<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 1998
REGISTRATION NOS.: 333-39791
811-8240
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 1 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 5 [X]
---------------
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Post-Effective Amendment becomes effective.
---------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE
BOX)
X immediately upon filing pursuant to paragraph (b)
- ---
on (date) pursuant to paragraph (b)
- ---
60 days after filing pursuant to paragraph (a)
- ---
on (date) pursuant to paragraph (a) of rule 485
- ---
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
PROSPECTUS -- MARCH 31, 1998
- -----------------------------------------------------------------------------
TCW/DW Emerging Markets Opportunities Trust (the "Fund") is an open-end,
non-diversified management investment company, whose investment objective is
long-term capital appreciation through investment primarily in equity
securities of companies in emerging market countries. The Fund seeks to
achieve its investment objective by investing at least 65% of its total
assets in equity securities of companies in emerging market countries. There
is no assurance that the Fund's investment objective will be achieved. See
"Investment Objective and Policies." The Fund may invest up to 35% of its
total assets in high risk debt securities which are unrated or rated below
investment grade. Investments in emerging market countries involve certain
special risk factors and therefore may not be suitable for all investors.
The Fund offers four classes of shares (each, a "Class"), each with a
different combination of sales charges, ongoing fees and other features. The
different distribution arrangements permit an investor to choose the method
of purchasing shares that the investor believes is most beneficial given the
amount of the purchase, the length of time the investor expects to hold the
shares and other relevant circumstances. See "The Fund and its Management"
and "Purchase of Fund Shares--Alternative Purchase Arrangements."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated March 31, 1998 which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
Table of Contents
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 5
Financial Highlights .................................................. 7
The Fund and its Management ........................................... 10
Investment Objective and Policies ..................................... 11
Risk Considerations ................................................. 13
Investment Restrictions ............................................... 22
Purchase of Fund Shares ............................................... 22
Shareholder Services .................................................. 32
Repurchases and Redemptions ........................................... 35
Dividends, Distributions and Taxes .................................... 36
Performance Information ............................................... 37
Additional Information ................................................ 38
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TCW/DW EMERGING MARKETS
OPPORTUNITIES TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Dean Witter Distributors Inc.
Distributor
<PAGE>
PROSPECTUS SUMMARY
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
THE The Fund is organized as a trust, commonly known as a Massachusetts business trust, and is an open-end, non-
FUND diversified management investment company investing primarily in equity securities of companies in emerging
market countries.
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES Shares of beneficial interest with $0.01 par value (see page 38). The Fund offers four Classes of shares, each
OFFERED with a different combination of sales charges, ongoing fees and other features (see pages 22-31).
- -----------------------------------------------------------------------------------------------------------------------------------
MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account is opened through EasyInvest
PURCHASE (Service Mark)). Class D shares are only available to persons investing $5 million ($25 million for certain
qualified plans) or more and to certain other limited categories of investors. For the purpose of meeting the
minimum $5 million (or $25 million) investment for Class D shares, and subject to the $1,000 minimum initial
investment for each Class of the Fund, an investor's existing holdings of Class A shares and concurrent
investments in Class D shares of the Fund and other multiple class funds for which Dean Witter Services Company
Inc. serves as manager and TCW Funds Management, Inc. serves as investment adviser will be aggregated. The
minimum subsequent investment is $100 (see pages 22-24).
- -----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is long-term capital appreciation through investment primarily in equity
OBJECTIVE securities of companies in emerging market countries.
- -----------------------------------------------------------------------------------------------------------------------------------
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 101
investmentcompanies and other portfolios with assets of approximately $109.9 billion at February 28, 1998.
- -----------------------------------------------------------------------------------------------------------------------------------
CO-ADVISERS TCW Funds Management, Inc. ("TCW") and Morgan Stanley Asset Management Inc. ("MSAM"), an affiliate of
InterCapital (collectively, the "Co-Advisers") are the Fund's investment advisers. In addition to the Fund, TCW
serves as investment adviser to 10 other TCW/DW Funds. As of February 28, 1998, TCW and its affiliates had over
$50 billion under management or committed to management in various fiduciary or advisory capacities, primarily
from institutional investors. MSAM serves as investment adviser to one other TCW/DW Fund. MSAM conducts a
worldwide investment advisory business. As of February 28, 1998, MSAM, together with its institutional
investment management affiliates, managed assets in various fiduciary or advisory capacities of approximately
$156.5 billion (see page 10).
- -----------------------------------------------------------------------------------------------------------------------------------
SUB-ADVISERS TCW has appointed TCW London International, Limited and TCW Asia Limited as sub-advisers, to assist TCW in
performing its advisory functions.
- -----------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.75% of daily net assets. The Co-Advisers
AND ADVISORY collectively receive a monthly fee at the annual rate of 0.50% of daily net assets (see page 10). Fees
- -----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR AND Dean Witter Distributors Inc. (the "Distributor"). The Fund has adopted a distribution plan pursuant to Rule
DISTRIBUTION 12b-1 under the Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by the
FEE Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee payable by Class A
and a portion of the 12b-1 fee payable by each of Class B and Class C equal to 0.25% of the average daily net
assets of the Class are currently each characterized as a service fee within the meaning of the National
Association of Securities Dealers, Inc. guidelines. The remaining portion of the 12b-1 fee, if any, is
characterized as an asset-based sales charge (see pages 22 and 30).
- -----------------------------------------------------------------------------------------------------------------------------------
2
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS o Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for larger purchases.
Investments of $1 million or more (and investments by certain other limited categories of investors) are not
subject to any sales charge at the time of purchase but a contingent deferred sales charge ("CDSC") of 1.0%
may be imposed on redemptions within one year of purchase. The Fund is authorized to reimburse the Distributor
for specific expenses incurred in promoting the distribution of the Fund's Class A shares and servicing
shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to
payments at an annual rate of 0.25% of average daily net assets of the Class (see pages 22, 26 and 30). All
shares of the Fund held prior to January 26, 1998 have been designated Class A shares and are not subject to
any CDSC at the time of redemption.
o Class B shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
(scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The CDSC will be imposed on any
redemption of shares if after such redemption the aggregate current value of a Class B account with the Fund
falls below the aggregate amount of the investor's purchase payments made during the six years preceding the
redemption. A different CDSC schedule applies to investments by certain qualified plans. Class B shares are
also subject to a 12b-1 fee assessed at the annual rate of 1.0% of the average daily net assets of Class B.
Class B shares convert to Class A shares approximately ten years after the date of the original purchase (see
pages 22, 28 and 30).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject to a CDSC
of 1.0% if redeemed within one year after purchase. The Fund is authorized to reimburse the Distributor for
specific expenses incurred in promoting the distribution of the Fund's Class C shares and servicing shareholder
accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event exceed an amount equal to payments
at an annual rate of 1.0% of average daily net assets of the Class (see pages 22 and 30).
o Class D shares are offered only to investors meeting an initial investment minimum of $5 million ($25 million
for certain qualified plans) and to certain other limited categories of investors. Class D shares are offered
without a front-end sales charge or CDSC and are not subject to any 12b-1 fee (see pages 22 and 30).
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income and distributions from net capital gains, if any, are paid at least
CAPITAL GAINS annually. The Fund may, however, determine to retain all or part of any net long-term capital gains in any year
DISTRIBUTIONS for reinvestment. Dividends and capital gains distributions paid on shares of a Class are automatically
reinvested in additional shares of the same Class at net asset value unless the shareholder elects to receive
cash. Shares acquired by dividend and distribution reinvestment will not be subject to any sales charge or CDSC
36).
- -----------------------------------------------------------------------------------------------------------------------------------
REDEMPTION Shares are redeemable by the shareholder at net asset value less any applicable CDSC on Class A, Class B or
Class C shares. An account may be involuntarily redeemed if the total value of the account is less than $100
or, if the account was opened through EasyInvest (Service Mark), if after twelve months the shareholder has
(see pages 32 and invested less than $1,000 in the account (see page 35).
- -----------------------------------------------------------------------------------------------------------------------------------
3
<PAGE>
- -----------------------------------------------------------------------------------------------------------------------------------
RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the Fund's portfolio
CONSIDERATIONS securities. It should be recognized that investing in emerging market country securities includes certain risks
not typically associated with investing in securities of U.S. issuers, including (i) the risks associated with
international investments generally, such as fluctuations in foreign currency exchange rates, (ii) the risks
of investing in countries with smaller, less developed capital markets, such as limited liquidity, price
volatility, custodial settlement issues and restrictions on foreign investment, and (iii) the risks associated
with emerging country economies, including high levels of inflation, large amounts of debt and political and
social uncertainties, such as the risk of expropriation, nationalization or confiscation of the Fund's assets
or the imposition of restrictions on foreign investment or the repatriation of capital invested. In addition,
securities markets in emerging market countries are subject to non-uniform corporate disclosure standards and
governmental regulation which may lead to less publicly available and less reliable information concerning
issuers in emerging market countries than is generally the case for U.S. issuers (see page 14). The Fund may
invest in securities issued by foreign investment companies, which may result in additional costs to the Fund.
The Fund is a non-diversified investment company and, as such, is not subject to the diversification
requirements of the Investment Company Act of 1940. As a result, a relatively high percentage of the Fund's
assets may be invested in a limited number of issuers. However, the Fund intends to continue to qualify as a
regulated investment company under the federal income tax laws and, as such, is subject to the diversification
requirements of the Internal Revenue Code (see page 19). The Fund may invest in lower rated or unrated
sovereign debt of emerging market countries or debt securities of issuers in emerging market countries, which
involves a high degree of risk (see page 15). The Fund also may engage in options and futures transactions and
swaps and may purchase securities on a when-issued, delayed delivery or "when, as and if issued" basis, which
may involve certain additional risks (see pages 13-21).
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------------------------------------------------------------
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
4
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The estimated expenses and fees set forth in the table
are based on the expenses and fees for the fiscal year ended January 31,
1998, as adjusted for changes resulting from open-ending the Fund and
implementing the distribution plan.
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C CLASS D
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
- -------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ............................................. 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ............... None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption
proceeds).................................................... None(2) 5.00%(3) 1.00%(4) None
Redemption Fees............................................... None None None None
Exchange Fee.................................................. None None None None
Annual Fund Operating Expenses (as a percentage of average net assets)
- ----------------------------------------------------------------------
Management and Advisory Fees ................................. 1.25% 1.25% 1.25% 1.25%
12b-1 Fees (5)(6)............................................. 0.25% 1.00% 1.00% None
Other Expenses ............................................... 0.39% 0.39% 0.39% 0.39%
Total Fund Operating Expenses (7)............................. 1.89% 2.64% 2.64% 1.64%
</TABLE>
- ------------
(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares"). Shares of
the Fund held prior to January 26, 1998 were not subject to a front-end
sales charge.
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for shares of
the Fund held prior to January 26, 1998 and in certain other specific
circumstances (see "Purchase of Fund Shares--Initial Sales Charge
Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1
fee payable by Class A and a portion of the 12b-1 fee payable by each
of Class B and Class C equal to 0.25% of the average daily net assets
of the Class are currently each characterized as a service fee within
the meaning of National Association of Securities Dealers, Inc.
("NASD") guidelines and are payments made for personal service and/or
maintenance of shareholder accounts. The remainder of the 12b-1 fee, if
any, is an asset-based sales charge, and is a distribution fee paid to
the Distributor to compensate it for the services provided and the
expenses borne by the Distributor and others in the distribution of the
Fund's shares (see "Purchase of Fund Shares--Plan of Distribution").
(6) Upon conversion of Class B shares to Class A shares, such shares will
be subject to the lower 12b-1 fee applicable to Class A shares. No
sales charge is imposed at the time of conversion of Class B shares to
Class A shares. Class C shares do not have a conversion feature and,
therefore, are subject to an ongoing 1.00% distribution fee (see
"Purchase of Fund Shares--Alternative Purchase Arrangements").
(7) There were no outstanding shares of Class B, Class C or Class D prior
to January 26, 1998. Accordingly, "Total Fund Operating Expenses," as
shown above with respect to those Classes, are based upon the sum of
12b-1 Fees, Management and Advisory Fees and estimated "Other
Expenses." "Total Fund Operating Expenses" of Class A shares are based
upon the sum of 12b-1 Fees applicable to the Class A shares, Management
and Advisory Fees and estimated "Other Expenses" based on actual
expenses for the fiscal year ended January 31, 1998 as adjusted for
estimated incremental expenses in connection with operating as an
open-ended Fund.
5
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
EXAMPLES 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------- -------- --------- --------- ----------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of
each time period:
Class A .......................................................... $71 $109 $149 $262
Class B .......................................................... $77 $112 $160 $297
Class C........................................................... $37 $ 82 $140 $297
Class D .......................................................... $17 $ 52 $ 89 $194
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A .......................................................... $71 $109 $149 $262
Class B .......................................................... $27 $ 82 $140 $297
Class C .......................................................... $27 $ 82 $140 $297
Class D .......................................................... $17 $ 52 $ 89 $194
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER
OR LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of
Distribution" and "Repurchases and Redemptions."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
6
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each of the periods through January 31, 1998 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.
On January 26, 1998 the Fund converted from a closed-end investment
company to an open-end investment company. Accordingly, the financial
information below reflects the Fund's performance as a closed-end
investment company and may not be indicative of the Fund's performance
as an open-end investment company.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 31, MARCH 30, 1994*
--------------------------------- THROUGH
1998**++ 1997 1996 JANUARY 31, 1995
- -------------------------------------------------- ---------- ---------- --------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.............. $ 14.70 $ 13.07 $ 11.18 $ 14.02
---------- ---------- ---------- ----------------
Net investment income............................. 0.10 0.02 0.04 0.11
Net realized and unrealized gain (loss) .......... (1.94) 1.65 1.73 (2.89)
---------- ---------- ---------- ----------------
Total from investment operations.................. (1.84) 1.67 1.77 (2.78)
---------- ---------- ---------- ----------------
Offering costs charged against capital............ -- -- -- (0.02)
---------- ---------- ---------- ----------------
Less dividends and distributions from:
Net investment income............................. (0.15) (0.05) (0.02) (0.09)
Net realized gain................................. -- -- -- (0.01)
---------- ---------- ---------- ----------------
Total dividends and distributions................. (0.15) (0.05) (0.02) (0.10)
---------- ---------- ---------- ----------------
Anti-dilutive effect of acquiring treasury shares -- 0.01 0.14 0.06
---------- ---------- ---------- ----------------
Net asset value, end of period.................... $ 12.71 $ 14.70 $ 13.07 $ 11.18
========== ========== ========== ================
TOTAL INVESTMENT RETURN+ .......................... (12.43)% 13.03% 17.04% (19.47)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.......................................... 1.67% 1.72% 1.69% 1.73%(2)
Net investment income............................. .64% 0.12% 0.28% 0.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands .......... $169,252 $305,308 $273,172 $254,358
Portfolio turnover rate .......................... 85% 66% 66% 61%(1)
Average commission rate paid...................... $ 0.0009 $ 0.0012 -- --
</TABLE>
- ------------
* Commencement of operations.
** Prior to January 26, 1998, the Fund operated as a closed-end management
investment company and was solely advised by TCW Funds Management.
Shares of the Fund existing at the time of its conversion to an
open-end management investment company have been designated as Class A
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.
7
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 26, 1998*
THROUGH
JANUARY 31,
1998++
-----------------
<S> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $12.34
Net realized and unrealized gain ...... 0.37
-----------------
Net asset value, end of period ........ $12.71
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 3.18 %(2)
Net investment loss .................... (2.77)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $35
Portfolio turnover rate ................ 85 %
Average commission rate paid ........... $0.0009
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $12.34
Net realized and unrealized gain ...... 0.37
-----------------
Net asset value, end of period ........ $12.71
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 % (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 3.07 %(2)
Net investment loss .................... (2.85)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $11
Portfolio turnover rate ................ 85 %
Average commission rate paid ........... $0.0009
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
8
<PAGE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 26, 1998*
THROUGH
JANUARY 31,
1998++
-----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $12.34
Net realized and unrealized gain ...... 0.38
-----------------
Net asset value, end of period ........ $12.72
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 2.07 % (2)
Net investment loss .................... (1.60)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $10
Portfolio turnover rate ................ 85 %
Average commission rate paid ........... $0.0009
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
9
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
TCW/DW Emerging Markets Opportunities Trust (the "Fund") is an open-end,
non-diversified management investment company. The Fund is a trust of the
type commonly known as a "Massachusetts business trust" and was organized
under the laws of Massachusetts on December 22, 1993 as a closed-end
non-diversified investment company. On July 22, 1997, the shareholders of the
Fund voted to, among other things, convert the Fund to an open-end investment
company. Effective as of January 26, 1998, the Fund converted to an open-end
investment company.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The
Manager is a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"). InterCapital is a wholly-owned subsidiary of Morgan Stanley
Dean Witter & Co. ("MSDW"), a preeminent global financial services firm that
maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
The Manager acts as manager to thirteen other TCW/DW Funds. The Manager
and InterCapital serve in various investment management, advisory, management
and administrative capacities to a total of 101 investment companies, 28 of
which are listed on the New York Stock Exchange, with combined assets of
approximately $105.8 billion as of February 28, 1998. InterCapital also
manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $4.1 billion at such date.
The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. ("TCW"), whose address is 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017, and Morgan Stanley Asset
Management Inc. ("MSAM"), whose address is 1221 Avenue of the Americas, New
York, NY 10020, are the Fund's investment advisers (the "Co-Advisers").
TCW was organized in 1987 as a wholly-owned subsidiary of The TCW Group,
Inc. (the "TCW Group"), 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 the TCW Group, may be deemed to be a control
person of TCW by virtue of the aggregate ownership by Mr. Day and his family
of more than 25% of the outstanding voting stock of the TCW Group. TCW serves
as investment adviser to thirteen other TCW/DW Funds in addition to the Fund.
TCW has entered into two sub-advisory agreements with two other wholly-owned
subsidiaries of TCW Group, TCW London International, Limited ("TCW London")
and TCW Asia Limited ("TCW Asia") to assist in performing its advisory
functions. The address of TCW London is 27 Albemarle Street, London W1X 3FA
and the address of TCW Asia is One Pacific Place, 88 Queensway, Hong Kong. As
of February 28, 1998, TCW and its affiliated companies had over $50
billion under management or committed to management, primarily from
institutional investors.
MSAM, an affiliate of InterCapital, is a wholly-owned subsidiary of MSDW.
MSAM, together with its institutional investment management affiliates
manages, as of February 28, 1998, assets in various fiduciary or advisory
capacities of approximately $156.5 billion primarily for U.S. corporate and
public employees benefit plans, investment companies, endowments, foundations
and wealthy individuals.
The Fund has retained the Co-Advisers to invest the Fund's assets. Prior
to the date of this Prospectus, TCW was the sole investment adviser of the
Fund. In November, 1997, TCW indicated its intention to manage only a portion
of the Fund's assets. InterCapital, with the concurrence of TCW, recommended
to the Fund's Board of Trustees that MSAM be appointed as a co-investment
adviser. Under the co-advisory arrangement, TCW and MSAM do not manage the
Fund's total assets jointly; instead, each co-adviser is responsible only for
investment of its
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portion of the Fund's assets. Thus, securities will be purchased and sold by
TCW and MSAM based on each co-adviser's independent portfolio management
decisions, which could result in purchases and sales, and concomitant
brokerage commissions, at times when they would not occur in a portfolio
managed by a single adviser. The Board of Trustees recommended that new
Co-Advisory Agreements with TCW and MSAM be submitted to shareholders of the
Fund for approval. The shareholders approved the new Co-Advisory Agreements
with TCW and MSAM on January 12, 1998 and those agreements became effective
as of January 26, 1998.
The Fund's Trustees review the various services provided by the Manager
and the Co-Advisers 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
0.75% to the Fund's net assets. As compensation for its investment advisory
services, the Fund pays the Co-Advisers collectively monthly compensation
calculated daily by applying an annual rate of 0.50% to the Fund's net
assets. For the fiscal year ended January 31, 1998, the Fund accrued total
compensation to the Manager and the Co-Advisers amounting to 0.75% and 0.50%,
respectively, of the Fund's average daily net assets. During that period, the
Fund's total expenses of Class A amounted to 1.67% of the Fund's average
daily net assets of Class A. Shares of Class B, Class C and Class D were
first issued on January 26, 1998. The expenses of the Fund include: the fee
of the Investment Manager; the fee pursuant to the Plan of Distribution (see
"Purchase of Fund Shares"); taxes; transfer agent, custodian and auditing
fees; certain legal fees; and printing and other expenses relating to the
Fund's operations which are not expressly assumed by the Investment Manager
under its Investment Management Agreement with the Fund.
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The Fund's investment objective is long-term capital appreciation through
investment primarily in equity securities of companies in emerging market
countries. This objective is fundamental and may not be changed without
shareholder approval. There is no assurance that the objective will be
achieved. The Fund seeks to achieve its investment objective by investing
under normal circumstances at least 65% of its total assets in equity
securities of companies in emerging market countries.
For the purpose of this Prospectus, an "emerging market country" is any
country that is considered an emerging or developing country by the
International Bank of Reconstruction and Development (the "World Bank"), as
well as Hong Kong, Israel and Singapore. Presently, there are approximately
158 countries considered to be emerging market countries. These countries
generally include every nation in the world except the United States, Canada,
Japan, Australia, New Zealand, most nations located in Western Europe and
certain other nations located in Asia. A list of the countries not falling
within the World Bank definition of an emerging market country is set forth
in the Statement of Additional Information.
The Fund will invest primarily in equity securities of companies that: (i)
are organized under the laws of emerging market countries; (ii) regardless of
where organized, derive at least 50% of their revenues or earnings from goods
produced or sold, investments made, or services performed in emerging market
countries; (iii) maintain at least 50% of their assets in emerging market
countries; or (iv) have securities which are traded principally on a stock
exchange in an emerging market country. Under normal circumstances, the Fund
will invest in at least three emerging market countries. Substantially all of
the Fund's investments may be denominated in currencies other than the U.S.
dollar.
The equity securities in which the Fund may invest include common and
preferred stock (including
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convertible preferred stock), bonds, notes and debentures convertible into
common or preferred stock, stock purchase warrants and rights, equity
interests in trusts and partnerships and American, Global or other types of
Depository Receipts. These securities may be listed on securities exchanges,
traded in various over-the-counter markets or have no organized market.
A convertible security is a bond, debenture, note, preferred stock or
other security that may be converted into or exchanged for a prescribed
amount of common stock of the same or a different issuer within a particular
period of time at a specified price or formula. Convertible securities rank
senior to common stocks in a corporation's capital structure and, therefore,
entail less risk than the corporation's common stock. The value of a
convertible security is a function of its "investment value" (its value as if
it did not have a conversion privilege), and 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).
The Fund may invest up to 35% of its total assets in (i) non-convertible
fixed-income securities of government or corporate issuers located in
emerging market countries; (ii) equity and fixed-income securities of issuers
in developed countries; and (iii) cash and money market instruments.
The fixed-income securities (including convertible securities described
above) of government or corporate issuers located in emerging market
countries, the United States or other developed countries in which the Fund
may invest may consist of fixed-income securities that are unrated or rated
Ba or lower by Moody's Investors Service, Inc. ("Moody's") or BB or lower by
Standard & Poor's Corporation ("S&P"), including zero coupon securities.
There is no limit other than the overall 35% limitation described above on
the percentage of the Fund's total assets which may be invested in
fixed-income securities which are unrated or rated below investment grade.
Securities below investment grade are the equivalent of high yield, high risk
bonds, commonly known as "junk bonds." Fixed-income securities rated Ba or
lower by Moody's or BB or lower by S&P are considered to be speculative
investments with respect to the ability of the issuer to pay interest and
repay principal. Furthermore, since the Fund does not have any minimum
quality rating standard for such investments, the Fund may invest in
fixed-income securities rated as low as C by Moody's or as low as D by S&P.
These securities are regarded as having extremely poor prospects of ever
attaining any real investment standing, to have a current identifiable
vulnerability to default and/or to be in default or not current in the
payment of interest or principal. A description of fixed-income securities
ratings (including convertible securities) is contained in the Appendix to
the Statement of Additional Information. See "Risk Considerations" below for
a further discussion of the characteristics and risks associated with high
yield, lower rated fixed-income securities.
The Fund is subject to no restrictions on the maturities of the
fixed-income securities it holds. The value of the fixed-income securities
held by the Fund generally will vary inversely to changes in prevailing
interest rates. The Fund's investments in fixed-rated debt securities with
longer terms to maturity are subject to greater volatility than the Fund's
investments in shorter-term obligations. Debt obligations acquired at a
discount are subject to greater fluctuations of market value in response to
changing interest rates than debt obligations of comparable maturities which
are not subject to such discount.
The Fund's investments in debt obligations of government issuers in
emerging market countries will consist of: (i) debt securities or obligations
issued or guaranteed by governments, governmental agencies or
instrumentalities and political subdivisions located in emerging market
countries (including participations in loans between governments and
financial institutions), (ii) debt securities or obligations issued by
government owned, controlled or sponsored entities located in emerging market
countries, and (iii) interests in issuers organized and operated for the
purpose of restructuring the investment characteristics of instruments issued
by any of the entities described above ("Sovereign Debt"). The Sovereign Debt
held by the Fund will take the form of bonds, notes, bills, debentures,
warrants, short-term paper, loan participations, loan assignments and
securities or
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interests issued by entities organized and operated for the purpose of
restructuring the investment characteristics of such Sovereign Debt. This
Sovereign Debt may include a particular type of debt security known as "Brady
Bonds," which were issued under the "Brady Plan" in exchange for loans and
cash in connection with debt restructurings in various emerging market
countries in 1990. Certain Sovereign Debt held by the Fund will not be traded
on any securities exchange. See "Risk Considerations."
U.S. and non-U.S. corporate fixed-income securities in which the Fund may
invest include debt securities, convertible securities and preferred stocks
of corporate issuers.
The Co-Advisers attempt to minimize the speculative risks associated with
investments in lower rated securities through credit analysis, and by
carefully monitoring current trends in interest rates, political developments
and other factors. Nonetheless, investors should carefully review the
investment objective and policies of the Fund and consider their ability to
assume the investment risks involved before making an investment.
The money market instruments in which the Fund may invest are securities
issued or guaranteed by the U.S. Government (Treasury bills, notes and bonds,
including zero coupon securities); 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 deposits; and commercial paper rated within the two
highest grades by Moody's or S&P or, if not rated, issued by an issuer having
an outstanding long-term debt issue rated at least Aa by Moody's or AA by
S&P.
During temporary defensive periods when, in the opinion of either of the
Co-Advisers, market conditions or economic, financial or political conditions
warrant reductions of some or all of the Fund's investments in equity
securities of emerging market countries or other securities in which the Fund
may invest in accordance with its investment objective and policies, the Fund
may adopt a temporary "defensive" posture in which any amount of its total
assets may be invested in U.S. Government securities, short-term high quality
money market instruments or cash.
Investment in Other Investment Vehicles. Under the Investment Company Act
of 1940, as amended (the "Investment Company Act"), the Fund generally may
invest up to 10% of its total assets in the aggregate in shares of other
investment companies (including, to the extent permitted by the Investment
Company Act, those which are advised by the Manager, the Co-Advisers or their
affiliates) and up to 5% of its total assets in any one investment company,
as long as that investment does not represent more than 3% of the voting
stock of the acquired investment company at the time such shares are
purchased. As stated above, investment in other investment companies or
vehicles may be the sole or most practical means by which the Fund can
participate in certain emerging country securities markets. Such investment
may involve the payment of substantial premiums above the value of such
issuers' portfolio securities, and is subject to the limitations described
above and market availability. There can be no assurance that vehicles or
funds for investing in certain emerging market countries will be available
for investment. In addition, special tax considerations may apply. The Fund
does not intend to invest in such vehicles or funds unless, in the judgment
of the Co-Advisers, the potential benefits of such investment justify the
payment of any applicable premium or sales charge. As a shareholder in an
investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. At the
same time the Fund would continue to pay its own management and advisory fees
and other expenses, as a result of which the Fund and its shareholders in
effect will be absorbing duplicate levels of advisory fees with respect to
investments in such other investment companies.
RISK CONSIDERATIONS
The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's securities. The market value of the Fund's
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<PAGE>
portfolio securities will increase or decrease due to a variety of economic,
market and political factors which cannot be predicted.
Foreign Securities. Investors should carefully consider the risks of
investing in securities of foreign issuers and securities denominated in
non-U.S. currencies. Fluctuations in the relative rates of exchange between
the currencies of different nations will affect the value of the Fund's
investments. 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.
See the Statement of Additional Information for a discussion of additional
risk factors.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade.
In addition, many of the currencies of emerging market countries have
experienced steady devaluations relative to the U.S. dollar, and major
devaluations have historically occurred in certain countries. Any
devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund.
Some emerging market countries also may have managed currencies which are
not free floating against the U.S. dollar. In addition, there is a risk that
certain emerging market countries may restrict the free conversion of their
currencies into other currencies. Further, certain emerging market currencies
may not be internationally traded.
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. Political and economic developments in emerging market countries
may have profound effects upon the value of the Fund's portfolio. In the
event of expropriation, nationalization or other complication, the Fund could
lose its entire investment in any one country. In addition, individual
emerging market countries may place restrictions on the ability of foreign
entities such as the Fund to invest in particular segments of the local
economies.
Companies in emerging market countries 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, companies in emerging
market countries are not subject to uniform accounting, auditing and
financial reporting standards and requirements comparable to those applicable
to U.S. companies. Also, certain emerging market countries may impose
unusually high withholding taxes on dividends payable to the Fund, thereby
effectively reducing the Fund's investment income.
The securities markets of emerging market countries are substantially
smaller, less developed, less liquid and more volatile than the major
securities markets in the United States. The limited size of many emerging
market securities markets and limited trading volume in issuers compared to
volume of trading in U.S. securities could cause prices to be erratic for
reasons apart from factors that affect the quality of the securities. For
example, limited market size may cause prices to be unduly influenced by
traders who control large positions. Adverse publicity and investors'
perceptions, whether or not based on fundamental analysis, may decrease the
value and liquidity of portfolio securities, especially in these markets.
In addition, exchanges and broker-dealers in emerging market countries are
generally subject to less government and exchange scrutiny and regulation
than their U.S. counterparts. Brokerage commissions, dealer concessions,
custodial expenses and other transaction costs may be higher in foreign
markets than in the U.S. Thus, the Fund's operating expenses are expected to
be higher than those of investment com-
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<PAGE>
panies investing primarily in domestic or other more established market
regions. Also, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of Fund trades effected in such
markets. 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. In addition, certain adverse tax
consequences of the Fund's investments in passive foreign investment
companies are discussed below under "Dividends, Distributions and Taxes."
Most emerging market countries have experienced substantial, and in some
periods extremely high, rates of inflation for many years. Inflation and
rapid fluctuations in inflation rates have had and may continue to have very
negative effects on the economies and securities markets of certain emerging
market countries.
The Fund may not invest more than 15% of its net assets in illiquid
securities. The Fund will treat any emerging market securities that are
subject to restrictions on repatriation for more than seven days, as well as
any securities issued in connection with emerging market debt conversion
programs that are restricted as to remittance of invested capital or profits,
as illiquid securities for purposes of this limitation. The Fund will also
treat repurchase agreements with maturities in excess of seven days as being
illiquid for this purpose.
Debt Securities. Because of the special nature of the Fund's permitted
investments in lower rated convertible and debt securities, each Co-Adviser
must take account of certain special considerations in assessing the risks
associated with such investments. The prices of lower rated securities have
been found to be less sensitive to changes in prevailing interest rates than
higher rated investments, but are likely to be more sensitive to adverse
economic changes or individual corporate developments. During an economic
downturn or substantial period of rising interest rates, highly leveraged
issuers may experience financial stress which would adversely affect their
ability to service their principal and interest payment obligations, to meet
their projected business goals or to obtain additional financing. If the
issuer of a fixed-income security owned by the Fund defaults, the Fund may
incur additional expenses to seek recovery. In addition, periods of economic
uncertainty and change can be expected to result in an increased volatility
of market prices of lower rated securities and a corresponding volatility in
the net asset value of a share of the Fund.
Certain emerging market countries are among the largest debtors to
commercial banks and foreign governments. At times certain emerging market
countries have declared moratoria on the payment of principal and/or interest
on external debt. Trading in Sovereign Debt involves a high degree of risk,
since the governmental entity that controls the repayment of Sovereign Debt
may not be willing or able to repay the principal and/or interest of such
debt obligations when it becomes due, due to factors such as debt service
burden, political constraints, cash flow situation and other national
economic factors. As a result, emerging market governments may default on
their Sovereign Debt, which may require holders of such Sovereign Debt to
participate in debt rescheduling or additional lending to defaulting
governments. There is no bankruptcy proceeding by which defaulted Sovereign
Debt may be collected in whole or in part.
The risks of other investment techniques which may be utilized by the Fund
are described under "Interest Rate Transactions," "Forward Foreign Currency
Exchange Contracts," "Options and Futures Transactions," "Risks of Options
and Futures Transactions," "Short Sales" and "Other Investment Policies"
below.
Interest Rate Transactions. Among the hedging techniques into which the
Fund may enter are interest rate swaps and the purchase or sale of interest
rate caps and floors. The Fund expects to enter into these transactions
primarily to preserve a return or spread on a particular investment or
portion of its portfolio as a duration management technique or to protect
against any increase in the price of securities the Fund
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<PAGE>
anticipates purchasing at a later date. The Fund intends to use these
transactions as a hedge and not as a speculative investment. The Fund will
not sell interest rate caps or floors that it does not own. Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of
principal. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor.
The Fund may enter into interest rate swaps, caps and floors on either an
asset-based or liability-based basis, depending on whether it is hedging its
assets or its liabilities, and will usually enter into interest rate swaps on
a net basis, i.e., the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payment rates. The Fund will accrue the net amount of the excess, if any, of
the Fund's obligations over its entitlements with respect to each interest
rate swap on a daily basis and will segregate with a custodian an amount of
cash or liquid securities having an aggregate net asset value at least equal
to the accrued excess. The Fund will not enter into any interest rate swap,
cap or floor transaction unless the unsecured senior debt or the
claims-paying ability of the other party thereto is rated in the highest
rating category of at least one nationally recognized rating organization at
the time of entering into such transactions. If there is a default by the
other party to such a transaction, the Fund will have contractual remedies
pursuant to the agreements related to the transaction. The swap market has
grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. Caps and floors are more recent innovations
for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
Forward Foreign Currency Exchange Contracts. To hedge against adverse
price movements in the securities held in its portfolio and the currencies in
which they are denominated (as well as in the securities it might wish to
purchase and their denominated currencies) the Fund may engage in
transactions in forward foreign currency contracts.
A forward foreign currency exchange contract, ("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.
Currently, only a limited market, if any, exists for hedging transactions
relating to currencies in most emerging markets or to securities of issuers
domiciled or principally engaged in business in emerging markets. This may
limit the Fund's ability to effectively hedge its investments in emerging
markets. Hedging against a decline in the value of a currency does not
eliminate fluctuations in the prices of portfolio securities or prevent
losses if the prices of such securities decline. Such transactions also limit
the opportunity for gain if the value of the hedged currencies should rise.
In addition, it may not be possible for the Fund to hedge against a
devaluation that is so generally anticipated that the Fund is not able to
contract to sell the currency at a price above the devaluation level it
anticipates.
If the Fund enters into forward contract transactions and the currency in
which the Fund's portfolio securities (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 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
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<PAGE>
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 applicable Co-Adviser.
Options and Futures Transactions. The Fund may purchase and sell (write)
call and put options on portfolio securities which are denominated in either
U.S. dollars or foreign currencies and on the U.S. dollar and foreign
currencies, which are or may in the future be listed on several U.S. and
foreign securities exchanges or are written in over-the-counter transactions
("OTC options"). OTC options are purchased from or sold (written) to dealers
or financial institutions which have entered into direct agreements with the
Fund.
The Fund is permitted to write covered call options on portfolio
securities and the U.S. dollar and foreign currencies, without limit, in
order to hedge against the decline in the value of a security or currency in
which such security is denominated and to close out long call option
positions. The Fund may write covered put options, under which the Fund
incurs an obligation to buy the security (or currency) 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. The aggregate value of
the obligation underlying the puts determined as of the date the options are
sold will not exceed 50% of the Fund's net assets.
The Fund may purchase listed and OTC call and put options in amounts
equalling up to 5% of its total assets. The Fund may purchase call options to
close out a covered call position or to protect against an increase in the
price of a security it anticipates purchasing or, in the case of call options
on a foreign currency, to hedge against an adverse exchange rate change of
the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The Fund
may purchase put options on securities which it holds in its portfolio only
to protect itself against a decline in the value of the security. The Fund
may also purchase put options to close out written put positions in a manner
similar to call option closing purchase transactions. There are no other
limits on the Fund's ability to purchase call and put options.
The Fund may purchase and sell futures contracts that are currently
traded, or may in the future be traded, on U.S. and foreign commodity
exchanges underlying portfolio securities, U.S. Treasury bonds, notes and
bills and/or any other non-U.S. fixed-income security ("interest rate"
futures) on foreign currencies ("currency" futures) and on such indexes of
U.S. or foreign equity or fixed-income securities as may exist or come into
being ("index" futures). The Fund may purchase or sell interest rate futures
contracts for the purpose of hedging some or all of the value of its
portfolio securities (or anticipated portfolio securities) against changes in
prevailing interest rates. The Fund may purchase or sell index futures
contracts for the purpose of hedging some or all of its portfolio (or
anticipated portfolio) securities against changes in their prices (or the
currency in which they are denominated.) As stated above, currently only a
limited market exists for options and futures transactions relating to
emerging market currencies or issuers. As a futures contract purchaser, the
Fund 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. As a seller of a futures contract, the Fund incurs an
obligation to deliver the specified amount of the underlying obligation at a
specified time in return for an agreed upon price.
The Fund also may purchase and write call and put options on futures
contracts which are traded on an exchange and enter into closing transactions
with respect to such options to terminate an existing position.
New futures contracts, options and other financial products and various
combinations thereof continue to be developed. The Fund may invest in any
such futures, options or products as may be developed, to the extent
consistent with its investment objective and applicable regulatory
requirements.
Risks of Options and Futures Transactions. The Fund may close out its
position as writer of an option,
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<PAGE>
or as a buyer or seller of a futures contract, only if a liquid secondary
market exists for options or futures contracts of that series. There is no
assurance that such a market will exist, particularly in the case of OTC
options, as such options may generally only be closed out by entering into a
closing purchase transaction with the purchasing dealer. Also, exchanges may
limit the amount by which the price of many futures contracts may move on any
day. If the price moves equal to the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit
moves have ceased.
While the futures contracts and options transactions to be engaged in by
the Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such
instruments. One such risk is that the Adviser could be incorrect in its
expectations as to the direction or extent of various interest rate or price
movements or the time span within which the movements take place. For
example, if the Fund sold futures contracts for the sale of securities in
anticipation of an increase in interest rates, and then interest rates went
down instead, causing bond prices to rise, the Fund would lose money on the
sale. Another risk which will arise in employing futures contracts to protect
against the price volatility of portfolio securities is that the prices of
securities, currencies and indexes subject to futures contracts (and thereby
the futures contract prices) may correlate imperfectly with the behavior of
the U.S. dollar cash prices of the Fund's portfolio securities and their
denominated currencies. See the Statement of Additional Information for a
further discussion of risks.
Short Sales. The Fund may make short sales of securities, consistent with
applicable legal requirements. A short sale is a transaction in which the
Fund sells a security it does not own in anticipation that the market price
of that security will decline. The Fund expects to make short sales both as a
form of hedging to offset potential declines in long positions in similar
securities and in order to maintain portfolio flexibility.
When the Fund makes a short sale, it must borrow the security sold short
and deliver it to the broker-dealer through which it made the short sale as
collateral for its obligation to deliver the security upon conclusion of the
sale. The Fund may have to pay a fee to borrow particular securities and is
often obligated to pay over any payments received on such borrowed
securities.
The Fund's obligation to replace the borrowed security will be secured by
collateral deposited with the broker-dealer, usually cash, U.S. Government
securities or other high grade liquid securities similar to those borrowed.
The Fund will also be required to deposit similar collateral with its
custodian to the extent, if any, necessary so that the value of both
collateral deposits in the aggregate is at all times equal to at least 100%
of the current market value of the security sold short. Depending on
arrangements made with the broker-dealer from which it borrowed the security
regarding payment over of any payments received by the Fund on such security,
the Fund may not receive any payments (including interest) on its collateral
deposited with such broker-dealer.
If the price of the security sold short increases between the time of the
short sale and the time the Fund replaces the borrowed security, the Fund
will incur a loss; conversely, if the price declines, the Fund will realize a
gain. Any gain will be decreased, and any loss increased, by the transaction
costs described above. Although the Fund's gain is limited to the price at
which it sold the security short, its potential loss is theoretically
unlimited.
The Fund will not make a short sale if, after giving effect to such sale,
the market value of all securities sold short exceeds 25% of the value of its
total assets or the Fund's aggregate short sales of a particular class of
securities exceeds 25% of the outstanding securities of that class. The Fund
may also make short sales "against the box" without respect to such
limitations. In this type of short sale, at the time of the sale, the Fund
owns or has the immediate and unconditional right to acquire at no additional
cost the identical security.
Year 2000. The management services provided to the Fund by the Manager,
the advisory services provided to the Fund by the Co-Advisers, and the
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<PAGE>
services provided by the Distributor and the Transfer Agent to shareholders,
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, each
Co-Adviser, the Distributor and the Transfer Agent have been actively working
on necessary changes to their own computer systems to deal with 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
noncomplying 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.
OTHER INVESTMENT POLICIES
Non-Diversified Status. The Fund is classified as a non-diversified
investment company under the Investment Company Act, and as such is not
limited by the Investment Company Act in the proportion of its assets that it
may invest in the obligations of a single issuer. However, the Fund intends
to conduct its operations so as to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code. See "Dividends,
Distributions and Taxes." In order to qualify, among other requirements, the
Fund will limit its investments so that at the close of each quarter of the
taxable year, (i) not more than 25% of the market value of the Fund's total
assets will be invested in the securities of a single issuer, and (ii) with
respect to 50% of the market value of its total assets not more than 5% will
be invested in the securities of a single issuer and the Fund will not own
more than 10% of the outstanding voting securities of a single issuer. To the
extent that a relatively high percentage of the Fund's assets may be invested
in the obligations of a limited number of issuers, the Fund's portfolio
securities may be more susceptible to any single economic, political or
regulatory occurrence than the portfolio securities of a diversified
investment company. The limitations described in this paragraph are not
fundamental policies and may be revised to the extent applicable Federal
income tax requirements are revised.
Repurchase Agreements. The Fund may enter into repurchase agreements,
which may be viewed as a type of secured lending by the Fund, and which
typically involve the acquisition by the Fund of debt securities from a
selling financial institution such as a bank, savings and loan association or
broker-dealer. The agreement provides that the Fund will sell back to the
institution, and that the institution will repurchase, the underlying
security at a specified price and at a fixed time in the future, usually not
more than seven days from the date of purchase. While repurchase agreements
involve certain risks not associated with direct investments in debt
securities, including the risks of default or bankruptcy of the selling
financial institution, the Fund follows procedures designed to minimize those
risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions and
maintaining adequate collateralization.
When-Issued and Delayed Delivery Securities and Forward Commitments. From
time to time, in the ordinary course of business, the Fund may purchase
securities on a when-issued or delayed delivery basis or may purchase or sell
securities on a forward commitment basis. 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
19
<PAGE>
Fund's assets which may be committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
when-issued, delayed delivery or forward commitment basis may increase the
volatility of the Fund's net asset value.
When, As and If Issued Securities. The Fund may purchase securities on a
"when, as and if issued" basis under which the issuance of the security
depends upon the occurrence of a subsequent event, such as approval of a
merger, corporate reorganization, leveraged buyout or debt restructuring. If
the anticipated event does not occur and the securities are not issued, the
Fund will have lost an investment opportunity. There is no overall limit on
the percentage of the Fund's assets which may be committed to the purchase of
securities on a "when, as and if issued" basis. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when, as
and if issued" basis may increase the volatility of its net asset value.
Rights and Warrants. The Fund may acquire rights and/or warrants which are
attached to other securities in its portfolio, or which are issued as a
distribution by the issuer of a security held in its portfolio. Rights and/or
warrants are, in effect, options to purchase equity securities at a specific
price, generally valid for a specific period of time, and have no voting
rights, pay no dividends and have no rights with respect to the corporation
issuing them.
Securities Receipts. The Fund may also invest in securities of foreign
issuers in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs), Global Depositary Receipts (GDRs) or other
similar securities convertible into securities of foreign issuers. These
securities may not necessarily be denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically
issued by a United States bank or trust company evidencing ownership of the
underlying securities. EDRs are European receipts evidencing a similar
arrangement. Generally, ADRs, in registered form, are designed for use in the
United States securities markets and EDRs, in bearer form, are designed for
use in European securities markets.
Loan Participations and Assignments. The Fund may invest in fixed rate and
floating rate loans ("Loans") arranged through private negotiations between
an issuer of sovereign debt obligations and one or more financial
institutions ("Lenders"). The Fund's investments in Loans are expected in
most instances to be in the form of participation in Loans ("Participations")
and assignments of all or a portion of Loans ("Assignments") from third
parties. The Fund will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling
the Participation and only upon receipt by the Lender of the payments from
the borrower. In the event of the insolvency of the Lender selling a
Participation, the Fund may be treated as a general creditor of the Lender
and may not benefit from any set-off between the Lender and the borrower.
Certain Participations may be structured in a manner designed to avoid
purchasers of Participations being subject to the credit risk of the Lender
with respect to the Participation. Even under such a structure, in the event
of the Lender's insolvency, the Lender's servicing of the Participation may
be delayed and the assignability of the Participation may be impaired. The
Fund will acquire Participations only if the Lender interpositioned between
the Fund and the borrower is determined by the Co-Adviser to be creditworthy.
When the Fund purchases Assignments from Lenders it will acquire direct
rights against the borrower on the Loan. However, because Assignments are
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those
held by the assigning Lender. Because there is no liquid market for such
securities, the Fund anticipates that such securities could be sold only to a
limited number of institutional investors. The lack of a liquid secondary
market may have an adverse impact on the value of such securities and the
Fund's ability to dispose of particular Assignments or Participations when
necessary to meet the Fund's liquidity needs or in response to a specific
economic event such as a deterioration in the creditworthiness of
20
<PAGE>
the borrowers. The lack of a liquid secondary market for Assignments and
Participations also may make it more difficult for the Fund to assign a value
to these securities for purposes of valuing the Fund's portfolio and
calculating its net asset value.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements, the Fund may lend its portfolio securities to brokers, dealers
and other financial institutions, provided that such loans are callable at
any time by the Fund (subject to certain notice provisions described in the
Statement of Additional Information), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. 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, loans of portfolio securities will only be made to
firms deemed by the Adviser to be creditworthy and when the income which can
be earned from such loans justifies the attendant risks. The Fund will not
under any circumstances lend more than 25% of the value of its total assets.
Private Placements. 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, 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.
Rule 144A under the Securities Act 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.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by each Co-Adviser acting
independently, each with a view to achieving the Fund's investment objective.
Shaun C.K. Chan, Managing Director of TCW Asia Ltd., Terence F. Mahony,
Managing Director of TCW, and Michael P. Reilly, Managing Director of TCW,
are the primary portfolio managers of TCW for the Fund and Madhav Dhar,
Managing Director of MSAM and Morgan Stanley & Co. Incorporated ("MS&Co."),
and Robert L. Meyer, Managing Director of MSAM and MS&Co., are primary
portfolio managers of MSAM for the Fund. Mr. Chan has been a portfolio
manager of the Fund since 1993, prior to which time he was Director of
Wardley Investment Services (Hong Kong) Ltd. Mr. Mahony has been a primary
portfolio manager of the Fund since July, 1996 and has been a portfolio
manager with TCW Asia Ltd. since April, 1996, prior to which time he was
Chief Investment Officer for Global Emerging Markets at HSBC Asset Management
(September 1993-April 1996) and prior thereto was a Director at Baring Asset
Management. Mr. Reilly has been a primary portfolio manager of the Fund since
December, 1994 and has been a portfolio manager with affiliates of the TCW
Group for over five years. Madhav Dhar has been with MSAM since 1984. He is a
member of MSAM's executive committee, head of MSAM's emerging markets group
and chief investment officer of MSAM's global emerging market equity
portfolios. Robert L. Meyer has been with MSAM since 1989. He is a co-manager
of MSAM's emerging markets group and head of MSAM's Latin American team.
21
<PAGE>
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Co-Advisers will rely on information from various
sources, including research, analysis and appraisals of brokers and dealers,
including Dean Witter Reynolds Inc. ("DWR"), MS&Co. and other broker-dealer
affiliates of the Manager and others regarding economic developments and
interest rate trends, and the Co-Advisers' own analysis of factors they deem
relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR, MS&Co. and
other broker-dealer affiliates of the Manager. The Fund may incur brokerage
commissions on transactions conducted through DWR, MS&Co. and other brokers
and dealers that are affiliates of the Manager. The Fund intends to buy and
hold securities for capital appreciation. Although the Fund does not intend
to engage in substantial short-term trading as a means of achieving its
investment objective, the Fund may sell portfolio securities without regard
to the length of time that they have been held, in order to take advantage of
new investment opportunities or yield differentials, or because the Fund
desires to preserve gains or limit losses due to changing economic
conditions, interest rate trends, or the financial condition of the issuer.
It is not anticipated that the Fund's portfolio turnover rate will exceed
100% in any one year. Short term gains and losses may result from such
portfolio transactions. See "Dividends, Distributions and Taxes" for a
discussion of the tax implications of the Fund's transactions.
The expenses of the Fund relating to its portfolio management are likely
to be greater than those incurred by other investment companies investing
only in securities issued by domestic issuers, as custodial costs, brokerage
commissions and other transaction charges related to investing on foreign
markets are generally higher than in the United States.
Except as specifically noted, all investment policies and practices
discussed above are not fundamental policies of the Fund and thus may be
changed without shareholder approval.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
The investment restriction listed below is 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 limitation:
(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 invest 25% or more of the value of its total assets in
securities of issuers in any one industry. Obligations issued or guaranteed
by the U.S. Government, its agencies or instrumentalities shall not be
considered investments in the securities of issuers in a single industry.
Additional restrictions which have been adopted by the Fund as fundamental
policies are contained in the Statement of Additional Information.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares for sale to the public on a
continuous basis. Pursuant to a Distribution Agreement between the Fund and
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the
Manager, shares of the Fund are distributed by the Distributor and offered by
DWR and other dealers (which may include TCW Brokerage Services, an affiliate
of TCW) who have entered into selected dealer agreements with the Distributor
("Selected
22
<PAGE>
Broker-Dealers"). The principal executive office of the Distributor is
located at Two World Trade Center, New York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales
charge are subject to a contingent deferred sales charge ("CDSC") of 1.0% if
redeemed within one year of purchase, except for certain specific
circumstances. Class B shares are sold without an initial sales charge but
are subject to a CDSC (scaled down from 5.0% to 1.0%) payable upon most
redemptions within six years after purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0%
if redeemed within three years after purchase.) Class C shares are sold
without an initial sales charge but are subject to a CDSC of 1.0% on most
redemptions made within one year after purchase. Class D shares are sold
without an initial sales charge or CDSC and are available only to investors
meeting an initial investment minimum of $5 million ($25 million for certain
qualified plans), and to certain other limited categories of investors. At
the discretion of the Board of Trustees of the Fund, Class A shares may be
sold to categories of investors in addition to those set forth in this
prospectus at net asset value without a front-end sales charge, and Class D
shares may be sold to certain other categories of investors, in each case as
may be described in the then current prospectus of the Fund. See "Alternative
Purchase Arrangements--Selecting a Particular Class" for a discussion of
factors to consider in selecting which Class of shares to purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25
million for certain qualified plans) or more and to certain other limited
categories of investors. For the purpose of meeting the minimum $5 million
(or $25 million) initial investment for Class D shares, and subject to the
$1,000 minimum initial investment for each Class of the Fund, an investor's
existing holdings of Class A shares and concurrent investments in Class D
shares of the Fund and other TCW/DW Funds which are multiple class funds
("TCW/DW Multi-Class Funds") will be aggregated. Subsequent purchases of $100
or more may be made by sending a check, payable to TCW/DW Emerging Markets
Opportunities Trust, directly to Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent" or "MSDW Trust") at P.O. Box 1040, Jersey City, NJ 07303 or
by contacting an account executive of DWR or other Selected Broker-Dealer.
When purchasing shares of the Fund, investors must specify whether the
purchase is for Class A, Class B, Class C or Class D shares. If no Class is
specified, the Transfer Agent will not process the transaction until the
proper Class is identified. The minimum initial purchase in the case of
investments through EasyInvest (Service Mark), an automatic purchase plan
(see "Shareholder Services"), is $100, provided that the schedule of
automatic investments will result in investments totalling $1,000 within the
first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the
InterCapital mutual fund asset allocation program and (iii) fee based
programs approved by the Distributor, pursuant to which participants pay an
asset based fee for services in the nature of investment advisory,
administrative and/or brokerage services, the Fund, in its discretion, may
accept investments without regard to any minimum amounts which would
otherwise be required, provided, in the case of Systematic Payroll Deduction
Plans, that the Distributor has reason to believe that additional investments
will increase the investment in all accounts under such Plans to at least
$1,000. Certificates for shares purchased will not be issued unless requested
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,
23
<PAGE>
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. Sales personnel of a Selected Broker-Dealer are compensated
for selling shares of the Fund by the Distributor or any of its affiliates
and/or the Selected Broker-Dealer. In addition, some sales personnel of the
Selected Broker-Dealer will receive various types of non-cash compensation as
special sales incentives, including trips, educational and/or business
seminars and merchandise. The Fund and the Distributor reserve the right to
reject any purchase orders.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to provide
them with the flexibility of selecting an investment best suited to their
needs. The general public is offered three Classes of shares: Class A shares,
Class B shares and Class C shares, which differ principally in terms of sales
charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors
(see "No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class
A, Class B and Class C shares bear the expenses of the ongoing shareholder
service fees, Class B and Class C shares bear the expenses of the ongoing
distribution fees and Class A, Class B and Class C shares which are redeemed
subject to a CDSC bear the expense of the additional incremental distribution
costs resulting from the CDSC applicable to shares of those Classes. The
ongoing distribution fees that are imposed on Class A, Class B and Class C
shares will be imposed directly against those Classes and not against all
assets of the Fund and, accordingly, such charges against one Class will not
affect the net asset value of any other Class or have any impact on investors
choosing another sales charge option. See "Plan of Distribution" and
"Redemptions and Repurchases."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class.
This summary is qualified in its entirety by detailed discussion of each
Class that follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an initial
sales charge of up to 5.25%. The initial sales charge is reduced for certain
purchases. Investments of $1 million or more (and investments by certain
other limited categories of investors) are not subject to any sales charges
at the time of purchase but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase, except for certain specific circumstances.
Class A shares are also subject to a 12b-1 fee of up to 0.25% of the average
daily net assets of the Class. See "Initial Sales Charge Alternative--Class A
Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to
1.0%) if redeemed within six years of purchase. (Class B shares purchased by
certain qualified plans are subject to a CDSC scaled down from 2.0% to 1.0%
if redeemed within three years after purchase.) This CDSC may be waived for
certain redemptions. Class B shares are also subject to an annual 12b-1 fee
of 1.0% of the average daily net assets of Class B. The Class B shares'
distribution fee will cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition,
a certain portion of Class B shares that have been acquired through the
reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no initial
sales charge but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase. This CDSC may be waived for certain redemptions. They
are subject to an annual
24
<PAGE>
12b-1 fee of up to 1.0% of the average daily net assets of the Class C
shares. 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. See
"Level Load Alternative--Class C Shares."
Class D Shares. Class D shares are available only to limited categories of
investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are
not subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any
other relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an investor
depends on the amount and intended length of his or her investment. Investors
who prefer an initial sales charge alternative may elect to purchase Class A
shares. Investors qualifying for significantly reduced or, in the case of
purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are
not available with respect to Class B or Class C shares. Moreover, Class A
shares are subject to lower ongoing expenses than are Class B or Class C
shares over the term of the investment. As an alternative, Class B and Class
C shares are sold without any initial sales charge so the entire purchase
price is immediately invested in the Fund. Any investment return on these
additional investment amounts may partially or wholly offset the higher
annual expenses of these Classes. Because the Fund's future return cannot be
predicted, however, there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to
an ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a
front-end sales charge and they are uncertain as to the length of time they
intend to hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all
TCW/DW Multi-Class Funds, and holdings of shares of "Exchange Funds" (see
"Shareholder Services--Exchange Privilege") for which Class A shares have
been exchanged, will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
CONVERSION
CLASS SALES CHARGE 12B-1 FEE FEATURE
- --------- ---------------------------- --------- --------------------------
<S> <C> <C> <C>
A Maximum 5.25% initial 0.25% No
sales charge reduced
for purchases of $25,000
and over; shares sold
without an initial sales
charge generally subject
to a 1.0% CDSC during
first year.
- --------- ---------------------------- --------- --------------------------
B Maximum 5.0% 1.0% B shares convert to
CDSC during the first A shares automatically
year decreasing after approximately
to 0 after six years ten years
- --------- ---------------------------- --------- --------------------------
C 1.0% CDSC during 1.0% No
first year
- --------- ---------------------------- --------- --------------------------
D None None No
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees
for each
25
<PAGE>
Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one
year after purchase (calculated from the last day of the month in which the
shares were purchased), except for certain specific circumstances. The CDSC
will be assessed on an amount equal to the lesser of the current market value
or the cost of the shares being redeemed. The CDSC will not be imposed (i) in
the circumstances set forth below in the section "Contingent Deferred Sales
Charge Alternative--Class B Shares--CDSC Waivers," except that the references
to six years in the first paragraph of that section shall mean one year in
the case of Class A shares, and (ii) in the circumstances identified in the
section "Additional Net Asset Value Purchase Options" below. Class A shares
are also subject to an annual 12b-1 fee of up to 0.25% of the average daily
net assets of the Class.
The offering price of Class A shares will be the net asset value per share
next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
--------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- -------------------- --------------- ---------------
<S> <C> <C>
Less than $25,000 .. 5.25% 5.54%
$25,000 but less
than $50,000 ...... 4.75% 4.99%
$50,000 but less
than $100,000 ..... 4.00% 4.17%
$100,000 but less
than $250,000 ..... 3.00% 3.09%
$250,000 but less
than $1 million .. 2.00% 2.04%
$1 million and over 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow up
to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the
sales charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a single
transaction by, among others: (a) an individual; (b) an individual, his or
her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified
under Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue
Code of a single employer or of employers who are "affiliated persons" of
each other within the meaning of Section 2(a)(3)(c) of the Act; and for
investments in Individual Retirement Accounts of employees of a single
employer through Systematic Payroll Deduction plans; or (g) any other
organized group of persons, whether incorporated or not, provided the
organization has been in existence for at least six months and has some
purpose other than the purchase of redeemable securities of a registered
investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class
A shares of other TCW/DW Multi-Class Funds. The sales charge payable on the
purchase of the Class A shares of the Fund and the Class A shares of the
other TCW/DW Multi-Class Funds will be at their respective rates applicable
to the total amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single
transaction, together with shares of the Fund and other TCW/DW Multi-Class
Funds previously purchased at a price including a front-end sales
26
<PAGE>
charge (including shares of the Fund, other TCW/DW Multi-Class Funds or
"Exchange Funds" (see "Shareholder Services--Exchange Privilege") acquired in
exchange for those shares, and including in each case shares acquired through
reinvestment of dividends and distributions), which are held at the time of
such transaction, amounts to $25,000 or more. If such investor has a
cumulative net asset value of Class A and Class D shares that together with
the current investment amount, is equal to at least $5 million ($25 million
for certain qualified plans), such investor is eligible to purchase Class D
shares subject to the $1,000 minimum initial investment requirement of that
Class of the Fund. See "No Load Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or the
shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Selected Broker-Dealer or the Transfer Agent
fails to confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or Class A shares of other TCW/DW Multi-Class Funds which
were previously purchased at a price including a front-end sales charge
during the 90-day period prior to the date of receipt by the Distributor of
the Letter of Intent, or of Class A shares of the Fund or other TCW/DW
Multi-Class Funds or shares of "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") acquired in exchange for Class A shares of
such funds purchased during such period at a price including a front-end
sales charge, which are still owned by the shareholder, may also be included
in determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments of
$1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which MSDW Trust (an affiliate of the Investment Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for
services in the nature of investment advisory, administrative and/or
brokerage services (such investments are subject to all of the terms and
conditions of such programs, which may include termination fees, mandatory
redemption upon termination and such other circumstances as specified in the
programs' agreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class
A shares, regardless of the plan's asset size or number of eligible
employees;
(5) investors who are clients of a Dean Witter account executive who
joined Dean Witter from another investment firm within six months prior to
the date of purchase of Fund shares by such investors, if the shares are
being purchased with the proceeds from a redemption of shares of an open-end
proprietary mutual fund of the account executive's previous firm which
imposed either a front-end or deferred sales charge, provided such purchase
was made within sixty days after the redemption and the proceeds of the
redemption had been maintained in the interim in cash or a money market fund;
and
27
<PAGE>
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
Prior to the date of this Prospectus the Fund was organized as a
closed-end investment company; all shares of the Fund held prior to such date
have been designated Class A shares and are not subject to any CDSC upon
redemption.
For further information concerning purchases of the Fund's shares, contact
DWR or another Selected Broker-Dealer or consult the Statement of Additional
Information.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase
payment may be immediately invested in the Fund. A CDSC, however, will be
imposed on most Class B shares redeemed within six years after purchase. The
CDSC will be imposed on any redemption of shares if after such redemption the
aggregate current value of a Class B account with the Fund falls below the
aggregate amount of the investor's purchase payments for Class B shares made
during the six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) preceding the redemption. In addition, Class B
shares are subject to an annual 12b-1 fee of 1.0% of the average daily net
assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may,
however, be subject to a CDSC which will be a percentage of the dollar amount
of shares redeemed and will be assessed on an amount equal to the lesser of
the current market value or the cost of the shares being redeemed. The size
of this percentage will depend upon how long the shares have been held, as
set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First...................... 5.0%
Second..................... 4.0%
Third...................... 3.0%
Fourth..................... 2.0%
Fifth...................... 2.0%
Sixth...................... 1.0%
Seventh and thereafter .... None
</TABLE>
In the case of Class B shares of the Fund purchased by Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement
Plan Services serves as recordkeeper pursuant to a written Recordkeeping
Services Agreement, shares held for three years or more after purchase
(calculated as described in the paragraph above) will not be subject to any
CDSC upon redemption. However, shares redeemed earlier than three years after
purchase may be subject to a CDSC (calculated as described in the paragraph
above), the percentage of which will depend on how long the shares have been
held, as set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------- ------------------------
<S> <C>
First ..................... 2.0%
Second .................... 2.0%
Third ..................... 1.0%
Fourth and thereafter .... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three
years) preceding the redemption; (ii) the current net asset value of shares
purchased more than six years (or, in the case of shares held by certain
Qualified Retirement Plans, three years) prior to the redemption; and (iii)
the current net asset value of shares purchased through reinvestment of
dividends or distributions. Moreover, in determining whether a CDSC is
applicable it will be assumed that amounts described in (i), (ii) and (iii)
above (in that order) are redeemed first.
28
<PAGE>
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held
in a qualified corporate or self-employed retirement plan, Individual
Retirement Account ("IRA") or Custodial Account under Section 403(b)(7) of
the Internal Revenue Code ("403(b) Custodial Account"), provided in either
case that the redemption is requested within one year of the death or initial
determination of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified
corporate or self-employed retirement plan following retirement (or, in the
case of a "key employee" of a "top heavy" plan, following attainment of age
59 1/2); (B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA; and
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Manager or its parent, Dean Witter InterCapital Inc., as self-directed
investment alternatives and for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement ("Eligible Plan"), provided that either: (A)
the plan continues to be an Eligible Plan after the redemption; or (B) the
redemption is in connection with the complete termination of the plan
involving the distribution of all plan assets to participants.
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to
engage in gainful employment. With reference to (2) above, the term
"distribution" does not encompass a direct transfer of IRA, 403(b) Custodial
Account or retirement plan assets to a successor custodian or trustee. All
waivers will be granted only following receipt by the Distributor of
confirmation of the shareholder's entitlement.
Conversion to Class A Shares. Class B shares will convert automatically to
Class A shares, based on the relative net asset values of the shares of the
two Classes on the conversion date, which will be approximately ten (10)
years after the date of the original purchase. The ten year period is
calculated from the last day of the month in which the shares were purchased
or, in the case of Class B shares acquired through an exchange or a series of
exchanges, from the last day of the month in which the original Class B
shares were purchased; provided that shares acquired in exchange for shares
of another fund originally purchased before May 1, 1997 will convert to Class
A shares in May, 2007. The conversion of shares purchased on or after May 1,
1997 will take place in the month following the tenth anniversary of the
purchase. There will also be converted at that time such proportion of Class
B shares acquired through automatic reinvestment of dividends and
distributions owned by the shareholder as the total number of his or her
Class B shares converting at the time bears to the total number of
outstanding Class B shares purchased and owned by the shareholder. In the
case of Class B shares held by a Qualified Retirement Plan for which MSDW
Trust serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Agreement, the plan is
treated as a single investor and all Class B shares will convert to Class A
shares on the conversion date of the first shares of a TCW/DW Multi-Class
Fund purchased by that plan. In the case of Class B shares previously
exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired) is excluded from the holding period for
conversion. If those shares are subsequently re-exchanged for Class B shares
of a TCW/DW Multi-Class Fund, the holding period resumes on the last day of
the month in which Class B shares are reacquired.
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to
29
<PAGE>
the Transfer Agent at least one week prior to the date for conversion. Class
B shares evidenced by share certificates that are not received by the
Transfer Agent at least one week prior to any conversion date will be
converted into Class A shares on the next scheduled conversion date after
such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions
made within one year after purchase (calculated from the last day of the
month in which the shares were purchased). The CDSC will be assessed on an
amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed in the circumstances set
forth above in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case
of Class C shares. Class C shares are subject to an annual 12b-1 fee of up to
1.0% of the average daily net assets of the Class. Unlike Class B shares,
Class C shares have no conversion feature and, accordingly, an investor that
purchases Class C shares will be subject to 12b-1 fees applicable to Class C
shares for an indefinite period subject to annual approval by the Fund's
Board of Trustees and regulatory limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million
for Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the InterCapital mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services (subject to all
of the terms and conditions of such programs referred to in (i) and (ii)
above, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs
agreements, and restrictions on transferability of Fund shares); (iii)
certain Unit Investment Trusts sponsored by DWR; (iv) certain other open-end
investment companies whose shares are distributed by the Distributor; and (v)
other categories of investors, at the discretion of the Board, as disclosed
in the then current prospectus of the Fund. Investors who require a $5
million (or $25 million) minimum initial investment to qualify to purchase
Class D shares may satisfy that requirement by investing that amount in a
single transaction in Class D shares of the Fund and other TCW/DW Multi-Class
Funds, subject to the $1,000 minimum initial investment required for that
Class of the Fund. In addition, for the purpose of meeting the $5 million (or
$25 million) minimum investment amount, holdings of Class A shares in all
TCW/DW Multi-Class Funds, and holdings of shares of "Exchange Funds" (see
"Shareholder Services--Exchange Privilege") for which Class A shares have
been exchanged, will be included together with the current investment amount.
If a shareholder redeems Class A shares and purchases Class D shares, such
redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C
shares
30
<PAGE>
of the Fund. In the case of Class A and Class C shares, the Plan provides
that the Fund will reimburse the Distributor and others for the expenses of
certain activities and services incurred by them specifically on behalf of
those shares. Reimbursements for these expenses will be made in monthly
payments by the Fund to the Distributor, which will in no event exceed
amounts equal to payments at the annual rates of 0.25% and 1.0% of the
average daily net assets of Class A and Class C, respectively. In the case of
Class B shares, the Plan provides that the Fund will pay the Distributor a
fee, which is accrued daily and paid monthly, at the annual rate of 1.0% of
the average daily net assets of Class B. The fee is treated by the Fund as an
expense in the year it is accrued. In the case of Class A shares, the entire
amount of the fee currently represents a service fee within the meaning of
the NASD guidelines. In the case of Class B and Class C shares, a portion of
the fee payable pursuant to the Plan, equal to 0.25% of the average daily net
assets of each of these Classes, is currently characterized as a service fee.
A service fee is a payment made for personal service and/or the maintenance
of shareholder accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses
borne by the Distributor and others in the distribution of the shares of
those Classes, including the payment of commissions for sales of the shares
of those Classes and incentive compensation to and expenses of DWR's account
executives and others who engage in or support distribution of shares or who
service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of the Fund's shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan in the case of Class B shares to compensate DWR and other Selected
Broker-Dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
For the fiscal period January 26 through January 31, 1998, Class A, Class
B and Class C shares of the Fund accrued payments under the Plan amounting to
$8,696, $2 and $1, respectively, which amounts on an annualized basis are
equal to 0.25%, 1.0% and 1.0% of the average daily net assets of Class A,
Class B and Class C, respectively, for such period.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B shares. For example,
if $1 million in expenses in distributing Class B shares of the Fund had been
incurred and $750,000 had been received as described in (i) and (ii) above,
the excess expense would amount to $250,000. Because there is no requirement
under the Plan that the Distributor be reimbursed for all distribution
expenses or any requirement that the Plan be continued from year to year,
such excess amount does not constitute a liability of the Fund. Although
there is no legal obligation for the Fund to pay expenses incurred in excess
of payments made to the Distributor under the Plan, and the proceeds of CDSCs
paid by investors upon redemption of shares, if for any reason the Plan is
terminated the Trustees will consider at that time the manner in which to
treat such expenses. Any cumulative expenses incurred, but not yet recovered
through distribution fees or CDSCs, may or may not be recovered through
future distribution fees or CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses
representing a gross sales commission credited to account executives at the
time of sale may be reimbursed in the subsequent calendar year. 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.
31
<PAGE>
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the
Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign exchange is valued at its latest sale price on that
exchange prior to the time 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 and bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of Trustees
(valuation of debt securities for which market quotations are not readily
available may be based upon current market prices of securities which are
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors).
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.
Generally, trading in foreign securities, as well as corporate bonds,
United States 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 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
some 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.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distribu tions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end TCW/DW Fund), unless the
shareholder requests that they be paid in cash. Shares so acquired are
acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Repurchases and Redemptions").
32
<PAGE>
Investment of Dividends and Distributions Received in Cash. Any
shareholder who receives a cash payment representing a dividend or capital
gains distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after
receipt by the Transfer Agent, by returning the check or the proceeds to the
Transfer Agent within thirty days after the payment date. Shares so acquired
are acquired at net asset value and are not subject to the imposition of a
front-end sales charge or a CDSC (see "Repurchases and Redemptions").
EasyInvest (Service Mark). Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to
be transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund (see "Purchase of Fund Shares" and "Repurchases and Redemptions --
Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders who own or purchase shares of the Fund
having a minimum value of $10,000 based upon the then current net asset
value. The Withdrawal Plan provides for monthly or quarterly (March, June,
September and December) checks in any dollar amount, not less than $25, or in
any whole percentage of the account balance, on an annualized basis. Any
applicable CDSC will be imposed on shares redeemed under the Withdrawal Plan
(see "Purchase of Fund Shares"). Therefore, any shareholder participating in
the Withdrawal Plan will have sufficient shares redeemed from his or her
account so that the proceeds (net of any applicable CDSC) to the shareholder
will be the designated monthly or quarterly amount. Withdrawal plan payments
should not be considered as dividends, yields or income. If periodic
withdrawal plan payments continuously exceed net investment income and net
capital gains, the shareholder's original investment will be correspondingly
reduced and ultimately exhausted. Each withdrawal constitutes a redemption of
shares and any gain or loss realized must be recognized for federal income
tax purposes.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about any of
the above services.
Tax Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent. With respect to shares held through broker-dealers that have
not entered into selected dealer agreements with the Distributor, shares must
be registered directly with the Fund by contacting the Transfer Agent, or by
contacting an account executive of DWR or other Selected Broker-Dealer in
order to receive the shareholder services described in this section.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other TCW/DW Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of TCW/DW North American Government
Income Trust and for shares of five money market funds for which InterCapital
serves as investment manager: Dean Witter Liquid Asset Fund Inc., Dean Witter
U.S. Government Money Market Trust, Dean Witter Tax-Free Daily Income Trust,
Dean Witter California Tax-Free Daily Income Trust and Dean Witter New York
Municipal Money Market Trust (the foregoing six funds are hereinafter
collectively referred to as "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by
33
<PAGE>
exchange or dividend reinvestment) have been held for thirty days. There is
no waiting period for exchanges of shares acquired by exchange or dividend
reinvestment.
An exchange to another TCW/DW Multi-Class Fund or any Exchange Fund that
is not a money market fund is on the basis of the next calculated net asset
value per share of each fund after the exchange order is received. When
exchanging into a money market fund from the Fund, shares of the Fund are
redeemed out of the Fund at their next calculated net asset value and the
proceeds of the redemption are used to purchase shares of the money market
fund at their net asset value determined the following business day.
Subsequent exchanges between any of the money market funds and any of the
TCW/DW Multi-Class Funds or any Exchange Fund that is not a money market fund
can be effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period
of time the shareholder remains in an Exchange Fund (calculated from the last
day of the month in which the Exchange Fund shares were acquired), the
holding period (for the purpose of determining the rate of the CDSC) is
frozen. If those shares are subsequently re-exchanged for shares of a TCW/DW
Multi-Class Fund, the holding period previously frozen when the first
exchange was made resumes on the last day of the month in which shares of a
TCW/DW Multi-Class Fund are reacquired. Thus, the CDSC is based upon the time
(calculated as described above) the shareholder was invested in shares of a
TCW/DW Multi-Class Fund (see "Purchase of Fund Shares"). In the case of
shares exchanged into an Exchange Fund, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1
distribution fees which are attributable to those shares. (Exchange Fund
12b-1 distribution fees are described in the prospectuses for those funds.)
Additional Information Regarding Exchanges. Purchases and exchanges should
be made for investment purposes only. A pattern of frequent exchanges may be
deemed by the Manager to be abusive and contrary to the best interests of the
Fund's other shareholders and, at the Manager's discretion, may be limited by
the Fund's refusal to accept additional purchases and/or exchanges from the
investor. Although the Fund does not have any specific definition of what
constitutes a pattern of frequent exchanges, and will consider all relevant
factors in determining whether a particular situation is abusive and contrary
to the best interests of the Fund and its other shareholders, investors
should be aware that the Fund, each of the other TCW/DW Funds and each of the
money market funds may in their discretion limit or otherwise restrict the
number of times this Exchange Privilege may be exercised by any investor. Any
such restriction will be made by the Fund on a prospective basis only, upon
notice to the shareholder not later than ten days following such
shareholder's most recent exchange. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of such TCW/DW Funds
or money market funds for which shares of the Fund have been exchanged, upon
such notice as may be required by applicable regulatory agencies.
Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their account executive regarding restrictions
on exchange of shares of the Fund pledged in the margin account.
The current prospectus for each fund describes its investment objective(s)
and policies, and shareholders should obtain a copy and examine it carefully
before investing. Exchanges are subject to the minimum investment requirement
of each Class of shares and any other conditions imposed by each fund. In the
case of a shareholder holding a share certificate or certificates, no
exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within
34
<PAGE>
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 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. Such procedures may
include requiring various forms of personal identification such as name,
mailing address, social security or other tax identification number and DWR
or other Selected Broker-Dealer account number (if any). Telephone
instructions may also be recorded. If such procedures are not employed, the
Fund may be liable for any losses due to unauthorized or fraudulent
instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m., New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
with in the past with other funds managed by the Manager.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for further information about the
Exchange Privilege.
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 computed (see "Purchase of Fund Shares") after such
purchase order is received by DWR or other Selected Broker-Dealer reduced by
any applicable CDSC.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. The offer by DWR and other Selected Broker-Dealers to repurchase
shares may be suspended without notice by them at any time. In that event,
shareholders may redeem their shares through the Fund's Transfer Agent as set
forth below under "Redemptions."
Redemptions. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption, along
with any additional information required by the Transfer Agent.
35
<PAGE>
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in
good order. Such payment may be postponed or the right of redemption
suspended under unusual circumstances, e.g., when normal trading is not
taking place on the New York Stock Exchange. 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 executives regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
redeemed or repurchased and has not previously exercised this reinstatement
privilege may, within 35 days after the date of the redemption or repurchase,
reinstate any portion or all of the proceeds of such redemption or repurchase
in shares of the Fund in the same Class from which such shares were redeemed
or repurchased, at their net asset value next determined after a
reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro rata credit for any CDSC paid in connection
with such redemption or repurchase.
Involuntary Redemption. The Fund reserves the right, on 60 days' notice,
to redeem, at their net asset value, the shares of any shareholder (other
than shares held in an Individual Retirement Account or custodial account
under Section 403(b)(7) of the Internal Revenue Code) whose shares due to
redemptions by the shareholder have a value of less than $100, or such lesser
amount as may be fixed by the Board of Trustees or, in the case of an account
opened through EasyInvest (Service Mark), if after twelve months the
shareholder has invested less than $1,000 in the account. However, before the
Fund redeems such shares and sends the proceeds to the shareholder, it will
notify the shareholder that the value of the shares is less than the
applicable amount and allow the shareholder 60 days to make an additional
investment in an amount which will increase the value of his or her account
to at least the applicable amount before the redemption is processed. No CDSC
will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to distribute substantially all of its net
investment income and net realized short-term and long-term capital gains, if
any, at least once each year. The Fund may, however, determine to retain all
or part of any net long-term capital gains in any year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be
paid in cash. Shares acquired by dividend and distribution reinvestments will
not be subject to any front-end sales charge or CDSC. Class B shares acquired
through dividend and distribution reinvestments will become eligible for
conversion to Class A shares on a pro rata basis. Distributions paid on Class
A and Class D shares will be higher than for Class B and Class C shares
because distribution fees paid by Class B and Class C shares are higher. (See
"Shareholder Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and net capital gains (to the extent not offset by capital loss
carryovers) to shareholders and remain qualified 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 applicable state and/or local income taxes, on
any
36
<PAGE>
dividends and distributions they receive from the Fund. Such dividends and
distributions, to the extent they are derived from net investment income and
net short-term capital gains, are taxable to the shareholder as ordinary
dividend income regardless of whether the shareholder receives such payments
in additional shares or in cash. Any dividends declared in the last quarter
of any calendar year which are paid in the following year prior to February 1
will be deemed, for tax purposes, to have been received by the shareholder in
the prior year.
Long-term and short-term capital gains may be generated by the sale of
portfolio securities by the Fund. 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 Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a
return of a portion of each shareholder's investment. All, or a portion, of
such payments would not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes, including information as to the portion characterized as ordinary
income, the portion taxable as long-term capital gains and the amount of
dividends eligible for the Federal dividends received deduction available to
corporations. Shareholders will also be notified of their proportionate share
of long-term capital gains distributions that are eligible for a reduced rate
of tax under the Taxpayer Relief Act of 1997.
To avoid being subject to a 31% federal backup withholding tax on taxable
dividends, capital gains distributions and the proceeds of redemptions and
repurchases, shareholders' taxpayer identification numbers must be furnished
and certified as to their accuracy. Shareholders who are not citizens or
residents of, or entities organized in, the United States may be subject to
withholding taxes of up to 30% on certain payments received from the Fund.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are computed separately for Class A,
Class B, Class C and Class D shares. 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 a Class of the Fund of $1,000 over periods of one, five
and ten years, or 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 applicable Class and all sales charges which will be incurred by
shareholders, for the stated periods. It also assumes reinvestment of all
dividends and distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average,
year by year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations, such as mutual fund performance rankings of Lipper
Analytical Services, Inc.
Prior to January 26, 1998, the Fund operated as a closed-end investment
company. Thehistorical performance of the Class A shares of the Fund has been
37
<PAGE>
restated to reflect the front-end sales charge of such Class A shares in
effect as of January 26, 1998. Class A shares are also subject to a 0.25%
12b-1 fee which is not reflected in the restated historical performance.
Including the 12b-1 fee would have the effect of lowering the Fund's
performance.
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A 's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein,
Class A, Class B and Class C bear the expenses related to the distribution of
their respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for 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 Fund obligations include such disclaimer, and provides
for indemnification and reimbursement of expenses out of the property of the
Fund for any shareholder held personally liable for the obligations of the
Fund. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Fund itself
would be unable to meet its obligations. Given the above limitations on
shareholder personal liability, and the nature of the Fund's assets and
operations, the possibility of the Fund being unable to meet its obligations
is remote and thus, in the opinion of Massachusetts counsel to the Fund, the
risk to Fund shareholders of personal liability is remote.
Code of Ethics. Each Co-Adviser is subject to a Code of Ethics with
respect to investment transactions in which the Co-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 of TCW, as it pertains to the TCW/DW Funds, contains several
restrictions and procedures designed to eliminate conflicts of interest
including: (a) preclearance of personal investment transactions to ensure
that personal transactions by employees are not being conducted at the same
time as TCW'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 of
TCW provides that exemptive relief may be given from certain of its
requirements, upon application. Each Co-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.
38
<PAGE>
TCW/DW EMERGING
MARKETS OPPORTUNITIES TRUST
Two World Trade Center
New York, New York 10048
BOARD OF TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
Shaun C.K. Chan
Vice President
Terence F. Mahony
Vice President
Michael P. Reilly
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Chase Manhattan Bank
One Chase Plaza
New York, New York 10005
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
CO-ADVISERS
TCW Funds Management, Inc.
Morgan Stanley Asset Management Inc.
EMERGING
MARKETS
OPPORTUNITIES
TRUST
PROSPECTUS
MARCH 31, 1998
<PAGE>
TCW/DW
EMERGING MARKETS
OPPORTUNITIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
MARCH 31, 1998
- -----------------------------------------------------------------------------
TCW/DW Emerging Markets Opportunities Trust (the "Fund") is an open-end,
non-diversified management investment company, whose investment objective is
long-term capital appreciation through investment primarily in equity
securities of companies in emerging market countries. See "Investment
Objective and Policies."
A Prospectus for the Fund dated March 31, 1998, which provides the basic
information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below or
from the Fund's Distributor, Dean Witter Distributors Inc., or from Dean Witter
Reynolds Inc. at any of its branch offices. This Statement of Additional
Information is not a Prospectus. It contains information in addition to and more
detailed than that set forth in the Prospectus. It is intended to provide
additional information regarding the activities and operations of the Fund, and
should be read in conjunction with the Prospectus.
TCW/DW
Emerging Markets Opportunities Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
The Fund and its Management .................... 3
Trustees and Officers .......................... 6
Investment Practices and Policies .............. 12
Investment Restrictions ........................ 25
Portfolio Transactions and Brokerage ........... 27
The Distributor ................................ 28
Purchase of Fund Shares......................... 31
Shareholder Services ........................... 34
Repurchases and Redemptions .................... 37
Dividends, Distributions and Taxes ............. 39
Performance Information ........................ 40
Description of Shares .......................... 41
Custodian and Transfer Agent ................... 41
Independent Accountants ........................ 42
Reports to Shareholders ........................ 42
Legal Counsel .................................. 42
Experts ........................................ 42
Registration Statement ......................... 42
Financial Statements--January 31, 1998 ......... 43
Report of Independent Accountants .............. 62
Appendix--Ratings of Corporate Debt Instruments 63
</TABLE>
2
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts business
trust" and was organized under the laws of the Commonwealth of Massachusetts on
December 22, 1993 as a closed-end non-diversified investment company. The Fund
converted to an open-end non-diversified investment company on January 26, 1998.
The Fund is one of the TCW/DW Funds, which currently consist of, in addition to
the Fund, TCW/DW Small Cap Growth Fund, TCW/DW North American Government Income
Trust, TCW/DW Latin American Growth Fund, TCW/DW Term Trust 2002, TCW/DW Income
and Growth Fund, TCW/DW Term Trust 2003, TCW/DW Term Trust 2000, TCW/DW Mid-Cap
Equity Trust, TCW/DW Global Telecom Trust and TCW/DW Total Return Trust.
THE MANAGER
Dean Witter Services Company Inc. (the "Manager"), a Delaware corporation,
whose address is Two World Trade Center, New York, New York 10048, is the Fund's
Manager. The Manager is a wholly-owned subsidiary of Dean Witter InterCapital
Inc. ("InterCapital"), a Delaware corporation. InterCapital is a wholly-owned
subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"), a Delaware corporation.
In an internal reorganization which took place in January, 1993, InterCapital
assumed the management, administrative and investment advisory activities
previously performed by the InterCapital Division of Dean Witter Reynolds Inc.
("DWR"), a broker-dealer affiliate of the Manager. (As hereinafter used in this
Statement of Additional Information, the term "InterCapital" refers to DWR's
InterCapital Division prior to the internal reorganization and to Dean Witter
InterCapital Inc. thereafter). The daily management of the Fund is conducted by
or under the direction of officers of the Fund and of the Manager and Adviser
(see below), subject to review by the Fund's Board of Trustees. Information as
to these Trustees and officers is contained under the caption "Trustees and
Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and records and furnishes, at its own expense, such
office space, facilities, equipment, supplies, clerical help and bookkeeping and
certain legal services as the Fund may reasonably require in the conduct of its
business, including the preparation of prospectuses, statements of additional
information, proxy statements and reports required to be filed with federal and
state securities commissions (except insofar as the participation or assistance
of independent accountants and attorneys is, in the opinion of the Manager,
necessary or desirable). In addition, the Manager pays the salaries of all
personnel, including officers of the Fund, who are employees of the Manager. The
Manager also bears the cost of the Fund's telephone service, heat, light, power
and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.75% to
the daily net assets of the Fund determined as of the close of each business
day. In evaluating the Management Agreement and the Co-Advisory Agreements, the
Board of Trustees recognized that the Manager and the Co-Advisers had, pursuant
to an agreement described under the section entitled "The Co-Advisers," agreed
to a division as between themselves of the total fees necessary for the
management of the business affairs of and the furnishing of investment advice to
the Fund. Accordingly, in reviewing the Management Agreement and Co-Advisory
Agreements, the Board viewed as most significant the question as to whether the
total fees payable under the Management and Co-Advisory Agreements were in the
aggregate reasonable in relation to the services to be provided thereunder.
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, 1996, 1997, and 1998, the Fund paid the Manager total compensation
under the Management Agreement in the amounts, of $1,950,537, $2,091,746, and
2,367,943, respectively.
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 in no way restricts the Manager from acting
as manager to others.
3
<PAGE>
InterCapital paid the organizational expenses of the Fund incurred prior to
the offering of the Fund's shares. The Fund has reimbursed InterCapital for
approximately $50,000 of such expenses, in accordance with the terms of the
Underwriting Agreement between the Fund and DWR. These reimbursed expenses have
been deferred and are being amortized by the Fund on the straight line method
over a period not to exceed five years from the date of commencement of the
Fund's operations.
The Management Agreement was initially approved by the Trustees on February
9, 1994. The Management Agreement may be terminated at any time, without
penalty, on thirty days' notice by the Trustees of the Fund.
Under its terms, the Management Agreement had an initial term ending April
30, 1995, and will remain in effect from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the Trustees of
the Fund, including the vote of a majority of the Trustees of the Fund who are
not parties to the Management Agreement or either of the Co-Advisory Agreements
or "interested persons" (as defined in the Investment Company Act of 1940, as
amended (the "Act")), of any such party (the "Independent Trustees"). At their
meeting on April 24, 1997, the Trustees, including a majority of the Independent
Trustees, approved an amendment to the Management Agreement changing the fee
calculation from weekly to daily. The amended Management Agreement took effect
on January 26, 1998 upon the conversion of the Fund to an open-end investment
company. Continuation of the Management Agreement for one year until April 30,
1998 was approved by the Trustees, including a majority of the Independent
Trustees, at a meeting called for that purpose on April 24, 1997.
THE CO-ADVISERS
TCW Funds Management, Inc. ("TCW") and Morgan Stanley Asset Management Inc.
("MSAM") are the co-investment advisers of the Fund (the "Co-Advisers"). TCW is
a wholly-owned subsidiary of The TCW Group, Inc. (the "TCW Group"), whose
subsidiaries, including Trust Company of the West and TCW Asset Management
Company, provide a variety of trust, investment management and investment
advisory services. As of February 28, 1998, TCW and its affiliates had
over $50 billion under management or committed to management. The TCW
Group and its affiliates have managed equity securities portfolios for
institutional investors since 1971. TCW is headquartered at 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017 and is registered as an
investment adviser under the Investment Advisers Act of 1940. In addition to the
Fund, TCW serves as investment adviser to ten other TCW/DW Funds: TCW/DW North
American Government Income Trust, TCW/DW Latin American Growth Fund, TCW/DW
Income and Growth Fund, TCW/DW Small Cap Growth Fund, TCW/DW Term Trust 2002,
TCW/DW Term Trust 2003, TCW/DW Term Trust 2000, TCW/DW Total Return Trust,
TCW/DW Global Telecom Trust and TCW/DW Mid-Cap Equity Trust. TCW also serves as
investment adviser to TCW Convertible Securities Fund, Inc., a closed-end
investment company traded on the New York Stock Exchange, and to TCW Galileo
Funds, Inc., an open-end investment company, and acts as adviser or sub-adviser
to other investment companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW.
MSAM, a subsidiary of MSDW and an affiliate of the Manager, is located at
1221 Avenue of the Americas, New York, New York 10020. MSAM, together with its
affiliated asset management companies, conducts a worldwide portfolio management
business and provides a broad range of portfolio management services to
customers in the United States and abroad. As of February 28, 1998 MSAM,
together with its affiliated asset management companies, had approximately
$156.5 billion in assets under management as an investment manager or as a
fiduciary adviser. MSAM has been managing international securities since 1986.
Pursuant to co-investment advisory agreements (the "Co-Advisory Agreements")
with TCW and MSAM, respectively, the Fund has retained the Co-Advisers to invest
the Fund's assets, including the placing of orders for the purchase and sale of
portfolio securities. The Co-Advisers obtain and evaluate such information and
advice relating to economy, securities markets, and specific securities as they
consider necessary or useful to continuously manage the assets of the Fund in a
manner consistent with its investment objective. In addition, the Co-Advisers
pay the salaries of all personnel, including officers of the Fund, who are
employees of the respective Co-Adviser.
4
<PAGE>
TCW has in turn entered into further sub-advisory agreements (the
"Sub-Advisory Agreements") with two of its affiliates, TCW Asia Limited, a
Hong-Kong corporation, and TCW London International, Limited, a California
corporation (the "Sub-Advisers"), pursuant to which the Sub-Advisers assist TCW
in providing services under its Co-Advisory Agreement. Each of the Sub-Advisers
is a wholly-owned subsidiary of the TCW Group.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Co-Advisers, the Fund pays the
Co-Advisers collectively monthly compensation calculated daily by applying the
annual rate of 0.50% to the net assets of the Fund determined as of the close of
each business day. For services to be provided to TCW by the Sub-Advisers under
the Sub-Advisory Agreements, TCW pays each Sub-Adviser monthly compensation
determined by applying the annual rate of 0.50% to the Fund's average daily net
assets for which each Sub-Adviser renders sub-advisory services. The advisory
fee is allocated among the Classes pro rata based on the net assets of the Fund
attributable to each Class. Total compensation (net of expense reimbursement, if
any) accrued to TCW, as sole adviser or Co-Adviser, as applicable, for the
fiscal years ended January 31, 1996, 1997 and 1998 amounted to $1,300,358,
$1,394,498 and $1,566,448, respectively. Total compensation (net of expense
reimbursement, if any) accrued to MSAM as Co-Adviser for the fiscal period
January 26, 1998 (the date MSAM commenced services as a Co-Adviser) through
January 31, 1998 amounted to $12,181.
The Co-Advisory Agreements provide that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, each Co-Adviser is not liable to the Fund or any of its
investors for any act or omission by that Co-Adviser or for any losses sustained
by the Fund or its investors. The Co-Advisory Agreements in no way restrict the
Co-Advisers from acting as investment advisers to others.
The Co-Advisory Agreements and each Sub-Advisory Agreement was approved by
the Trustees on November 6, 1997 and by shareholders of the Fund on January 12,
1998. The Co-Advisory Agreements may be terminated at any time, without penalty,
on thirty days' notice by the Trustees of the Fund, by the holders of a
majority, as defined in the Act, of the outstanding shares of the Fund, or by
the applicable Co-Adviser. Each Sub-Advisory Agreement may be terminated at any
time, without penalty, on thirty days' notice by the Trustees of the Fund, by
the holders of a majority, as defined in the Act, of the outstanding shares of
the Fund, by TCW, or by the applicable Sub-Adviser. The Agreements will
automatically terminate in the event of their assignment (as defined in the
Act).
Under its terms, each Co-Advisory Agreement and each Sub-Advisory Agreement
will continue in effect until April 30, 1999, and will continue from year to
year thereafter, provided continuance of the Agreements are approved at least
annually by the vote of the holders of a majority, as defined in the Act, of the
outstanding shares of the Fund, or by the Trustees of the Fund; provided that in
either event such continuance is approved annually by the vote of a majority of
the Independent Trustees of the Fund, which vote must be cast in person at a
meeting called for the purpose of voting on such approval.
Expenses not expressly assumed by the Manager under the Management Agreement,
by the Co-Advisers under the Co-Advisory Agreements or by the Distributor of the
Fund's shares, Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. These expenses
will be allocated among the four classes of shares of the Fund (each, a Class)
pro rata based on the net assets of the Fund attributable to each Class, except
as described below. Such expenses include, but are not limited to: expenses of
the Plan of Distribution pursuant to Rule 12b-1 (the "12b-1 fee") (see "The
Distributor"); charges and expenses of any registrar; custodian, stock transfer
and dividend disbursing agent; brokerage commissions and securities transaction
costs; taxes; engraving and printing of share certificates; registration costs
of the Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing Prospectuses and
Statements of Additional Information of the Fund and supplements thereto to the
Fund's shareholders; all expenses of shareholders' and trustees' meetings and of
preparing, printing and mailing 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 Co-Advisers 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
Co-Advisers (not including compensation or expenses of attorneys who are
employees of the Manager or the Adviser) and independent accountants; membership
dues of
5
<PAGE>
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.
The following owned 5% or more of the outstanding shares of Class B on
February 28, 1998: Dean Witter InterCapital Inc., Two World Trade Center, New
York, NY 10048--24.8%; Dean Witter Funds Control Department Manager, 5 World
Trade Center, New York, NY 10058--23.9%; Dean Witter Reynolds, Custodian for
Samuel David Maddalone, IRA Standard, 2711 South Ocean Blvd., Apt. 9, Highland
Beach, FL 33487--14.2%; Dean Witter Reynolds, Custodian for Walter J. Smith, IRA
Rollover, 233 Nevins Road, Henrietta, NY 14467--11.7%; Dean Witter Reynolds,
Custodian for Leonard J. Mark, IRA Standard, 6 Little Bear Drive, Yorktown
Heights, NY 10598--7.8%; Dean Witter Reynolds, Custodian for Mark H. Alexander,
IRA Rollover, 2316 Totem Trail, Minnetonka, MN 55305--7.6%.
The following have owned 5% or more of the outstanding shares of Class C on
February 28, 1998: Dean Witter InterCapital Inc., Two World Trade Center, New
York, NY 10048--43.3%; Dean Witter Reynolds, Custodian for Loretta Rutowski, IRA
Rollover, 4915 South Eagle Circle, Aurora, CO 80015--26.8%; Dean Witter
Reynolds, Custodian for Paul C. Biel, Roth IRA, 1413 Prairie Street, Madison, WI
53711--13.2%; Dean Witter Reynolds, Custodian for Ruby A. Powell, IRA Rollover,
705 North Main Street, Corona, CA 91720--12.3%.
The following have owned 5% or more of the outstanding shares of Class D
on February 28, 1998: Dean Witter InterCapital Inc., Two World Trade Center,
New York, NY 10048--99.9%.
The Fund has acknowledged that each of DWR and the TCW Group owns its own
name, initials and logo. The Fund has agreed to change its name at the request
of either the Manager or TCW, if the Management Agreement between the Manager
and the Fund or the Co-Advisory Agreement between TCW and the Fund is
terminated.
TRUSTEES AND OFFICERS
- -----------------------------------------------------------------------------
The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Manager or the Adviser, and affiliated companies of either, and with the 11
TCW/DW Funds and with 85 investment companies for which InterCapital serves as
investment manager or investment adviser (the "Dean Witter Funds"), are shown
below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- ------------------------------------------------------------------
<S> <C>
John C. Argue (66) Of Counsel, Argue Pearson Harbison & Myers (law firm); Director, Avery Dennison
Trustee Corporation (manufacturer of self-adhesive products and office supplies) and CalMat
c/o Argue Pearson Harbison & Myers Company (producer of aggregates, asphalt and ready mixed concrete); Chairman, The
801 South Flower Street Rio Hondo Memorial Foundation (charitable foundation); advisory director, LAACO Ltd.
Los Angeles, California (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.
and TCW Convertible Securities Fund, Inc.; Director, Apex Mortgage Capital, Inc. and
Nationwide Health Properties, Inc. (Real Estate Investment Trusts); Trustee of the
TCW/DW Funds.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- ---------------------------------------------------------------------------------
Richard M. DeMartini* (45) President and Chief Operating Officer of Dean Witter Capital, a division of DWR;
Trustee Director of DWR, the Manager, InterCapital, Distributors and Morgan Stanley Dean
Two World Trade Center Witter Trust FSB ("MSDW Trust"); Trustee of the TCW/DW Funds; Formerly Vice Chairman
New York, New York of the Board of the National Association of Securities Dealers, Inc.; formerly
Chairman of the Board of the Nasdaq Market, Inc.
Charles A. Fiumefreddo* (64) Chairman, and Director of the Manager, InterCapital and Distributors; Executive Vice
Chief Executive Officer President and Director of DWR; Chairman Executive Officer and Trustee of the Board,
Chairman of the Board, Chief Chief Executive Officer and Trustee of the TCW/DW Funds; Chairman of the Board,
Two World Trade Center Director or Trustee, President and Chief Executive Officer of the Dean Witter Funds;
New York, New York Chairman and Director of MSDW Trust; Director and/or officer of various MSDW
subsidiaries.
John R. Haire (73) Chairman of the Audit Committee and Chairman of the Committee of the
Trustee Independent Trustees and Trustee of the TCW/DW Funds; Chairman of the
Two World Trade Center Audit Committee and Chairman of the Committee of the Independent Directors
New York, New York or Trustees and Director or Trustee of the Dean Witter Funds; formerly
President, Council for Aid to Education (1978-1989) and Chairman and
Chief Executive Officer of Anchor Corporation, an Investment Adviser
(1964-1978).
Dr. Manuel H. Johnson (49) Senior Partner, Johnson Smick International, Inc., a consulting firm; Co-Chairman
Trustee and a founder of the Group of Seven Council (G7C), an international economic
c/o Johnson Smick International, Inc. commission; Director of NASDAQ (since June, 1995); Chairman and Trustee of the
1133 Connecticut Avenue, N.W. Financial Accounting Foundation (oversight organization for the Financial Accounting
Washington, D.C. 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 (1982-1986);
Director or Trustee of the Dean Witter Funds; Trustee of the TCW/DW Funds.
Executive Vice President and Director, The TCW Group, Inc.; President and Director
Thomas E. Larkin, Jr.* (58) of Trust Company of the West; Vice Chairman and Director of TCW Asset Management
President and Trustee Company; Chairman of the Adviser; President and Director of TCW Galileo Funds, Inc.;
865 South Figueroa Street Senior Vice President of TCW Convertible Securities Fund, Inc.; Member of the Board
Los Angeles, California of Trustees of the University of Notre Dame; Director of Orthopaedic Hospital of Los
Angeles; President and Trustee of the TCW/DW Funds.
Michael E. Nugent (61) General Partner, Triumph Capital, L.P., a private investment partnership; formerly
Trustee Vice President, Bankers Trust Company and BT Capital Corporation (1984-1988);
c/o Triumph Capital, L.P. Director of various business organizations; Director or Trustee of the Dean Witter
237 Park Avenue Funds; Trustee of the TCW/DW Funds.
New York, New York
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- ------------------------------------------------------------------
John L. Schroeder (67) Retired; Director or Trustee of the Dean Witter Funds; Trustee of the
Trustee TCW/DW Funds; Director of Citizens Utilities Company; formerly Executive
c/o Gordon Altman Butowsky Vice President and Chief Investment Officer of the Home Insurance Company
Weitzen Shalov & Wein (August, 1991-September, 1995).
Counsel to the Independent Trustees
114 West 47th Street
New York, New York
Marc I. Stern* (53) President and Director, The TCW Group, Inc.; President and Director of the Adviser;
Trustee Vice Chairman and Director of TCW Asset Management Company; Executive Vice President
865 South Figueroa Street and Director of Trust Company of the West; Chairman and Director of TCW Galileo
Los Angeles, California Funds, Inc.; Trustee of the TCW/DW Funds; Chairman of TCW Americas Development,
Inc.; Chairman of TCW Asia, Limited (since January, 1993); Chairman of TCW London
International, Limited (since March, 1993); formerly President of SunAmerica, Inc.
(financial services company); Chairman, Apex Mortgage Capital, Inc. (since October
1997); Director of Qualcomm, Incorporated (wireless communications); director
or trustee of various not-for-profit organizations.
Barry Fink (43) Senior Vice President (since March, 1997) and Secretary and General Counsel (since
Vice President, Secretary February, 1997) of the Manager and InterCapital; Senior Vice President (since March,
and General Counsel 1997) and Assistant Secretary and Assistant General Counsel (since February, 1997)
Two World Trade Center of Distributors; Assistant Secretary of DWR (since August, 1996); Vice President,
New York, New York Secretary and General Counsel of the Dean Witter Funds and the TCW/DW Funds (since
February, 1997); previously First Vice President (June, 1993-February, 1997), Vice
President (until June, 1993) and Assistant Secretary and Assistant General Counsel
of the Manager and InterCapital and Assistant Secretary of the Dean Witter Funds and
the TCW/DW Funds.
Shaun C.K. Chan (35) Managing Director, TCW Asia Ltd. (since 1993); formerly Regional Strategist and
Vice President Director of Wardley Investment Services (Hong Kong) Ltd. (1986-1993). In 1991, he
3110 One Pacific Place was selected by the Korean Ministry of Finance to manage the Korea Asia Fund, making
88 Queensway him one of the first foreign investors in Korea.
Hong Kong
Terence F. Mahony (54) Managing Director and Head of Emerging Markets Equities of TCW (since
Vice President April, 1996); previously Chief Investment Officer for Global Emerging
865 South Figueroa Street Markets at HSBC Asset Management (September, 1993-April, 1996) and prior
Los Angeles, California thereto a Director of Baring Asset Management.
Michael P. Reilly (34) Managing Director of TCW; Vice President of various TCW/DW Funds.
Vice President
865 South Figueroa Street
Los Angeles, California
8
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- -------------------------------------------- ------------------------------------------------------------------
Thomas F. Caloia (52) First Vice President and Assistant Treasurer of the Manager and
Treasurer InterCapital; Treasurer of the TCW/DW Funds and the Dean Witter Funds.
Two World Trade Center
New York, New York
</TABLE>
- ------------
* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Robert M. Scanlan, President and Chief Operating Officer of the
Manager and InterCapital, Executive Vice President of Distributors and MSDW
Trust and Director of MSDW Trust, Mitchell M. Merin, President and Chief
Strategic Officer of InterCapital and DWSC, Executive Vice President of
Distributors and MSDW Trust and Director of MSDW Trust, Executive Vice President
and Director of DWR, and Director of SPS Transaction Services, Inc. and various
other MSDWD subsidiaries, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and MSDW Trust and Director of MSDW Trust, are
Vice Presidents of the Fund. Marilyn K. Cranney, First Vice President and
Assistant General Counsel of the Manager and InterCapital, and Lou Anne D.
McInnis, Ruth Rossi and Carsten Otto, Vice Presidents and Assistant General
Counsels of the Manager and InterCapital, and Frank Bruttomesso and Todd Lebo,
Staff Attorneys with InterCapital, are Assistant Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same individuals
also serve as trustees for all of the TCW/DW Funds. As of the date of this
Statement of Additional Information, there are a total of 11 TCW/DW Funds. As of
February 28, 1998, the TCW/DW Funds had total net assets of approximately $4.3
billion and approximately a quarter of a million shareholders.
Five Trustees (56% of the total number) have no affiliation or business
connection with TCW Funds Management, Inc. or Dean Witter Services Company
Inc. or any of their affiliated persons and do not own any stock or other
securities issued by MSDW or TCW, the parent companies of Dean Witter
Services Company Inc. and TCW Funds Management, Inc., respectively. These are
the "disinterested" or "independent" Trustees. The other four Trustees (the
"management Trustees") are affiliated with either Dean Witter Services
Company Inc. or TCW. Four of the five independent Trustees are also
Independent Trustees of the Dean Witter Funds.
Law and regulation establish both general guidelines and specific duties for
the Independent Trustees. The TCW/DW Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee and
the Committee of the Independent Trustees. Three of them also serve as members
of the Derivatives Committee. During the calendar year ended December 31, 1997,
the three Committees held a combined total of sixteen meetings. The Committees
hold some meetings at the offices of the Manager or Adviser and some outside
those offices. Management Trustees or officers do not attend these meetings
unless they are invited for purposes of furnishing information or making a
report.
The Committee of the Independent Trustees is charged with recommending to the
full Board approval of management, advisory and administration contracts, Rule
12b-1 plans and distribution and underwriting agreements; continually reviewing
Fund performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage and
allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill any
Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1 plan
of distribution. Each of the open-end TCW/DW Funds has such a plan.
9
<PAGE>
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; reviewing the adequacy of the Fund's system of internal
controls; and preparing and submitting Committee meeting minutes to the full
Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
The Chairman of the Committees maintains an office in the Funds' headquarters
in New York. He is responsible for keeping abreast of regulatory and industry
developments and the Funds' operations and management. He screens and/or
prepares written materials and identifies critical issues for the Independent
Trustees to consider, develops agendas for Committee meetings, determines the
type and amount of information that the Committees will need to form a judgment
on various issues, and arranges to have that information furnished to Committee
members. He also arranges for the services of independent experts and consults
with them in advance of meetings to help refine reports and to focus on critical
issues. Members of the Committees believe that the person who serves as Chairman
of both Committees and guides their efforts is pivotal to the effective
functioning of the Committees.
The Chairman of the Committees also maintains continuous contact with the
Funds' management, with independent counsel to the Independent Trustees and with
the Funds' independent auditors. He arranges for a series of special meetings
involving the annual review of investment advisory, management and other
operating contracts of the Funds and, on behalf of the Committees, conducts
negotiations with the Investment Adviser and the Manager and other service
providers. In effect, the Chairman of the Committees serves as a combination of
chief executive and support staff of the Independent Trustees.
The Chairman of the Committee of the Independent Trustees and the Audit
Committee is not employed by any other organization and devotes his time
primarily to the services he performs as Committee Chairman and Independent
Trustee of the TCW/DW Funds and as Chairman of the Committee of the Independent
Trustees and the Audit Committee and Independent Director or Trustee of the Dean
Witter Funds. The current Committee Chairman has had more than 35 years
experience as a senior executive in the investment company industry.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the TCW/DW Funds avoids the duplication of
effort that would arise from having different groups of individuals serving as
Independent Trustees for each of the Funds or even of sub-groups of Funds. They
believe that having the same individuals serve as Independent Trustees of all
the Funds tends to increase their knowledge and expertise regarding matters
which affect the Fund complex generally and enhances their ability to negotiate
on behalf of each Fund with the Fund's service providers. This arrangement also
precludes the possibility of separate groups of Independent Trustees arriving at
conflicting decisions regarding operations and management of the Funds and
avoids the cost and confusion that would likely ensue. Finally, having the same
Independent Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Trustees, and a Chairman of their Committees, of the caliber, experience and
business acumen of the individuals who serve as Independent Trustees of the
TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $2,225 plus a per
meeting fee of $200 for meetings of the Board of Trustees or committees of the
Board of Trustees attended by the Trustee (the Fund pays the Chairman of the
Audit Committee an annual fee of $750 and pays the Chairman of the Committee of
the Independent Trustees an additional annual fee of $1,200). If a Board meeting
and a Committee meeting, or more than one Committee meeting, take place on a
single day, the Trustees are paid a single meeting fee by the Fund. The Fund
also reimburses such Trustees for travel and other out-of-pocket expenses
incurred by them in
10
<PAGE>
connection with attending such meetings. Trustees and officers of the Fund who
are or have been employed by the Manager or the Adviser or an affiliated company
of either receive no compensation or expense reimbursement from the Fund. The
Trustees of the TCW/DW Funds do not have retirement or deferred compensation
plans.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended January 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- --------------------------- ---------------
<S> <C>
John C. Argue............... $5,625
John R. Haire............... 7,775
Dr. Manuel H. Johnson....... 5,625
Michael E. Nugent........... 5,825
John L. Schroeder........... 5,825
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 14 TCW/DW Funds and, in the case of Messrs. Haire, Johnson, Nugent and
Schroeder, the 84 Dean Witter Funds that were in operation at December 31, 1997,
and, in the case of Mr. Argue, TCW Galileo Funds, Inc. and TCW Convertible
Securities Fund, Inc. With respect to Messrs. Haire, Johnson, Nugent and
Schroeder, the Dean Witter Funds are included solely because of a limited
exchange privilege between various TCW/DW Funds and five Dean Witter Money
Market Funds. With respect to Mr. Argue, TCW Galileo Funds, Inc. and TCW
Convertible Securities Fund, Inc. are included solely because the Fund's
Adviser, TCW Funds Management, Inc., also serves as Adviser to those investment
companies.
CASH COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICES AS CHAIRMAN OF TOTAL CASH
CHAIRMAN OF COMMITTEES OF COMPENSATION
FOR SERVICE COMMITTEES OF INDEPENDENT FOR SERVICES TO
FOR SERVICE AS AS DIRECTOR OR FOR SERVICE AS INDEPENDENT DIRECTORS/ 84 DEAN WITTER
TRUSTEE AND TRUSTEE AND DIRECTOR OF TRUSTEES TRUSTEES FUNDS, 14
COMMITTEE COMMITTEE TCW GALILEO AND AUDIT AND AUDIT TCW/DW FUNDS,
MEMBER MEMBER FUNDS, INC. COMMITTEES COMMITTEES TCW GALILEO FUNDS, INC.
OF 14 OF 84 AND TCW OF 13 OF 84 AND TCW
NAME OF INDEPENDENT TCW/DW DEAN WITTER CONVERTIBLE SECURITIES TCW/DW DEAN WITTER CONVERTIBLE SECURITIES
TRUSTEE FUNDS FUNDS FUND, INC. FUNDS FUNDS FUND,INC.
- -------------------- --------------- -------------- ---------------------- --------------- -------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
John C. Argue........ $71,125 -- $43,250 -- -- $114,375
John R. Haire........ 73,725 $149,702 -- $25,350 $157,463 406,240
Dr. Manuel H. Johnson 71,125 145,702 -- -- -- 216,827
Michael E. Nugent.... 73,725 149,702 -- -- -- 223,427
John L. Schroeder.... 73,725 149,702 -- -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the Dean
Witter Funds have adopted a retirement program under which an Independent
Trustee who retires after serving for at least five years (or such lesser
period as may be determined by the Board) as an Independent Director or Trustee
of any Dean Witter Fund that has adopted the retirement program (each such Fund
referred to as an "Adopting Fund" and each such Trustee referred to as an
"Eligible Trustee") is entitled to retirement payments upon reaching the
eligible retirement age (normally, after attaining age 72). Annual payments are
based upon length of service. Currently, upon retirement, each Eligible Trustee
is entitled to receive from the Adopting Fund, commencing as of his or her
retirement date and continuing for the remainder of his or her life, an annual
retirement benefit (the "Regular Benefit") equal to 25.0% of his or her
Eligible Compensation plus 0.4166666% of such Eligible Compensation for each
full month of service as an Independent Director or Trustee of any Adopting
Fund in excess of five years up to a maximum of 50.0% after ten years of
service. The foregoing percentages may be changed by the Board.(1) "Eligible
Compensation" is one-fifth of the total compensation earned by such Eligible
Trustee for service to the Adopting
- ------------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment of
benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.
11
<PAGE>
Fund in the five year period prior to the date of the Eligible Trustee's
retirement. Benefits under the retirement program are not secured or funded by
the Adopting Funds.
The following table illustrates the retirement benefits accrued to Messrs.
Haire, Johnson, Nugent and Schroeder by the 57 Dean Witter Funds for the year
ended December 31, 1997, and the estimated retirement benefits for Messrs.
Haire, Johnson, Nugent and Schroeder, to commence upon their retirement, from
the 57 Dean Witter Funds as of December 31, 1997.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
CREDITED YEARS ESTIMATED RETIREMENT BENEFITS ESTIMATED ANNUAL BENEFITS
OF SERVICE AT PERCENTAGE OF ACCRUED AS EXPENSES UPON RETIREMENT
RETIREMENT ELIGIBLE BY ALL ADOPTING FROM ALL ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- --------------------------- -------------- --------------- ------------------- -------------------------
<S> <C> <C> <C> <C>
John R. Haire............... 10 50.0% $(19,823)(3) $127,897
Dr. Manuel H. Johnson....... 10 50.0 12,832 47,025
Michael E. Nugent........... 10 50.0 22,546 47,025
John L. Schroeder........... 8 41.7 39,350 39,504
</TABLE>
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until June 1, 1998.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's officers
and Trustees as a group was less than 1 percent of the Fund's shares of
beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
EMERGING MARKET COUNTRY DESIGNATION
The following countries are not included within the International Bank of
Reconstruction and Development (the "World Bank") definition of an emerging
market country: Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Iceland, Ireland, Italy, Japan, Kuwait, Luxembourg, The
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland, The
United Kingdom, and the United States.
RISK FACTORS
Political and Economic Risks. Even though opportunities for investment may
exist in emerging market countries, any change in the leadership or policies of
the governments of those countries or in the leadership or policies of any other
government which exercises a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and thereby eliminate any investment opportunities which
may currently exist.
Investors should note that upon the accession to power of authoritarian
regimes, the governments of a number of emerging market countries previously
expropriated large quantities of real and personal property. The claims of
property owners against those governments were never finally settled. There can
be no assurance that any property represented by securities purchased by the
Fund will not also be expropriated, nationalized, or otherwise confiscated. If
such confiscation were to occur, the Fund could lose a substantial portion of
its investments in such countries. The Fund's investments would similarly be
adversely affected by exchange control regulations in any of those countries.
Securities Markets. The market capitalizations of listed equity securities on
major exchanges in emerging market countries is significantly smaller than in
the United States. A high proportion of the shares of many emerging market
companies may be held by a limited number of persons, which may further limit
the number of shares available for investment by the Fund. A limited number of
issuers in most, if not all, emerging market securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
The limited liquidity of emerging market securities markets may also affect the
Fund's ability to acquire or dispose
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of securities at the price and time it wishes to do so. In addition, certain
emerging market securities markets are susceptible to being influenced by large
investors trading significant blocks of securities or by large dispositions of
securities resulting from the failure to meet margin calls when due.
The high volatility of certain emerging market securities markets, as well as
currency fluctuations, may result in greater volatility in the Fund's net asset
value than would be the case for companies investing in domestic securities. If
the Fund were to experience unexpected net redemptions, it could be forced to
sell securities in its portfolio without regard to investment merit, thereby
decreasing the asset base over which Fund expenses can be spread and possibly
reducing the Fund's rate of return.
Emerging market securities exchanges and brokers are generally subject to
less governmental supervision and regulation than in the U.S., and foreign
securities exchange transactions are usually subject to fixed commissions, which
are generally higher than negotiated commissions on U.S. transactions. In
addition, foreign securities exchange transactions may be subject to
difficulties associated with the settlement of such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems either could result in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser.
Sovereign Debt. Sovereign Debt differs from debt obligations issued by
private entities in that usually remedies from defaults must be pursued in the
courts of the defaulting party. Legal recourse is therefore somewhat diminished.
Political conditions, in terms of a country or agency's willingness to meet the
terms of its debt obligations, is of considerable significance. Also, there can
be no assurance that the holders of commercial bank debt may not contest
payments to the holders of Sovereign Debt in the event of default under
commercial bank loan agreements. Investors should be aware that the Sovereign
Debt instruments in which the Fund may invest involve great risk and are deemed
to be the equivalent in terms of quality to securities rated below investment
grade by Moody's Investors Service, Inc.
and Standard & Poor's Corporation.
Sovereign Debt generally offers high yields, reflecting not only perceived
credit risk, but also the need to compete with other local investments in
domestic financial markets. Certain emerging market countries are among the
largest debtors to commercial banks and foreign governments. A foreign debtor's
willingness or ability to repay principal and interest due in a timely manner
may be affected by, among other factors, its cash flow situation, the extent of
its foreign reserves, the availability of sufficient foreign exchange on the
date a payment is due, the relative size of the debt service burden to the
economy as a whole, the foreign debtor's policy towards the International
Monetary Fund and the political constraints to which a sovereign debtor may be
subject. Sovereign debtors may default on their Sovereign Debt. Sovereign
debtors may also be dependent on expected disbursements from foreign
governments, multilateral agencies and others abroad to reduce principal and
interest arrearages on their debt. The commitment on the part of these
government agencies and others to make such disbursements may be conditioned on
a sovereign debtor's implementation of economic reforms and/or economic
performance and the timely service of such debtor's obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due, may result in the cancellation of such third
parties' commitments to lend funds to the sovereign debtor, which may further
impair such debtor's ability or willingness to service its debts.
Some of the emerging market countries in which the Fund invests have
encountered difficulties in servicing their Sovereign Debt. Some of these
countries have withheld payments of interest and/or principal of Sovereign Debt.
These difficulties have also led to agreements to restructure external debt
obligations; in particular, commercial bank loans, typically by rescheduling
principal payments, reducing interest rates and extending new credits to finance
interest payments on existing debt. In the future, holders of Sovereign Debt may
be requested to participate in similar reschedulings of such debt.
The ability of emerging market governments to make timely payments on their
Sovereign Debt is likely to be influenced strongly by a country's balance of
trade and its access to trade and other international credits. A country whose
exports are concentrated in a few commodities could be vulnerable to a decline
in the international prices of one or more of such commodities. Increased
protectionism on the part of a country's trading partners could also adversely
affect its exports. Such events could extinguish a country's trade account
surplus, if any. To the extent that a country receives payment for its exports
in currencies other than hard currencies, its ability to make hard currency
payments could be affected.
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The occurrence of political, social or diplomatic changes in one or more of
the countries issuing Sovereign Debt could adversely affect the Fund's
investments. The countries issuing such instruments are faced with social and
political issues and some of them have experienced high rates of inflation in
recent years and have extensive internal debt. Among other effects, high
inflation and internal debt service requirements may adversely affect the cost
and availability of future domestic sovereign borrowing to finance governmental
programs, and may have other adverse social, political and economic
consequences. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their Sovereign Debt. While each Co-Adviser intends to invest the Fund's
portfolio in a manner that will minimize the exposure to such risks, there can
be no assurance that adverse political changes will not cause the Fund to suffer
a loss of interest or principal on any of its holdings.
Periods of economic uncertainty may result in the volatility of market prices
of Sovereign Debt and in turn, the Fund's net asset value, to a greater extent
than the volatility inherent in domestic securities. The value of Sovereign Debt
will likely vary inversely with changes in prevailing interest rates, which are
subject to considerable variance in the international market.
Restrictions on Investments. The Fund may be prohibited under the Act from
purchasing the securities of any company that, in its most recent fiscal year,
derived more than 15% of its gross revenues from securities-related activities.
In a number of emerging market countries, commercial banks act as securities
brokers and dealers, investment advisers and underwriters or otherwise engaged
in securities-related activities, which may limit the Fund's ability to hold
securities issued by the banks.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets, particularly
their equity markets, by foreign entities such as the Fund. For example, certain
countries require governmental approval prior to investments by foreign persons
or limit the amount of investment by foreign persons in a particular company or
limit the investment by foreign persons to only a specific class of securities
of a company that may have less advantageous terms than securities of the
company available for purchase by nationals. Moreover, the national policies of
certain countries may restrict investment opportunities in issuers or industries
deemed sensitive to national interests. In addition, some countries require
governmental approval for the repatriation of investment income, capital or the
proceeds of securities sales by foreign investors. The Fund could be adversely
affected by delays in or a refusal to grant any required governmental approval
for repatriation, such as by the application to it of other restrictions on
investments.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
As discussed in the Prospectus, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") as a hedge against
fluctuations in future foreign exchange rates. The Fund will conduct its foreign
currency exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward
contract involves an obligation to purchase or sell a specific 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. These
contracts are traded in the interbank market conducted directly between currency
traders (usually large, commercial and investment banks) and their customers.
Such forward contracts will only be entered into with United States banks and
their foreign branches or foreign banks whose assets total $1 billion or more. A
forward contract generally has no deposit requirement, and no commissions are
charged at any stage for trades.
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 a security in U.S. dollars or some other foreign currency which the
Fund is holding in its portfolio. By entering into a forward contract for the
purchase or sale, for a fixed amount of dollars or other currency, of the amount
of foreign currency involved in the underlying security transactions, the fund
will be able to protect itself against a possible loss resulting from an adverse
change in the relationship between the U.S. dollar or other currency which is
being used for the security purchase and the foreign currency in which the
security is denominated during the period between the date on which the security
is purchased or sold and the date on which payment is made or received.
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<PAGE>
At other times, when, for example, the Co-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 portfolio
securities (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 Co-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.
In addition, when the Co-Adviser anticipated purchasing securities at some
time in the future, and wishes to lock in the current exchange rate of the
currency in which those securities are denominated against the U.S. dollar or
some other foreign currency, the Fund may enter into a forward contract to
purchase an amount of currency equal to some or all of the value of the
anticipated purchase, for a fixed amount of U.S. dollars or other currency.
Finally, the Fund is permitted to enter into forward contracts with respect
to currencies in which certain of its portfolio securities are denominated an
don which options have been written (see "Options and Futures Transactions,"
below).
The Fund will not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts would
obligate the Fund to deliver an amount of foreign currency in excess of the
value of the fund's portfolio securities or other assets denominated in that
currency. Under normal circumstances, consideration of the prospect for currency
parities will be incorporated into the longer term investment decisions made
with regard to overall diversification strategies. However, the management of
the Fund believes that it is important to have the flexibility to enter into
such forward contracts when it determines that the best interests of the fund
will be served. The Fund's custodian bank will place cash, U.S. Government
securities or other appropriate liquid portfolio securities in a segregated
account of the Fund in an amount equal to the value of the Fund's total assets
committed to the consummation of forward contracts entered into under the
circumstances set forth above. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Fund's commitments with respect to such contracts.
Where, for example, the Fund is hedging a portfolio position consisting of
foreign fixed-income securities denominated in a foreign currency against
adverse exchange rate moves vis-a-vis the U.S. dollar; at the maturity of the
forward contract for delivery by the Fund of a foreign currency, the Fund may
either sell the portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. It is impossible to forecast the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for the fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio securities
if its market value exceeds the amount of foreign currency the Fund is obligated
to deliver.
If the Fund retains the portfolio securities and engages in an offsetting
transaction, the Fund will incur a gain or loss to the extent that there has
been movement in spot or forward contract prices. If the fund engages in an
offsetting transaction, it may subsequently enter into a new forward contract to
sell the foreign currency. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the purchase of
the foreign currency, the Fund will realize a gain to the extent the price of
the currency it has agreed to sell exceeds the price of the currency it has
agreed to purchase. Should forward prices increase, the Fund will suffer a loss
to the extent the price of the currency it has agreed to purchase exceeds the
price of the currency it has agreed to sell.
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If the Fund purchases a fixed-income security which is denominated in U.S.
dollars but which will pay out its principal based upon a formula tied to the
exchange rate between the U.S. dollar and a foreign currency, it may hedge
against a decline in the principal value of the security by entering into a
forward contract to sell or purchase an amount of the relevant foreign currency
equal to some or all of the principal value of the security.
At times when the Fund has written a call or put option on a fixed-income
security or the currency in which it is denominated, it may wish to enter into a
forward contract to purchase or sell the foreign currency in which the security
is denominated. A forward contract to purchase or sell the foreign currency in
which the security is denominated. A forward contract would, for example, hedge
the risk of the security on which a call currency option has been written
declining in value to a greater extent than the value of the premium received
for the option. The Fund will maintain with its Custodian at all times, cash,
U.S. Government securities or other appropriate liquid portfolio securities in a
segregated account equal in value to all forward contract obligations and option
contract obligations entered into in hedge situations such as this.
Although the Fund values its assets daily in terms of U.S. dollars, it does
not intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will, however, do so from time to time, and investors should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the spread
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to resell that
currency to the dealer.
The Fund generally will not enter into a forward contract with a term of
greater than one year, although it may enter into forward contracts for periods
of up to five years. The Fund may be limited in its ability to enter into
hedging transactions involving forward contracts by the Internal Revenue Code
requirements relating to qualification as a regulated investment company (see
"Dividends, Distributions and Taxes").
OPTIONS AND FUTURES TRANSACTIONS
As stated in the Prospectus, the Fund may write covered call options against
securities held in its portfolio and covered put options on eligible portfolio
securities and purchase options of the same series to effect closing
transactions, and may hedge against potential changes in the market value of its
investments (or anticipated investments) by purchasing put and call options on
portfolio (or eligible portfolio) securities (and the currencies in which they
are denominated) and engaging in transactions involving futures contracts and
options on such contracts.
Call and put options on U.S. Treasury notes, bonds and bills and on various
foreign currencies are listed on several U.S. and foreign securities exchanges
and are written in over-the-counter transactions ("OTC options"). Listed options
are issued or guaranteed by the exchange on which they trade or by a clearing
corporation such as the Options Clearing Corporation ("OCC"). Ownership of a
listed call option gives the Fund the right to buy from the OCC (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 or currency) by filing an exercise notice prior to the
expiration date of the option. The writer (seller) of the option would then have
the obligation to sell, to the OCC (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 option would have the obligation to purchase
the underlying security or currency from the OCC (in the U.S.) or other clearing
corporation or exchange at the exercise price.
Options on Foreign Currencies. The Fund may purchase and write options on
foreign currencies for purposes similar to those involved with investing in
forward foreign currency exchange contracts. For example, in order to protect
against declines in the dollar value of portfolio securities which are
denominated in a foreign currency, the Fund may purchase put options on an
amount such foreign currency equivalent to the current value of the portfolio
securities involved. As a result, the Fund would be enabled to sell the foreign
currency for a fixed amount of U.S. dollars, thereby "locking in" the dollar
value of the portfolio securities (less the amount of the premiums
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<PAGE>
paid for the options). Conversely, the Fund may purchase call options on foreign
currencies in which securities it anticipates purchasing are denominated to
secure a set U.S. dollar price for such securities and protect against a decline
in the value of the U.S. dollar against such foreign currency. The Fund may also
purchase call and put options to close out written option positions.
The Fund may also write call options on foreign currency to protect against
potential declines in its portfolio securities which are denominated in foreign
currencies. If the U.S. dollar value of the portfolio securities falls as a
result of a decline in the exchange rate between the foreign currency in which
it is denominated and the U.S. dollar, then a loss to the Fund occasioned by
such value decline would be ameliorated by receipt of the premium on the option
sold. At the same time, however, the Fund gives up the benefit of any rise in
value of the relevant portfolio securities above the exercise price of the
option and, in fact, only receives a benefit from the writing of the option to
the extent that the value of the portfolio securities falls below the price of
the premium received. The Fund may also write options to close out long call
option positions. A put option on a foreign currency would be written by the
Fund for the same reason it would purchase a call option, namely, to hedge
against an increase in the U.S. dollar value of a foreign security which the
Fund anticipates purchasing. Here, the receipt of the premium would offset, to
the extent of the size of the premium, any increased cost to the Fund resulting
from an increase in the U.S. dollar value of the foreign security. However, the
Fund could not benefit from any decline in the cost of the foreign security
which is greater than the price of the premium received. The Fund may also write
options to close out long put and call option positions.
The markets in foreign currency options are relatively new and the Fund's
ability to establish and close out positions on such options is subject to the
maintenance of a liquid secondary market. Although the Fund will not purchase or
write such options unless and until, in the opinion of the Co-Adviser, the
market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with
the underlying currency, there can be no assurance that a liquid secondary
market will exist for a particular option at any specific time. In addition,
options on foreign currencies are affected by all of those factors which
influence foreign exchange rates and investments generally.
The value of a foreign currency option depends upon the value of the
underlying currency relative to the U.S. dollar. As a result, the price of the
option position may vary with changes in the value of either or both currencies
and have no relationship to the investment merits of a foreign security,
including foreign securities held in a "hedged" investment portfolio. Because
foreign currency transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in the use of
foreign currency options, investors may be disadvantaged by having to deal in an
odd lot market (generally consisting of transactions of less than $1 million)
for the underlying foreign currencies at prices that are less favorable than for
round lots.
There is no systematic reporting of last sale information for foreign
currencies or any regulatory requirement that quotations available through
dealers or other market sources be firm or revised on a timely basis. Quotation
information available is generally representative of very large transactions in
the interbank market and thus may not reflect relatively smaller transactions
(i.e., less than $1 million) where rates may be less favorable. The interbank
market in foreign currencies is a global, around-the-clock market. To the extent
that the U.S. options markets are closed while the markets for the underlying
currencies remain open, significant price and rate movements may take place in
the underlying markets that are not reflected in the options market.
OTC Options. Exchange-listed options are issued by the OCC (in the U.S.) or
other clearing corporation or exchange which assures that all transactions in
such options are properly executed. OTC options are purchased from or sold
(written) to dealers or financial institutions which have entered into direct
agreements with the Fund. With OTC options, such variables as expiration date,
exercise price and premium will be agreed upon between the fund and the
transacting dealer, without the intermediation of a third party such as the OCC.
If the transacting dealer fails to make or take delivery of the securities or
amount of foreign currency underlying an option it has written, in accordance
with the term s of that option, the Fund would lose the premium paid for the
option as well as any anticipated benefit of the transaction. The Fund will
engage in OTC option transactions only with member banks of the Federal Reserve
System or primary dealers in U.S. Government securities or with affiliates of
such banks or dealers which have capital of at least $50 million or whose
obligations are guaranteed by an entity having capital of at least $50 million.
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Covered Call Writing. As stated in the Prospectus, the Fund is permitted to
write covered call options on portfolio securities and on the U.S. Dollar and
foreign currencies in which they are denominated, without limit, in order to aid
in achieving its investment objective. Generally, a call option is "covered" if
the Fund owns, or has the right to acquire, without additional cash
consideration (or for additional cash consideration held for the Fund by its
Custodian in a segregated account) the underlying security (currency) subject to
the option except that in the case of call options on U.S. Treasury Bills, the
fund might own U.S. Treasury Bills of a different series from those underlying
the call option, but with a principal amount and value corresponding to the
exercise price and a maturity date no later than that of the security (currency)
deliverable under the call option. A call option is also covered if the fund
holds a call on the same security as the underlying security (currency) of the
written option, where the exercise price of the call used for coverage is equal
to or less than the exercise price of the call written or greater than the
exercise price of the call written if the mark to market difference is
maintained by the fund in cash, U.S. Government securities or other liquid
portfolio securities which the Fund holds in a segregated account maintained
with its Custodian.
The Fund will receive from the purchaser, in return for a call it has
written, a "premium"; i.e., the price of the option. Receipt of these premiums
may better enable the Fund to earn a higher level of current income than it
would earn from holding the underlying securities (currencies) alone. Moreover,
the premium received will offset a portion of the potential loss incurred by the
Fund if the securities (currencies) underlying the option are ultimately sold
(exchanged) by the Fund at a loss. Furthermore, a premium received on a call
written on a foreign currency will ameliorate any potential loss of value on the
portfolio security due to a decline in the value of the currency. However,
during the option period, the covered call writer has, in return for the premium
or the option, given up the opportunity for capital appreciation above the
exercise price should the market price of the underlying security (or the
exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the
exchange rate of the currency in which it is denominated) decline. The premium
received will fluctuate with varying economic market conditions. If the market
value of the portfolio securities (or the currencies in which they are
denominated) upon which call options have been written increases, the Fund may
receive a lower total return from the portion of its portfolio upon which calls
have been written than it would have had such calls not been written.
As regards listed options and certain OTC options, during the option period,
the Fund may be required, at any time, to deliver the underlying security
(currency) against payment of the exercise on any calls it has written (exercise
of certain listed and OTC options may be limited to specific expiration dates).
This obligation is terminated upon the expiration of the option period or at
such earlier time when the writer effects a closing purchase transaction. A
closing purchase transaction is accomplished by purchasing an option of the same
series as the option previously written. However, once the Fund has been
assigned an exercise notice, the Fund will be unable to effect a closing
purchase transaction.
Closing purchase transactions are ordinarily effected to realize a profit on
an outstanding call option, to prevent an underlying security (currency) from
being called, to permit the sale of an underlying security (or the exchange of
the underlying currency) or to enable the Fund to write another call option on
the underlying security (currency) with either a different exercise price or
expiration date or both. The Fund may realize a net gain or loss from a closing
purchase transaction depending upon whether the amount of the premium received
on the call option is more or less than the cost of effecting the closing
purchase transaction. Any loss incurred in a closing purchase transaction may be
wholly or partially offset by unrealized appreciation in the market value of the
underlying security (currency). Conversely, a gain resulting from a closing
purchase transaction could be offset in whole or in part or exceeded by a
decline in the market value of the underlying security (currency).
If a call option expires unexercised, the Fund realizes a gain in the amount
of the premium on the option less the commission paid. Such a gain, however, may
be offset by depreciation in the market value of the underlying security
(currency) during the option period. If a call option is exercised, the Fund
realizes a gain or loss from the sale of the underlying security (currency)
equal to the difference between the purchase price of the underlying security
(currency) and the proceeds of the sale of the security (currency) plus the
premium received on the option less the commission paid.
Options written by the Fund will normally have expiration dates of up to
eighteen months from the date written. The exercise price of a call option may
be below, equal to or above the current market value of the underlying security
at the time the option is written. See "Risks of Transactions in Futures
Contracts and Related Options," below.
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Covered Put Writing. As a writer of a covered put option, the Fund incurs an
obligation to buy the security underlying the option from the purchaser of the
put, at the option's exercise price at any time during the option period, at the
purchaser's election (certain listed and OTC put options written by the Fund
will be exercisable by the purchaser only on a specific date). A put is
"covered" if, at all times, the Fund maintains, in a segregated account
maintained on its behalf at the Fund's Custodian, cash, U.S. Government
securities or other liquid portfolio securities in an amount equal to at least
the exercise price of the option, at all times during the option period.
Similarly, a short put position could be covered by the Fund by its purchase of
a put option on the same security (currency) as the underlying security of the
written option, where the exercise price of the purchased option is equal to or
more than the exercise price of the put written or less than the exercise price
of the put written if the marked to market difference is maintained by the Fund
in cash, U.S. Government securities or other liquid portfolio securities which
the Fund holds in a segregated account maintained at its Custodian. In writing
puts, the Fund assumes the risk of loss should the market value of the
underlying security (currency) decline below the exercise price of the option
(any loss being decreased by the receipt of the premium on the option written).
In the case of listed options, during the option period, the Fund may be
required, at any time, to make payment of the exercise price against delivery of
the underlying security (currency). The operation of and limitations on covered
put options in other respects are substantially identical to those of call
options.
The Fund will write put options for three purposes: (1) to receive the income
derived from the premiums paid by purchasers; (2) when the Co-Adviser wishes to
purchase the security (or a security denominated in the currency underlying the
option) underlying the option at a price lower than its current market price, in
which case it will write the covered put at an exercise price reflecting the
lower purchase price sought; and (3) to close out a long put option position.
The potential gain on a covered put option is limited to the premium received on
the option (less the commissions paid on the transaction) while the potential
loss equals the differences between the exercise price of the option and the
current market price of the underlying securities (currencies) when the put is
exercised, offset by the premium received (less the commissions paid on the
transaction).
Purchasing Call and Put Options. As stated in the Prospectus, the Fund may
purchase listed and OTC call and put options in amounts equalling up to 5% of
its total assets. The Fund may purchase a call option in order to close out a
covered call position (see "Covered Call Writing" above), to protect against an
increase in price of a security it anticipates purchasing or, in the case of a
call option on foreign currency, to hedge against an adverse exchange rate move
of the currency in which the security it anticipates purchasing is denominated
vis-a-vis the currency in which the exercise price is denominated. The purchase
of the call option to effect a closing transaction on a call written
over-the-counter may be a listed or an OTC option. In either case, the call
purchased is likely to be on the same securities (currencies) and have the same
terms as the written option. If purchased over-the-counter, the option would
generally be acquired from the dealer or financial institution which purchased
the call written by the Fund.
The Fund may purchase put options on securities (currencies) which it holds
in its portfolio to protect itself against a decline in the value of the
security and to close out written put option positions. If the value of the
underlying security (currency) were to fall below the exercise price of the put
purchased in an amount greater than the premium paid for the option, the Fund
would incur no additional loss. In addition, the Fund may sell a put option
which it has previously purchased prior to the sale of the securities
(currencies) underlying such option. Such a sale would result in a net gain or
loss depending on whether the amount received on the sale is more or less than
the premium and other transaction costs paid on the put option which is sold.
And such gain or loss could be offset in whole or in part by a change in the
market value of the underlying security (currency). If a put option purchased by
the Fund expired without being sold or exercised, the premium would be lost.
Risks of Options Transactions. The successful use of options depends on the
ability of the Co-Adviser to forecast correctly interest rates and 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 writer has no
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control over the time when it may be required to fulfill its obligation as a
writer of the option. Once an option writer has received an exercise notice, it
cannot effect a closing purchase transaction in order to terminate its
obligation under the option and must deliver or receive the underlying
securities at the exercise price.
Prior to exercise or expiration, an option position can only be terminated by
entering into a closing purchase or sale transaction. If a covered call option
writer is unable to effect a closing purchase transaction or to purchase an
offsetting OTC option, it cannot sell the underlying security until the option
expires or the option is exercised. Accordingly, a covered call option writer
may not be able to sell an underlying security at a time when it might otherwise
be advantageous to do so. A secured put option writer who is unable to effect a
closing purchase transaction or to purchase an offsetting OTC option would
continue to bear the risk of decline in the market price of the underlying
security until the option expires or is exercised. In addition, a secured put
writer would be unable to utilize the amount held in cash or U.S. Government or
other liquid portfolio securities as security for the put option for other
investment purposes until the exercise or expiration of the option.
As discussed in the Prospectus, the Fund's ability to close out its position
as a writer of an option is dependent upon the existence of a liquid secondary
market on Option Exchanges. There is no assurance that such a market will exist,
particularly in the case of OTC options, as such options will generally only be
closed out by entering into a closing purchase transaction with the purchasing
dealer. However, the Fund may be able to purchase an offsetting option which
does not close out its position as a writer but constitutes an asset of equal
value to the obligation under the option written. If the Fund is not able to
either enter into a closing purchase transaction or purchase an offsetting
position, it will be required to maintain the securities subject to the call, or
the collateral underlying the put, even though it might not be advantageous to
do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on an
Exchange are: (i) insufficient trading interest in certain options; (ii)
restrictions on transactions imposed by an Exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities; (iv) interruption of the normal
operations on an Exchange; (v) inadequacy of the facilities of an Exchange or
the OCC to handle current trading volume; or (vi) a decision by one or more
Exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the secondary market on that Exchange (or in that
class or series of options) would cease to exist, although outstanding options
on that Exchange that had been issued by the OCC as a result of trades on that
Exchange would generally continue to be exercisable in accordance with their
terms.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in options, the Fund could experience delays and/or losses in
liquidating open positions purchased or sold through the broker and/or incur a
loss of all or part of its margin deposits with the broker. Similarly, in the
event of the bankruptcy of the writer of an OTC option purchased by the Fund,
the Fund could experience a loss of all or part of the value of the option.
Transactions are entered into by the Fund only with brokers or financial
institutions deemed creditworthy by the Fund's management.
Each of the Exchanges has established limitations governing the maximum
number of options on the same underlying security or futures contract (whether
or not covered) which may be written by a single investor, whether acting alone
or in concert with others (regardless of whether such options are written on the
same or different Exchanges or are held or written on one or more accounts or
through one or more brokers). An Exchange may order the liquidation of positions
found to be in violation of these limits and it may impose other sanctions or
restrictions. These position limits may restrict the number of listed options
which the Fund may write.
The hours of trading for options may not conform to the hours during which
the underlying securities are traded. To the extent that the option markets
close before the markets for the underlying securities, significant price and
rate movements can take place in the underlying markets that cannot be reflected
in the option markets.
The extent to which the Fund may enter into transactions involving options
may be limited by the Internal Revenue Code's requirements for qualification as
a regulated investment company and the Fund's intention to qualify as such (see
"Dividends, Distributions and Taxes").
Futures Contracts. As stated in the Prospectus, the Fund may purchase and
sell interest rate, currency, and index futures contracts ("futures
contracts"), that are traded on U.S. and foreign commodity exchanges, on such
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underlying securities as U.S. Treasury bonds, notes and bills and/or any foreign
government fixed-income security ("interest rate" futures), on various
currencies ("currency futures") and on such indexes of U.S. and foreign
securities as may exist or come into being ("index" futures).
The Fund will purchase or sell interest rate futures contracts for the
purpose of hedging some or all of the value of its portfolio securities (or
anticipated portfolio securities) against changes in prevailing interest rates.
If the Co-Adviser anticipates that interest rates may rise and, concomitantly,
the price of certain of its portfolio securities fall, the Fund may sell an
interest rate futures contract. If declining interest rates are anticipated, the
Fund may purchase an interest rate futures contract to protect against a
potential increase in the price of securities the Fund intends to purchase.
Subsequently, appropriate securities may be purchased by the Fund in an orderly
fashion; as securities are purchased, corresponding futures positions would be
terminated by offsetting sales of contracts.
The Fund will purchase or sell index futures contracts for the purpose of
hedging some or all of its portfolio (or anticipated portfolio) securities
against changes in their prices. If the Co-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.
The Fund will purchase or sell currency futures on currencies in which its
portfolio securities (or anticipated portfolio securities) are denominated for
the purposes of hedging against anticipated changes in currency exchange rates.
The Fund will enter into currency futures contracts for the same reasons as set
forth above for entering into forward foreign currency contracts; namely, to
"lock-in" the value of a security purchased or sold in a given currency
vis-a-vis a different currency or to hedge against an adverse currency exchange
rate movement of a portfolio security's (or anticipated portfolio security's)
denominated currency vis-a-vis a different currency.
In addition to the above, interest rate, index and currency futures will be
bought or sold in order to close out a short or long position maintained by the
Fund in a corresponding futures contract.
Although most interest rate futures contracts call for actual delivery or
acceptance of securities, the contracts usually are closed out before the
settlement date without the making or taking of delivery. A futures contract
sale is closed out by effecting a futures contract purchase for the same
aggregate amount of the specific type of security (currency) and the same
delivery date. If the sale price exceeds the offsetting purchase price, the
seller would be paid the difference and would realize a gain. If the offsetting
purchase price exceeds the sale price, the seller would pay the difference and
would realize a loss. Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same aggregate amount of the specific
type of security (currency) and the same delivery date. If the offsetting sale
price exceeds the offsetting sale price, the purchaser would realize a gain,
whereas if the purchase price exceeds the offsetting sale price, the purchaser
would realize a loss. There is no assurance that the Fund will be able to enter
into a closing transaction.
Interest Rate Futures Contracts. When the Fund enters into an interest rate
futures contract, it is initially required to deposit with the Fund's Custodian,
in a segregated account in the name of the broker performing the transaction, an
"initial margin" of cash or U.S. Government securities or other liquid portfolio
securities equal to approximately 2% of the contract amount. Initial margin
requirements are established by the Exchanges on which futures contracts trade
and may, from time to time, change. In addition, brokers may establish margin
deposit requirements in excess of those required by the Exchanges.
Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of funds by a
brokers' client but is, rather, a good faith deposit on the futures contract
which will be returned to the Fund upon the proper termination of the futures
contract. The margin deposits made are marked-to-market daily and the Fund may
be required to make subsequent deposits of cash or U.S. Government securities
called "variation margin," with the Fund's futures contract clearing broker,
which are reflective of price fluctuations in the futures contract.
Currency Futures. Generally, foreign currency futures provide for the
delivery of a specified amount of a given currency, on the exercise date, for a
set exercise price denominated in U.S. dollars or other currency. Foreign
currency futures contracts would be entered into for the same reason and under
the same circumstances as forward foreign currency exchange contracts. The
Co-Adviser will assess such factors as cost spreads, liquidity and transaction
costs in determining whether to utilize futures contracts or forward contracts
in its foreign currency transactions and hedging strategy.
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Purchasers and sellers of foreign currency futures contracts are subject to
the same risks that apply to the buying and selling of futures generally. In
addition, there are risks associated with foreign currency futures contracts and
their use as a hedging device similar to those associated with options on
foreign currencies described above. Further, settlement of a foreign currency
futures contract must occur within the country issuing the underlying currency.
Thus, the Fund must accept or make delivery of the underlying foreign currency
in accordance with any U.S. or foreign restrictions or regulations regarding the
maintenance of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such delivery which
are assessed in the issuing country.
Options on foreign currency futures contracts may involve certain additional
risks. Trading options on foreign currency futures contracts is relatively new.
The ability to establish and close out positions on such options is subject to
the maintenance of a liquid secondary market. To reduce this risk, the Fund will
not purchase or write options on foreign currency futures contracts unless and
until, in the Co-Adviser's opinion, the market for such options has developed
sufficiently that the risks in connection with such options are not greater than
the risks in connection with transactions in the underlying foreign currency
futures contracts.
Index Futures Contracts. As discussed in the Prospectus, the Fund may invest
in index futures contracts. An index futures contract sale creates an obligation
by the Fund, as seller, to deliver cash at a specified future time. An index
futures contract purchase would create an obligation by the Fund, as purchaser,
to take delivery of cash at a specified future time. Futures contracts on
indexes do not require the physical delivery of securities, but provide for a
final cash settlement on the expiration date which reflects accumulated profits
and losses credited or debited to each party's account.
The Fund is required to maintain margin deposits with brokerage firms through
which it effects index futures contracts in a manner similar to that described
above for interest rate futures contracts. In addition, due to current industry
practice, daily variations in gains and losses on open contracts are required to
be reflected in cash in the form of variation margin payments. The Fund may be
required to make additional margin payments during the term of the contract.
At any time prior to expiration of the futures contract, the Fund may elect
to close the position by taking an opposite position which will operate to
terminate the Fund's position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid by or
released to the Fund and the Fund realizes a loss or gain.
Options on Futures Contracts. The Fund may purchase and write call and put
options on futures contracts which are traded on an exchange and enter into
closing transactions with respect to such options to terminate an existing
position. An option on a futures contract gives the purchaser the right (in
return for the premium paid) to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the term of the option. Upon
exercise of the option, the delivery of the futures position by the writer of
the option to the holder of the option is accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents the
amount by which the market price of the futures contract at the time of exercise
exceeds, in case of a call, or is less than, in the case a put, the exercise
price of the option on the futures contract.
The Fund will purchase and write options on futures contracts for identical
purposes to those set forth above for the purchase of a futures contract
(purchase of a call option or sale of a put option) and the sale of a futures
contract (purchase of a put option or sale of a call option), or to close out a
long or short position in futures contracts. If, for example, the Co-Adviser
wished to protect against an increase in interest rates and the resulting
negative impact on the value of a portion of its fixed-income portfolio, it
might write a call option on an interest rate futures contract, the underlying
security of which correlates with the portion of the portfolio the Co-Adviser
seeks to hedge. Any premiums received in the writing of options on futures
contracts may, of course, provide a further hedge against losses resulting from
price declines in portions of the Fund's portfolio.
Limitations on Futures Contracts and Options on Futures. The Fund may not
enter into futures contracts or purchase related options thereon if, immediately
thereafter, the amount committed to margin plus the amount paid for premiums for
unexpired options on futures contracts exceeds 5% of the value of the Fund's
total assets, after taking into account unrealized gains and unrealized losses
on such contracts it has entered into, provided, however,
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that in the case of an option that is in-the-money (the exercise price of the
call (put) option is less (more) than the market price of the underlying
security) at the time of purchase, the in-the-money amount may be excluded in
calculating the 5%. However, there is no overall limitation on the percentage of
the Fund's assets which may be subject to a hedge position. Except as described
above, there are no other limitations on the use of futures and options thereon
by the Fund.
The writer of an option on a futures contract is required to deposit initial
and variation margin pursuant to requirements similar to those applicable to
futures contracts. Premiums received from the writing of an option on a futures
contract are included in initial margin deposits.
Risks of Transactions in Futures Contracts and Related Options. As stated in
the Prospectus, the Fund may sell a futures contract to protect against the
decline in the value of securities (or the currency in which they are
denominated) held by the Fund. However, it is possible that the futures market
may advance and the value of securities (or the currency in which they are
denominated) held in the portfolio of the Fund may decline. If this occurred,
the Fund would lose money on the futures contract and also experience a decline
in value of its portfolio securities. However, while this could occur for a very
brief period or to a very small degree, over time the value of a diversified
portfolio will tend to move in the same direction as the futures contracts.
If the Fund purchases a futures contract to hedge against the increase in
value of securities it intends to buy (or the currency in which they are
denominated), and the value of such securities (currencies) decreases, then the
Fund may determine not to invest in the securities as planned and will realize a
loss on the futures contract that is not offset by a reduction in the price of
the securities.
If the Fund has sold a call option on a futures contract, it will cover this
position by holding in a segregated account maintained at its Custodian, cash,
U.S. Government securities or other liquid portfolio securities equal in value
(when added to any initial or variation margin on deposit) to the market value
of the securities (currencies) underlying the futures contract or the exercise
price of the option. Such a position may also be covered by owning the
securities (currencies) underlying the futures contract, or by holding a call
option permitting the Fund to purchase the same contract at a price no higher
than the price at which the short position was established.
In addition, if the Fund holds a long position in a futures contract it will
hold cash, U.S. Government securities or other liquid portfolio securities equal
to the purchase price of the contract (less the amount of initial or variation
margin on deposit) in a segregated account maintained for the Fund by its
Custodian. Alternatively, the Fund could cover its long position by purchasing a
put option on the same futures contract with an exercise as high or higher than
the price of the contract held by the Fund.
Exchanges limit the amount by which the price of a futures contract may move
on any day. If the price moves equal the daily limit on successive days, then it
may prove impossible to liquidate a futures position until the daily limit moves
have ceased. In the event of adverse price movements, the Fund would continue to
be required to make daily cash payments of variation margin on open futures
positions. In such situations, if the Fund has insufficient cash, it may have to
sell portfolio securities to meet daily variation margin requirements at a time
when it may be disadvantageous to do so. In addition, the Fund may be required
to take or make delivery of the instrument underlying interest rate futures
contracts it holds at a time when it is disadvantageous to do so. The inability
to close out options and futures positions could also have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
Futures contracts and options thereon which are purchased or sold on foreign
commodities exchanges may have greater price volatility than their U.S.
counterparts. Furthermore, foreign commodities exchanges may be less regulated
and under less governmental scrutiny than U.S. exchanges. Brokerage commissions,
clearing costs and other transaction costs may be higher on foreign exchanges.
Greater margin requirements may limit the Fund's ability to enter into certain
commodity transactions on foreign exchanges. Moreover, differences in clearance
and delivery requirements on foreign exchanges may occasion delays in the
settlement of the Fund's transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker through which the Fund engages in
transactions in futures or options thereon, the Fund could experience delays
and/or losses in liquidating open positions purchased or sold through the broker
and/or incur a loss of all or part of its martin deposits with the broker.
Similarly in the event of the bankruptcy of the writer of an OTC option
purchased by the Fund, the Fund could experience a loss of all or part of the
value of the option. Transactions are entered into by the Fund only with brokers
or financial institutions deemed creditworthy by the Co-Adviser.
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While the futures contracts and options transactions to be engaged in by the
Fund for the purpose of hedging the Fund's portfolio securities are not
speculative in nature, there are risks inherent in the use of such instruments.
One such risk which may arise in employing futures contracts to protect against
the price volatility of portfolio securities (and the currencies in which they
are denominated) is that the prices of securities and indexes subject to futures
contracts (and thereby the futures contract prices) may correlate imperfectly
with the behavior of the cash prices of the Fund's portfolio securities (and the
currencies in which they are denominated). Another such risk is that prices of
interest rate futures contracts may not move in tandem with the changes in
prevailing interest rates against which the Fund seeks a hedge. A correlation
may also be distorted (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
imperfect correlation between movements in the prices of securities and
movements in the prices of futures contracts, a correct forecast of interest
rate trends may still not result in a successful hedging transaction.
As stated in the Prospectus, there is no assurance that a liquid secondary
market will exist for futures contracts and related options in which the Fund
may invest. In the event a liquid market does not exist, it may not be possible
to close out a futures position, and in the event of adverse price movements,
the Fund would continue to be required to make daily cash payments of variation
margin. In addition, limitations imposed by an exchange or board of trade on
which futures contracts are traded may compel or prevent the Fund from closing
out a contract which may result in reduced gain or increased loss to the Fund.
The absence of a liquid market in futures contracts might cause the Fund to make
or take delivery of the underlying securities (currencies) at a time when it may
be disadvantageous to do so.
The extent to which the Fund may enter into transactions involving futures
contracts and options thereon may be limited by the Internal Revenue Code's
requirements for qualification as a regulated investment company and the Fund's
intention to qualify as such (see "Dividends, Distributions and Taxes").
Compared to the purchase or sale of futures contracts, the purchase of call
or put options on futures contracts involves less potential risk to the Fund
because the maximum amount at risk is the premium paid for the options (plus
transaction costs). However, there may be circumstances when the purchase of a
call or put option on a futures contract would result in a loss to the Fund
notwithstanding that the purchase or sale of a futures contract would not result
in a loss, as in the instance where there is no movement in the prices of the
futures contract or underlying securities (currencies).
Each Co-Adviser has substantial experience in the use of the investment
techniques described above under the heading "Options and Futures Transactions,"
which techniques require skills different from those needed to select the
portfolio securities underlying various options and futures contracts.
New Instruments. New futures contracts, options and other financial products
and various combinations thereof continue to be developed. The Fund may invest
in any such futures, options or products as may be developed, to the extent
consistent with its investment objective and applicable regulatory requirements.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to notice
provisions described below), and are at all times secured by cash or money
market instruments, which are maintained in a segregated account pursuant to
applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is that
the Fund continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. The Fund will not lend its portfolio
securities if such loans are not permitted by the laws or regulations of any
state in which its shares are qualified for sale and will not lend more than 25%
of the value of its total assets. A loan may be terminated by the borrower on
one business day's
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notice, or by the Fund on two business days' notice. If the borrower fails to
deliver the loaned securities within two days after receipt of notice, the Fund
could use the collateral to replace the securities while holding the borrower
liable for any excess of replacement cost over collateral. As with any
extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially. However, these loans of portfolio securities will only be made to
firms deemed by the Fund's management to be creditworthy and when the income
which can be earned from such loans justifies the attendant risks. Upon
termination of the loan, the borrower is required to return the securities to
the Fund. Any gain or loss in the market price during the loan period would
inure to the Fund. The creditworthiness of firms to which the Fund lends its
portfolio securities will be monitored on an ongoing basis by the applicable
Co-Adviser pursuant to procedures adopted and reviewed, on an ongoing basis, by
the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to the
borrower, the Fund will follow the policy of calling the loaned securities, to
be delivered within one day after notice, to permit the exercise of such rights
if the matters involved would have a material effect on the Fund's investment in
such loaned securities. The Fund will pay reasonable finder's, administrative
and custodial fees in connection with a loan of its securities.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested or
used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease below
the purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of securities subject to repurchase agreements are not subject to any
limits.
While repurchase agreements involve certain risks not associated with direct
investments in debt securities, the Fund follows procedures designed to minimize
such risks. These procedures include effecting repurchase transactions only with
large, well-capitalized and well-established financial institutions whose
financial condition will be continually monitored by the Adviser subject to
procedures established by the Board of Trustees of the Fund. In addition, as
described above, the value of the collateral underlying the repurchase agreement
will be at least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. In the event of a default or bankruptcy by a
selling financial institution, the Fund will seek to liquidate such collateral.
However, the exercising of the Fund's right to liquidate such collateral could
involve certain costs or delays and, to the extent that proceeds from any sale
upon a default of the obligation to repurchase were less than the repurchase
price, the Fund could suffer a loss. It is the current policy of the Fund not to
invest in repurchase agreements that do not mature within seven days if any such
investment, together with any other illiquid assets held by the Fund, amounts to
more than 15% of its net assets.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will not
exceed 100%. A 100% turnover rate would occur, for example, if 100% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
the year.
INVESTMENT RESTRICTIONS
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In addition to the investment restrictions enumerated in the Prospectus, the
investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the
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Fund, as defined in the Act. Such a majority is defined as the lesser of (a) 67%
or more of the shares present at a meeting of shareholders, if the holders of
50% of the outstanding shares of the Fund are present or represented by proxy or
(b) more than 50% of the outstanding shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein, although the
Fund may purchase securities secured by real estate or interests therein.
This shall not prohibit the Trust from purchasing, holding and selling
real estate acquired as a result of the ownership of such securities.
2. Purchase or sell commodities or commodity contracts, except for
hedging purposes as described under "Investment Practices and Policies."
3. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
4. Borrow money, except that the Fund may borrow up to 5% of its
total assets for temporary purposes.
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in Restriction
4. However, for the purpose of this restriction, collateral arrangements
with respect to hedging transactions, short sales, when-issued, when, as
and if issued and forward commitment transactions and similar investment
strategies are not deemed to be pledges of assets.
6. Issue senior securities as defined in the Act except insofar as
the Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts or options thereon; (d) borrowing money in
accordance with restrictions described above; or (e) lending portfolio
securities.
7. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) investments in Loans through
Participations and Assignments; (c) by investment in repurchase
agreements; or (d) by lending its portfolio securities.
8. Make any short sale of securities except in conformity with
applicable laws, rules and regulations and unless, giving effect to such
sale, the market value of all securities sold short does not exceed 25% of
the value of the Fund's total assets and the Fund's aggregate short sales
of a particular class of securities does not exceed 25% of then
outstanding securities of that class.
9. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
10. Engage in the underwriting of securities, except insofar as the
Fund may be deemed an underwriter under the Securities Act of 1933 in
disposing of a portfolio security. (The Fund may invest in restricted
securities subject to the non-fundamental limitations contained in the
Prospectus).
11. Invest for the purpose of exercising control or management of any
other issuer.
12. Invest in securities of any issuer, other than securities of the
Fund, if, to the knowledge of the Fund, any officer or trustee of the Fund
or any officer or director of the Manager or a Co-Adviser owns more than
1/2 of 1% of the outstanding securities of such issuer, and such officers,
trustees and directors who own more than 1/2 of 1% own in the aggregate
more than 5% of the outstanding securities of such issuer.
If (except with respect to Restriction 4) a percentage restriction is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from a change in values of portfolio securities or amount
of total or net assets will not be considered a violation of any of the
foregoing restrictions.
26
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Trustees, each Co-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, for its respective portion of the Fund's
portfolio. Purchases and sales of securities on a stock exchange are effected
through brokers who charge a commission for their services. In the
over-the-counter market, securities are generally traded on a "net" basis with
dealers acting as principal for their own accounts without a stated commission,
although the price of the security usually includes a profit to the dealer. In
addition, securities may be purchased at times in underwritten offerings where
the price includes a fixed amount of compensation, generally referred to as the
underwriters' concession or discount. Futures transactions will usually be
effected through a broker and a commission will be charged. On occasion the Fund
may also purchase certain money market instruments directly from an issuer, in
which case no commissions or discounts are paid. During the fiscal years ended
January 31, 1996, 1997 and 1998, the Fund paid a total of $1,631,927, $1,483,314
and 2,014,274, respectively, in brokerage commissions.
Each Co-Adviser currently serves as investment adviser to a number of
clients, including other investment companies, and may in the future act as
investment adviser to others. It is the practice of the each Co-Adviser to cause
purchase and sale transactions to be allocated among the Fund and others whose
assets it managed in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main factors
considered are the respective investment objectives, relative size of portfolio
holdings of the same or comparable securities, the availability of cash for
investment, the size of investment commitments generally held and the opinions
of the persons responsible for managing the portfolios of the Fund and other
client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid in
all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Co-Advisers from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Co-Adviser relies upon its experience
and knowledge regarding commissions generally charged by various brokers and on
its judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily subjective
and imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
The Fund anticipates that certain of its transactions involving foreign
securities will be effected on securities exchanges. Fixed commissions on such
transactions are generally higher than negotiated commissions on domestic
transactions. There is also generally less government supervision and regulation
of foreign securities exchanges and brokers than in the United States.
In seeking to implement the Fund's policies, each Co-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
Co-Adviser believes such prices and executions are obtainable from more than one
broker or dealer, it may give consideration to placing portfolio transactions
with those brokers and dealers who also furnish research and other services to
the Fund or the Co-Adviser. Such services may include, but are not limited to,
any one or more of the following: reports on industries and companies, economic
analyses and review of business conditions, portfolio strategy, analytic
computer software, account performance services, computer terminals and various
trading and/or quotation equipment. They also include advice from broker-dealers
as to the value of securities, availability of securities, availability of
buyers, and availability of sellers. In addition, they include recommendations
as to purchase and sale of individual securities and timing of such
transactions. The Fund will not purchase at a higher price or sell at a lower
price in connection with transactions effected with a dealer, acting as
principal, who furnishes research services to the Fund than would be the case if
no weight were given by the Fund to the dealer's furnishing of such services.
During the fiscal year ended January 31, 1998, the Fund directed the payment of
$2,006,451, in brokerage commissions in connection with transactions in the
aggregate amount of $428,492,602 to brokers because of research provided.
27
<PAGE>
The information and services received by the Co-Advisers from brokers and
dealers may be of benefit to the Co-Advisers in the management of accounts of
some of their other clients and may not in all cases benefit the Fund directly.
While the receipt of such information and services is useful in varying degrees
and would generally reduce the amount of research or services otherwise
performed by the Co-Advisers and thereby reduce their expenses, it is of
indeterminable value and the advisory fee paid to the Co-Advisers is not reduced
by any amount that may be attributable to the value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may be
effected through DWR, Morgan Stanley & Co. Incorporated ("MS&Co.") and other
affiliated brokers and dealers. In order for an affiliated broker or dealer to
effect any portfolio transactions for the Fund, the commissions, fees or other
remuneration received by the affiliated broker or dealer must be reasonable and
fair compared to the commissions, fees or other remuneration paid to other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on an exchange during a comparable period of time. This
standard would allow the affiliated broker or dealer to receive no more than the
remuneration which would be expected to be received by an unaffiliated broker in
a commensurate arm's-length transaction. Furthermore, the Board of Trustees of
the Fund, including a majority of the Trustees who are not "interested" persons
of the Fund, as defined in the Act, have adopted procedures which are reasonably
designed to provide that any commissions, fees or other remuneration paid to an
affiliated broker or dealer are consistent with the foregoing standard. The Fund
does not reduce the management fee it pays to the Investment Manager by any
amount of the brokerage commissions it may pay to an affiliated broker or
dealer. During the fiscal years ended January 31, 1996 and 1997, and the period
February 1, 1997 through April 30, 1997, the Fund did not pay any brokerage
commissions to any affiliated brokers or dealers. During the period May 31, 1997
through January 31, 1998, the Fund paid a total of $61,638 in brokerage
commissions to MS&Co., which broker-dealer became an affiliate of the Investment
Manager on May 31, 1997 upon the consummation of the merger of Dean Witter,
Discover & Co. with Morgan Stanley Group Inc. The brokerage commissions paid to
MS&Co. represented approximately 3.06% of the total brokerage commissions paid
by the Fund for this period and were paid on account of transactions having an
aggregate dollar value equal to approximately 3.56% of the aggregate dollar
value of all portfolio transactions of the Fund during the period for which
commissions were paid.
THE DISTRIBUTOR
- -----------------------------------------------------------------------------
As discussed in the Prospectus, shares of the Fund are distributed by Dean
Witter Distributors Inc. (the "Distributor"). The Distributor has entered into a
selected dealer agreement with DWR, which through its own sales organization
sells shares of the Fund. In addition, the Distributor may enter into selected
dealer agreements with other selected broker-dealers. The Distributor, a
Delaware corporation, is a wholly-owned subsidiary of MSDW. The Trustees of the
Fund, including a majority of the Independent Trustees, approved, at their
meeting held on January 12, 1998, the current Distribution Agreement appointing
the Distributor as exclusive distributor of the Fund's shares and providing for
the Distributor to bear distribution expenses not borne by the Fund. By its
terms, the Distribution Agreement has an initial term ending April 30, 1998 and
will remain in effect from year to year thereafter if approved by the Board.
The Distributor bears all expenses it may incur in providing services under
the Distribution Agreement. Such expenses include the payment of commissions for
sales of the Fund's shares and incentive compensation to account executives. The
Distributor also pays certain expenses in connection with the distribution of
the Fund's shares, including the costs of preparing, printing and distributing
advertising or promotional materials, and the costs of printing and distributing
prospectuses and supplements thereto used in connection with the offering and
sale of the Fund's shares. The Fund bears the costs of initial typesetting,
printing and distribution of prospectuses and supplements thereto to
shareholders. The Fund also bears the costs of registering the Fund and its
shares under federal securities laws and pays filing fees in accordance with
state securities laws. The Fund and the Distributor have agreed to indemnify
each other against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. Under the Distribution Agreement, the
Distributor uses its best efforts in rendering services to the Fund, but in the
absence of willful misfeasance, bad faith, gross negligence or reckless
disregard of its obligations, the Distributor is not liable to the Fund or any
of its shareholders for any error of judgment or mistake of law or for any act
or omission or for any losses sustained by the Fund or its shareholders.
Plan of Distribution. The Fund has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Act (the "Plan") pursuant to which each Class, other than
Class D, pays the Distributor compensation accrued daily and
28
<PAGE>
payable monthly at the following annual rates: 0.25%, 1.0% and 1.0% of the
average daily net assets of Class A, Class B and Class C, respectively. The
Distributor also receives the proceeds of front-end sales charges and of
contingent deferred sales charges imposed on certain redemptions of shares,
which are separate and apart from payments made pursuant to the Plan (see
"Purchase of Fund Shares" in the Prospectus).
The Distributor has informed the Fund that the entire fee payable by Class A
and a portion of the fees payable by each of Class B and Class C each year under
the Plan equal to 0.25% of such Class's average daily net assets are currently
each characterized as a "service fee" under the Rules of the Association of the
National Association of Securities Dealers (of which the Distributor is a
member). The service fee is a payment made for personal service and/or the
maintenance of shareholder accounts. The remaining portion of the Plan fees
payable by a Class, if any, is characterized as an "asset-based sales charge" as
such is defined by the aforementioned Rules of the Association.
The Plan was adopted by a majority vote of the Board of Trustees, including a
majority of the Trustees of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent 12b-1 Trustees"), cast
in person at a meeting called for the purpose of voting on the Plan, on April
24, 1997, and was amended by the Trustees, including a majority of the
Independent 12b-1 Trustees, at their meeting held on January 12, 1998 to reflect
the multiple-class structure for the Fund. In making their decision to adopt the
Plan, the Trustees requested from the Distributor and received such information
as they deemed necessary to make an informed determination as to whether or not
adoption of the Plan was in the best interests of the shareholders of the Fund.
After due consideration of the information received, the Trustees, including the
Independent 12b-1 Trustees, determined that the adoption of the Plan would
benefit the shareholders of the Fund. The Plan was approved, by the shareholders
holding a majority, as defined in the Act, of the outstanding voting securities
of the Fund at the Annual Meeting of Shareholders of the Fund held on July 22,
1997. The Plan, as amended to reflect the Fund's multiple-class structure, took
effect on January 26, 1998, upon the conversion of the Fund to an open-end
investment company.
Under its terms, the Plan had an initial term ending April 30, 1998, and
provides that it will continue from year to year thereafter, provided such
continuance is approved annually by a vote of the Trustees in the manner
described above.
Under the Plan and as required by Rule 12b-1, the Trustees receive and review
promptly after the end of each fiscal quarter a written report provided by the
Distributor of the amounts expended under the Plan and the purpose for which
such expenditures were made. In the Trustees' quarterly reviews of the Plan,
they will consider its continued appropriateness and the level of compensation
provided therein. For the fiscal period January 26, through January 31, 1998,
Class A, Class B and Class C Shares of the Fund accrued payments under the Plan
amounting to $8,696, $2 and $1, respectively, which amounts on an annualized
basis are equal to 0.25%, 1.0% and 1.0% of the average daily net assets of Class
A, Class B and Class C respectively, for such period.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a distribution arrangement as set forth in the
Prospectus.
With respect to Class A shares, DWR compensates its account executives by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value of
the respective accounts for which they are the account executives or dealers of
record in all cases. On orders of $1 million or more (for which no sales charge
was paid) or net asset value purchases by employer-sponsored 401(k) plans and
other plans qualified under Section 401(a) of the Internal Revenue Code
("Qualified Retirement Plans") for which Morgan Stanley Dean Witter Trust FSB
("MSDW Trust") serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement,
InterCapital compensates DWR's account executives by paying them, from its own
funds, a gross sales credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission, currently
a residual of up to 0.25% of
29
<PAGE>
the current value (not including reinvested dividends or distributions) of the
amount sold in all cases. In the case of Class B shares purchased by Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement, DWR compensates its account executives by paying them, from its own
funds, a gross sales credit of 3.0% of the amount sold.
With respect to Class C shares, DWR compensates its account executives by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value of
the respective accounts for which they are the account executives of record.
With respect to Class D shares other than shares held by participants in the
InterCapital mutual fund asset allocation program, InterCapital compensates
DWR's account executives by paying them, from its own funds, commissions for the
sale of Class D shares, currently a gross sales credit of up to 1.0% of the
amount sold. There is a chargeback of 100% of the amount paid if the Class D
shares are redeemed in the first year and a chargeback of 50% of the amount paid
if the Class D shares are redeemed in the second year after purchase.
InterCapital also compensates DWR's account executives by paying them, from its
own funds, an annual residual commission, currently a residual of up to 0.10% of
the current value of the respective accounts for which they are the account
executives of record (not including accounts of participants in the InterCapital
mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR to
its account executives and DWR's Fund-associated distribution-related expenses,
including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund sales. The distribution fee that
the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in the
case of Class B shares, opportunity costs, such as the gross sales credit and an
assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of the distribution expenses to the Fund, in the case of Class B
shares, such assumed interest (computed at the "broker's call rate") has been
calculated on the gross credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received by
the Distributor upon redemption of shares of the Fund. No other interest charge
is included as a distribution expense in the Distributor's calculation of its
distribution costs for this purpose. The broker's call rate is the interest rate
charged to securities brokers on loans secured by exchange-listed securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through payments at
the end of each month. The amount of each monthly payment may in no event exceed
an amount equal to a payment at the annual rate of 0.25%, in the case of Class
A, and 1.0%, in the case of Class C, of the average net assets of the respective
Class during the month. No interest or other financing charges, if any, incurred
on any distribution expenses on behalf of Class A and Class C will be
reimbursable under the Plan. With respect to Class A, in the case of all
expenses other than expenses representing the service fee, and, with respect to
Class C, in the case of all expenses other than expenses representing a gross
sales credit or a residual to account executives, such amounts shall be
determined at the beginning of each calendar quarter by the Trustees, including,
a majority of the Independent 12b-1 Trustees. Expenses representing the service
fee (for Class A) or a gross sales credit or a residual to account executives
(for Class C) may be reimbursed without prior determination. In the event that
the Distributor proposes that monies shall be reimbursed for other than such
expenses, then in making quarterly determinations of the amounts that may be
reimbursed by the Fund, the Distributor will provide and the Trustees will
review a quarterly budget of projected distribution expenses to be incurred on
behalf of the Fund, together with a report explaining the purposes and
anticipated benefits of incurring such expenses. The Trustees will determine
which particular expenses, and the portions thereof, that may be borne by the
Fund, and in making such a determination shall consider the scope of the
Distributor's commitment to promoting the distribution of the Fund's Class A and
Class C shares.
30
<PAGE>
In the case of Class B shares, at any given time, the expenses of
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses with respect to Class B shares or any
requirement that the Plan be continued from year to year, this excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan and the proceeds of contingent deferred sales
charges paid by investors upon redemption of shares, if for any reason the Plan
is terminated, the Trustees will consider at that time the manner in which to
treat such expenses. Any cumulative expenses incurred, but not yet recovered
through distribution fees or contingent deferred sales charges, may or may not
be recovered through future distribution fees or contingent deferred sales
charges.
No interested person of the Fund, nor any Trustee of the Fund who is not an
interested person of the Fund, as defined in the Act, has any direct or indirect
financial interest in the operation of the Plan except to the extent that DWR,
InterCapital, the Distributor or the Manager or certain of their employees, may
be deemed to have such an interest as a result of benefits derived from the
successful operation of the Plan or as a result of receiving a portion of the
amounts expended thereunder by the Fund.
The Plan may not be amended to increase materially the amount to be spent for
the services described therein without approval of the shareholders of the
affected Class or Classes of the Fund, and all material amendments of the Plan
must also be approved by the Trustees in the manner described above. The Plan
may be terminated at any time, without payment of any penalty, by vote of a
majority of the Independent 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund (as defined in the Act) on not more
than thirty days written notice to any other party to the Plan. So long as the
Plan is in effect, the election and nomination of Independent Trustees shall be
committed to the discretion of the Independent Trustees.
DETERMINATION OF NET ASSET VALUE
The net asset value per share for each Class of shares of the Fund is
determined once daily at 4:00 p.m., New York time (or, on days when the New York
Stock Exchange closes prior to 4 p.m., at such earlier time) on each day that
the New York Stock Exchange is open. The New York Stock Exchange currently
observes the following holidays: New Year's Day, Reverend Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may combine
the current value of shares purchased in separate transactions for purposes of
benefitting from the reduced sales charges available for purchases of shares of
the Fund totalling at least $25,000 in net asset value. For example, if any
person or entity who qualifies for this privilege holds Class A shares of the
Fund and/or other TCW/DW Funds which are multiple class funds ("TCW/DW
Multi-Class Funds") purchased at a price including a front-end sales charge
having a current value of $5,000, and purchases $20,000 of additional shares of
the Fund, the sales charge applicable to the $20,000 purchase would be 4.75% of
the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Distributor or Morgan Stanley Dean Witter Trust FSB (the
"Transfer Agent" or "MSDW Trust") fails to confirm the investor's represented
holdings.
31
<PAGE>
Letter of Intent. As discussed in the Prospectus, reduced sales charges are
available to investors who enter into a written Letter of Intent providing for
the purchase, within a thirteen-month period, of Class A shares of the Fund from
the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment goal
to be achieved by any number of purchases over a thirteen-month period. Each
purchase of Class A shares made during the period will receive the reduced sales
commission applicable to the amount represented by the goal, as if it were a
single purchase. A number of shares equal in value to 5% of the dollar amount of
the Letter of Intent will be held in escrow by the Transfer Agent, in the name
of the shareholder. The initial purchase under a Letter of Intent must be equal
to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the Fund
to sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the thirteen-month period, the investor is required to pay the
difference between the sales charge otherwise applicable to the purchases made
during this period and sales charges actually paid. Such payment may be made
directly to the Distributor or, if not paid, the Distributor is authorized by
the shareholder to liquidate a sufficient number of his or her escrowed shares
to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level, the
sales charge on the entire amount of the purchase that results in passing that
level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation," but
there will be no retroactive reduction of sales charges on previous purchases.
For the purpose of determining whether the investor is entitled to a further
reduced sales charge applicable to purchases at or above a sales charge level
which exceeds the stated goal of a Letter of Intent, the cumulative current net
asset value of any shares owned by the investor in any other TCW/DW Multi-Class
Funds held by the shareholder which were previously purchased at a price
including a front-end sales charge (including shares of the Fund, other TCW/DW
Multi-Class Funds or "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") acquired in exchange for those shares, and including in each case
shares acquired through reinvestment of dividends and distributions) will be
added to the cost or net asset value of shares of the Fund owned by the
investor. However, shares of "Exchange Funds" and the purchase of shares of
other TCW/DW Funds will not be included in determining whether the stated goal
of a Letter of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction. The
5% escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase shares of the Fund pursuant to a Letter of
Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to a
CDSC payable upon most redemptions within six years after purchase. As stated in
the Prospectus, a CDSC will be imposed on any redemption by an investor if after
such redemption the current value of the investor's Class B shares of the Fund
is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years). However, no
CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption, plus (b) the current net
asset value of shares purchased through reinvestment of dividends or
distributions of the Fund or another TCW/DW Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) increases in the net asset value of the
investor's shares above the total amount of payments for the purchase of Fund
shares made during the preceding six (three) years. The CDSC will be paid to the
Distributor.
In determining the applicability of the CDSC to each redemption, the amount
which represents an increase in the net asset value of the investor's shares
above the amount of the total payments for the purchase of shares within the
last six years (or, in the case of shares held by certain Qualified Retirement
Plans, three years) will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount
32
<PAGE>
redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six (three) years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions. A
portion of the amount redeemed which exceeds an amount which represents both
such increase in value and the value of shares purchased more than six years
(or, in the case of shares held by certain Qualified Retirement Plans, three
years) prior to the redemption and/or shares purchased through reinvestment of
dividends or distributions will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number of
years from the time of any payment for the purchase of shares, all payments made
during a month will be aggregated and deemed to have been made on the last day
of the month. The following table sets forth the rates of the CDSC applicable to
most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
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>
The following table sets forth the rates of the CDSC applicable to Class B
shares of the Fund purchased on or after January 26, 1998 by Qualified
Retirement Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------- ------------------------
<S> <C>
First .................... 2.0%
Second ................... 2.0%
Third .................... 1.0%
Fourth and thereafter .... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption is
made of shares held by the investor for the longest period of time within the
applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC of
1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
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SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account is
opened for the investor on the books of the Fund and maintained by the Transfer
Agent. This is an open account in which shares owned by the investor are
credited by the Transfer Agent in lieu of issuance of a share certificate. If a
share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be redeposited
in the account at any time. There is no charge to the investor for issuance of a
certificate. Whenever a shareholder-instituted transaction takes place in the
Shareholder Investment Account, the shareholder will be mailed a confirmation of
the transaction from the Fund or from DWR or other selected broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital 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 applicable Class 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. To assure 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 the other selected
broker-dealer, and which will be forwarded to the shareholder, upon the receipt
of proper instructions. It has been and remains the Fund's policy and practice
that, if checks for dividends or distributions paid in cash remain uncashed, no
interest will accrue on amounts represented by such uncashed checks.
Targeted Dividends. (Service Mark) In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end TCW/DW Fund other
than TCW/DW Emerging Markets Opportunities Trust or in another Class of TCW/DW
Emerging Markets Opportunities Trust. Such investment will be made as described
above for automatic investment in shares of the applicable Class of the Fund, at
the net asset value per share of the selected TCW/DW Fund as of the close of
business on the payment date of the dividend or distribution and will begin to
earn dividends, if any, in the selected TCW/DW Fund the next business day. To
participate in the Targeted Dividends program, shareholders should contact their
DWR or other selected broker-dealer account executive or the Transfer Agent.
Shareholders of the Fund must be shareholders of the selected Class of the
TCW/DW Fund targeted to receive investments from dividends at the time they
enter the Targeted Dividends program. Investors should review the prospectus of
the targeted TCW/DW Fund before entering the program.
EasyInvest. (Service Mark) Shareholders may subscribe to EasyInvest, an
automatic purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Dean Witter money market fund, on a semi-monthly,
monthly or quarterly basis, to the Transfer Agent for investment in shares of
the Fund. Shares purchased through EasyInvest will be added to the shareholder's
existing account at the net asset value calculated the same business day the
transfer of funds is effected (subjected to any applicable sales charges).
Shares of the Dean Witter Money Market Funds redeemed in connection with
EasyInvest are redeemed on the business day preceding the transfer of funds. For
further information or to subscribe to EasyInvest, shareholders should contact
their DWR or other selected broker-dealer account executive or the Transfer
Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution in shares of
the applicable Class at the net asset value per share, without the imposition of
a CDSC upon redemption, by returning the check or the proceeds to the Transfer
Agent within 30 days after the payment date. If the shareholder returns the
proceeds of a dividend or distribution, such funds must be accompanied by a
signed statement indicating that the proceeds constitute a dividend or
distribution to be invested. Such investment will be made at the net asset value
per share next determined after receipt of the check or proceeds by the Transfer
Agent.
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<PAGE>
Systematic Withdrawal Plan. As discussed in the Prospectus, a systematic
withdrawal plan (the "Withdrawal Plan") is available for shareholders who own or
purchase shares of the Fund having a minimum value of $10,000 based upon the
then current net asset value. The Withdrawal Plan provides for monthly or
quarterly (March, June, September and December) checks in any dollar amount, not
less than $25, or in any whole percentage of the account balance, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"). Therefore, any shareholder
participating in the Withdrawal Plan will have sufficient shares redeemed from
his or her account so that the proceeds (net of any applicable CDSC) to the
shareholder will be the designated monthly or quarterly amount.
The Transfer Agent acts as agent for the shareholder in tendering to the Fund
for redemption sufficient full and fractional shares to provide the amount of
the periodic withdrawal payment designated in the application. The shares will
be redeemed at their net asset value determined, at the shareholder's option, on
the tenth or twenty-fifth day (or next following business day) of the relevant
month or quarter and normally a check for the proceeds will be mailed by the
Transfer Agent, or amounts credited to a shareholder's DWR or other selected
broker-dealer brokerage account, within five business days after the date of
redemption. The Withdrawal Plan may be terminated at any time by the Fund.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted.
Each withdrawal constitutes a redemption of shares and any gain or loss
realized must be recognized for federal income tax purposes. Although the
shareholder may make additional investments of $2,500 or more under the
Withdrawal Plan, withdrawals made concurrently with purchases of additional
shares may be inadvisable because of sales charges which may be applicable to
purchases or redemptions of shares (see "Purchase of Fund Shares").
Any shareholder who wishes to have payments under the Withdrawal Plan made to
a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her DWR or other selected broker-dealer account executive or by written
notification to the Transfer Agent. In addition, the party and/or the address to
which checks are mailed may be changed by written notification to the Transfer
Agent, with signature guarantees required in the manner described above. The
shareholder may also terminate the Withdrawal Plan at any time by written notice
to the Transfer Agent. In the event of such termination, the account will be
continued as a regular shareholder investment account. The shareholder may also
redeem all or part of the shares held in the Withdrawal Plan account (see
"Repurchases and Redemptions" in the Prospectus) at any time. Shareholders
wishing to enroll in the Withdrawal Plan should contact their account executive
or the Transfer Agent.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to TCW/DW Emerging Markets Opportunities Trust, and
indicating the selected Class, directly to the Fund's Transfer Agent. In the
case of Class A shares, after deduction of any applicable sales charge, the
balance will be applied to the purchase of Fund shares, and, in the case of
shares of the other Classes, the entire amount will be applied to the purchase
of Fund shares, at the net asset value per share next computed after receipt of
the check or purchase payment by the Transfer Agent. The shares so purchased
will be credited to the investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its shareholders
an Exchange Privilege whereby shareholders of each Class of shares of the Fund
may exchange their shares for shares of the same Class of shares of any other
TCW/DW Multi-Class Fund without the imposition of any exchange fee. Shares may
also be exchanged for TCW/DW North American Government Income Trust and five
money market funds for which InterCapital serves as investment manager (the
foregoing six funds are hereinafter collectively referred to as the
35
<PAGE>
"Exchange Funds"). Exchanges may be made after the shares of the fund acquired
by purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange or
dividend reinvestment. An exchange will be treated for federal income tax
purposes the same as a repurchase or redemption of shares, on which the
shareholder may realize a capital gain or loss.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or
InterCapital, except for other TCW/DW Funds and the five money market funds
listed in the Prospectus.
Any new account established through the Exchange Privilege will have the same
registration and cash dividend or dividend reinvestment plan as the present
account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
Any shares held in certificate form cannot be exchanged but must be forwarded
to the Transfer Agent and deposited into the shareholder's account before being
eligible for exchange. (Certificates mailed in for deposit should not be
endorsed.)
As described below, and in the Prospectus under the caption "Purchase of Fund
Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a TCW/DW
Multi-Class Fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund, they
will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a TCW/DW Multi-Class Fund. However, in the case of
shares exchanged into an Exchange Fund, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the CDSC)
will be given in an amount equal to the Exchange Fund 12b-1 distribution fees
which are attributable to those shares. Shareholders acquiring shares of an
Exchange Fund pursuant to this exchange privilege may exchange those shares back
into a TCW/DW Multi-Class Fund from the Exchange Fund, with no charge being
imposed on such exchange. The holding period previously frozen when shares were
first exchanged for shares of an Exchange Fund resumes on the last day of the
month in which shares of a TCW/DW Multi-Class Fund are reacquired. A CDSC is
imposed only upon an ultimate redemption, based upon the time (calculated as
described above) the shareholder was invested in a TCW/DW Multi-Class Fund.
When shares initially purchased in a TCW/DW Multi-Class Fund are exchanged
for shares of a TCW/DW Multi-Class Fund or shares of an Exchange Fund, the date
of purchase of the shares of the fund exchanged into, for purposes of the CDSC
upon redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments between
funds for purposes of the CDSC the amount which represents the current net asset
value of shares at the time of the exchange which were (i) purchased more than
one, three or six years (depending on the CDSC schedule applicable to the
shares) prior to the exchange and (ii) originally acquired through reinvestment
of dividends or distributions (all such shares called "Free Shares") will be
exchanged first. After an exchange, all dividends earned on shares in the
Exchange Fund will be considered Free Shares. If the exchanged amount exceeds
the value of such Free Shares, an exchange is made, on a block-by-block basis,
of non-Free Shares held for the longest period of time. Shares equal to any
appreciation in the value of non-Free Shares exchanged will be treated as Free
Shares, and the amount of the purchase payments for the non-Free Shares of the
fund exchanged into will be equal to the lesser of (a) the purchase payments
for, or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value of
the block (up to the amount of the exchange) will be treated as Free Shares and
exchanged first, and the purchase payment for that block will be allocated on a
pro rata basis between the non-Free Shares of that block to be retained and the
non-Free Shares to be exchanged. The prorated amount of such purchase payment
attributable to the retained non-Free Shares will remain as the purchase payment
for such shares, and the amount of purchase payment for the exchanged non-Free
Shares will be equal to the lesser of (a) the prorated amount of the purchase
36
<PAGE>
payment for, or (b) the current net asset value of, those exchanged non-Free
Shares. Based upon the procedures described in the Prospectus under the caption
"Purchase of Fund Shares," any applicable CDSC will be imposed upon the ultimate
redemption of shares of any fund, regardless of the number of exchanges since
those shares were originally purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, 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 selected
broker-dealer.
The Distributor and any selected broker-dealer have authorized and appointed
the Transfer Agent to act as their agent in connection with the application of
proceeds of any redemption of Fund shares to the purchase of shares of any other
fund and the general administration of the Exchange Privilege. No commission or
discounts will be paid to the Distributor or any selected broker-dealer for any
transactions pursuant to this Exchange Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Dean Witter Liquid Asset
Fund Inc., Dean Witter Tax-Free Daily Income Trust, Dean Witter New York
Municipal Money Market Trust and Dean Witter California Tax-Free Daily Income
Trust, although those funds may, at their discretion, accept initial investments
of as low as $1,000. The minimum initial investment for the Exchange Privilege
account of each Class for Dean Witter U.S. Government Money Market Trust and for
all TCW/DW Funds is $1,000.) Upon exchange into an Exchange Fund, the shares of
that fund will be held in a special Exchange Privilege Account separately from
accounts of those shareholders who have acquired their shares directly from that
fund. As a result, certain services normally available to shareholders of money
market funds, including the check writing feature, will not be available for
funds held in that account.
The Fund, each of the other TCW/DW Funds and each of the money market funds
may limit the number of times this Exchange Privilege may be exercised by any
investor within a specified period of time. Also, the Exchange Privilege may be
terminated or revised at any time by the Fund and/or any of the funds for which
shares of the Fund have been exchanged, upon such notice as may be required by
applicable regulatory agencies (presently sixty days for termination or material
revision), provided that six months prior written notice of termination will be
given to the shareholders who hold shares of Exchange Funds pursuant to this
Exchange Privilege, and provided further that the Exchange Privilege may be
terminated or materially revised without notice at times (a) when the New York
Stock Exchange is closed for other than customary weekends and holidays, (b)
when trading on that Exchange is restricted, (c) when an emergency exists as a
result of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, (d) during any other period when the Securities and
Exchange Commission by order so permits (provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist) or (e) if the Fund would be
unable to invest amounts effectively in accordance with its investment
objective, policies and restrictions.
For further information regarding the Exchange Privilege, shareholders should
contact their DWR or other selected broker-dealer account executive or the
Transfer Agent.
REPURCHASES AND REDEMPTIONS
- -----------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of each Class of the Fund can
be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer Agent
at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are held by
the shareholder, the shares may be redeemed by surrendering the certificates
with a written request for redemption. The share certificate, or an accompanying
stock power, and the request for redemption, must be signed by the shareholder
or shareholders exactly as the shares are registered. Each request for
redemption, whether or not accompanied by a share certificate, must be sent to
the Fund's Transfer Agent, which will redeem the shares at their net asset value
next computed (see "Purchase of Fund Shares") after it receives the
37
<PAGE>
request, and certificate, if any, in good order. Any redemption request received
after such computation will be redeemed at the next determined net asset value.
The term "good order" means that the share certificate, if any, and request for
redemption are properly signed, accompanied by any documentation required by the
Transfer Agent, and bear signature guarantees when required by the Fund or the
Transfer Agent. If redemption is requested by a corporation, partnership, trust
or fiduciary, the Transfer Agent may require that written evidence of authority
acceptable to the Transfer Agent be submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other than
the Distributor or a selected broker-dealer for the account of the shareholder),
partnership, trust or fiduciary, or sent to the shareholder at an address other
than the registered address, signatures must be guaranteed by an eligible
guarantor acceptable to the Transfer Agent (shareholders should contact the
Transfer Agent for a determination as to whether a particular institution is
such an eligible guarantor). A stock power may be obtained from any dealer or
commercial bank. The Fund may change the signature guarantee requirements from
time to time upon notice to shareholders, which may be by means of a revised
prospectus.
Repurchase. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by DWR
and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
Payment for Shares Repurchased or Redeemed. As discussed in the Prospectus,
payment for shares of any Class presented for repurchase or redemption will be
made by check within seven days after receipt by the Transfer Agent of the
certificate and/or written request in good order. Such payment may be postponed
or the right of redemption suspended at times (a) when the New York Stock
Exchange is closed for other than customary weekends and holidays, (b) when
trading on that Exchange is restricted, (c) when an emergency exists as a result
of which disposal by the Fund of securities owned by it is not reasonably
practicable or it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (d) during any other period when the Securities
and Exchange Commission by order so permits; provided that applicable rules and
regulations of the Securities and Exchange Commission shall govern as to whether
the conditions prescribed in (b) or (c) exist. If the shares to be redeemed have
recently been purchased by check, 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). It has been and remains the Fund's policy and
practice that, if checks for redemption proceeds remain uncashed, no interest
will accrue on amounts represented by such uncashed checks. Shareholders
maintaining margin accounts with DWR or another selected broker-dealer are
referred to their account executive regarding restrictions on redemption of
shares of the Fund pledged in the margin account.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the length
of time shares subject to the charge have been held), any transfer involving
less than all of the shares in an account will be made on a pro rata basis (that
is, by transferring shares in the same proportion that the transferred shares
bear to the total shares in the account immediately prior to the transfer). The
transferred shares will continue to be subject to any applicable CDSC as if they
had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within 35 days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and reinstatement
is made in shares of the Fund, some or all of the loss, depending on the amount
reinstated, will not be allowed as a deduction for federal income tax purposes,
but will be applied to adjust the cost basis of the shares acquired upon
reinstatement.
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<PAGE>
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus under "Dividends, Distributions and Taxes,"
the Fund will determine either to distribute or to retain all or part of any net
long-term capital gains in any year for reinvestment. If any such gains are
retained, the Fund will pay federal income tax thereon, and shareholders at
year-end will be able to claim their share of the tax paid by the Fund as a
credit against their individual federal income tax. Shareholders will increase
their tax basis of Fund shares owned by an amount equal, under current law, to
65% of the amount of undistributed capital gains.
The Fund, however, intends to distribute substantially all of its net
investment income and net capital gains to shareholders and otherwise qualify as
a regulated investment company under Subchapter M of the Internal Revenue Code.
It is not expected that the Fund will be required to pay any federal income tax.
Shareholders will normally have to pay federal income taxes, and any state
income taxes, on the dividends and distributions they receive from the Fund.
Such dividends and distributions, to the extent that they are derived from the
net investment income or net short-term capital gains, are taxable to the
shareholder as ordinary income regardless of whether the shareholder receives
such payments in additional shares or in cash. Any dividends declared in the
last quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior calendar
year. 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 per dividend, generally, must be met by the Fund
and the shareholder.
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 twelve
months. Gains or losses on the sale of securities with a tax holding period of
twelve months or less will be short-term capital gains or losses.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax purposes,
including information as to the portion taxable as ordinary income, the portion
taxable as mid-term and long-term capital gains, and the amount of dividends
eligible for the Federal dividends received deduction available to corporations.
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.
Under current federal tax law, the Fund will receive net investment income in
the form of interest by virtue of holding Treasury bills, notes and bonds, and
will recognize income attributable to it from holding zero coupon Treasury
securities. 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
payment in cash on the security during the year. As an investment company, the
Fund must pay out substantially all of its net investment income each year.
Accordingly, the Fund, to the extent it invests in zero coupon Treasury
securities, may be required to pay out as an income distribution each year an
amount which is greater than the total amount of cash receipts of interest the
Fund actually received. 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
Investment Manager 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.
Any dividend or capital gains distribution received by a shareholder from any
investment company will have the effect of reducing the net asset value of the
shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and some
portion of the dividends are subject to federal income taxes. If the net asset
value of the shares should be reduced below a shareholder's cost as a result of
the payment of dividends or the distribution of realized long-term capital
gains, such payment or distribution would be in part a return of capital 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.
Shareholders are urged to consult their attorneys or tax advisers regarding
specific questions as to federal, state or local taxes.
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<PAGE>
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, 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. Prior to
January 26, 1998, the Fund operated as a closed-end investment company.
Accordingly, the performance information below may not be indicative of the
Fund's performance as an open-end investment company. The historical performance
of the Class A shares of the Fund has been restated to reflect the front-end
sales charge of such Class A shares in effect as of January 26, 1998. Class A
shares are also subject to a 0.25% 12b-1 fee which is not reflected in the
restated historical performance. Including the 12b-1 fee would have the effect
of lowering the Fund's performance.
The Fund's "average annual total return" represents an annualization of the
Fund's total return over a particular period and is computed by finding the
annual percentage rate which will result in the ending redeemable value of a
hypothetical $1,000 investment made at the beginning of a one, five or ten year
period, or for the period from the date of commencement of the Fund's
operations, if shorter than any of the foregoing. The ending redeemable value is
reduced by any CDSC at the end of the one, five or ten year or other period. For
the purpose of this calculation, it is assumed that all dividends and
distributions are reinvested. The formula for computing the average annual total
return involves a percentage obtained by dividing the ending redeemable value by
the amount of the initial investment, taking a root of the quotient (where the
root is equivalent to the number of years in the period) and subtracting 1 from
the result. The restated average annual total returns of Class A for the fiscal
year ended January 31, 1998 and for the period from March 30, 1994 (commencement
of operations) through January 31, 1998 were -17.03% and -3.16%, respectively.
For periods of less than one year, the Fund quotes its total return on a
non-annualized basis. Accordingly, the Fund may compute its aggregate total
return for each of Class B, Class C and Class D for specified periods by
determining the aggregate percentage rate which will result in the ending value
of a hypothetical $1,000 investment made at the beginning of the period. For the
purpose of this calculation, it is assumed that all dividends and distributions
are reinvested. The formula for computing aggregate total return involves a
percentage obtained by dividing the ending value by the initial $1,000
investment and subtracting 1 from the result. The ending redeemable value is
reduced by any CDSC at the end of the period. Based on the foregoing
calculations, the total returns for the period January 26, 1998 through January
31, 1998 were -1.92%, 2.08% and 3.08% for Class B, Class C and Class D,
respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, year-by-year or
other types of total return figures. Such calculations may or may not reflect
the imposition of the maximum front-end sales charge for Class A or the
deduction of the CDSC for each of Class B and Class C which, if reflected, would
reduce the performance quoted. For example, the average annual total return of
the Fund may be calculated in the manner described above, but without deduction
for any applicable sales charge. Based on this calculation, the restated average
annual total returns of Class A for the fiscal year ended January 31, 1998 and
for the period from March 30, 1994 through January 31, 1998 were -12.43% and
- -1.79%, 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 the 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 of Class A for the fiscal year ended January 31,
1998 and for the period from March 30, 1994 through January 31, 1998 were
- -12.43% and -6.71%, respectively. Based on the foregoing calculations, the total
returns for Class B, Class C and Class D for the period January 26, 1998 through
January 31, 1998 were 3.08%, 3.08% and 3.08%, 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
$9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 or $100,000 adjusted to reflect the front-end sales
40
<PAGE>
charge of such Class A shares in effect as of the date of this Prospectus), 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, 1998:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ---------------------------
CLASS DATE $10,000 $50,000 $100,000
- ----- ---- ------- ------- --------
<S> <C> <C> <C> <C>
Class A... 3/30/94 $ 8,839 $44,779 $ 90,491
Class B... 1/26/98 10,308 51,540 103,080
Class C... 1/26/98 10,308 51,540 103,080
Class D... 1/26/98 10,308 51,540 103,080
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES
- -----------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full share
held. The Trustees themselves have the power to alter the number and the terms
of office of the Trustees, and they may at any time lengthen their own terms or
make their terms of unlimited duration and appoint their own successors,
provided that always at least a majority of the Trustees has been elected by the
shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right to
remove the Trustees following a meeting called for that purpose requested in
writing by the record holders of not less than ten percent of the Fund's
outstanding shares. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (which would be used to distinguish among the rights of
different categories of shareholders, as might be required by future regulations
or other unforeseen circumstances). The Trustees have not authorized any such
additional series or classes of shares other than as set forth in the
Prospectus.
The Declaration of Trust provides that no Trustee, officer, employee or agent
of the Fund is liable to the Fund or to a shareholder, nor is any Trustee,
officer, employee or agent liable to any third persons in connection with the
affairs of the Fund, except as such liability may arise from his own bad faith,
willful misfeasance, gross negligence, or reckless disregard of his duties. It
also provides that all third persons shall look solely to the Fund's property
for satisfaction of claims arising in connection with the affairs of the Fund.
With the exceptions stated, the Declaration of Trust provides that a Trustee,
officer, employee or agent is entitled to be indemnified against all liabilities
in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of beneficial
interest. The Fund shall be of unlimited duration subject to the provisions of
the Declaration of Trust concerning termination by action of the shareholders.
CUSTODIAN AND TRANSFER AGENT
- -----------------------------------------------------------------------------
The Chase Manhattan Bank, One Chase Plaza, New York, New York 10005 is the
Custodian of the Fund's assets. The Chase Manhattan Bank has contracted with
various foreign banks and depositaries to hold securities on behalf of the Fund.
Any of the Fund's cash balances with the Custodian in excess of $100,000 are
unprotected by federal deposit insurance. Such balances may, at time, be
substantial.
Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), Harborside Financial
Center, Plaza Two, Jersey City, New Jersey 07311 is the Transfer Agent of the
Fund's shares and Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various investment
plans described herein. MSDW Trust is an affiliate of Dean Witter Services
Company Inc., the Fund's Manager, and of Dean Witter Distributors Inc., the
Fund's Distributor. As Transfer Agent and Dividend Disbursing Agent, MSDW
Trust's responsibilities include maintaining shareholder accounts, disbursing
cash dividends and reinvesting
41
<PAGE>
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 MSDW Trust receives a per
shareholder account fee.
INDEPENDENT ACCOUNTANTS
- -----------------------------------------------------------------------------
Price Waterhouse LLP serves as the independent accountants of the Fund. The
independent accountants are responsible for auditing the annual financial
statements of the Fund.
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports showing
the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on January 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- -----------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the Manager,
is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The annual financial statements of the Fund for the year ended January 31,
1998 included in this Statement of Additional Information and incorporated by
reference into the Prospectus have been so included and incorporated in reliance
on the report of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
42
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998
<TABLE>
<CAPTION>
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------ --------------
COMMON AND PREFERRED STOCKS
<S> <C> <C>
AND CONVERTIBLE BONDS (83.3%)
ARGENTINA (5.7%)
Banking
25,402 Banco de Galicia y Buenos Aires S.A. de C.V. (ADR) ............. $ 557,256
--------------
Brewery
48,040 Quilmes Industrial S.A. (ADR) .................................. 603,502
--------------
Investment Companies
191,488 CEI Citicorp Holdings S.A. ..................................... 747,080
--------------
Multi-Industry
133,147 Perez Companc S.A. (Class B) ................................... 875,100
--------------
Oil & Gas
101,090 Yacimentos Petroliferos Fiscales S.A. (ADR) .................... 3,076,927
--------------
Steel
212,901 Siderca S.A. (Class A) ......................................... 485,594
--------------
Telecommunications
25,820 Telecom Argentina Stet -France Telecom S.A. (ADR) .............. 810,102
72,030 Telefonica de Argentina S.A. (ADR) ............................. 2,494,039
--------------
3,304,141
--------------
TOTAL ARGENTINA ................................................ 9,649,600
--------------
BRAZIL (14.3%)
Banking
110,000 Banco Itau S.A. (Pref.) ........................................ 60,045
13,260 Uniao de Bancos Brasileiros S.A. (GDR) ......................... 397,800
--------------
457,845
--------------
Brewery
13,360 Companhia Cervejaria Brahma (ADR) .............................. 186,205
1,718,202 Companhia Cervejaria Brahma (Pref.) + .......................... 1,178,108
--------------
1,364,313
--------------
Electric
40,630 Companhia Paranaense de Energia -Copel (ADR) + ................. 487,560
1,458,000 Empresa Nacional de Comercio Redito e Participacoes S.A. ....... 4,739
--------------
492,299
--------------
Financial Services
1,145,000 Itausa Investimentos Itau S.A. (Pref.) + ....................... $ 713,713
--------------
Metals & Mining
128,340 Companhia Vale do Rio Doce S.A. (Debentures) ................... --
71,140 Companhia Vale do Rio Doce S.A. (Pref.) + ...................... 1,374,655
--------------
1,374,655
--------------
Oil & Gas
9,562,000 Petroleo Brasileiro S.A. (Pref.) + ............................. 2,043,526
--------------
Telecommunications
235,106 CIA Riograndense Telecomunicacoes S.A. + ....................... 243,899
58,050 Telecomunicacoes Brasileiras S.A. (ADR) + ...................... 6,443,550
23,973,593 Telecomunicacoes Brasileiras S.A. (Pref.) + .................... 2,625,781
Telecomunicacoes Brasileiras
17,015,000 S.A. + ......................................................... 1,560,592
3,064,994 Telecomunicacoes de Sao Paulo S.A. (Pref.) + ................... 887,047
--------------
11,760,869
--------------
Utilities
2,151,000 Companhia de Saneamento Basico do Estado de Sao Paulo + ........ 415,643
--------------
<PAGE>
Utilities -Electric
6,342,830 Centrais Electricas Brasileiras S.A. + ......................... 273,933
17,138,770 Centrais Electricas Brasileiras S.A. (Pref.) + ................. 770,711
88,800 Companhia Energetica de Minas Gerais S.A. (Pref.)(ADR) + ....... 3,474,300
2,791 Companhia Energetica de Minas Gerais S.A. (ADR) -144A** ........ 109,198
9,977,342 Companhia Energetica de Minas Gerais S.A. (Pref.) .............. 394,474
2,698,800 Light Participacoes S.A. + ..................................... 504,673
--------------
5,527,289
--------------
TOTAL BRAZIL ................................................... 24,150,152
--------------
CHILE (3.3%)
Food, Beverage, Tobacco, &
Household Products
81,820 Embotelladora Andina S.A. (Series A)(ADR) ...................... 1,636,400
SEE NOTES TO FINANCIAL STATEMENTS
43
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------ --------------
18,300 Embotelladora Andina S.A. (Series B)(ADR) ...................... $ 322,537
19,300 Vina Concha Y Toro (ADR) ....................................... 559,700
--------------
2,518,637
--------------
Investment Companies
18,615 Genesis Chile Fund Ltd. ........................................ 607,314
--------------
Telecommunications
31,304 Compania de Telecommunicaciones de Chile S.A. (ADR) ............ 753,253
--------------
Utilities -Electric
19,500 Chilectra S.A. (ADR) -144A** ................................... 470,438
48,410 Enersis S.A. (ADR) ............................................. 1,279,839
--------------
1,750,277
--------------
TOTAL CHILE .................................................... 5,629,481
--------------
CHINA (0.6%)
Air Transport
1,963,000 China Southern Airlines Co., Ltd. (Class H) .................... 324,924
--------------
Machinery
1,040,000 First Tractor Co., Ltd. (Class H) .............................. 379,930
--------------
Oil Refineries
1,391,000 Zhenhai Refining & Chemical Co. (Class H) ...................... 373,248
--------------
TOTAL CHINA .................................................... 1,078,102
--------------
COLOMBIA (1.7%)
Banking
80,250 Banco de Bogota ................................................ 370,472
31,365 Banco Industrial Colombiano S.A. (ADR) ......................... 374,420
--------------
744,892
--------------
Financial Services
38,912 Compania Suramericana de Seguros S.A. .......................... 623,032
--------------
Food & Beverages
97,701 Bavaria S.A. ................................................... 662,108
195,701 Valores Bavaria S.A. ........................................... 801,721
--------------
1,463,829
--------------
Retail
45,000 Almacenes Exito S.A. ........................................... 123,995
--------------
TOTAL COLOMBIA ................................................. 2,955,748
--------------
EGYPT (1.2%)
Banking
65,200 Commercial International Bank (GDR)* -144A** ................... $1,164,635
18,000 MISR International Bank S.A.E. (GDR)* -144A** .................. 227,250
--------------
1,391,885
--------------
Manufacturing
34,600 Suez Cement Co. (GDR) -144A** ................................... 628,422
--------------
TOTAL EGYPT .................................................... 2,020,307
--------------
HONG KONG (0.8%)
Electric
1,595,000 Beijing Datang Power Generation Co., Ltd. ...................... 758,002
--------------
Telecommunications
468,000 China Telecom Ltd. ............................................. 662,692
--------------
TOTAL HONG KONG ................................................ 1,420,694
--------------
HUNGARY (2.4%)
Hotels
15,316 Pannonia Hotels ................................................ 217,118
--------------
Oil -Exploration & Production
79,050 MOL Magyar Olaj-es Gazipari RT (GDR) -144A** ................... 1,916,962
--------------
<PAGE>
Pharmaceuticals
3,397 EGIS RT ........................................................ 195,887
7,789 Gedeon Richter RT (GDR)* -144A** ............................... 753,586
--------------
949,473
--------------
Telecommunications
147,500 Magyar Tavkozlesi RT ........................................... 696,035
12,850 Magyar Tavkozlesi RT (ADR) ..................................... 301,975
--------------
998,010
--------------
TOTAL HUNGARY .................................................. 4,081,563
--------------
INDIA (7.0%)
Banking
115,800 State Bank of India (GDR) ...................................... 1,765,950
--------------
Diversified Manufacturing
240,000 Reliance Industries Ltd. (GDR) -144A** ......................... 1,740,000
--------------
Financial Services
64,950 Hindalco Industries Ltd. (GDR) ................................. 998,606
--------------
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------ --------------
Industrials
65,000 Mahindra & Mahindra Ltd. (GDR) .................................. $ 479,375
--------------
Pharmaceuticals
64,000 Ranbaxy Laboratories Ltd. (GDR) ................................. 1,492,000
--------------
Telecommunications
117,200 Mahanagar Telephone Nigam (GDR) ................................ 1,765,355
109,500 Videsh Sanchar Nigam Ltd. (GDR) ................................ 1,259,250
--------------
3,024,605
--------------
Utilities -Electric
139,600 BSES Ltd. (GDR) ................................................ 2,347,374
--------------
TOTAL INDIA .................................................... 11,847,910
--------------
KAZAKHSTAN (0.2%)
Banking
21,200 Kazkommertsbank Co. (GDR) -144A** .............................. 312,855
--------------
MEXICO (15.2%)
Building Materials
107,500 Apasco S.A. de C.V. ............................................ 698,877
678,600 Cemex S.A. de C.V. (B Shares) .................................. 2,923,755
--------------
3,622,632
--------------
Conglomerates
159,280 DESC S.A. de C.V. (Series B) ................................... 1,157,887
Grupo Carso S.A. de C.V.
117,700 (Series A1) .................................................... 690,061
--------------
1,847,948
--------------
Consumer Products
775,250 Kimberly-Clark de Mexico S.A. de C.V. (A Shares) ............... 3,440,974
--------------
Financial Services
153,618 Grupo Financiero Inbursa S.A. de C.V. (B Shares) ............... 488,454
--------------
Food, Beverage, Tobacco, &
Household Products
254,300 Fomento Economico Mexicano S.A. de C.V. (B Shares) ............. 1,650,245
66,800 Grupo Industrial Bimbo S.A. de C.V. (Series A) ................. 655,366
Grupo Modelo S.A. de C.V.
89,100 (Series C) ..................................................... 726,702
13,940 Panamerican Beverages, Inc. (Class A) .......................... $ 453,050
--------------
3,485,363
--------------
Media Group
80,890 Grupo Televisa S.A. de C.V. (GDR) ............................... 2,603,647
28,700 TV Azteca S.A. de C.V. (ADR) ................................... 574,000
--------------
3,177,647
--------------
Retail
1,758,600 Cifra S.A. de C.V. (Series C) .................................. 2,972,574
287,033 Cifra S.A. de C.V. (Series V) .................................. 521,817
119,300 Organizacion Soriana S.A. de C.V. (Series B) ................... 425,870
--------------
3,920,261
--------------
Steel & Iron
30,550 Tubos de Acero de Mexico S.A. de C.V. (ADR) .................... 507,894
--------------
Telecommunications
107,795 Telefonos de Mexico S.A. de C.V. (Series L)(ADR) ............... 5,308,904
--------------
TOTAL MEXICO ................................................... 25,800,077
--------------
PAKISTAN (0.0%)
Banking
11 Muslim Commercial Bank Ltd. .................................... 8
--------------
<PAGE>
PERU (1.5%)
Brewers
Union de Cervecerias Peruanas Backus & Johnston S.A.
578,381 (T Shares) ..................................................... 495,874
--------------
Building Materials
317,838 Cementos Lima, S.A. ............................................ 627,432
--------------
Financial Services
31,256 Credicorp Ltd. ................................................. 543,073
--------------
Telecommunications
33,350 CPT Telefonica del Peru S.A. (ADR) ............................. 654,494
CPT Telefonica del Peru S.A.
70,006 (B Shares) ..................................................... 137,440
--------------
791,934
--------------
TOTAL PERU ..................................................... 2,458,313
--------------
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------ --------------
PHILIPPINES (1.5%)
Building & Construction
$ 2,150K Bacnotan Consolidated Industries 5.50% due 06/21/04 (Conv.) .... $ 752,500
--------------
Telecommunications
57,450 Philippine Long Distance Telephone Co. ......................... 1,409,278
--------------
Utilities -Electric
103,038 Manila Electric Co. (B Shares) ................................. 326,529
--------------
TOTAL PHILIPPINES .............................................. 2,488,307
--------------
POLAND (2.9%)
Banking
92,000 Bank Rozwoju Eksportu S.A. ..................................... 1,985,892
--------------
Brewery
11,250 Zaklady Piwowarskie w Zywcu S.A. ............................... 1,098,335
--------------
Investment Companies
10,000 Powszechne Swiadectwo Udzialowe ................................ 330,135
--------------
Publishing
5,692 International Trading & Investment Co. ......................... 1,423,000
--------------
TOTAL POLAND ................................................... 4,837,362
--------------
RUSSIA (3.3%)
Banking
18,000 Bank Vozrozhdeniye -(ADR) ...................................... 108,000
--------------
Electric -Major
32,000 Unified Energy Systems (BRIDGE) Certificate (ADR) .............. 692,000
16,076 Unified Energy Systems (BRIDGE) Certificate (ADR) -144A** ...... 773,529
--------------
1,465,529
--------------
Gas
67,000 Gazprom (ADR) -144A** .......................................... 1,239,500
--------------
Oil & Gas
20,546 Lukoil Holding Co. (ADR) -144A** ............................... 1,376,582
193,500 Surgutneftegaz (ADR) ........................................... 1,112,625
--------------
2,489,207
--------------
Utilities -Electric
3,500 AO Tatneft (ADR) ............................................... $ 329,000
--------------
TOTAL RUSSIA ................................................... 5,631,236
--------------
SOUTH AFRICA (3.2%)
Banking
30,880 Nedcor Ltd. .................................................... 768,947
--------------
Conglomerates
38,543 Johnnies Industrial Corp., Ltd. ................................ 437,678
New Africa Investments Ltd.
753,100 (N Shares) ..................................................... 768,142
--------------
1,205,820
--------------
Life Insurance
20,270 Liberty Life Association of Africa Ltd. ........................ 535,985
--------------
Metals & Mining
1,100 Vaal Reefs Exploration & Mining Co., Ltd. ...................... 51,526
--------------
Multi-Industry
106,172 Barlow Ltd. .................................................... 968,821
130,681 Rembrandt Group Ltd. ........................................... 993,722
--------------
1,962,543
--------------
Oil & Gas
91,074 Sasol Ltd. ..................................................... 831,051
--------------
TOTAL SOUTH AFRICA ............................................. 5,355,872
--------------
<PAGE>
SOUTH KOREA (3.1%)
Electronic & Electrical Equipment
31,000 Samsung Electronics (GDR) -144A** .............................. 980,375
30,000 Samsung Electronics Co. ........................................ 1,715,131
--------------
2,695,506
--------------
Insurance
5,660 Samsung Fire & Marine Insurance ................................ 1,560,224
--------------
Steel & Iron
46,000 Pohang Iron & Steel Co., Ltd. (ADR) ............................ 1,089,625
--------------
TOTAL SOUTH KOREA .............................................. 5,345,355
--------------
TAIWAN (5.0%)
Computers -Peripheral Equipment
79,500 Asustek Computer Inc. (GDR) .................................... 1,545,281
--------------
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PORTFOLIO OF INVESTMENTS January 31, 1998, continued
SHARES/PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------ --------------
Electronics -Semiconductors/Components
31,000 Siliconware Precision Industries Co. (GDR) ..................... $ 449,113
73,000 Taiwan Semiconductor Manufacturing Co., Ltd. (ADR) ............. 1,733,750
--------------
2,182,863
--------------
Investment Companies
491,200 ROC Taiwan Fund ................................................ 4,727,800
--------------
TOTAL TAIWAN ................................................... 8,455,944
--------------
THAILAND (1.8%)
Banking
549,600 Thai Farmers Bank Public Co., Ltd. (Alien Market) .............. 1,741,617
--------------
Electric
487,200 Electricity Generating Public Co., Ltd. ........................ 1,349,738
--------------
TOTAL THAILAND ................................................. 3,091,355
--------------
TURKEY (4.2%)
Banking
9,585,000 Akbank T.A.S. .................................................. 778,288
13,956,000 Turkiye Garanti Bankasi A.S. ................................... 638,426
--------------
1,416,714
--------------
Beverages
5,810,000 Efes Sinai Yatirim Holding A.S. ................................ 897,015
--------------
Building Materials
11,545,500 Cimsa Cimento Sanayi Ve Ticaret A.S. ........................... 580,972
--------------
Cement
1,688,000 Baticim Bati Anadolu Cimento Sanayii A.S. ...................... 185,325
--------------
Electronics
4,623,600 Netas Northern Elektrik Telekomunikasyon A.S. .................. 1,607,473
--------------
Housewares
22,663,461 Trakya Cam Sanayii A.S. ........................................ 1,321,863
--------------
Property -Casualty Insurance
17,450,000 Aksigorta A.S. ................................................. 1,037,740
--------------
TOTAL TURKEY ................................................... 7,047,102
--------------
UZBEKISTAN (0.4%)
Investment Companies
80,000 Central Asian Investment Company Ltd. .......................... 600,000
--------------
VENEZUELA (4.0%)
Telecommunications
147,100 Compania Anonima Nacional Telefonos de Venezuela (ADR) ......... 5,405,925
--------------
Utilities -Electric
1,475,576 C.A. la Electridad de Caracas S.A.C.A. ......................... 1,416,738
--------------
TOTAL VENEZUELA ................................................ 6,822,663
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL COMMON AND PREFERRED STOCKS
AND CONVERTIBLE BONDS
(Identified Cost $141,745,664)(a) . 83.3% 141,080,006
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES ........................ 16.7 28,228,415
-------- -------------
NET ASSETS ......................... 100.0% $169,308,421
======== =============
</TABLE>
- ------------
ADR American Depository Receipt.
GDR Global Depository Receipt.
K In thousands.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
+ Some or all of these securities are segregated in connection with
open forward foreign currency contracts.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$15,986,078 and the aggregate gross unrealized depreciation is
$16,651,736, resulting in net unrealized depreciation of $665,658.
FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JANUARY 31, 1998:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACTS IN DELIVERY APPRECIATION
TO RECEIVE EXCHANGE FOR DATE (DEPRECIATION)
- ---------------------- ---------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$ 429,641 MXN 3,647,654 02/02/98 $ (1,523)
TRL 196,087,500,000 $ 895,786 02/06/98 1,229
$ 6,345,000 BRL 7,614,000 04/29/98 (208,624)
BRL 4,712,000 $ 4,000,000 04/29/98 55,776
$ 6,345,000 BRL 7,614,000 04/30/98 (206,368)
--------------
Net unrealized depreciation ................... $(359,510)
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
47
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
SUMMARY OF INVESTMENTS January 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Air Transport ............. $ 324,924 0.2%
Banking ................... 11,251,861 6.7
Beverages ................. 897,015 0.5
Brewers ................... 495,874 0.3
Brewery ................... 3,066,150 1.8
Building & Construction .. 752,500 0.4
Building Materials ........ 4,831,036 2.9
Cement .................... 185,325 0.1
Computer -Peripheral
Equipment ................ 1,545,281 0.9
Conglomerates ............. 3,053,768 1.8
Consumer Products ......... 3,440,974 2.0
Diversified Manufacturing 1,740,000 1.0
Electric .................. 2,600,039 1.5
Electric -Major ........... 1,465,529 0.9
Electronic & Electrical
Equipment ................ 2,695,506 1.6
Electronics ............... 1,607,473 1.0
Electronics
-Semiconductors/Components 2,182,863 1.3
Financial Services ........ 3,366,878 2.0
Food, Beverage, Tobacco &
Household Products ....... 6,004,000 3.5
Food & Beverages .......... 1,463,829 0.9
Gas ....................... 1,239,500 0.7
Hotels .................... 217,118 0.1
Housewares ................ 1,321,863 0.8
Industrials ............... 479,375 0.3
Insurance ................. 1,560,224 0.9
Investment Companies ..... 7,012,329 4.1
Life Insurance ............ $ 535,985 0.3%
Machinery ................. 379,930 0.2
Manufacturing ............. 628,422 0.4
Media Group ............... 3,177,647 1.9
Metals & Mining ........... 1,426,181 0.8
Multi-Industry ............ 2,837,643 1.7
Oil & Gas ................. 8,440,711 5.0
Oil -Exploration &
Production ............... 1,916,962 1.1
Oil Refineries ............ 373,248 0.2
Pharmaceuticals ........... 2,441,473 1.5
Property -Casualty
Insurance ................ 1,037,740 0.6
Publishing ................ 1,423,000 0.9
Retail .................... 4,044,256 2.4
Steel ..................... 485,594 0.3
Steel & Iron .............. 1,597,519 1.0
Telecommunications ........ 33,419,611 19.7
Utilities ................. 415,643 0.2
Utilities -Electric ....... 11,697,207 6.9
-------------- ------
$141,080,006 83.3%
============== ======
</TABLE>
<TABLE>
<CAPTION>
PERCENT OF
TYPE OF INVESTMENT VALUE NET ASSETS
- ------------------ -------------- ------------
<S> <C> <C>
Common Stocks ..... $126,805,146 74.9%
Convertible Bonds 752,500 0.4
Preferred Stocks . 13,522,360 8.0
-------------- ------------
$141,080,006 83.3%
============== ============
</TABLE>
48
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $141,745,664) $141,080,006
Unrealized appreciation on open forward foreign currency contracts 57,005
Cash (including $541,290 in foreign currency) ..................... 31,670,590
Receivable for:
Investments sold ................................................ 9,788,598
Interest ........................................................ 287,737
Dividends ....................................................... 49,081
Shares of beneficial interest sold .............................. 13,684
Deferred organizational expenses .................................. 11,416
Prepaid expenses and other assets ................................. 160,261
--------------
TOTAL ASSETS .................................................... 183,118,378
--------------
LIABILITIES:
Unrealized depreciation on open forward foreign currency contracts 416,515
Payable for:
Shares of beneficial interest repurchased ....................... 7,018,357
Investments purchased ........................................... 5,786,855
Management fee .................................................. 193,002
Investment advisory fee ......................................... 128,668
Plan of distribution fee ........................................ 8,699
Accrued expenses and other payables ............................... 257,861
--------------
TOTAL LIABILITIES ............................................... 13,809,957
--------------
NET ASSETS ...................................................... $169,308,421
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $207,723,634
Net unrealized depreciation ....................................... (1,032,090)
Accumulated undistributed net investment income ................... 477,392
Accumulated net realized loss ..................................... (37,860,515)
--------------
NET ASSETS ...................................................... $169,308,421
==============
CLASS A SHARES:
Net Assets ........................................................ $169,251,625
Shares Outstanding (unlimited authorized, $.01 par value) ........ 13,312,530
NET ASSET VALUE PER SHARE ....................................... $12.71
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $13.41
==============
CLASS B SHARES:
Net Assets ........................................................ $35,168
Shares Outstanding (unlimited authorized, $.01 par value) ........ 2,766
NET ASSET VALUE PER SHARE ....................................... $12.71
==============
CLASS C SHARES:
Net Assets ........................................................ $11,324
Shares Outstanding (unlimited authorized, $.01 par value) ........ 891
NET ASSET VALUE PER SHARE ....................................... $12.71
==============
CLASS D SHARES:
Net Assets ........................................................ $10,304
Shares Outstanding (unlimited authorized, $.01 par value) ........ 810
NET ASSET VALUE PER SHARE ....................................... $12.72
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
49
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended January 31, 1998*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $351,342 foreign withholding tax) ............... $ 6,064,827
Interest .......................................................... 1,223,818
--------------
TOTAL INCOME .................................................... 7,288,645
--------------
EXPENSES
Plan of distribution fee (Class A shares) ......................... 8,696
Management fee .................................................... 2,367,943
Investment advisory fee ........................................... 1,578,629
Custodian fees .................................................... 675,478
Transfer agent fees and expenses .................................. 192,185
Shareholder reports and notices ................................... 120,344
Foreign exchange provisional tax .................................. 110,578
Professional fees ................................................. 92,196
Registration fees ................................................. 56,977
Trustees' fees and expenses ....................................... 33,193
Organizational expenses ........................................... 10,038
Other ............................................................. 26,216
--------------
TOTAL EXPENSES .................................................. 5,272,473
--------------
NET INVESTMENT INCOME ........................................... 2,016,172
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments ..................................................... 14,318,931
Foreign exchange transactions ................................... 100,124
--------------
NET GAIN ........................................................ 14,419,055
--------------
Net change in unrealized appreciation/depreciation on:
Investments ..................................................... (56,562,495)
Translation of forward foreign currency contracts, other assets
and liabilities denominated in foreign currencies .............. (367,009)
--------------
NET DEPRECIATION ................................................ (56,929,504)
--------------
NET LOSS ........................................................ (42,510,449)
--------------
NET DECREASE ...................................................... $(40,494,277)
==============
</TABLE>
- ------------
* Class B, Class C and Class D shares were issued January 26, 1998.
SEE NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1998* JANUARY 31, 1997
- ------------------------------------------------------ ----------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 2,016,172 $ 331,538
Net realized gain (loss) .............................. 14,419,055 (1,662,158)
Net change in unrealized appreciation/depreciation ... (56,929,504) 35,901,840
----------------- ----------------
NET INCREASE (DECREASE) ............................. (40,494,277) 34,571,220
Dividends to shareholders from net investment income -
Class A shares (3,126,315) (963,188)
Net decrease from transactions in shares of beneficial
interest.............................................. (92,378,521) (1,472,887)
----------------- ----------------
NET INCREASE (DECREASE) ............................. (135,999,113) 32,135,145
NET ASSETS:
Beginning of period ................................... 305,307,534 273,172,389
----------------- ----------------
END OF PERIOD
(Including undistributed net investment income of
$477,392 and dividends in excess of net investment
income of $810,770, respectively) ................... $ 169,308,421 $305,307,534
================= ================
</TABLE>
- ------------
* Class B, Class C and Class D shares were issued January 26, 1998.
SEE NOTES TO FINANCIAL STATEMENTS
51
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
TCW/DW Emerging Markets Opportunities Trust (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's investment objective is to seek
capital appreciation through investment in equity securities of emerging market
countries. The Fund was organized as a Massachusetts business trust on December
22, 1993 and commenced operations as a closed-end management investment company
on March 30, 1994. On July 22, 1997, the shareholders of the Fund voted to
convert the Fund to an open-end investment company. The conversion took effect
on January 26, 1998 and the Fund commenced offering four classes of shares with
the then current shares designated as Class A shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange, the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are 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. ("TCW") or Morgan Stanley Asset
Management Inc. ("MSAM"), an affiliate of Dean Witter Services Company Inc. (the
"Manager"), (collectively, the "Co-Advisers") that sale or bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by and
under the general supervision of the Trustees (valuation of debt securities for
which market quotations are not readily available may be based upon current
market prices of securities which
52
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
are comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); (4) certain of the Fund's 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 evaluation by its staff,
including review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio securities
valued by such pricing service; and (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 except for
certain dividends on foreign securities which are recorded as soon as the Fund
is informed after 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. FOREIGN CURRENCY TRANSLATION -- The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value of
investment securities, other assets and liabilities and forward foreign currency
contracts are translated at the exchange rates prevailing at the end of the
period; and (2) purchases, sales, income and expenses are translated at the
exchange rates prevailing on the respective dates of such transactions. The
resultant exchange gains and losses are included in the Statement of Operations
as realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange gains/losses
included in realized and unrealized gain/loss are included in or are a reduction
of ordinary income for federal income tax purposes. The Fund does not isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the securities.
53
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
E. FORWARD FOREIGN CURRENCY CONTRACTS -- The Fund may enter into forward foreign
currency contracts as a hedge against fluctuations in foreign exchange rates.
Forward contracts are valued daily at the appropriate exchange rates. The
resultant exchange gains and losses are included in the Statement of Operations
as unrealized gain/loss on foreign exchange transactions. The Fund records
realized gains or losses on delivery of the currency or at the time the forward
contract is extinguished (compensated) by entering into a closing transaction
prior to delivery.
F. 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.
G. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
H. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc., paid the organizational expenses of the Fund
in the amount of approximately $50,000 which have been reimbursed for the full
amount thereof. Such expenses have been deferred and are being amortized on the
straight-line method over a period not to exceed five years from the
commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager a management fee,
calculated daily and payable monthly, by applying the annual rate of 0.75% to
the Fund's daily net assets.
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
54
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
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 a Co-Investment Advisory Agreement with the Co-Advisers, the Fund
pays the Co-Advisers collectively an advisory fee, calculated daily and payable
monthly, by applying the annual rate of 0.50% to the Fund's daily net assets.
TCW has in turn entered into further sub-advisory agreements (the "Sub-Advisory
Agreements") with two of its affiliates, TCW Asia Limited, a Hong-Kong
corporation, and TCW London International, Limited, a California corporation
(the "Sub-Advisers"), pursuant to which the Sub-Advisers assist TCW in providing
services under its Co-Advisory Agreement.
Under the terms of the Co-Investment Advisory Agreement, the Fund has retained
the Co-Advisers to invest the Fund's assets, including placing orders for the
purchase and sale of portfolio securities. The Co-Advisers obtain and evaluate
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 Co-Advisers pay the salaries of all personnel, including officers
of the Fund, who are employees of the Co-Advisers.
The Co-Advisory Agreements and each Sub-Advisory Agreement was approved by the
Trustees on November 6, 1997 and by shareholders of the Fund on January 12, 1998
and took effect on January 26, 1998. Prior to January 26, 1998, TCW was the sole
Investment Adviser of the Fund and received compensation at the same rate as the
Co-Advisers receive collectively.
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Dean Witter Distributors Inc. (the
"Distributor"), an affiliate of the Manager. On January 26, 1998, the Fund
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -up to
0.25% of the average daily net assets of Class A; (ii) Class B -1.0% of the
average daily net assets of Class B; and (iii) Class C -up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts paid
under the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for services provided and the expenses borne by it and others in the
distribution of the shares of these Classes, including the payment of
commissions for sales
55
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
of these Classes and incentive compensation to, and expenses of, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and
Distributor, and others who engage in or support distribution of the shares or
who service shareholder accounts, including overhead and telephone expenses;
printing and distribution of prospectuses and reports used in connection with
the offering of these shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that there were no such excess amounts at
January 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the period ended January 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended January 31, 1998 aggregated
$239,366,969 and $356,817,161, respectively.
For the period May 31, 1997 through January 31, 1998, the Fund incurred
brokerage commissions with Morgan Stanley & Co., Inc., an affiliate of the
Manager since May 31, 1997, in the amount of $61,638.
Dean Witter Trust FSB, an affiliate of the Manager, is the Fund's transfer
agent. At January 31, 1998, the Fund had transfer agent fees and expenses
payable of approximately $8,000.
56
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1998 JANUARY 31, 1997
------------------------------ ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Redeemed (7,451,203) $(92,433,846) -- --
Treasury shares purchased and retired (weighted average
discount 18.33%)* -- -- (136,500) $(1,472,887)
------------- --------------- ------------ --------------
Net decrease -Class A (7,451,203) (92,433,846) (136,500) (1,472,887)
------------- --------------- ------------ --------------
CLASS B SHARES**
Sold 2,766 34,325 -- --
------------- --------------- ------------ --------------
CLASS C SHARES**
Sold 891 11,000 -- --
------------- --------------- ------------ --------------
CLASS D SHARES**
Sold 810 10,000 -- --
------------- --------------- ------------ --------------
Net decrease in Fund (7,446,736) $(92,378,521) (136,500) $(1,472,887)
============= =============== ============ ==============
</TABLE>
- ------------
* The Trustees have voted to retire the shares purchased.
** For the period January 26, 1998 (issue date) through January 31, 1998.
7. FEDERAL INCOME TAX STATUS
During the year ended January 31, 1998, the Fund utilized approximately
$19,003,000 of its net capital loss carryover. At January 31, 1998, the Fund had
a net capital loss carryover of approximately $29,379,000 of which $21,279,000
will be available through January 31, 2004 and $8,100,000 will be available
through January 31, 2005 to offset future capital gains to the extent provided
by regulations.
Capital and foreign currency losses incurred after October 31 ("post-October"
losses) within the taxable year are deemed to arise on the first business day of
the Fund's next taxable year. The Fund incurred and will elect to defer net
capital and foreign currency losses of approximately $7,934,000 and $378,000,
respectively, during fiscal 1998.
As of January 31, 1998, the Fund had temporary book/tax differences primarily
attributable to post-October losses, capital loss deferrals on wash sales,
income from the mark-to-market of passive foreign investment companies ("PFICs")
and mark-to-market of open forward foreign currency exchange contracts. The Fund
had permanent book/tax differences primarily attributable to foreign currency
gains
57
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1998, continued
and tax adjustments on PFICs sold by the Fund. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged $19,223,
accumulated net realized loss was charged $2,379,082 and accumulated
undistributed net investment income was credited $2,398,305.
8. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may enter into forward foreign currency contracts ("forward contracts")
to facilitate settlement of foreign currency denominated portfolio transactions
or to manage foreign currency exposure associated with foreign currency
denominated securities.
Forward contracts involve elements of market risk in excess of the amounts
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in foreign exchange rates underlying the forward
contracts. Risks may also arise upon entering into these contracts from the
potential inability of the counterparties to meet the terms of their contracts.
At January 31, 1998, the Fund had outstanding forward contracts to facilitate
settlements of foreign currency denominated portfolio transactions.
At January 31, 1998, the Fund's cash balance consisted principally of interest
bearing deposits with Chase Manhattan N.A., the Fund's custodian.
58
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED JANUARY 31, MARCH 30, 1994*
------------------------------------------ THROUGH
1998**++ 1997 1996 JANUARY 31, 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period............... $ 14.70 $13.07 $11.18 $ 14.02
-------------- -------------- -------------- ----------------
Net investment income.............................. 0.10 0.02 0.04 0.11
Net realized and unrealized gain (loss)............ (1.94) 1.65 1.73 (2.89)
-------------- -------------- -------------- ----------------
Total from investment operations................... (1.84) 1.67 1.77 (2.78)
-------------- -------------- -------------- ----------------
Offering costs charged against capital............. -- -- -- (0.02)
-------------- -------------- -------------- ----------------
Less dividends and distributions from:
Net investment income............................. (0.15) (0.05) (0.02) (0.09)
Net realized gain................................. -- -- -- (0.01)
-------------- -------------- -------------- ----------------
Total dividends and distributions.................. (0.15) (0.05) (0.02) (0.10)
-------------- -------------- -------------- ----------------
Anti-dilutive effect of acquiring treasury shares -- 0.01 0.14 0.06
-------------- -------------- -------------- ----------------
Net asset value, end of period..................... $ 12.71 $14.70 $13.07 $ 11.18
============== ============== ============== ================
TOTAL INVESTMENT RETURN+ .......................... (12.43)% 13.03% 17.04% (19.47)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................................... 1.67% 1.72% 1.69% 1.73%(2)
Net investment income.............................. .64% 0.12% 0.28% 0.94%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............ $169,252 $305,308 $273,172 $254,358
Portfolio turnover rate ........................... 85% 66% 66% 61%(1)
Average commission rate paid....................... $0.0009 $0.0012 -- --
</TABLE>
- ------------
* Commencement of operations.
** Prior to January 26, 1998, the Fund operated as a closed-end management
investment company and was solely advised by TCW Funds Management. Shares
of the Fund existing at the time of its conversion to an open-end
management investment company have been designated as Class A shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
59
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 26, 1998*
THROUGH
JANUARY 31,
1998++
- ---------------------------------------- -----------------
<S> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.34
Net realized and unrealized gain ....... 0.37
-----------------
Net asset value, end of period .......... $12.71
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 3.18 %(2)
Net investment loss ..................... (2.77)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $35
Portfolio turnover rate ................. 85 %
Average commission rate paid ............ $0.0009
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.34
Net realized and unrealized gain ....... 0.37
-----------------
Net asset value, end of period .......... $12.71
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 % (1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 3.07 %(2)
Net investment loss ..................... (2.85)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $11
Portfolio turnover rate ................. 85 %
Average commission rate paid ............ $0.0009
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
60
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 26, 1998*
THROUGH
JANUARY 31,
1998++
- ---------------------------------------- -----------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.34
Net realized and unrealized gain ....... 0.38
-----------------
Net asset value, end of period .......... $12.72
=================
TOTAL INVESTMENT RETURN+ ................ 3.08 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 2.07 % (2)
Net investment loss ..................... (1.60)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $10
Portfolio turnover rate ................. 85 %
Average commission rate paid ............ $0.0009
</TABLE>
- ------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
61
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
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 Emerging Markets
Opportunities Trust (the "Fund") at January 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the periods presented, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at January 31, 1998 by correspondence with the
custodian and brokers and the application of alternative auditing procedures
where confirmations from brokers were not received, provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 18, 1998
62
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
FIXED-INCOME AND CONVERTIBLE SECURITIES RATINGS
Aaa Fixed-income securities which are rated Aaa are judged to be of
the best quality. They carry the smallest degree of investment risk
and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa Fixed-income securities which are rated Aa are judged to be of
high quality by all standards. Together with the Aaa group they
comprise what are generally known as high grade fixed-income
securities. They are rated lower than the best fixed-income
securities because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A Fixed-income securities which are rated A possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest a
susceptibility to impairment sometime in the future.
Baa Fixed-income securities which are rated Baa are considered as
medium grade obligations; i.e., they are neither highly protected
nor poorly secured. Interest payments and principal security
appear adequate for the present but certain protective elements
may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Fixed-income securities rated Aaa, Aa, A and Baa are considered
investment grade.
Ba Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and therefore not well safeguarded during both good and bad times in
the future. Uncertainty of position characterizes fixed-income
securities in this class.
B Fixed-income securities which are rated B generally lack
characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa Fixed-income securities which are rated Caa are of poor standing.
Such issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca Fixed-income securities which are rated Ca present obligations which
are speculative in a high degree. Such issues are often in default or
have other marked shortcomings.
C Fixed-income securities which are rated C are the lowest rated class
of fixed-income securities, and issues so rated can be regarded as
having extremely poor prospects of ever attaining any real investment
standing.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal
fixed-income security rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and a modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well as taxable
Commercial Paper. Moody's employs the following three designations, all judged
to be investment grade, to indicate the relative repayment capacity of rated
issuers: Prime-1, Prime-2, Prime-3.
63
<PAGE>
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
FIXED-INCOME AND CONVERTIBLE SECURITIES RATINGS
A Standard & Poor's fixed-income security rating is a current assessment of
the creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers, or
lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the timely
payment of interest and repayment of principal in accordance with the terms of
the obligations; (2) nature of and provisions of the obligation; and (3)
protection afforded by, and relative position of, the obligation in the event of
bankruptcy, reorganization or other arrangement under the laws of bankruptcy and
other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating and
may, on occasion, rely on unaudited financial information. The ratings may be
changed, suspended or withdrawn as a result of changes in, or unavailability of,
such information, or for other reasons.
AAA Fixed-income securities rated "AAA" have the highest rating
assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Fixed-income securities rated "AA" have a very strong capacity to pay
interest and repay principal and differs from the highest-rated
issues only in small degree.
A Fixed-income securities rated "A" have a strong capacity to pay
interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and
economic conditions than fixed-income securities in higher-rated
categories.
BBB Fixed-income securities rated "BBB" are regarded as having an
adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for
fixed-income securities in this category than for fixed-income
securities in higher-rated categories.
Fixed-income securities rated AAA, AA, A, and BBB are considered
investment grade.
BB Fixed-income securities rated "BB" have less near-term vulnerability
to default than other speculative grade fixed-income securities.
However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to
inadequate capacity or willingness to pay interest and repay
principal.
B Fixed-income securities rated "B" have a greater vulnerability to
default but presently has the capacity to meet interest payments and
principal repayments. Adverse business, financial or economic
conditions would likely impair capacity or willingness to pay
interest and repay principal.
CCC Fixed-income securities rated "CCC" have a current identifiable
vulnerability to default, and is dependent upon favorable business,
financial and economic conditions to meet timely payments of interest
and repayments of principal. In the event of adverse business,
financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied
"CCC" rating.
C The rating "C" is typically applied to fixed-income securities
subordinated to senior debt which is assigned an actual or implied
"CCC-" rating.
CI The rating "CI" is reserved for fixed-income securities on which no
interest is being paid.
NR Indicates that no rating has been requested, that there is
insufficient information on which to base a rating or that Standard &
Poor's does not rate a particular type of obligation as a matter of
policy.
64
<PAGE>
Fixed-income securities rated "BB", "B", "CCC", "CC" and "C" are
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. "BB"
indicates the least degree of speculation and "C" the highest degree
of speculation. While such fixed-income securities will likely have
some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing
with the major ratings categories.
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. The commercial paper rating is not a recommendation to purchase or
sell a security. The ratings are based upon current information furnished by the
issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the designation
1, 2, and 3 to indicate the relative degree of safety.
A-1 indicates that the degree of safety regarding timely payment is
very strong.
A-2 indicates capacity for timely payment on issues with this
designation is strong. However, the relative degree of safety is
not as overwhelming as for issues designated "A-1."
A-3 indicates a satisfactory capacity for timely payment. Obligations
carrying this designation are, however, somewhat more vulnerable to
the adverse effects of changes in circumstances than obligations
carrying the higher designations.
65
<PAGE>
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included in Prospectus (Part A):
<TABLE>
<CAPTION>
Page
In Prospectus
-------------
<S> <C>
Financial Highlights for the period March 30, 1994 (commencement of
operations) through January 31, 1995 and for the years ended January
31, 1996, 1997 and 1998 (Class A).............................................. 7
Financial Highlights for the period January 26, 1998 through January
31, 1998 (Class B, C and D).................................................... 8
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page In
SAI
-------
Portfolio of Investments at January 31, 1998................................... 43
Statements of Assets and Liabilities at January 31, 1998....................... 49
Statement of Operations for the year ended January 31, 1998.................... 50
Statement of Change in Net Assets for the years ended January 31, 1997
and January 31, 1998........................................................... 51
Notes to Financial Statements at January 31, 1998.............................. 52
Financial Highlights for the period March 30, 1994 (commencement of
operations) through January 31, 1996 and for the years ended January
31, 1996,1997 and 1998 (Class A)............................................... 59
Financial Highlights for the period January 26, 1998 through January
31, 1998 (Class B, C and D).................................................... 60
</TABLE>
(b) Exhibits:
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedules
- ------------------------
* All other exhibits were previously filed via EDGAR and are hereby
incorporated by reference.
1
<PAGE>
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at February 28, 1998
-------------- ------------------------
Class A 16,846
Class B 10
Class C 6
Class D 2
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties
or by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Management or either Co-Advisory Agreements,
none of the Manager, the Advisers or any trustee, officer, employee or agent of
the Registrant shall be liable for any action or failure to act, except in the
case of bad faith, willful misfeasance, gross negligence or reckless disregard
of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
2
<PAGE>
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Manager, Registrant's Trustees,
and other registered investment management companies managed by the Manager,
maintains insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the request of
Registrant as a trustee, director, officer, employee or agent of another trust
or corporation, against any liability asserted against him and incurred by him
or arising out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant itself
is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
The TCW Funds Management, Inc. ("TCW") is a 100% owned subsidiary of
The TCW Group, Inc., a Nevada corporation. TCW presently serves as investment
adviser to: (1) TCW Funds, Inc., a diversified open-end management investment
company, (2) TCW Convertible Securities Fund, Inc., a diversified closed-end
management investment company; (3) TCW/DW North American Government Income
Trust, an open-end, non-diversified management company, (4) TCW/DW Income and
Growth Fund, an open-end, non-diversified management company, (5) TCW/DW Latin
American Growth Fund, an open-end, non-diversified management company, (6)
TCW/DW Small Cap Growth Fund, an open-end non-diversified management company,
(7) TCW/DW Term Trust 2000, a closed-end, diversified management company, (8)
TCW/DW Term Trust 2002, a closed-end diversified management company, (9) TCW/DW
Term Trust 2003, a closed-end diversified management company, (10) TCW/DW
Emerging Markets Opportunities Trust, an open-end, non-diversified management
company, (11) TCW/DW Total Return Trust, an open-end non-diversified management
investment company, (12) TCW/DW Mid-Cap Equity Trust, an open-end, diversified
management investment company and (13) TCW/DW Global Telecom Trust, an open-end
diversified management investment company. TCW also serves as investment
adviser or sub-adviser to other investment companies, including foreign
investment companies. The list required by this Item 28 of the officers and
directors of TCW together with information as to any other business,
profession, vocation or employment of a substantive nature 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.
See "The Fund and Its Management" in the Prospectus constituting Part A of this
Registration Statement regarding the business of Morgan Stanley Asset
Management Inc. ("MSAM").
Listed below are the Officers and Directors of MSAM:
DIRECTORS:
James M. Allwin Director
Barton M. Biggs Director
Gordon S. Gray Director
Peter A. Nadosy Director
Dennis G. Sherva Director
3
<PAGE>
OFFICERS:
Barton M. Biggs Chairman, Managing Director
Peter A. Nadosy Vice Chairman, Managing Director
James M. Allwin President, Managing Director
John R. Alkire Managing Director (MSAM) - Tokyo
Francine J. Bovich Managing Director
P. Dominic Caldecott Managing Director (MSAM) - UK
Frances Campion Managing Director
A. MacDonald Caputo Managing Director
Ean Wah Chin Managing Director
(MSAM) - Singapore
Steven C. Cordy Managing Director
Garry B. Crowder Managing Director
Madhav Dhar Managing Director
Kurt A. Feuerman Managing Director
Philip Freidman
Robert Gartland
Paul B. Ghaffari Managing Director
Gordon S. Gray Managing Director
Marianne Liang Hay Managing Director (MSAM) - UK
Joseph Hill
Gary D. Latainer Managing Director
Mahmoud A. Mamdani Managing Director
Robert L. Meyer Managing Director
Peter A. Nadosy
Margaret P. Naylor Managing Director
Russell C. Platt Managing Director
Robert A. Sargent Managing Director (MSAM) - UK
Vinod R. Sethi Managing Director
Dennis G. Sherva Managing Director
Judy Smith
James L. Tanner Managing Director (MSAM) - UK
Marna Whittington
Richard G. Woolworth, Jr. Managing Director
Debra M. Aaron Principal
Warren Ackerman III Principal
Robert E. Angevine Principal
Suzanne S. Akers Principal
Gerald P. Barth-Wehrenalp Principal
Theodore R. Bigman Principal
Richard L. Block Principal
Stuart Bohart
Richard F. Brereton Principal
Stuart J.M. Breslow Principal
Andrew C. Brown Principal (MSAM) - UK
Jefferey P. Brown Principal
Angelica Cantlon
Terence P. Carmichael Principal
Arthur Certosimo Principal
Jacqueline A. Day Principal (MSAM) - UK
4
<PAGE>
Raye L. Dube Principal
Abigail Jones Feder Principal
Eugene Flood, Jr. Principal
Thomas C. Frame Principal
Nicoaas Simon Frits Fiene Principal
W. Blair Garff Principal
James Wayne Grisham Principal
Perry E. Hall II Principal
Kimberly L. Hirschman Principal
William Higgins
Ruth A. Hughes-Guden Principal
Margaret Kinsley Johnson Principal
Michael F. Klein Principal
Paul Klug Principal
George Koshy Principal
Michael B. Kushma Principal
Khoon-Min Lim Principal
Marianne J. Lippmann Principal
William David Lock Principal
Gordon W. Loery Principal
Yvonne Longley Principal (MSAM) - UK
Andrew Mack Principal (MSAM) - UK
Gary J. Mangino Principal
Jeffrey Margolis Principal
M. Paul Martin Principal
Walter Maynard, Jr. Principal
Alexis E. McCarthy Principal
Phoebe McBee
Yoshiro Okawa Principal (MSAM) - Tokyo
Wayne Peterson
Christopher G. Petrow Principal
Narayan Ramachandran Principal
Gail Hunt Reeke Principal
Christine I. Reilly Principal
Stefano Russo Principal (MSAM) - Milan
Bruce R. Sandberg Principal
Andy B. Skov Principal
Kiat Seng Seah Principal (MSAM) - Singapore
Stephen C. Sexauer Principal
Kim I. Spellman Principal
Robert M. Smith Principal
Joseph P. Stadler Principal
Ram K. Sundaram Principal
Kunihiko Sugio Principal (MSAM) - Toyko
Anne D. Thievierge Principal
Joseph Y.S. Tern Principal
Robverto Vedovotto Principal
Philip W. Winters Principal
Bruce Wolfe Principal
Peter John Wright Principal
Alford E. Zick, Jr. Principal
5
<PAGE>
Maryann Savadelis Agre Vice President
Peter Aliprantis Vice President
Jeffrey Alvino Vice President
Alistair Anderson Vice President
William S. Auslander Vice President
Kimberly L. Austin Vice President
Marianne Bachynski
Timothy Baron
Marshall T. Bassett Vice President
Joseph C. Benedetti
Frank J. Biondo Vice President
Christopher Blair Vice President
Melinda Bowne
Geraldine Boyle Vice President
Paul Boyne Vice President
L. Kenneth Brooks Vice President
Brian Bruman Vice President
Jonathan Paul Buckeridge Vice President (MSAM) - Melbourne
Wendy M. Cambor Vice President
Jacqueline M. Carr Vice President
Carl Kuo-Wei Chien Vice President (MSAM) - Hong Kong
Lori A. Cohane Vice President
Catherine Colecchi
James Colmenares Vice President
William T. Corcoran Vice President
Kate Cornish-Bowden Vice President (MSAM) - UK
Joseph C.S. D'Souza Vice President
Janet E. Day Vice President
Jan-Willem Adriaan De Geus Vice President
Nathalie Francoise Degan Vice President
Nancy J. Deutsch Vice President
Nikhil Dhaon Vice President
ohn F. Dougherty Vice President
Christine H. du Bois Vice President
Steve Epstein Vice President
Richard S. Farden Vice President
Glenn Fogel
Daniel E. Fox Vice President
Karen T. Frost Vice President (MSAM) - UK
Lisa Gallo
Ramalingam Ganesh Vice President
David Gates
Kaushik Ghosh Vice President
Josephine M. Glass Vice President
Charles A. Golden Vice President
Dimitri Goulandris Vice President
James A. Grasselino Vice President
Kenneth John Greig Vice President (MSAM) - UK
Maureen A. Grover Vice President
Janice Hart
Sheryl Hempel
6
<PAGE>
Michael Hewett Vice President
Kenneth R. Holloy Vice President
Holly D. Hopps Vice President
Patricia Inlander
Etsuko Fuseya Jennings Vice President
Donald B. Johnson Vice President
Stephen Kelly
Jaideep Khanna Vice President
Peter L. Kirby Vice President
Paul Koski Vice President
Daniel R. Lascano Vice President
Arthur J. Lev Vice President
Valerie Y. Lewis Vice President
Jane Likins Principal (MSAM) - UK
William David Lock Vice President (MSAM) - UK
Susan Lucas
Bill McCormick
Abigail McKenna
Yogesh Prabhaker Modak Vice President
Paula J. Morgan Vice President (MSAM) - UK
Nancy Morton Vice President
Cyril Moulle-Berteaux Vice President
Clare K. Mutone Vice President
Terumi Nagata Vice President (MSAM) - Tokyo
Que Nguyen
Dan Niland
Nancy Norton
Bradley Okita Vice President
Martin O. Pearce Vice President
Alexander A. Pena Vice President
Anthony J. Pesce Vice President
Karen Post Vice President
Paul C. Psaila Vice President
Tom Quantrille
Vazquez Sergio Rivera Vice President
Gregg A. Robinson Vice President
Gerald D. Rubin Vice President
Deborah Russell
Donald P. Ryan Vice President
Kenneth M. Schlechter Vice President
Neil Siegel Vice President
Ashutosh Sinha Vice President
Michael James Smith Vice President (MSAM) - UK
Sharon Smith
Christian K. Stadlinger Vice President
David Stanley Vice President
Keiko Tamaki-Kuroda Vice President
Shunso Tatsumi Vice President
Louise Teeple Vice President
Landon Thomas Vice President
Richard Boon Hwee Toh Vice President (MSAM) - Singapore
7
<PAGE>
Hiroshi Ueda Vice President
K.N. Vaidyanathan Vice President (MSAM) - Bombay
Epco Diederik Van Der Lend Vice President
Oscar Jan Vermeulen Vice Presiden
Williem Pieter Vinke Vice President
Dennis J. Walsh Vice President
Jacob Walthour Vice President
Patricia Woo Vice President
Karen Yesner
Haiime Yokovama Vice President
Harold J. Schaaff, Jr. Principal, General Counsel and
Secretary
Eileen K. Murray Managing Director and Treasurer
Madeline D. Barkhorn Assistant Secretary
Charlene R. Herzer Assistant Secretary
In addition, MSAM acts as investment adviser to the following
registered investment companies: American Advantage International Equity Fund;
The Brazilian Investment Fund, Inc.; The Enterprise Group of Funds,
Inc.--Tax-Exempt Income Portfolio; Fortis Series Fund, Inc.--Global Asset
Allocation Series; Fountain Square International Equity Fund; General American
Capital Company; The Latin American Discovery Fund, Inc.; certain portfolios of
the Legends Fund, Inc.; The Malaysia Fund, Inc.; Morgan Stanley Africa
Investment Fund, Inc.; Morgan Stanley Asia-Pacific Fund, Inc.; Morgan Stanley
Emerging Markets Debt Fund, Inc.; Morgan Stanley Emerging Markets Fund, Inc.;
Morgan Stanley European Emerging Markets Fund, Inc.; all funds of the Morgan
Stanley Fund, Inc.; Morgan Stanley Global Opportunity Bond Fund, Inc.; The
Morgan Stanley High Yield Fund, Inc.; Morgan Stanley India Investment Fund,
Inc.; Morgan Stanley Fund, Inc.; Morgan Stanley Institutional Fund, Inc.; The
Pakistan Investment Fund, Inc.; Principal Aggressive Growth Fund, Inc.;
Principal Asset Allocation Fund, Inc.; certain portfolios of Sun America Series
Trust; The Thai Fund, Inc. and the Turkish Investment Fund, Inc.
Item 29. Principal Underwriters.
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware corporation,
is the principal underwriter of the Registrant. Distributors is also the
principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
8
<PAGE>
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Short-Term U.S. Treasury Trust
(34) Dean Witter Diversified Income Trust
(35) Dean Witter Health Sciences Trust
(36) Dean Witter Global Dividend Growth Securities
(37) Dean Witter American Value Fund
(38) Dean Witter U.S. Government Money Market Trust
(39) Dean Witter Global Short-Term Income Fund Inc.
(40) Dean Witter Variable Investment Series
(41) Dean Witter Value-Added Market Series
(42) Dean Witter Short-Term Bond Fund
(43) Dean Witter International SmallCap Fund
(44) Dean Witter Hawaii Municipal Trust
(45) Dean Witter Balanced Growth Fund
(46) Dean Witter Balanced Income Fund
(47) Dean Witter Intermediate Term U.S. Treasury Trust
(48) Dean Witter Global Asset Allocation Fund
(49) Dean Witter Mid-Cap Growth Fund
(50) Dean Witter Capital Appreciation Fund
(51) Dean Witter Information Fund
(52) Dean Witter Japan Fund
(53) Dean Witter Income Builder Fund
(54) Dean Witter Special Value Fund
(55) Dean Witter Financial Services Trust
(56) Dean Witter Market Leader Trust
(57) Dean Witter S&P 500 Index Fund
(58) Dean Witter Fund of Funds
(59) Morgan Stanley Dean Witter Competitive Edge
Fund - "Best Ideas" Portfolio
(60) Morgan Stanley Dean Witter Growth Fund
(61) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(1) TCW/DW North American Government Income Trust
(2) TCW/DW Latin American Growth Fund
(3) TCW/DW Income and Growth Fund
(4) TCW/DW Small Cap Growth Fund
9
<PAGE>
(5) TCW/DW Total Return Trust
(6) TCW/DW Mid-Cap Equity Trust
(7) TCW/DW Global Telecom Trust
(8) TCW/DW Emerging Markets Opportunities Trust
(a) The following information is given regarding directors and officers of
Dean Witter Distributors Inc. ("Distributors"). The principal address of
Distributors is Two World Trade Center, New York, New York 10048.
<TABLE>
<CAPTION>
<S> <C>
POSITION AND OFFICE WITH DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- -------------------------------------
Charles A. Fiumefreddo Chairman, Chief Executive Officer and
Director of Distributors and Chairman, Chief
Executive Officer and Trustee of the
Registrant.
Philip J. Purcell Director of Distributors.
Richard M. DeMartini Director of Distributors and Trustee of the
Registrant.
James F. Higgins Director of Distributors.
Thomas C. Schneider Executive Vice President, Chief Financial
Officer and Director of Distributors.
Christine A. Edwards Executive Vice President, Secretary, Chief
Legal Officer and Director of Distributors.
Robert Scanlan Executive Vice President of Distributors
and Vice President of the Registrant.
Mitchell M. Merin Executive Vice President of Distributors and
Vice President Of the Registrant.
Robert S. Giambrone Senior Vice President of Distributors and
Vice President of the Registrant.
Barry Fink Senior Vice President, Assistant General
Counsel and Assistant Secretary of
Distributors and Vice President, Secretary
and General Counsel of the Registrant.
Frederick K. Kubler Senior Vice President, Assistant Secretary
and Chief Compliance Officer of
Distributors.
10
<PAGE>
POSITION AND OFFICE WITH DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- -------------------------------------
Michael T. Gregg Vice President and Assistant Secretary of
Distributors.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Thomas F. Caloia Assistant Treasurer of Distributors and
Treasurer of the Registrant.
Michael Interrante Assistant Treasurer of Distributors.
</TABLE>
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service contract.
Item 32. Undertakings
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 31st day of March, 1998
TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST
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. 1 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURES TITLE DATE
(1) Principal Executive Officer President, Chief
Executive Officer,
Trustee and Chairman
By /s/ Charles A. Fiumefreddo 3/31/98
---------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By : /s/ Thomas F. Caloia 3/31/98
-------------------------------
Thomas F. Caloia
(3) Majority of the Trustees Trustee
Charles A. Fiumefreddo (Chairman)
Thomas E. Larkin, Jr.
Richard M. DeMartini
Marc I. Stern
By /s/ Barry Fink 3/31/98
--------------------------------
Barry Fink
Attorney-in-Fact
John C. Argue Manuel H. Johnson
John R. Haire Michael E. Nugent
John L. Schroeder
By /s/ David M. Butowsky 3/31/98
-------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
13
<PAGE>
EXHIBIT INDEX
11. -- Consent of Independent Accountants
16. -- Schedules for Computation of Performance Quotations
27. -- Financial Data Schedules
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amentment No. 1 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
March 18, 1998, relating to the financial statements and financial highlights
of TCW/DW Emerging Markets Opportunities Trust, 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 references to us under the headings
"Independent Accountants" and "Experts" in such Statement of Additional
Information and to the reference to us under the heading "Financial Highlights"
in such Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 30, 1998
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW EMERGING MARKETS OPPORTUNITY TRUST (A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Jan-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
31-Jan-97 $829.70 1.00 -17.03% -17.03%
30-Mar-94 $883.90 3.84 -3.16% -11.61%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
EV
TR = -------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
31-Jan-97 $875.70 -12.43% 1.00 -12.43%
30-Mar-94 $932.90 -6.71% 3.84 -1.79%
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
(D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
TOTAL $10,000 $50,000 $100,000
INVESTED - P RETURN - TR INVESTMENT - G INVESTMENT - G INVESTMENT - G
- ------------ ----------- -------------- -------------- --------------
30-Mar-94 -6.71 $8,839 $44,779 $90,491
*INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4%
& 3% SALES CHARGE
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW EMERGING MARKETS OPPORTUNITY TRUST (B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Jan-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
26-Jan-98 $980.80 0.01 N/A -1.92%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
EV
TR = -------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
26-Jan-98 $1,030.80 3.08% 0.01 N/A
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
(D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
TOTAL $10,000 $50,000 $100,000
INVESTED - P RETURN - TR INVESTMENT - G INVESTMENT - G INVESTMENT - G
- ------------ ----------- -------------- -------------- --------------
26-Jan-98 3.08 $10,308 $51,540 $103,080
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW EMERGING MARKETS OPPORTUNITY TRUST (C)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF NUMBER OF AVERAGE ANNUAL CUMULATIVE
INVESTED - P 31-Jan-98 YEARS - n COMPOUND RETURN - T TOTAL RETURN
- ------------ --------- --------- ------------------- ------------
26-Jan-98 $1,020.80 0.01 N/A 2.08%
(B) AVERAGE ANNUAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
EV
TR = -------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
26-Jan-98 $1,030.80 3.08% 0.01 N/A
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
(D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
TOTAL $10,000 $50,000 $100,000
INVESTED - P RETURN - TR INVESTMENT - G INVESTMENT - G INVESTMENT - G
- ------------ ----------- -------------- -------------- --------------
26-Jan-98 3.08 $10,308 $51,540 $103,080
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW EMERGING MARKETS OPPORTUNITY TRUST (D)
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ _
| ---------------------- |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------ | - 1
| \ | P |
| \| |
|_ _|
EV
TR = -------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jan-98 RETURN - TR YEARS - n COMPOUND RETURN - t
- ------------ --------- ----------- --------- -------------------
26-Jan-98 $1,030.80 3.08% 0.01 NA
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
(C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
$10,000 TOTAL $10,000 $50,000 $100,000
INVESTED - P RETURN - TR INVESTMENT - G INVESTMENT - G INVESTMENT - G
- ------------ ----------- -------------- -------------- --------------
26-Jan-98 3.08 $10,308 $51,540 $103,080
<PAGE>
[ARTICLE] 6
[CIK]
[NAME] TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JAN-31-1998
[PERIOD-END] JAN-31-1998
[INVESTMENTS-AT-COST] 141,745,664
[INVESTMENTS-AT-VALUE] 141,080,006
[RECEIVABLES] 10,139,100
[ASSETS-OTHER] 228,682
[OTHER-ITEMS-ASSETS] 31,670,590
[TOTAL-ASSETS] 183,118,378
[PAYABLE-FOR-SECURITIES] 5,786,855
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,023,102
[TOTAL-LIABILITIES] 13,809,957
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 207,723,634
[SHARES-COMMON-STOCK] 13,312,530
[SHARES-COMMON-PRIOR] 20,763,733
[ACCUMULATED-NII-CURRENT] 477,392
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (37,860,515)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,032,090)
[NET-ASSETS] 169,251,625
[DIVIDEND-INCOME] 6,064,827
[INTEREST-INCOME] 1,223,818
[OTHER-INCOME] 0
[EXPENSES-NET] 5,272,473
[NET-INVESTMENT-INCOME] 2,016,172
[REALIZED-GAINS-CURRENT] 14,419,055
[APPREC-INCREASE-CURRENT] (56,562,495)
[NET-CHANGE-FROM-OPS] (40,494,277)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 3,126,315
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 7,451,203
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (135,999,113)
[ACCUMULATED-NII-PRIOR] (810,770)
[ACCUMULATED-GAINS-PRIOR] (49,900,488)
[OVERDISTRIB-NII-PRIOR] (810,770)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,946,572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,272,473
[AVERAGE-NET-ASSETS] 314,873,669
[PER-SHARE-NAV-BEGIN] 14.70
[PER-SHARE-NII] .10
[PER-SHARE-GAIN-APPREC] (1.94)
[PER-SHARE-DIVIDEND] (.15)
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.71
[EXPENSE-RATIO] 1.67
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK]
[NAME] TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JAN-31-1998
[PERIOD-END] JAN-31-1998
[INVESTMENTS-AT-COST] 141,745,664
[INVESTMENTS-AT-VALUE] 141,080,006
[RECEIVABLES] 10,139,100
[ASSETS-OTHER] 228,682
[OTHER-ITEMS-ASSETS] 31,670,590
[TOTAL-ASSETS] 183,118,378
[PAYABLE-FOR-SECURITIES] 5,786,855
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,023,102
[TOTAL-LIABILITIES] 13,809,957
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 207,723,634
[SHARES-COMMON-STOCK] 2,766
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 477,392
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (37,860,515)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,032,090)
[NET-ASSETS] 35,168
[DIVIDEND-INCOME] 6,064,827
[INTEREST-INCOME] 1,223,818
[OTHER-INCOME] 0
[EXPENSES-NET] 5,272,473
[NET-INVESTMENT-INCOME] 2,016,172
[REALIZED-GAINS-CURRENT] 14,419,055
[APPREC-INCREASE-CURRENT] (56,562,495)
[NET-CHANGE-FROM-OPS] (40,494,277)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 2,766
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (135,999,113)
[ACCUMULATED-NII-PRIOR] (810,770)
[ACCUMULATED-GAINS-PRIOR] (49,900,488)
[OVERDISTRIB-NII-PRIOR] (810,770)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,946,572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,272,473
[AVERAGE-NET-ASSETS] 17,993
[PER-SHARE-NAV-BEGIN] 12.34
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] .37
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.71
[EXPENSE-RATIO] 3.18
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK]
[NAME] TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST CLASS C
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JAN-31-1998
[PERIOD-END] JAN-31-1998
[INVESTMENTS-AT-COST] 141,745,664
[INVESTMENTS-AT-VALUE] 141,080,006
[RECEIVABLES] 10,139,100
[ASSETS-OTHER] 228,682
[OTHER-ITEMS-ASSETS] 31,670,590
[TOTAL-ASSETS] 183,118,378
[PAYABLE-FOR-SECURITIES] 5,786,855
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,023,102
[TOTAL-LIABILITIES] 13,809,957
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 207,723,634
[SHARES-COMMON-STOCK] 891
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 477,392
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (37,860,515)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,032,090)
[NET-ASSETS] 11,324
[DIVIDEND-INCOME] 6,064,827
[INTEREST-INCOME] 1,223,818
[OTHER-INCOME] 0
[EXPENSES-NET] 5,272,473
[NET-INVESTMENT-INCOME] 2,016,172
[REALIZED-GAINS-CURRENT] 14,419,055
[APPREC-INCREASE-CURRENT] (56,562,495)
[NET-CHANGE-FROM-OPS] (40,494,277)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 891
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (135,999,113)
[ACCUMULATED-NII-PRIOR] (810,770)
[ACCUMULATED-GAINS-PRIOR] (49,900,488)
[OVERDISTRIB-NII-PRIOR] (810,770)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,946,572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,272,473
[AVERAGE-NET-ASSETS] 8,715
[PER-SHARE-NAV-BEGIN] 12.34
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] .37
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.71
[EXPENSE-RATIO] 3.07
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[CIK]
[NAME] TCW/DW EMERGING MARKETS OPPORTUNITIES TRUST CLASS D
<TABLE>
<S> <C>
[PERIOD-TYPE] 12-MOS
[FISCAL-YEAR-END] JAN-31-1998
[PERIOD-END] JAN-31-1998
[INVESTMENTS-AT-COST] 141,745,664
[INVESTMENTS-AT-VALUE] 141,080,006
[RECEIVABLES] 10,139,100
[ASSETS-OTHER] 228,682
[OTHER-ITEMS-ASSETS] 31,670,590
[TOTAL-ASSETS] 183,118,378
[PAYABLE-FOR-SECURITIES] 5,786,855
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 8,023,102
[TOTAL-LIABILITIES] 13,809,957
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 207,723,634
[SHARES-COMMON-STOCK] 810
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 477,392
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (37,860,515)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] (1,032,090)
[NET-ASSETS] 10,304
[DIVIDEND-INCOME] 6,064,827
[INTEREST-INCOME] 1,223,818
[OTHER-INCOME] 0
[EXPENSES-NET] 5,272,473
[NET-INVESTMENT-INCOME] 2,016,172
[REALIZED-GAINS-CURRENT] 14,419,055
[APPREC-INCREASE-CURRENT] (56,562,495)
[NET-CHANGE-FROM-OPS] (40,494,277)
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 810
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (135,999,113)
[ACCUMULATED-NII-PRIOR] (810,770)
[ACCUMULATED-GAINS-PRIOR] (49,900,488)
[OVERDISTRIB-NII-PRIOR] (810,770)
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 3,946,572
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 5,272,473
[AVERAGE-NET-ASSETS] 8,111
[PER-SHARE-NAV-BEGIN] 12.34
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] .38
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 12.72
[EXPENSE-RATIO] 2.07
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
