovered options; (d) a seven day "black-out period" prior or subsequent to a
TCW/DW Fund transaction during which portfolio managers are prohibited from
making certain transactions in securities which are being purchased or sold by a
TCW/DW Fund; (e) a prohibition, with respect to certain investment personnel,
from profiting in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within 60 calendar days; and (f) a prohibition against
acquiring any security which is subject to firm wide or, if applicable, a
department restriction of the Adviser. The Code of Ethics provides that
exemptive relief may be given from certain of its requirements, upon
application. The Adviser's Code of Ethics complies with regulatory requirements
and, insofar as it relates to persons associated with registered investment
companies, the 1994 Report of the Advisory Group on Personal Investing of the
Investment Company Institute.
SHAREHOLDER INQUIRIES. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover of
this Prospectus.
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<PAGE>
TCW/DW BALANCED FUND
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
James A. Tilton
Vice President
James M. Goldberg
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT
AND DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
