<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 26, 1996
REGISTRATION NOS.: 33-81012
811-8600
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. 3
[X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
[X]
AMENDMENT NO. 4
[X]
TCW/DW TOTAL RETURN 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
SHELDON CURTIS, 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 effective date of this amendment.
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
THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF ITS SHARES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO SECTION (A)(1) OF RULE 24F-2 UNDER THE
INVESTMENT COMPANY ACT OF 1940. THE REGISTRANT FILED ITS RULE 24F-2 NOTICE
FOR ITS FISCAL YEAR ENDING JULY 31, 1996 WITH THE SECURITIES AND EXCHANGE
COMMISSION ON AUGUST 30, 1996.
<PAGE>
TCW/DW TOTAL RETURN TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
- -------------- -------------------------------------------------------
<S> <C>
1. Cover Page
2. Summary of Fund Expenses; Prospectus Summary
3. Financial Highlights; Performance Information
4. Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary
5. The Fund and Its Management; Back Cover; Investment
Objective and Policies
6. Dividends, Distributions and Taxes; Additional
Information
7. Purchase of Fund Shares; Shareholder Services;
Repurchases and Redemptions
8. Repurchases and Redemptions; Shareholder Services
9. Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- -------------- ------------------------------------------------------
<S> <C>
10. Cover Page
11. Table of Contents
12. The Fund and Its Management
13. Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. The Fund and Its Management; Trustees and Officers
15. Trustees and Officers
16. The Fund and Its Management; Custodian and Transfer
Agent; Independent Accountants
17. Portfolio Transactions and Brokerage
18. Description of Shares
19. Repurchases and Redemptions; Shareholder Services
20. Dividends, Distributions and Taxes
21. The Distributor
22. Performance Information
23. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
PROSPECTUS -- SEPTEMBER 26, 1996
- -----------------------------------------------------------------------------
TCW/DW Total Return Trust (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is high total
return from capital growth and income. The Fund seeks to achieve its
investment objective by investing primarily in equity and equity-related
securities issued by domestic and foreign companies. See "Investment
Objective and Policies."
Shares of the Fund will be priced at the net asset value per share next
determined following receipt of an order without imposition of a sales
charge. However, repurchases and/or redemptions of shares are subject in most
cases to a contingent deferred sales charge, scaled down from 5% to 1% of the
amount redeemed, if made within six years of purchase, which charge will be
paid to the Fund's Distributor, Dean Witter Distributors Inc. See
"Repurchases and Redemptions--Contingent Deferred Sales Charge." In addition,
the Fund pays the Distributor a Rule 12b-1 distribution fee pursuant to a
Plan of Distribution at the annual rate of 1% of the lesser of the (i)
average daily aggregate net sales or (ii) average daily net assets of the
Fund. See "Purchase of Fund Shares--Plan of Distribution."
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 September 26, 1996, which has been filed with
the Securities and Exchange Commission, and which is available at no charge
upon request of the Fund at the address or telephone numbers listed on this
page. The Statement of Additional Information is incorporated herein by
reference.
Table of Contents
Prospectus Summary .................................................... 2
Summary of Fund Expenses .............................................. 3
Financial Highlights .................................................. 4
The Fund and its Management ........................................... 5
Investment Objective and Policies ..................................... 6
Risk Considerations and Investment Practices ....................... 7
Investment Restrictions ............................................... 10
Purchase of Fund Shares ............................................... 11
Shareholder Services .................................................. 13
Repurchases and Redemptions ........................................... 16
Dividends, Distributions and Taxes .................................... 18
Performance Information ............................................... 19
Additional Information ................................................ 19
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any
other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
TCW/DW TOTAL RETURN 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,
FUND non-diversified management investment company investing primarily in equity and equity-related securities.
- ------------------ -------------------------------------------------------------------------------------------------------------
OFFERING PRICE At net asset value (see page 11). Shares redeemed within six years of purchase are subject to a contingent
deferred sales charge under most circumstances (see page 16).
- ------------------ -------------------------------------------------------------------------------------------------------------
MINIMUM Minimum initial purchase is $1,000 ($100 if the account is opened through EasyInvest (Service Mark) ).
PURCHASE Minimum subsequent purchase is $100 (see page 11).
- ------------------ -------------------------------------------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is high total return from capital growth and income.
OBJECTIVE
- ------------------ -------------------------------------------------------------------------------------------------------------
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 twelve other investment
companies 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 ninety-nine
investment companies and other portfolios with assets of approximately $84.6 billion at August 31, 1996.
(See page 5).
- ------------------ -------------------------------------------------------------------------------------------------------------
ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser. In addition to the Fund, the
Adviser serves as investment adviser to twelve other TCW/DW Funds. As of August 31, 1996, the Adviser and its
affiliates had approximately $53 billion under management or committed to management in various fiduciary or
advisory capacities, primarily to institutional investors. (See page 5).
- ------------------ -------------------------------------------------------------------------------------------------------------
MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.45% of daily net assets. The Adviser receives a
AND ADVISORY monthly fee at an annual rate of 0.30% of daily net assets. (See page 5).
FEES
- ------------------ -------------------------------------------------------------------------------------------------------------
DIVIDENDS Income dividends are paid quarterly. Capital gains, if any, will be distributed no less than annually.
Dividends and capital gains distributions are automatically reinvested in additional shares at net asset value
unless the shareholder elects to receive cash. (See page 18).
- ------------------ -------------------------------------------------------------------------------------------------------------
DISTRIBUTOR Dean Witter Distributors Inc. (the "Distributor"). The Distributor receives from the Fund a distribution fee
accrued daily and payable monthly at the rate of 1% per annum of the lesser of (i) the average daily aggregate
net sales or (ii) the Fund's average daily net assets. This fee compensates the Distributor for services
provided in distributing shares of the Fund and for sales-related expenses. The Distributor also receives the
proceeds of any contingent deferred sales charges (see pages 11-12).
- ------------------ -------------------------------------------------------------------------------------------------------------
REDEMPTION-- Shares are redeemable by the shareholder at net asset value. An account may be involuntarily redeemed if the
CONTINGENT total value of the account is less than $100 or, if the account was opened through EasyInvest(Service Mark),
DEFERRED if after twelve months the shareholder has less than $1,000 in the account. Although no commission or sales
SALES load is imposed upon the purchase of shares, a contingent deferred sales charge (scaled down from 5% to 1%)
CHARGE is imposed on any redemption of shares if after such redemption the aggregate current value of an account
with the Fund falls below the aggregate amount of the investor's purchase payments made during the six years
preceding the redemption. However, there is no charge imposed on redemption of shares purchased through
reinvestment of dividends or distributions (see pages 16-17).
- ------------------ -------------------------------------------------------------------------------------------------------------
RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the Fund's
CONSIDERATIONS portfolio securities. The Fund is a non-diversified management investment company and, as such, is not subject
to the diversification requirements of the Investment Company Act of 1940, as amended. As a result, a
relatively high percentage of the Fund's assets may be invested in a limited number of issuers. However, the
Fund intends to qualify as a regulated investment company under the federal income tax laws and, as such, is
subject to the diversification requirements of the Internal Revenue Code. The Fund may invest in foreign
securities and may purchase securities on a when-issued, delayed delivery or "when, as and if issued" basis,
which may involve certain special risks (see pages 7-10).
- ------------------ -------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
2
<PAGE>
SUMMARY OF FUND EXPENSES
- -----------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are for
the fiscal year ended July 31, 1996.
Shareholder Transaction Expenses
- --------------------------------
<TABLE>
<CAPTION>
<S> <C>
Maximum Sales Charge Imposed on Purchases ............................................. None
Maximum Sales Charge Imposed on Reinvested Dividends .................................. None
Contingent Deferred Sales Charge
(as a percentage of the lesser of original purchase price or redemption proceeds) .. 5.0%
</TABLE>
A contingent deferred sales charge is imposed at the following declining
rates:
YEAR SINCE PURCHASE PAYMENT MADE PERCENTAGE
- ------------------------------------ --------------
First ............................... 5.0%
Second .............................. 4.0%
Third ............................... 3.0%
Fourth .............................. 2.0%
Fifth ............................... 2.0%
Sixth ............................... 1.0%
Seventh and thereafter .............. None
Redemption Fees ..........................................................None
Exchange Fee ............................................................. None
Annual Fund Operating Expenses (as a Percentage of Average Net Assets)
Management and Advisory Fees* ............................................ 0.75%
12b-1 Fees ............................................................... 0.87%
Other Expenses* .......................................................... 0.59%
Total Fund Operating Expenses* ........................................... 2.21%
- ------------
* "Management and Advisory Fees" and "Other Expenses" have been restated
to reflect current fees and expenses. Pursuant to an undertaking,
InterCapital assumed all operating expenses (except for any 12b-1
and/or brokerage fees), the Manager waived the compensation provided
for in its Management Agreement and the Adviser waived the compensation
provided for in its Advisory Agreement until September 27, 1995.
<TABLE>
<CAPTION>
Example 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 no fee waiver), assuming (1) 5% annual return and
(2) redemption at the end of each time period: ........ $72 $99 $138 $254
You would pay the following expenses on the same investment,
assuming no redemption: ................................ $22 $69 $118 $254
</TABLE>
- ------------
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF THE FUND MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Plan of Distribution" and "Repurchases and
Redemptions" in this Prospectus.
Long-term shareholders of the Fund may pay more in sales charges including
distribution fees than the economic equivalent of the maximum front-end sales
charges permitted by the NASD.
3
<PAGE>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by Price Waterhouse LLP,
independent accountants. The financial highlights should be read in
conjunction with the financial statements, notes thereto and the unqualified
report of independent accountants which are contained in the Statement of
Additional Information. Further information about the performance of the Fund
is contained in the Fund's Annual Report to Shareholders, which may be
obtained without charge upon request to the Fund.
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JULY 31, NOVEMBER 30, 1994*
1996 THROUGH JULY 31, 1995
--------------- ---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period . $11.75 $ 10.00
--------------- ---------------------
Net investment income ................. 0.15 0.21
Net realized and unrealized gain ..... 0.80 1.68
--------------- ---------------------
Total from investment operations ..... 0.95 1.89
--------------- ---------------------
Less dividends and distributions from:
Net investment income ................ (0.21) (0.14)
Net realized gain .................... (0.49) --
--------------- ---------------------
Total dividends and distributions .... (0.70) (0.14)
--------------- ---------------------
Net asset value, end of period ....... $12.00 $ 11.75
=============== =====================
TOTAL INVESTMENT RETURN+ .............. 8.23% 19.04%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .............................. 1.98%(4) 0.94%(2)(3)
Net investment income ................. 1.30%(4) 3.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands ............................ $48,524 $36,018
Portfolio turnover rate ............... 261% 91%(1)
Average commission rate paid .......... $0.0582 --
</TABLE>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or
waived by the Manager and Adviser, the above annualized expense and net
investment ratios would have been 2.66% and 1.47%, respectively.
(4) If the Fund had borne all of its expenses that were reimbursed or
waived by the Manager and Adviser, the above annualized expense and net
investment ratios would have been 2.21% and 1.07%, respectively.
4
<PAGE>
THE FUND AND ITS MANAGEMENT
- -----------------------------------------------------------------------------
TCW/DW Total Return 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 June 29, 1994.
Dean Witter Services Company Inc. (the "Manager"), whose address is Two
World Trade Center, New York, New York 10048, is the Fund's Manager. The
Manager is a wholly-owned subsidiary of Dean Witter InterCapital Inc.
("InterCapital"). InterCapital is a wholly-owned subsidiary of Dean Witter,
Discover & Co. ("DWDC"), a balanced financial services organization providing
a broad range of nationally marketed credit and investment products.
The Manager acts as manager to twelve other TCW/DW Funds. The Manager and
InterCapital serve in various investment management, advisory, management and
administrative capacities to a total of ninety-nine investment companies,
thirty of which are listed on the New York Stock Exchange, with combined
assets of approximately $81.8 billion as of August 31, 1996. InterCapital
also manages and advises portfolios of pension plans, other institutions and
individuals which aggregated approximately $2.8 billion at such date.
The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety
of trust, investment management and investment advisory services. Robert A.
Day, who is Chairman of the Board of Directors of TCW, may be deemed to be a
control person of the Adviser by virtue of the aggregate ownership by Mr. Day
and his family of more than 25% of the outstanding voting stock of TCW. The
Adviser serves as investment adviser to twelve other TCW/DW Funds in addition
to the Fund. As of August 31, 1996, the Adviser and its affiliated companies
had approximately $53 billion under management or committed to management,
primarily from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager
and the Adviser to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the Fund
and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.45% to the Fund's net assets. As compensation for its investment advisory
services, the Fund pays the Adviser monthly compensation calculated daily by
applying an annual rate of 0.30% to the Fund's net assets. The total fees
paid by the Fund to the Manager and the Adviser are higher than the fees paid
by most other investment companies for similar services.
The Fund's expenses include: the fees of the Manager and the Adviser; the
fee pursuant to the Plan of Distribution (see "Purchase of Fund Shares");
taxes; legal, transfer agent, custodian and auditing fees; federal and state
registration fees; and printing and other expenses relating to the Fund's
operations which are not expressly assumed by the Manager or Adviser under
their respective Agreements with the Fund. Pursuant to an undertaking,
InterCapital assumed all operating expenses (except for 12b-1 and brokerage
fees) and the Manager and the Adviser waived their respective compensation
until September 27, 1995. For the fiscal year ended July 31, 1996, the Fund
accrued total compensation to the Manager and the Adviser amounting to 0.39%
and 0.26%, respectively of the Fund's average daily net assets and the Fund's
total expenses amounted to 1.98% of the Fund's average daily net assets.
5
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- -----------------------------------------------------------------------------
The investment objective of the Fund is high total return from capital
growth and income. 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 and
equity-related securities of domestic and foreign issuers. The equity and
equity-related securities in which the Fund may invest include common stocks
and convertible securities such as investment grade convertible bonds, notes,
debentures, preferred stocks or other securities convertible into common
stock.
The Fund's equity investments will be determined pursuant to a "top-down"
investment process ranging from the overall economic outlook, to the
development of industry/sector preferences, and, last, to specific stock
selections. The following disciplines generally apply with regard to equity
selection: (i) no single issuer's equity securities will represent at the
time of purchase more than 3% of the Fund's total assets; and (ii) at least
85% of the companies represented will have a minimum market capitalization at
the time of purchase in excess of $1 billion; and (iii) eligible securities
will be those which currently pay, or are expected to pay, dividend or
interest income. Subject to the Fund's investment objective, the Adviser may
modify the foregoing disciplines without notice.
Up to 35% of the Fund's total assets may be invested in equity or
investment grade fixed-income securities of foreign issuers. The Fund will
not invest 25% or more of its total assets in any one foreign country. Such
investments may be in the form of direct investments in securities of foreign
issuers or in the form of American Depository Receipts (ADRs), European
Depository Receipts (EDRs) 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. The Fund's investments in unlisted foreign securities are subject to
the Fund's overall policy limiting its investment in illiquid securities to
15% or less of its net assets.
Up to 35% of the Fund's total assets may be invested in investment grade
fixed-income securities consisting of securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities (including zero coupon
securities), corporate debt securities and money market instruments. With
respect to corporate debt securities, the term "investment grade" means
securities which are rated Baa or higher by Moody's Investors Services, Inc.
("Moody's") or BBB or higher by Standard & Poor's Corporation ("S&P") or, if
not rated, are deemed by the Adviser to be of comparable quality. See the
Appendix to the Statement of Additional Information for a discussion of
ratings of fixed-income securities.
Investments in fixed-income securities rated either BBB by S&P or Baa by
Moody's (the lowest credit ratings designated "investment grade") have
speculative characteristics and, therefore, changes in economic conditions or
other circumstances are more likely to weaken their capacity to make
principal and interest payments than would be the case with investments in
securities with higher credit ratings. If a fixed-income or convertible
security held by the Fund is rated BBB or Baa and is subsequently downgraded
by a rating agency, or otherwise falls below investment grade the Fund will
sell such securities as soon as is practicable without undue market or tax
consequences to the Fund.
The Fund may invest in investment grade convertible securities. A
convertible security is a bond, debenture, note, preferred stock or other
security that may be converted into or exchanged for a prescribed amount of
common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
6
<PAGE>
common stocks in a corporation's capital structure and, therefore, entail
less risk than the corporation's common stock. The value of a convertible
security is a function of its "investment value" (its value as if it did not
have a conversion privilege), and its "conversion value" (the security's
worth if it were to be exchanged for the underlying security, at market
value, pursuant to its conversion privilege). To the extent that a
convertible security's investment value is greater than its conversion value,
its price will be primarily a reflection of such investment value and its
price will be likely to increase when interest rates fall and decrease when
interest rates rise, as with a fixed-income security (the credit standing of
the issuer and other factors may also have an effect on the convertible
security's value). If the conversion value exceeds the investment value, the
price of the convertible security will rise above its investment value and,
in addition, will sell at some premium over its conversion value. (This
premium represents the price investors are willing to pay for the privilege
of purchasing a fixed-income security with a possibility of capital
appreciation due to the conversion privilege.) At such times the price of the
convertible security will tend to fluctuate directly with the price of the
underlying equity security.
Money market instruments in which the Fund may invest are securities
issued or guaranteed by the U.S. Government or its agencies (Treasury Bills,
Notes and Bonds (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 deposit; and commercial paper rated
within the two highest grades by Moody's or S&P or, if not rated, issued by a
company having an outstanding debt issue rated AAA by S&P or Aaa by Moody's.
There may be periods during which, in the opinion of the Adviser, market
conditions warrant reduction of some or all of the Fund's securities
holdings. During such periods, the Fund may adopt a temporary "defensive"
posture in which greater than 35% of its total assets is invested in money
market instruments or cash.
The Fund is classified as a non-diversified investment company under the
Investment Company Act of 1940, as amended (the "Act"), and as such is not
limited by the Act in the proportion of its assets that it may invest in the
obligations of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. See "Dividends, Distributions and
Taxes." In order to qualify, among other requirements, the Fund will limit
its investments so that at the close of each quarter of the taxable year, (i)
not more than 25% of the market value of the Fund's total assets will be
invested in the securities of a single issuer, and (ii) with respect to 50%
of the market value of its total assets not more than 5% will be invested in
the securities of a single issuer and the Fund will not own more than 10% of
the outstanding voting securities of a single issuer. To the extent that a
relatively high percentage of the Fund's assets may be invested in the
securities 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.
RISK CONSIDERATIONS AND INVESTMENT PRACTICES
The net asset value of the Fund's shares will fluctuate with changes in
the market value of the Fund's portfolio securities. The market value of the
Fund's portfolio securities will increase or decrease due to a variety of
economic, market or political factors which cannot be predicted.
Additionally, the net asset value of the Fund's shares may increase or
decrease due to changes in prevailing interest rates. Generally, a rise in
interest rates will result in a decrease in the value of the Fund's
fixed-income securities, while a drop in interest rates will result in an
increase in the value of those securities.
Foreign securities. Foreign securities investments may be affected by
changes in currency rates or exchange control regulations, changes in
governmen-
7
<PAGE>
tal administration or economic or monetary policy (in the United States and
abroad) or changed circumstances in dealings between nations. Fluctuations in
the relative rates of exchange between the currencies of different nations
will affect the value of the Fund's investments denominated in foreign
currency. Changes in foreign currency exchange rates relative to the U.S.
dollar will affect the U.S. dollar value of the Fund's assets denominated in
that currency and thereby impact upon the Fund's total return on such assets.
Foreign currency exchange rates are determined by forces of supply and
demand on the foreign exchange markets. These forces are themselves affected
by the international balance of payments and other economic and financial
conditions, government intervention, speculation and other factors. Moreover,
foreign currency exchange rates may be affected by the regulatory control of
the exchanges on which the currencies trade.
Investments in foreign securities will also occasion risks relating to
political and economic developments abroad, including the possibility of
expropriations or confiscatory taxation, limitations on the use or transfer
of Fund assets and any effects of foreign social, economic or political
instability. Foreign companies are not subject to the regulatory requirements
of U.S. companies and, as such, there may be less publicly available
information about such companies. Moreover, foreign companies are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those applicable to U.S. companies.
Securities of foreign issuers may be less liquid than comparable
securities of U.S. issuers and, as such, their price changes may be more
volatile. Furthermore, foreign exchanges and broker-dealers are generally
subject to less government and exchange scrutiny and regulation than their
American counterparts. Brokerage commissions, dealer concessions and other
transaction costs may be higher on foreign markets than in the U.S. In
addition, differences in clearance and settlement procedures on foreign
markets may occasion delays in settlements of the Fund's trades effected in
such markets. As such, the inability to dispose of portfolio securities due
to settlement delays could result in losses to the Fund due to subsequent
declines in value of such securities and the inability of the Fund to make
intended security purchases due to settlement problems could result in a
failure of the Fund to make potentially advantageous investments. To the
extent the Fund purchases Eurodollar certificates of deposit issued by
foreign branches of domestic United States banks, consideration will be given
to their domestic marketability, the lower reserve requirements normally
mandated for overseas banking operations, the possible impact of
interruptions in the flow of international currency transactions and future
international political and economic developments which might adversely
affect the payment of principal or interest.
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. See the Statement of Additional Information for a further discussion
of such investments.
Private Placements. The Fund may invest up to 5% of its total assets in
securities which are subject to restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), or which are otherwise not readily marketable. (Securities eligible
for resale pursuant to Rule 144A under the Securities Act, and determined to
be liquid pursuant to the procedures discussed in the following paragraph,
are not subject to the foregoing restriction.) These securities are generally
referred to as private placements or restricted securities. Limitations on
the resale of such
8
<PAGE>
securities may have an adverse effect on their marketability, and may prevent
the Fund from disposing of them promptly at reasonable prices. The Fund may
have to bear the expense of registering such securities for resale and the
risk of substantial delays in effecting such registration.
The Securities and Exchange Commission has adopted Rule 144A under the
Securities Act, which permits the Fund to sell restricted securities to
qualified institutional buyers without limitation. The Adviser, pursuant to
procedures adopted by the Trustees of the Fund, will make a determination as
to the liquidity of each such restricted security purchased by the Fund. If
such Rule 144A 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 that the Fund, at a particular point in time, may
be unable to find qualified institutional buyers interested in purchasing
such securities.
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.
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. See the Statement
of Additional Information for a further discussion of such investments.
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. 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. See
the Statement of Additional Information for a further discussion of such
investments.
Zero Coupon Securities. A portion of the fixed-income securities purchased
by the Fund may be zero coupon securities. Such securities are purchased at a
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as
income each year even though the Fund receives no interest payments in cash
on the security during the year.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments
primarily in commercial real estate properties. Investment in real estate
investment trusts may be the most practical available means for the Fund to
invest in the real estate industry (the Fund is prohibited from investing in
real estate directly). As a shareholder in a real estate investment trust,
the Fund would bear its ratable share of the real estate investment trust's
expenses, including
9
<PAGE>
its advisory and administration fees. At the same time the Fund would
continue to pay its own investment management fees and other expenses, as a
result of which the Fund and its shareholders in effect will be absorbing
duplicate levels of fees with respect to investments in real estate
investment trusts.
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.
Futures and Options Transactions. The Fund is authorized to engage in
options and futures transactions for hedging purposes, although it has no
current intention to do so during the coming year. The Fund will not engage
in such options and futures transactions unless and until the Fund's
Prospectus has been revised to reflect such a change following approval by
the Fund's Board of Trustees.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Fund's investment objective. James A. Tilton, Managing Director
of the Adviser, has been designated as the Fund's primary portfolio manager.
Mr. Tilton has been a portfolio manager with affiliates of TCW since 1980.
In determining which securities to purchase for the Fund or hold in the
Fund's portfolio, the Adviser will rely on information from various sources,
including research, analysis and appraisals of brokers and dealers, including
Dean Witter Reynolds Inc. ("DWR"), a broker-dealer affiliate of the Manager,
and others regarding economic developments and interest rate trends, and the
Adviser's own analysis of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are placed
for the Fund with a number of brokers and dealers, including DWR. The Fund
may incur brokerage commissions on transactions conducted through DWR.
Although the Fund does not engage in substantial short-term trading as a
means of achieving its investment objective, it may sell portfolio securities
without regard to the length of time they have been held in accordance with
the investment policies described earlier. It is not anticipated that, under
normal circumstances, the portfolio trading will result in the Fund's
portfolio turnover rate exceeding 300% in any one year. The Fund will incur
brokerage costs commensurate with its portfolio turnover rate. 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 trading policy. A more extensive discussion of the Fund's portfolio
brokerage policies is set forth in the Statement of Additional Information.
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 restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For
purposes of the following limitations: (i) all percentage limitations apply
immediately after a purchase or initial invest-
10
<PAGE>
ment, and (ii) any subsequent change in any applicable percentage resulting
from market fluctuations or other changes in total or net assets does not
require elimination of any security from the portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities of
issuers in any one in-dustry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. Invest more than 5% of the value of its total assets in securities of
issuers having a record, together with predecessors, of less than three
years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any
issuer.
PURCHASE OF FUND SHARES
- -----------------------------------------------------------------------------
The Fund offers its shares 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 the Adviser) who have
entered into selected broker-dealer agreements with the Distributor
("Selected Broker-Dealers"). The principal executive office of the
Distributor is located at Two World Trade Center, New York, New York 10048.
The minimum initial purchase is $1,000 and subsequent purchases of $100 or
more may be made by sending a check, payable to TCW/DW Total Return Trust,
directly to Dean Witter Trust Company (the "Transfer Agent") at P.O. Box
1040, Jersey City, NJ 07303, or by contacting an account executive of DWR or
other Selected Broker-Dealer. The minimum initial purchase, in the case of
investments through EasyInvest (Service Mark), an automatic purchase plan
(see "Shareholder Services"), is $100, provided that the schedule of
automatic investments will result in investments totalling at least $1,000
within the first twelve months. In the case of investments pursuant to
Systematic Payroll Deduction Plans (including Individual Retirement Plans),
the Fund, in its discretion, may accept investments without regard to any
minimum amounts which would otherwise be required if the Fund has reason to
believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares
purchased will not be issued unless a request is made by the shareholder in
writing to the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since
DWR and other Selected Broker-Dealers forward investors' funds on settlement
date, they will benefit from the temporary use of the funds if payment is
made prior thereto. As noted above, orders placed directly with the Transfer
Agent must be accompanied by payment. Investors will be entitled to receive
income dividends and capital gains distributions if their order is received
by the close of business on the day prior to the record date for such
dividends and distributions.
The offering price will be the net asset value per share next determined
following receipt of an order by the Transfer Agent (see "Determination of
Net Asset Value"). While no sales charge is imposed at the time shares are
purchased, a contingent deferred sales charge may be imposed at the time of
redemption (see "Repurchases and Redemptions"). Sales personnel of a Selected
Broker-Dealer are compensated for selling shares of the Fund at the time of
their sale by the Distributor and/or Selected Broker-Dealer. In addition,
some sales personnel of the Selected Broker-Dealer will receive various types
of non-cash compensation or 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.
11
<PAGE>
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan"), under which the Fund pays the Distributor a fee, which
is accrued daily and payable monthly, at an annual rate of 1% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) the
Fund's average daily net assets. This fee is treated by the Fund as an
expense in the year it is accrued. A portion of the fee payable pursuant to
the Plan, equal to 0.25% of the Fund's average daily net assets, is
characterized as a service fee within the meaning of NASD guidelines. The
service fee is a payment made for personal service and/or the maintenance of
shareholder accounts.
Amounts paid under the Plan are 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, including the payment of
commissions for sales of the Fund's shares and incentive compensation to and
expenses of DWR 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 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 distribution expenses. For the fiscal year ended July 31, 1996,
the Fund accrued payments under the Plan amounting to $394,800, which is
equal to the annualized rate of 0.87% of the Fund's average daily net assets
for the fiscal year. The payments accrued under the Plan were calculated
pursuant to clause (a) of the compensation formula under the Plan.
At any given time, the expenses in distributing 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 contingent deferred sales charges paid by
investors upon the redemption of shares (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). For example, if $1 million
in expenses in distributing shares of the Fund had been incurred and $750,000
had been received as described in (i) and (ii) above, the excess expense
would amount to $250,000. The Distributor has advised the Fund that the
excess distribution expenses (including the carrying charge described above)
totalled $2,360,033 at July 31, 1996, which was equal to 4.86% of the Fund's
net assets on such date.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all distribution expenses or any requirement that the Plan be
continued from year to year, such excess amount, if any, 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 of contingent deferred sales charges, may or may
not be recovered through future distribution fees or contingent deferred
sales charges.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting all its liabilities, dividing by the number of shares outstanding
and adjusting to the nearest cent. The net asset value per share will not be
determined on Good Friday and on such other federal and non-federal holidays
as are observed by the New York Stock Exchange.
12
<PAGE>
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 stock exchange or quoted by NASDAQ is valued at its
latest sale price on that exchange or quotation service; if there were no
sales that day, the security is valued at the latest bid price (in cases
where a security is traded on more than one exchange, the security is valued
on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); and (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest bid price. When market quotations are not readily available, including
circumstances under which it is determined by the Adviser that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Board of Trustees.
For valuation purposes, quotations of foreign portfolio securities, other
assets and liabilities and forward contracts stated in foreign currency are
translated into U.S. dollar equivalents at the prevailing market rates prior
to the close of the New York Stock Exchange as of the morning of valuation.
Dividends receivable are accrued as of the ex-dividend date or as of the time
that the relevant ex-dividend date and amounts become known.
Short-term debt securities with remaining maturities of 60 days or less at
the time of purchase are valued at amortized cost, unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. Other short-term debt securities will be valued on a mark-to-market
basis until such time as they reach a remaining maturity of 60 days,
whereupon they will be valued at amortized cost using their value on the 61st
day unless the Trustees determine such does not reflect the securities'
market value, in which case these securities will be valued at their fair
value as determined by the Trustees. All other securities and other assets
are valued at their fair value as determined in good faith under procedures
established by and under the supervision of the Trustees.
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 the pricing service believes is the fair valuation of such portfolio
securities.
SHAREHOLDER SERVICES
- -----------------------------------------------------------------------------
Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the Fund (or, if specified by the shareholder, any other TCW/DW
Fund), unless the shareholder requests that they be paid in cash. Shares so
acquired are not subject to the imposition of a contingent deferred sales
charge upon their redemptions (see "Repurchases and Redemptions").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution at the net asset value
per share next determined after receipt by the Transfer Agent, by returning
the check or the proceeds to the Transfer Agent within 30 days after the
payment date. Shares so acquired are not subject to the imposition of a
contingent deferred sales charge upon their redemption (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, on a
semi-monthly, monthly or quarterly basis, to the Fund's 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. For further
information or to subscribe to EasyInvest,
13
<PAGE>
shareholders should contact their DWR or other Selected Broker-Dealer account
executive or the Transfer Agent (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 contingent deferred sales charge will be imposed on shares
redeemed under the Withdrawal Plan (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). 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
contingent deferred sales charge) to the shareholder will be the designated
monthly or quarterly amount.
Shareholders should contact their DWR or other Selected Broker-Dealer
account executive or the Transfer Agent for information about any of the
above services.
Tax Sheltered Retirement Plans. Retirement plans are available for use by
corporations, the self-employed, Individual Retirement Accounts and Custodial
Accounts under Section 403(b)(7) of the Internal Revenue Code. Adoption of
such plans should be on advice of legal counsel or tax adviser.
For further information regarding plan administration, custodial fees and
other details, investors should contact their account executive or the
Transfer Agent.
EXCHANGE PRIVILEGE
The Fund makes available to its shareholders an "Exchange Privilege"
allowing the exchange of shares of the Fund for shares of any other TCW/DW
Fund sold with a contingent deferred sales charge ("CDSC Funds"), for shares
of TCW/DW North American Government Income Trust, TCW/DW Income and Growth
Fund and TCW/DW Balanced Fund, and for shares of five money market funds for
which InterCapital serves as investment manager: Dean Witter Liquid Asset
Fund Inc., Dean Witter U.S. Government Money Market Trust, Dean Witter
Tax-Free Daily Income Trust, Dean Witter California Tax-Free Daily Income
Trust and Dean Witter New York Municipal Money Market Trust (the foregoing
eight funds are hereinafter collectively referred to as the "Exchange
Funds"). Exchanges may be made after the shares of the Fund acquired by
purchase (not by exchange or dividend reinvestment) have been held for thirty
days. There is no waiting period for exchanges of shares acquired by exchange
or dividend reinvestment.
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, other than the other TCW/DW Funds and the five money market
funds listed above.
An exchange to another CDSC Fund or to 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 or any other TCW/DW 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 TCW/DW
Fund can be effected on the same basis. No contingent deferred sales charge
("CDSC") is imposed at the time of any exchange, although any applicable CDSC
will be imposed upon ultimate redemption. 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
(for the purpose of determining the rate of the CDSC) is frozen. If those
shares are subsequently reexchanged for shares of a CDSC Fund, the holding
period previously frozen when the first exchange was made resumes on the last
day of the month in which shares of a CDSC Fund are reacquired. Thus, the
CDSC is based upon the time (calculated as described above)
14
<PAGE>
the shareholder was invested in a CDSC Fund (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge"). However, in the case of
shares of the Fund 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.)
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 its 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 other 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
and any other conditions imposed by each fund. An exchange will be treated
for federal income tax purposes the same as a repurchase or redemption of
shares, on which the shareholder may realize a capital gain or loss. However,
the ability to deduct capital losses on an exchange may be limited in
situations where there is an exchange of shares within ninety days after the
shares are purchased. The Exchange Privilege is only available in states
where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the money
market funds for which the Exchange Privilege is available pursuant to this
Exchange Privilege by contacting their DWR or other Selected Broker-Dealer
account executive (no Exchange Privilege Authorization Form is required).
Other shareholders (and those shareholders who are clients of DWR or another
Selected Broker-Dealer but who wish to make exchanges directly by writing or
telephoning the Transfer Agent) must complete and forward to the Transfer
Agent an Exchange Privilege Authorization Form, copies of which may be
obtained from the Transfer Agent, to initiate an exchange. If the
Authorization Form is used, exchanges may be made in writing or by contacting
the Transfer Agent at (800) 869-NEWS (toll-free). The Fund will employ
reasonable procedures to confirm that exchange instructions communicated over
the telephone are genuine. 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 will also be
recorded. If such procedures are not employed, the Fund may be liable for any
losses due to unauthorized or fraudulent instructions.
Telephone exchange instructions will be accepted if received by the
Transfer Agent between 9:00 a.m. and 4:00 p.m. New York time, on any day the
New York Stock Exchange is open. Any shareholder wishing to make an exchange
who has previously filed an Exchange Privilege Authorization Form and who is
unable to reach the Fund by telephone should contact his or her DWR or other
Selected Broker-Dealer account executive, if appropriate, or make a written
15
<PAGE>
exchange request. Shareholders are advised that during periods of drastic
economic or market changes, it is possible that the telephone exchange
procedures may be difficult to implement, although this has not been the case
in the past with other funds managed by the Manager.
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
- -----------------------------------------------------------------------------
Repurchase. DWR and other Selected 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 or telegraphic request of the shareholder. The repurchase price is
the net asset value per share next computed (see "Purchase of Fund Shares")
after such repurchase order is received by DWR or other Selected
Broker-Dealer, reduced by any applicable CDSC (see below).
The CDSC, if any, will be the only fee imposed by the Fund, the
Distributor, DWR or other Selected Broker-Dealer. The offers 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 "Redemption."
Redemption. Shares 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 contingent deferred sales
charge (see below). 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
documentation required by the Transfer Agent.
Contingent Deferred Sales Charge. 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 charge upon
redemption. Shares redeemed sooner than six years after purchase may,
however, be subject to a charge upon redemption. This charge is called a
"contingent deferred sales charge" ("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 table below:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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>
A CDSC will not be imposed on: (i) any amount which represents an increase
in value of shares purchased within the six years preceding the redemption;
(ii) the current net asset value of shares purchased more than six years
prior to the redemption; and (iii) the current net asset value of shares
purchased through reinvestment of dividends or distributions. Moreover, in
determining whether a CDSC is applicable it will be assumed that amounts
described in (i), (ii) and (iii) above (in that order) are redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the case
of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of
16
<PAGE>
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
("Custodial Account") under Section 403(b)(7) of the Internal Revenue Code,
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 Individual Retirement Account or Custodial Account
under Section 403(b)(7) of the Internal Revenue Code following attainment of
age 59 1/2, and (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
corporate or self-employed retirement plan qualified under Section 401(k) of
the Internal Revenue Code which offers investment companies managed by the
Manager or its parent, Dean Witter InterCapital Inc., as self-directed
investment alternatives and for which Dean Witter Trust Company, an affiliate
of the Manager, serves as recordkeeper or Trustee ("Eligible 401(k) Plan"),
provided that either: (A) the plan continues to be an Eligible 401(k) 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.
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 executive regarding restrictions on redemption of shares of the Fund
pledged in the margin account.
Reinstatement Privilege. A shareholder who has had his or her shares
repurchased or redeemed and has not previously exercised this reinstatement
privilege may, within thirty days after the date of the repurchase or
redemption, reinstate any portion or all of the proceeds of such repurchase
or redemption in shares of the Fund at net asset value next determined after
a reinstatement request, together with the proceeds, is received by the
Transfer Agent and receive a pro-rata credit for any CDSC paid in connection
with such repurchase or redemption.
Involuntary Redemption. The Fund reserves the right, on sixty days'
notice, to redeem, at their net asset value, the shares of any shareholder
(other than shares held in an Individual Retirement Account or custodial
account under Section 403(b)(7) of the Internal Revenue Code) whose shares
due to redemptions by the shareholder have a value of less than $100 or such
lesser amount as may be fixed by the Trustees or, in the case of an account
opened through EasyInvest (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 him or her sixty days to
17
<PAGE>
make an additional investment in an amount which will increase the value of
his or her account to at least the applicable amount or more before the
redemption is processed. No CDSC will be imposed on any involuntary
redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
Dividends and Distributions. The Fund intends to pay quarterly dividends
and to distribute substantially all of the Fund's net investment income. The
Fund may distribute quarterly net short-term capital gains, if any. The Fund
intends to distribute net short-term and net long-term capital gains, if any,
at least once each year. The Fund may, however, determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment.
All dividends and any capital gains distributions will be paid in
additional Fund shares and automatically credited to the shareholder's
account without issuance of a share certificate unless the shareholder
requests in writing that all dividends and/or distributions be paid in cash.
(See "Shareholder Services --Automatic Investment of Dividends and
Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, it is not
expected that the Fund will be required to pay any federal income tax.
Shareholders who are required to pay taxes on their income will normally have
to pay federal income taxes, and any state income taxes, on the dividends and
distributions they receive from the Fund. Such dividends and distributions,
to the extent that they are derived from net investment income or 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 with a record date in the last
quarter of any calendar year which are paid in the following year prior to
February 1 will be deemed received by the shareholder in the prior calendar
year. Dividend payments will be eligible for the federal dividends received
deduction available to the Fund's corporate shareholders only to the extent
the aggregate dividends received by the Fund would be eligible for the
deduction if the Fund were the shareholder claiming the dividends received
deduction. In this regard, a 46-day holding period generally must be met by
the Fund and the shareholder.
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 is subject to foreign
withholding taxes and the pass through of such taxes may not be available 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. To avoid being subject to a 31% federal backup withholding tax on
taxable dividends, capital gains distributions and the proceeds of
redemptions and repurchases, shareholders' taxpayer identification numbers
must be furnished and certified as to their accuracy.
Shareholders should consult their tax advisers as to the applicability of
the foregoing to their current situation.
18
<PAGE>
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. The total return of the Fund is based on historical
earnings and is not intended to indicate future performance. The "average
annual total return" of the Fund refers to a figure reflecting the average
annualized percentage increase (or decrease) in the value of an initial
investment in the Fund of $1,000 over periods of one, five and ten years as
well as over the life of the Fund, if less than any of the foregoing. Average
annual total return reflects all income earned by the Fund, any appreciation
or depreciation of the Fund's assets, all expenses incurred by the Fund and
all sales charges which would be incurred by redeeming shareholders, for the
stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return over
different periods of time by means of aggregate, average, and year-by-year or
other types of total return figures. Such calculations may or may not reflect
the deduction of the contingent deferred 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 shares of the
Fund. The Fund from time to time may also advertise its performance relative
to certain performance rankings and indexes compiled by independent
organizations (such as mutual fund performance rankings of Lipper Analytical
Services, Inc.).
ADDITIONAL INFORMATION
- -----------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges.
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 obligations
of the Fund. However, the Declaration of Trust contains an express disclaimer
of shareholder liability for acts or obligations of the Fund, requires that
Fund obligations include such disclaimer, and provides for indemnification
and reimbursement of expenses out of the Fund's property for any shareholder
held personally liable for the obligations of the Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable to meet its
obligations. Given the above limitation 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. The Adviser is subject to a Code of Ethics with respect to
investment transactions in which the Adviser's officers, directors and
certain other persons have a beneficial interest to avoid any actual or
potential conflict or abuse of their fiduciary position. The Code of Ethics,
as it pertains to the TCW/DW Funds, contains several restrictions and
procedures designed to eliminate conflicts of interest including: (a)
pre-clearance of personal investment transactions to ensure that personal
transactions by employees are not being conducted at the same time as the
Adviser's clients; (b) quarterly reporting of personal securities
transactions; (c) a prohibition against personally acquiring securities in an
initial public offering, entering into uncovered short sales and writing
uncovered options; (d) a seven day "blackout 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
19
<PAGE>
Fund; (e) a prohibition, with respect to certain investment personnel, from
profiting in the purchase and sale, or sale and purchase, of the same (or
equivalent) securities within 60 calendar days; and (f) a prohibition against
acquiring any security which is subject to firm wide or, if applicable, a
department restriction of the Adviser. The Code of Ethics provides that
exemptive relief may be given from certain of its requirements, upon
application. The Adviser's Code of Ethics complies with regulatory
requirements and, insofar as it relates to persons associated with registered
investment companies, the 1994 Report of the Advisory Group on Personal
Investing of the Investment Company Institute.
Shareholder Inquiries. All inquiries regarding the Fund should be directed
to the Fund at the telephone numbers or address set forth on the front cover
of this Prospectus.
20
<PAGE>
TCW/DW Total Return Trust
Two World Trade Center TCW/DW
New York, New York 10048 Total Return
Trust
TRUSTEES
John C. Argue
Richard M. DeMartini PROSPECTUS
Charles A. Fiumefreddo SEPTEMBER 26, 1996
John R. Haire
Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
James A. Tilton
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Dean Witter Trust Company
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
<PAGE>
TCW/DW
TOTAL RETURN
TRUST
STATEMENT OF ADDITIONAL INFORMATION
September 26, 1996
- -----------------------------------------------------------------------------
TCW/DW Total Return Trust (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is high total
return from capital growth and income. The Fund seeks to achieve its
investment objective by investing primarily in equity and equity-related
securities issued by domestic and foreign companies. See "Investment
Objective and Policies."
A Prospectus for the Fund dated September 26, 1996, 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 Total Return 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 ........................ 15
Portfolio Transactions and Brokerage ........... 16
The Distributor ................................ 18
Shareholder Services ........................... 21
Repurchases and Redemptions .................... 24
Dividends, Distributions and Taxes ............. 26
Performance Information ........................ 27
Description of Shares .......................... 28
Custodian and Transfer Agent ................... 28
Independent Accountants ........................ 28
Reports to Shareholders ........................ 29
Legal Counsel .................................. 29
Experts ........................................ 29
Registration Statement ......................... 29
Report of Independent Accountants .............. 30
Financial Statements --July 31, 1996 ........... 31
Appendix--Ratings of Corporate Debt Instruments 38
</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 June 29, 1994. The Fund is one of the TCW/DW Funds, which
currently consist, in addition to the Fund, of TCW/DW Core Equity Trust,
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 Balanced Fund, TCW/DW Term Trust
2000, TCW/DW Mid-Cap Equity Trust, TCW/DW Emerging Markets Opportunities
Trust and TCW/DW Global Telecom 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 Dean Witter, Discover & Co. ("DWDC"), 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. In addition, Trustees of the Fund may provide
guidance on economic factors and interest rate trends. 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 0.45% to
the daily net assets of the Fund determined as of the close of each business
day. While the total fees payable under the Management Agreement and the
Advisory Agreement (described below) are higher than that paid by most other
investment companies for similar services, the Board of Trustees determined
that the total fees payable under the Management Agreement and the Advisory
Agreement (described below) are reasonable in relation to the scope and
quality of services to be provided thereunder. In this regard, in evaluating
the Management Agreement and the Advisory Agreement, the Board of Trustees
recognized that the Manager and the Adviser had, pursuant to an agreement
described under the section entitled "The Adviser," agreed to a division as
between themselves of the total fees necessary for the management of the
business affairs of and the furnishing of investment advice to the Fund.
Accordingly, in reviewing the Management Agreement and Advisory Agreement,
the Board viewed as most significant the question as to whether the total
fees payable under the Management and Advisory Agreements were in the
aggregate reasonable in relation to the services to be provided thereunder.
For the fiscal period November 30, 1994 (commencement of operations) through
July 31, 1995, the fee payable under the Management Agreement ($79,732) was
waived by the Manager pursuant to undertakings described below.
3
<PAGE>
During the fiscal year ended July 31, 1996, the Fund accrued total
compensation to the Manager under the Management Agreement in the amount of
$204,371. During this period, a portion of the fee payable under the
Management Agreement ($26,700) was waived by the Manager pursuant to
undertakings described below.
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.
InterCapital had undertaken to assume all Fund expenses (except for the
Plan of Distribution fee and brokerage fees) and the Manager had undertaken
to waive the compensation provided for in the Management Agreement for
services rendered, and the Adviser had undertaken to waive the compensation
provided for in its Advisory Agreement, until such time as the Fund had $50
million of net assets or until six months from the date of commencement of
operations, whichever occurred first. After this period, InterCapital
continued to assume all operating expenses (except for the Plan of
Distribution fee and brokerage fees) and the Manager and the Adviser
continued to waive their respective compensation until September 27, 1995.
InterCapital has paid the organizational expenses of the Fund
(approximately $127,000) incurred prior to the offering of the Fund's shares.
The Fund has reimbursed InterCapital for such expenses. These expenses are
being deferred by the Fund and are being amortized 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 April
20, 1995 and became effective on that date. The Management Agreement replaced
a prior management agreement in effect between the Fund and the Manager which
was approved by the Trustees on July 14, 1994. The nature and scope of the
services provided to the Fund, and the formula to determine fees paid by the
Fund under the Management Agreement, are identical to those of the Fund's
previous management agreement. The Management Agreement may be terminated at
any time, without penalty, on thirty days' notice by the Trustees of the
Fund, or by the Manager.
Under its terms, the Management Agreement will continue in effect until
April 30, 1996, and will continue in effect from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the
vote of the Trustees of the Fund, including the vote of a majority of the
Trustees of the Fund who are not parties to the Management or Advisory
Agreement or "interested persons" (as defined in the Investment Company Act
of 1940, as amended (the "Act")) of any such party (the "Independent
Trustees"). At their meeting held on April 17, 1996, the Board of Trustees,
including a majority of Independent Trustees, approved the continuation of
the Management Agreement until April 30, 1997.
THE ADVISER
TCW Funds Management, Inc. (the "Adviser") is a wholly-owned subsidiary of
The TCW Group, Inc. ("TCW"), whose direct and indirect 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 August 31, 1996, the Adviser and its affiliates had approximately $53
billion under management or committed to management. Trust Company of the
West and its affiliates have managed equity securities portfolios for
institutional investors since 1971. The Adviser is headquartered at 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017 and is registered
as an investment adviser under the Investment Advisers Act of 1940. In
addition to the Fund, the Adviser serves as investment adviser to twelve
other TCW/DW Funds: TCW/DW Small Cap Growth Fund, TCW/DW Core Equity Trust,
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 Balanced Fund, TCW/DW Term Trust 2000, TCW/DW Mid-Cap
Equity Income Trust, TCW/DW Emerging Markets Opportunities Trust and TCW/DW
Global Telecom Trust. The Adviser also serves as investment adviser to TCW
Convertible Securities Fund, Inc., a closed-end investment company listed on
the New York Stock Exchange, and to TCW Galileo Funds, Inc., an open-end
management investment company, and acts as adviser or sub-adviser to other
investment companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding
voting stock of TCW.
4
<PAGE>
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the purchase and sale of
portfolio securities. The Adviser obtains and evaluates such information and
advice relating to the economy, securities markets, and specific securities
as it considers necessary or useful to continuously manage the assets of the
Fund in a manner consistent with its investment objective. In addition, the
Adviser pays the salaries of all personnel, including officers of the Fund,
who are employees of the Adviser.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the annual rate of 0.30% to
the daily net assets of the Fund determined as of the close of each business
day. For the fiscal period November 30, 1994 (commencement of operations)
through July 31, 1995, the fee payable under the Advisory Agreement ($53,155)
was waived by the Adviser pursuant to undertakings described above. During
the fiscal year ended July 31, 1996, the Fund accrued total compensation to
the Adviser under the Advisory Agreement of $136,247. During this period, a
portion of the fee payable under the Advisory Agreement ($17,800) was waived
by the Adviser pursuant to undertakings described above.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable to the Fund or any of its
investors for any act or omission by the Adviser or for any losses sustained
by the Fund or its investors. The Advisory Agreement in no way restricts the
Adviser from acting as investment adviser to others.
The Advisory Agreement was initially approved by the Trustees on July 14,
1994 and by InterCapital as then sole shareholder on August 24, 1994. The
Advisory Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Act, of the outstanding shares of the Fund, or by the Adviser.
The Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Advisory Agreement will continue in effect until
April 30, 1996, and provides that it will continue from year to year
thereafter, provided continuance of the Agreement is approved at least
annually by the vote of the holders of a majority, as defined in the Act, of
the outstanding shares of the Fund, or by the Trustees of the Fund; provided
that in either event such continuance is approved annually by the vote of a
majority of the Independent Trustees of the Fund, which vote must be cast in
person at a meeting called for the purpose of voting on such approval. At
their meeting held on April 17, 1996, the Board of Trustees, including a
majority of Independent Trustees, approved the continuation of the Advisory
Agreement until April 30, 1997.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor
of the Fund's shares, Dean Witter Distributors Inc. ("Distributors" or the
"Distributor") (see "The Distributor"), will be paid by the Fund. The
expenses borne by the Fund include, but are not limited to: expenses of the
Plan of Distribution pursuant to Rule 12b-1 (see "The Distributor"); charges
and expenses of any registrar; custodian, stock transfer and dividend
disbursing agent; brokerage commissions and securities transaction costs;
taxes; engraving and printing of share certificates; registration costs of
the Fund and its shares under federal and state securities laws; the cost and
expense of printing, including typesetting, and distributing Prospectuses and
Statements of Additional Information of the Fund and supplements thereto to
the Fund's shareholders; all expenses of shareholders' and trustees' meetings
and of preparing, printing and mailing of proxy statements and reports to
shareholders; fees and travel expenses of trustees or members of any advisory
board or committee who are not employees of the Manager or Adviser or any
corporate affiliate of either; all expenses incident to any dividend,
withdrawal or redemption options; charges and expenses of any outside service
used for pricing of the Fund's shares; fees and expenses of legal counsel,
including counsel to the Trustees who are not interested persons of the Fund
or of the Manager or the Adviser (not including compensation or expenses of
attorneys who are employees of the Manager or the Adviser) and independent
accountants; membership dues of industry associations; interest on Fund
borrowings; postage; insurance premiums on property or personnel (including
officers and trustees) of the Fund which inure to its benefit; extraordinary
expenses (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.
Pursuant to the Management and Advisory Agreements, total operating
expenses of the Fund are subject to applicable limitations under rules and
regulations of states where the Fund is authorized to sell its shares.
5
<PAGE>
Therefore, operating expenses are effectively subject to the most restrictive
of such limitations as the same may be amended from time to time. Presently,
the most restrictive limitation is as follows. If, in any fiscal year, the
Fund's total operating expenses, exclusive of taxes, interest, brokerage
fees, distribution fees and extraordinary expenses (to the extent permitted
by applicable state securities laws and regulations), exceed 2 1/2% of the
first $30,000,000 of average daily net assets, 2% of the next $70,000,000 and
1 1/2% of any excess over $100,000,000, the Manager and the Adviser will
reimburse the Fund, on a pro rata basis, for the amount of such excess. Such
amount, if any, will be calculated daily and credited on a monthly basis.
During the fiscal period November 30, 1994 through July 31, 1995 and during
the fiscal year ended July 31, 1996 the Fund's expenses did not exceed the
expense limitation.
DWR and TCW have entered into an Agreement for the purpose of creating,
managing, administering and distributing a family of investment companies and
other managed pooled investment vehicles offered on a retail basis within the
United States. The Agreement contemplates that, subject to approval of the
board of trustees or directors of a particular investment entity, DWR or its
affiliates will provide management and distribution services and TCW or its
affiliates will provide investment advisory services for each such investment
entity. The Agree-ment sets forth the terms and conditions of the
relationship between TCW and its affiliates and DWR and its affiliates and
the manner in which the parties will implement the creation and maintenance
of the investment entities, including the parties' expectations as to
respective allocation of fees to be paid by an investment entity to each
party for the services to be provided to it by such party.
The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser 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 the affiliated companies of either, and the
13 TCW/DW Funds and with the 83 investment companies of 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 (64) Of Counsel, Argue Pearson Harbison & Myers (law firm); Director,
c/o Argue Pearson Harbison & Myers Avery Dennison Corporation (manufacturer of self-adhesive products
Trustee and office supplies) and CalMat Company (producer of aggregates,
801 South Flower Street asphalt and ready mixed concrete); Chairman, Rose Hills Memorial
Los Angeles, California Park (cemetery); advisory director, LAACO Ltd. (owner and operator
of private clubs and real estate); director or trustee of various
business and not-for-profit corporations; Director, Coast Savings
Financial Inc. and Coast Federal Bank (a subsidiary of Coast Savings
Financial Inc.); Director, TCW Galileo Funds, Inc.; Trustee,
University of Southern California, Occidental College and Pomona
College; Trustee of the TCW/DW Funds.
Richard M. DeMartini* (43) President and Chief Operating Officer of Dean Witter Capital, a
Trustee division of DWR; Director of DWR, the Manager, InterCapital,
Two World Trade Center Distributors and Dean Witter Trust Company ("DWTC"); Executive
New York, New York Vice President of DWDC; Member of the DWDC Management Committee;
Trustee of the TCW/DW Funds. Member (since January, 1993) and Chairman
(since January, 1995) of the Board of Directors of NASDAQ.
6
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- -------------------------------------------------------------
Charles A. Fiumefreddo* (63) Chairman, Chief Executive Officer and Director of the Manager,
Chairman of the Board, Chief InterCapital and Distributors; Executive Vice President and Director
Executive Officer and Trustee of DWR; Chairman of the Board, Chief Executive Officer and Trustee
Two World Trade Center of the TCW/DW Funds; Chairman of the Board, Director or Trustee,
New York, New York President and Chief Executive Officer of the Dean Witter Funds;
formerly Executive Vice President and Director of DWDC (until
February, 1993); Chairman and Director of DWTC; Director and/or
officer of various DWDC subsidiaries.
John R. Haire (71) Chairman of the Audit Committee and Chairman of the Committee of
Trustee Independent Trustees and Trustee of the TCW/DW Funds; Chairman
Two World Trade Center of the Audit Committee and Chairman of the Committee of Independent
New York, New York Directors or Trustees and Director or Trustee of each of the Dean
Witter Funds; formerly President, Council for Aid to Education
(1978-1989) and Chairman and Chief Executive Officer of Anchor
Corporation, an Investment Adviser (1964-1978); Director of
Washington National Corporation (insurance).
Dr. Manuel H. Johnson (47) Senior Partner, Johnson Smick International, Inc., a consulting
Trustee firm; Koch Professor of International Economics and Director of
c/o Johnson Smick International Inc. the Center for Global Market Studies at George Mason University
1133 Connecticut Avenue, N.W. (since September, 1990); Co-Chairman and a founder of the Group
Washington, D.C. of Seven Council (G7C), an international economic commission;
Director of NASDAQ (since June, 1995); Director of Greenwich Capital
Markets, Inc. (broker-dealer); formerly Vice Chairman of the Board
of Governors of the Federal Reserve System (February, 1986-August,
1990) and Assistant Secretary of the U.S. Treasury (1982-1986);
Trustee of the TCW/DW Funds; Director or Trustee of the Dean Witter
Funds.
Thomas E. Larkin, Jr.* (57) Executive Vice President and Director, The TCW Group, Inc.; President
President and Trustee and Director of Trust Company of the West; Vice Chairman and Director
865 South Figueroa Street of TCW Asset Management Company; Chairman of the Adviser; President
Los Angeles, California and Director of TCW Galileo Funds, Inc.; Senior Vice President
of TCW Convertible Securities Fund, Inc.; Member of the Board 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 (60) General Partner, Triumph Capital, L.P., a private investment
Trustee partnership; formerly Vice President, Bankers Trust Company and
c/o Triumph Capital, L.P. BT Capital Corporation (1984-1988); Director of various business
237 Park Avenue organizations; Trustee of the TCW/DW Funds; Director or Trustee
New York, New York of the Dean Witter Funds.
7
<PAGE>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------------- -------------------------------------------------------------
John L. Schroeder (66) Retired; Trustee of the TCW/DW Funds; Director or Trustee of the
Trustee Dean Witter Funds; Director of Citizens Utilities Company; formerly
c/o Gordon Altman Butowsky Weitzen Executive Vice President and Chief Investment Officer of the Home
Shalov & Wein Insurance Company (August, 1991-September, 1995); formerly Chairman
Counsel to the Independent Trustees and Chief Investment Officer of Axe-Houghton Management and the
114 West 47th Street, Axe-Houghton Funds (1983-1991) and President of USF&G Financial
New York, New York Services, Inc. (1990-1991).
Marc I. Stern* (52) President, The TCW Group, Inc. (since May, 1992); President and
Trustee Director of the Adviser (since May, 1992); Vice Chairman and Director
865 South Figueroa Street of TCW Asset Management Company (since May, 1992); Executive Vice
Los Angeles, California President and Director of Trust Company of the West; Chairman and
Director of the TCW Galileo Funds, Inc.; Trustee of the TCW/DW
Funds; Chairman of TCW Americas Development, Inc.; Chairman of
TCW Asia, Limited (since January, 1993); Chairman of TCW London
International, Limited (since March, 1993); formerly President
of SunAmerica, Inc. (financial services company; Director of
Qualcomm, Incorporated (wireless communications); Director or
Trustee of various not-for-profit organizations.
Sheldon Curtis (64) Senior Vice President, Secretary and General Counsel of the Manager
Vice President, Secretary and General Counsel and InterCapital; Senior Vice President and Secretary of DWTC;
Two World Trade Center Senior Vice President, Assistant Secretary and Assistant General
New York, New York Counsel of Distributors; Assistant Secretary of DWR and Vice
President, Secretary and General Counsel of the TCW/DW Funds and
the Dean Witter Funds.
James A. Tilton (55) Managing Director of the Adviser; Managing Director, Equities of
Vice President Trust Company of the West and TCW Asset Management Company; Chairman
865 South Figueroa Street of the Board of Verdugo Hills Hospital and Chairman of the Board
Los Angeles, California of Councilors of the University of Southern California School of
Public Administration; director of various other business
organizations; Vice President of TCW/DW Core Equity Trust and TCW/DW
Balanced Fund.
Thomas F. Caloia (50) First Vice President and Assistant Treasurer of the Manager and
Treasurer InterCapital and Treasurer of the TCW/DW Funds and the Dean Witter
Two World Trade Center Funds.
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
DWTC and Director of DWTC, and Robert S. Giambrone, Senior Vice President of
InterCapital, DWSC, Distributors and DWTC and Director of DWTC are Vice
Presidents of the Fund, and Marilyn K. Cranney and Barry Fink, First Vice
Presidents and Assistant General Counsels of the
8
<PAGE>
Manager and InterCapital, and Lou Anne D. McInnis and Ruth Rossi, Vice
Presidents and Assistant General Counsels of the Manager and InterCapital, and
Carsten Otto, a Staff Attorney 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 13
TCW/DW Funds. As of August 31, 1996, the TCW/DW Funds had total net assets of
approximately $4.1 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 DWDC 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, 1995, the three Committees held a combined total of nineteen meetings.
The Committees hold some meetings at the offices of the Manager or Adviser
and some outside those offices. Management Trustees or officers do not attend
these meetings unless they are invited for purposes of furnishing information
or making a report.
The Committee of the Independent Trustees is charged with recommending to
the full Board approval of management, advisory and administration contracts,
Rule 12b-1 plans and distribution and underwriting agreements; continually
reviewing Fund performance; checking on the pricing of portfolio securities,
brokerage commissions, transfer agent costs and performance, and trading
among Funds in the same complex; and approving fidelity bond and related
insurance coverage and allocations, as well as other matters that arise from
time to time. The Independent Trustees are required to select and nominate
individuals to fill any Independent Trustee vacancy on the Board of any Fund
that has a Rule 12b-1 plan of distribution. Each of the open-end TCW/DW Funds
has such a plan.
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing
engagement; approving professional services provided by the independent
accountants and other accounting firms prior to the performance of such
services; reviewing the independence of the independent accountants;
considering the range of audit and non-audit fees; reviewing the adequacy of
the Fund's system of internal controls; and preparing and submitting
Committee meeting minutes to the full Board.
Finally, the Board of each Fund has formed a Derivatives Committee to
establish parameters for and oversee the activities of the Fund with respect
to derivative investments, if any, made by the Fund.
DUTIES OF CHAIRMAN OF COMMITTEE OF THE INDEPENDENT TRUSTEES AND AUDIT
COMMITTEE
On July 1, 1996, Mr. Haire became Chairman of the Committee of the
Independent Trustees and the Audit Committee of the TCW/DW Funds. 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
9
<PAGE>
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).
The Fund also reimburses such Trustees for travel and other out-of-pocket
expenses incurred by them in connection with attending such meetings.
Trustees and officers of the Fund who are or have been employed by the
Manager or the Adviser or an affiliated company of either receive no
compensation or expense reimbursement from the Fund. The Trustees of the
TCW/DW Funds do not have retirement or deferred compensation plans.
At such time as the Fund has paid fees to the Independent Trustees for a
full fiscal year, and assuming that during such fiscal year the Fund holds
the same number of Board and committee meetings as were held by the other
TCW/DW Funds during the calendar year ended December 31, 1995, it is
estimated that the compensation paid to each Independent Trustee during such
fiscal year will be the amount shown in the following table.
10
<PAGE>
FUND COMPENSATION (ESTIMATED)
<TABLE>
<CAPTION>
AGGREGATE
NAME OF INDEPENDENT COMPENSATION
TRUSTEE FROM THE FUND
- -------------------------- ---------------
<S> <C>
John C. Argue ............. $5,225
John R. Haire ............. 7,175(1)
Dr. Manuel H. Johnson .... 5,225
Michael E. Nugent ......... 5,225
John L. Schroeder ......... 5,225
</TABLE>
[FN]
- ------------
(1) Of Mr. Haire's compensation from the Fund, $1,950 is paid to him as
Chairman of the Committee of the Independent Trustees ($1,200) and as
Chairman of the Audit Committee ($750).
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1995 for
services to the eleven TCW/DW Funds and, in the case of Messrs. Haire,
Johnson, Nugent and Schroeder, the seventy-nine Dean Witter Funds that were
in operation at December 31, 1995, and, in the case of Mr. Argue, TCW Galileo
Funds, 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. is included solely because the
Fund's Adviser, TCW Funds Management, Inc., also serves as Adviser to that
investment company. Mr. Schroeder was elected as a Trustee of each TCW/DW
Fund then in existence on April 20, 1995.
COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
FOR SERVICE AS
FOR SERVICE AS CHAIRMAN OF TOTAL COMPENSATION
FOR SERVICE AS DIRECTOR OR COMMITTEES OF PAID FOR SERVICES
TRUSTEE AND TRUSTEE AND FOR SERVICE AS INDEPENDENT TO 79 DEAN WITTER
COMMITTEE MEMBER COMMITTEE MEMBER DIRECTOR OF DIRECTORS/ FUNDS, 11 TCW/DW
NAME OF INDEPENDENT OF 11 TCW/DW OF 79 DEAN WITTER TCW GALILEO TRUSTEES AND FUNDS AND TCW
TRUSTEE FUNDS FUNDS FUNDS, INC. AUDIT COMMITTEES GALILEO FUNDS, INC.
- -------------------------- ---------------- ----------------- -------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C>
John C. Argue ............. $68,038 -- $37,500 -- $105,538
John R. Haire ............. 82,038 $ 98,450 -- $217,350(2) 397,838
Dr. Manuel H. Johnson .... 82,038 136,450 -- -- 218,488
Michael E. Nugent ......... 75,038 124,200 -- -- 199,238
John L. Schroeder ......... 46,964 136,450 -- -- 183,414
</TABLE>
- ------------
(2)For the 79 Dean Witter Funds in operation at December 31, 1995. As noted
above, on July 1, 1996, Mr. Haire became Chairman of the Committee of
the Independent Trustees and the Audit Committee of the TCW/DW Funds in
addition to continuing to serve in such positions for the Dean Witter
Funds.
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.(3) "Eligible Compensation" is one-fifth of the total compensation
earned by such Eligible Trustee for service to the Adopting
(3) 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 as of
December 31, 1995, and the estimated retirement benefits for Messrs. Haire,
Johnson, Nugent and Schroeder from the 57 Dean Witter Funds as of December
31, 1995.
RETIREMENT BENEFITS FROM ALL DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
CREDITED YEARS ESTIMATED ESTIMATED ANNUAL BENEFITS
OF SERVICE AT PERCENTAGE OF RETIREMENT BENEFITS UPON RETIREMENT
NAME OF INDEPENDENT RETIREMENT ELIGIBLE ACCRUED AS EXPENSES FROM ALL ADOPTING
TRUSTEE (MAXIMUM 10) COMPENSATION BY ALL ADOPTING FUNDS FUNDS(4)
- -------------------------- -------------- --------------- --------------------- -------------------------
<S> <C> <C> <C> <C>
John R. Haire ............. 10 50.0% $261,763 $130,404
Dr. Manuel H. Johnson .... 10 50.0 16,748 51,550
Michael E. Nugent ......... 10 50.0 30,370 51,550
John L. Schroeder ......... 8 41.7 51,812 42,958
</TABLE>
(4) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (3)
above.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- -----------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose
issuing agency or instrumentality has the right to borrow, to meet its
obligations, from an existing line of credit with the U.S. Treasury. Among
the agencies and instrumentalities issuing such obligations are the
Tennessee Valley Authority, the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") and the
U.S. Postal Service. The U.S. Treasury has no legal obligation to provide
such line of credit and may choose not to do so.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Banks.
Neither the value nor the yield of the U.S. Government securities which
may be invested in by the Fund are guaranteed by the U.S. Government. Such
values and yield will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of any
U.S. Government securities held by
12
<PAGE>
the Fund will fall. Such securities with longer maturities generally tend to
produce higher yields and are subject to greater market fluctuation as a
result of changes in interest rates than debt securities with shorter
maturities. The Fund is not limited as to the maturities of the U.S.
Government securities in which it may invest.
MONEY MARKET SECURITIES
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as
the Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of
banks subject to regulation by the U.S. Government and having total assets of
$1 billion or more, and instruments secured by such obligations, not
including obligations of foreign branches of domestic banks except as
permitted below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1
billion or more (investments in Eurodollar certificates may be affected by
changes in currency rates or exchange control regulations, or changes in
governmental administration or economic or monetary policy in the United
States and abroad);
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by Federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or
the Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or the highest grade by Moody's Investors
Service, Inc. or, if not rated, issued by a company having an outstanding
debt issue rated at least AAA by Standard & Poor's or Aaa by Moody's.
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to
notice provisions described below), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account
pursuant to applicable regulations and that are equal to at least the market
value, determined daily, of the loaned securities. The advantage of such
loans is that the Fund continues to receive the income on the loaned
securities while at the same time earning interest on the cash amounts
deposited as collateral, which will be invested in short-term obligations.
The Fund will not lend its portfolio securities if such loans are not
permitted by the laws or regulations of any state in which its shares are
qualified for sale and will not lend more than 25% of the value of its total
assets. A loan may be terminated by the borrower on one business day's
notice, or by the Fund on two business days' notice. If the borrower fails to
deliver the loaned securities within two days after receipt of notice, the
Fund could use the collateral to replace the securities while holding the
borrower liable for any excess of replacement cost over collateral. As with
any extensions of credit, there are risks of delay in recovery and in some
cases even loss of rights in the collateral should the borrower of the
securities fail financially. However, these loans of portfolio securities
will only be made to firms deemed by the Adviser 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
13
<PAGE>
lends its portfolio securities will be monitored on an ongoing basis by the
Adviser pursuant to procedures adopted and reviewed, on an ongoing basis, by
the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned
securities, to be delivered within one day after notice, to permit the
exercise of such rights if the matters involved would have a material effect
on the Fund's investment in such loaned securities. The Fund will pay
reasonable finder's, administrative and custodial fees in connection with a
loan of its securities. The Fund did not lend any of its portfolio securities
during the fiscal year ended July 31, 1996.
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. During the fiscal year ended July 31, 1996, the Fund's
investments in repurchase agreements did not exceed 5% of its total assets.
WARRANTS
The Fund may invest up to 5% of the value of its net assets in warrants,
including not more than 2% in warrants not listed on either the New York or
American Stock Exchange. Warrants are, in effect, an option to purchase
equity securities at a specific price, generally valid for a specific period
of time, and have no voting rights, pay no dividends and have no rights with
respect to the corporations issuing them. The Fund may acquire warrants
attached to other securities without reference to the foregoing limitations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
From time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis and may
purchase or sell securities on a forward commitment basis. When such
transactions are negotiated, the price is fixed at the time of the
commitment, but delivery and payment can take place a month or more after the
date of the commitment. The securities so purchased or sold are subject to
market fluctuation and no interest or dividends accrue to the purchaser prior
to the settlement date. While the Fund will only purchase securities on a
when-issued, delayed delivery or forward commitment basis with the intention
of acquiring the securities, the Fund may sell the securities before the
settlement date, if it is deemed advisable. At
14
<PAGE>
the time the Fund makes the commitment to purchase or sell securities on a
when-issued, delayed delivery or forward commitment basis, the Fund will
record the transaction and thereafter reflect the value, each day, of such
security purchased or, if a sale, the proceeds to be received, in determining
its net asset value. At the time of delivery of the securities, the value may
be more or less than the purchase or sale price. The Fund will also establish
a segregated account with the Fund's custodian bank in which it will
continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to commitments to purchase securities on
a when-issued, delayed delivery or forward commitment basis; subject to this
requirement, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. During the fiscal year ended July
31, 1996, the Fund did not purchase any such securities.
WHEN, AS AND IF ISSUED SECURITIES
The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a
subsequent event, such as approval of a merger, corporate reorganization,
leveraged buyout or debt restructuring. The commitment for the purchase of
any such security will not be recognized in the portfolio of the Fund until
the Adviser determines that issuance of the security is probable. At such
time, the Fund will record the transaction and, in determining its net asset
value, will reflect the value of the security daily. At such time, the Fund
will also establish a segregated account with its custodian bank in which it
will continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of
the occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are
not issued the Fund will have lost an investment opportunity. The Fund may
purchase securities on such basis without limit. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when, as and if issued" basis may increase the volatility of its net asset
value. The Adviser does not believe that the net asset value of the Fund will
be adversely affected by its purchase of securities on such basis. The Fund
may also sell securities on a "when, as and if issued" basis provided that
the issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale. During
the fiscal year ended July 31, 1996, the Fund did not purchase any such
securities.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 300%. A 300% turnover rate would occur, for example, if 300% of
the securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced
within one year. For the fiscal period November 30, 1994 through July 31,
1995 and for the fiscal year ended July 31, 1996, the Fund's portfolio
turnover rates were 91% and 261%, respectively. The difference in portfolio
turnover rates is due primarily to changes in the Fund's asset allocation
with respect to fixed-income securities during the past fiscal year.
INVESTMENT RESTRICTIONS
- -----------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at
a meeting of shareholders, if the holders of 50% of the outstanding shares of
the Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund
may invest in the securities of companies which operate, invest in, or
sponsor such programs.
15
<PAGE>
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
4. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in
restriction (4). For the purpose of this restriction, collateral
arrangements with respect to initial or variation margin for futures are
not deemed to be pledges of assets.
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; (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) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
8. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell financial or stock index futures contracts or
options thereon.
9. Make short sales of securities.
10. 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.
11. 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.
12. Invest for the purpose of exercising control or management of any
other issuer.
In addition, as a nonfundamental policy, the Fund may not invest in
securities of any issuer if, to the knowledge of the Fund, any officer or
trustee of the Fund or any officer or director of the Adviser or the Manager
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 issuers.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered
a violation of any of the foregoing restrictions.
PORTFOLIO TRANSACTIONS AND BROKERAGE
- -----------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of
securities on a stock exchange are effected through brokers who charge a
commission for their services. In the over-the-counter market, securities are
generally traded on a "net" basis with dealers acting as principal for their
own accounts without a stated commission, although the price of the security
usually includes a profit to the dealer. In addition, securities may be
purchased at times in underwritten offerings where the price includes a fixed
amount of compensation, generally referred to as the underwriter's concession
or discount. Futures transactions will usually be effected through a broker
and a commission will be charged. On occasion, the Fund may also purchase
certain money market instruments directly from an issuer, in which case no
commissions or discounts are paid. During the fiscal period November 30, 1994
through July 31, 1995 and during the fiscal year ended July 31, 1996 the Fund
paid $53,736 and $208,471 in brokerage commissions, respectively.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause
16
<PAGE>
purchase and sale transactions to be allocated among the Fund and others
whose assets it manages in such manner as it deems equitable. In making such
allocations among the Fund and other client accounts, the main factors
considered are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investments generally held and the opinions
of the persons responsible for managing the portfolios of the Fund and other
client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with
this policy, when securities transactions are effected on a stock exchange,
the Fund's policy is to pay commissions which are considered fair and
reasonable without necessarily determining that the lowest possible
commissions are paid in all circumstances. The Fund believes that a
requirement always to seek the lowest possible commission cost could impede
effective portfolio management and preclude the Fund and the Adviser from
obtaining a high quality of brokerage and research services. In seeking to
determine the reasonableness of brokerage commissions paid in any
transaction, the Adviser relies upon its experience and knowledge regarding
commissions generally charged by various brokers and on its judgment in
evaluating the brokerage and research services received from the broker
effecting the transaction. Such determinations are necessarily subjective and
imprecise, as in most cases an exact dollar value for those services is not
ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions.
If the Adviser believes such prices and executions are obtainable from more
than one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and
other services to the Fund or the Adviser. Such services may include, but are
not limited to, any one or more of the following: reports on industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, computer
terminals and various trading and/or quotation equipment. They also include
advice from broker-dealers as to the value of securities, availability of
securities, availability of buyers, and availability of sellers. In addition,
they include recommendations as to purchase and sale of individual securities
and timing of such transactions. The Fund will not purchase at a higher price
or sell at a lower price in connection with transactions 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 period November 30, 1994
through July 31, 1995 and during the fiscal year ended July 31, 1996, the
Fund did not direct the payment of any brokerage commissions because of
research services provided.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser in the management of accounts of
some of its other clients and may not in all cases benefit the Fund directly.
While the receipt of such information and services is useful in varying
degrees and would generally reduce the amount of research or services
otherwise performed by the Adviser and thereby reduce its expenses, it is of
indeterminable value and the advisory fee paid to the Adviser is not reduced
by any amount that may be attributable to the value of such services.
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR. In order for DWR to effect any portfolio
transactions for the Fund, the commissions, fees or other remuneration
received by DWR 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 DWR 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 DWR are consistent with the
foregoing standard. During the fiscal period November 30, 1994 through July
31, 1995 and during the fiscal year ended July 31, 1996, the Fund paid
$22,493 and $36,391, respectively, in brokerage commissions to DWR. During
the fiscal year ended July 31, 1996, the brokerage commissions paid to DWR
represented approximately 17.46% of the total brokerage commissions paid by
the Fund during the period and were paid on account of transactions having an
aggregate dollar value equal to approximately 27.48% of the aggregate dollar
value of all portfolio transactions of the Fund during the period for which
commissions were paid.
17
<PAGE>
During the fiscal year ended July 31, 1996, the Fund purchased common
stock issued by March & McLevran Companies, Inc. and held common stock issued
by Merrill Lynch & Co. Inc. which issuers were among the ten brokers or
dealers which executed transactions for or with the Fund in the largest
dollar amounts during the year. At July 31, 1996, the Fund held common stock
issued by March & McLevran Companies, Inc. and Merrill Lynch & Co. Inc. with
market values of $1,377,500 and $881,475, respectively.
THE DISTRIBUTOR
- -----------------------------------------------------------------------------
As discussed in the Prospectus, during the continuous offering 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 DWDC. As part of an internal reorganization that
took place in January, 1993, the Distributor assumed the investment company
share distribution activities previously performed by DWR. The Trustees of
the Fund, including a majority of the Independent Trustees, approved, at
their meeting held on July 14, 1994, a 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 had an initial term ending April 30, 1995,
and provides that it will remain in effect from year to year thereafter if
approved by the Board. At their meeting held on April 17, 1996, the Trustees,
including a majority of Independent Trustees, approved the most recent
continuation of the Distribution Agreement until April 30, 1997.
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 and 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
To compensate the Distributor for the services it or any selected dealer
provides and for the expenses it bears under the Distribution Agreement, the
Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Act
(the "Plan") pursuant to which the Fund pays the Distributor compensation
accrued daily and payable monthly at the annual rate of 1.0% of the lesser
of: (a) the average daily aggregate gross sales of the Fund's shares since
the inception of the Fund (not including reinvestments of dividends or
capital gains distributions), less the average daily aggregate net asset
value of the Fund's shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or upon which such charge
has been waived; or (b) the Fund's average daily net assets. The Distributor
receives the proceeds of contingent deferred sales charges imposed on certain
redemptions of shares, which are separate and apart from payments made
pursuant to the Plan. The Distributor has informed the Fund that it and/or
DWR received approximately $78,000 and $214,582, respectively, in contingent
deferred sales charges for the fiscal period November 30, 1994 through July
31, 1995 and for the fiscal year ended July 31, 1996.
The Distributor has informed the Fund that a portion of the fees payable
by the Fund each year under the Plan of Distribution, equal to 0.25% of the
Fund's average daily net assets, is characterized as a "service fee" under
the Rules of Fair Practice of the National Association of Securities Dealers
(of which the Distributor is a member). Such fee is payments made for
personal service and/or the maintenance of shareholder accounts. The
remaining portions of the Plan of Distribution fee payments made by the Fund
are characterized as "asset-based sales
18
<PAGE>
charges" pursuant to the aforementioned Rules of Fair Practice. At their
meeting held on October 26, 1995, the Trustees of the Fund, including all the
Independent 12b-1 Trustees, approved an amendment to the Plan to permit
payments to be made under the Plan with respect to certain distribution
expenses incurred in connection with the distribution of shares, including
personal services to shareholders with respect to holdings of such shares, of
an investment company whose assets are acquired by the Fund in a tax-free
reorganization.
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. The Fund accrued $394,800 payable to
the Distributor, under the Plan, for the fiscal year ended July 31, 1996.
This is an accrual at an annual rate of 0.87% of the average daily net assets
of the Fund for the fiscal year and was calculated pursuant to clause (a)
under the Plan. The 12b-1 fee is treated by the Fund as an expense in the
year it is accrued.
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method shares of the Fund are
sold without a sales load being deducted at the time of purchase, so that the
full amount of an investor's purchase payment will be invested in shares
without any deduction for sales charges. Shares of the Fund may be subject to
a contingent deferred sales charge, payable to the Distributor, if redeemed
during the six years after their purchase. DWR compensates its account
executives by paying them, from its own funds, commissions for the sale of
the Fund's shares, currently a gross sales credit of up to 5% of the amount
sold and an annual residual commission of up to 0.25 of 1% of the current
value of the amount sold. 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 share
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 opportunity costs, such as the gross sales credit and
an assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of distribution expenses to the Fund, such assumed interest
(computed at the "broker's call rate") has been calculated on the gross sales
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 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 paid 100% of the $394,800 accrued under the Plan for the fiscal
year ended July 31, 1996 to the Distributor. The Distributor estimates it has
spent, pursuant to the Plan, $3,216,755 on behalf of the Fund since the
inception of the Plan. It is estimated that this amount was spent in
approximately the following ways: (i) 25.29% ($813,490)--advertising and
promotional expenses; (ii) 2.97% ($95,693)--printing of prospectuses for
distribution to other than current stockholders; and (iii) 71.74%
($2,307,572)--other expenses, including the gross sales credit and the
carrying charges of which 5.02% ($115,748) represents carrying charges,
37.81% ($872,565) represents commission credits to DWR branch offices for
payments of commissions to account executives and 57.17% ($1,319,259)
represents overhead and other branch office distribution-related expenses.
The term "overhead and other branch office distribution-related expenses"
represents (a) the expenses of operating DWR's branch offices in connection
with the sale of the Fund shares, including lease costs, the salaries and
employee benefits of operations and sales support personnel, utility costs,
communications costs and the costs of stationery and supplies; (b) the costs
of client sales seminars; (c) travel expenses of Mutual Fund sales
coordinators to promote the sale of Fund shares; and (d) other expenses
relating to branch promotion of Fund share sales.
At any given time, the expenses in distributing shares of the Fund may be
more or less than the total of (i) the payments made by the Fund pursuant to
the Plan and (ii) the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares. The Distributor has advised the Fund
that the excess distribution expenses, including the carrying charge designed
to approximate the opportunity costs incurred by DWR which arise from it
having advanced monies without having received the amount of any sales
charges imposed at the time
19
<PAGE>
of the sale of the Fund's shares, totalled $2,360,033 at July 31, 1996.
Because there is no requirement under the Plan that the Distributor be
reimbursed for all expenses 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 distribution
expenses in excess of payments made 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.
Under the Plan, 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.
The Plan remained in effect until April 30, 1995, and will continue from
year to year thereafter, provided such continuance is approved annually by a
vote of the Trustees, including a majority of the Independent 12b-1 Trustees.
At their meeting held on April 17, 1996, the Board of Trustees of the
Fund, including a majority of the Independent 12b-1 Trustees, approved the
continuance of the Plan until April 30, 1997. Prior to approving the
continuation of the Plan, the Board requested and received from the
Distributor and reviewed all the information which it deemed necessary to
arrive at an informed determination. In making their determination to
continue the Plan, the Trustees considered: (1) the Fund's experience under
the Plan and whether such experience indicates that the Plan is operating as
anticipated; (2) the benefits the Fund had obtained, was obtaining and would
be likely to obtain under the Plan; and (3) what services had been provided
and were continuing to be provided under the Plan by the Distributor, DWR and
other selected broker-dealers to the Fund and its shareholders. Based upon
their review, the Trustees of the Fund, including each of the Independent
12b-1 Trustees, determined that continuation of the Plan would be in the best
interest of the Fund and would have a reasonable likelihood of continuing to
benefit the Fund and its shareholders. This determination was based upon the
conclusion of the Trustees that the Plan provides an effective means of
stimulating sales of shares of the Fund and of reducing or avoiding net
redemptions and the potentially adverse effects that may occur therefrom. In
the Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the Fund, and
all material amendments to the Plan must 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 the holders of a majority of the outstanding voting
securities of the Fund (as defined in the Act) on not more than 30 days
written notice to any other party to the Plan. So long as the Plan is in
effect, the selection or nomination of the Independent Trustees is committed
to the discretion of the Independent Trustees.
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.
DETERMINATION OF NET ASSET VALUE
As stated in the Prospectus, short-term 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. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees
determine such does not reflect the securities' market value, in which case
these securities will be valued at their fair value as determined by the
Trustees. All other securities and other assets are valued at their fair
value as determined in good faith under procedures established by and under
the supervision of the Trustees.
20
<PAGE>
The net asset value per share of the Fund is determined once daily at 4:00
p.m., New York time (or, on days when the New York Stock Exchange closes
prior to 4:00 p.m., at such earlier time), on each day that the New York
Stock Exchange is open by taking the value of all assets of the Fund,
subtracting its liabilities, dividing by the number of shares outstanding and
adjusting to the nearest cent. The New York Stock Exchange currently observes
the following holidays: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
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 Dean
Witter Trust Company (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 Fund, unless the
shareholder requests that they be paid in cash. Each purchase of shares of
the Fund is made upon the condition that the Transfer Agent is thereby
automatically appointed as agent of the investor to receive all dividends and
capital gains distributions on shares owned by the investor. Such dividends
and distributions will be paid, at the net asset value per share, in shares
of the Fund (or in cash if the shareholder so requests) as of the close of
business on the record date. At any time an investor may request the Transfer
Agent, in writing, to have subsequent dividends and/or capital gains
distributions paid to him or her in cash rather than shares. 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.
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 a TCW/DW Fund other
than TCW/DW Total Return Trust. Such investment will be made as described
above for automatic investment in shares 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 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, 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. 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 at the net
asset value per share, without the imposition of a contingent deferred sales
charge 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.
21
<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 contingent deferred sales charge will be
imposed on shares redeemed under the Withdrawal Plan (see "Repurchases and
Redemptions--Contingent Deferred Sales Charge" in the Prospectus). 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 contingent deferred sales charge) 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 the contingent deferred sales charge
applicable to the redemption of shares purchased during the preceding six
years (see "Repurchases and Redemptions--Contingent Deferred Sales Charge").
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,
a shareholder may make additional investments in Fund shares at any time by
sending a check in any amount, not less than $100, payable to TCW/DW Total
Return Trust, directly to the Fund's Transfer Agent. Such amounts 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 the Fund may
exchange their shares for shares of other TCW/DW Funds sold with a contingent
deferred sales charge ("CDSC Funds"), TCW/DW North American Government Income
Trust, TCW/DW Income and Growth Fund and TCW/DW Balanced Fund and five money
market funds for which InterCapital serves as investment manager (the
foregoing eight non-CDSC funds are hereinafter collectively referred to as
the "Exchange Funds"). Exchanges may be made after the shares of the fund
acquired by purchase (not by exchange or dividend reinvestment) have been
held for thirty days. There is no waiting period for exchanges of shares
22
<PAGE>
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 captions "Exchange
Privilege" and "Contingent Deferred Sales Charge," a contingent deferred
sales charge ("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 the Fund or
any other CDSC 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 the 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 the 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 CDSC 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 CDSC Fund.
When shares initially purchased in a CDSC Fund are exchanged for 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 six years prior to the
exchange and (ii) originally acquired through reinvestment of dividends or
distributions (all such shares called "Free Shares") will be exchanged first.
After an exchange, all dividends earned on shares in the Exchange Fund will
be considered Free Shares. If the exchanged amount exceeds the value of such
Free Shares, an exchange is made, on a block-by-block basis, of non-Free
Shares held for the longest period of time. Shares equal to any appreciation
in the value of non-Free Shares exchanged will be treated as Free Shares, and
the amount of the purchase payments for the non-Free Shares of the fund
exchanged into will be equal to the lesser of (a) the purchase payments for,
or (b) the current net asset value of, the exchanged non-Free Shares. If an
exchange between funds would result in exchange of only part of a particular
block of non-Free Shares, then shares equal to any appreciation in the value
of the block (up to the amount of the exchange) will be treated as Free
Shares and exchanged first, and the purchase payment for that block will be
allocated on a pro rata basis between the non-Free Shares of that block to be
retained and the non-Free Shares to be exchanged. The prorated amount of such
purchase payment attributable to the retained non-Free Shares will remain as
the purchase payment for such shares, and the amount of purchase payment for
the exchanged non-Free Shares will be equal to the lesser of (a) the prorated
amount of the purchase payment for, or (b) the current net asset value of,
those exchanged non-Free Shares. Based upon the procedures described in the
Prospectus under the caption "Contingent Deferred Sales Charge," 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.
23
<PAGE>
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 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 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.
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. An exchange will be treated for federal income tax purposes
the same as a repurchase or redemption of shares, on which the shareholder
may realize a capital gain or loss. However, the ability to deduct capital
losses on an exchange may be limited in situations where there is an exchange
of shares within ninety days after the shares are purchased. The Exchange
Privilege is only available in states where an exchange may legally be made.
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 the Fund can be
redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds may be reduced by the amount of
any applicable contingent deferred sales charges (see below). 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
24
<PAGE>
certificates with a written request for redemption. The share certificate, or
an accompanying stock power, and the request for redemption, must be signed
by the shareholder or shareholders exactly as the shares are registered. Each
request for redemption, whether or not accompanied by a share certificate,
must be sent to the Fund's Transfer Agent, which will redeem the shares at
their net asset value next computed (see "Purchase of Fund Shares") after it
receives the request, and certificate, if any, in good order. Any redemption
request received after such 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.
Contingent Deferred Sales Charge. As stated in the Prospectus, a
contingent deferred sales charge ("CDSC") will be imposed on any redemption
by an investor if after such redemption the current value of the investor's
shares of the Fund is less than the dollar amount of all payments by the
shareholder for the purchase of Fund shares during the preceding six 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 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 years. The CDSC will be paid to the
Distributor.
In determining the applicability of a 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 will be redeemed first. In the event the redemption amount
exceeds such increase in value, the next portion of the amount redeemed will
be the amount which represents the net asset value of the investor's shares
purchased more than six 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 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 Fund shares 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:
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR SINCE SALES CHARGE AS A
PURCHASE PERCENTAGE OF AMOUNT
PAYMENT MADE 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 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 period. This will result in any such CDSC
25
<PAGE>
being imposed at the lowest possible rate. Accordingly, shareholders may
redeem, without incurring any CDSC, amounts equal to any net increase in the
value of their shares above the amount of their purchase payments made within
the past six years and amounts equal to the current value of shares purchased
more than six years prior to the redemption and shares purchased through
reinvestment of dividends or distributions. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years of
purchase which are in excess of these amounts and which redemptions are not
(a) requested within one year of death or initial determination of disability
of a shareholder, or (b) made pursuant to certain taxable distributions from
retirement plans or retirement accounts, as described in the Prospectus.
Payment for Shares Repurchased or Redeemed. As discussed in the
Prospectus, 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. 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.
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). 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 contingent deferred sales charge 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 contingent deferred sales charge 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 thirty 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 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- -----------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual
federal income tax. In addition, shareholders are entitled to increase their
tax basis of their investment by their pro rata share of the undistributed
gain net of the tax paid by the Fund on such gain.
26
<PAGE>
Gains or losses on sales of securities by the Fund will be long-term
capital gains or losses if the securities have been held by the Fund for more
than twelve months. Gains or losses on the sale of securities held for twelve
months or less will be short-term gains or losses.
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value
of the shareholder's stock in that company by the exact amount of the
dividend or capital gains distribution. Furthermore, capital gains
distributions and dividends are subject to federal income taxes. If the net
asset value of the shares should be reduced below a shareholder's cost as a
result of the payment of dividends or the distribution of realized net
long-term capital gains, such payment or distribution would be in part a
return of the shareholder's investment to the extent of such reduction below
the shareholder's cost, but nonetheless would be fully taxable at either
ordinary or capital gain rates. Therefore, an investor should consider the
tax implications of purchasing Fund shares immediately prior to a dividend or
distribution record date.
Shareholders are urged to consult their attorneys or tax advisers
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- -----------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. The Fund's "average
annual total return" represents an annualization of the Fund's total return
over a particular period (of a year or more) 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 contingent deferred sales charge 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 average annual total return of the Fund for the fiscal year ended July
31, 1996 and for the period from November 30, 1994 (commencement of
operations) through July 31, 1996 was 3.23% and 14.23%, respectively. During
these periods, InterCapital assumed certain expenses of the Fund and the
Manager and the Adviser waived their management and advisory fees,
respectively. Had the Fund borne these expenses and paid these fees during
the stated periods, the total return for the periods would have been 2.95%
and 13.40%, respectively.
In addition to the foregoing, the Fund may advertise its total return 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
deduction of the contingent deferred sales charge which, if reflected, would
reduce the performance quoted. For example, the total return of the Fund may
be calculated in the manner described above, but without deduction for any
applicable contingent deferred sales charge. Based upon the foregoing, the
Fund's total return for the fiscal year ended July 31, 1996 and for the
period November 30, 1994 through July 31, 1996 was 8.23% and 16.41%,
respectively.
In addition, the Fund may compute its aggregate total return for specified
periods by determining the aggregate percentage rate which will result in the
ending value of a hypothetical $1,000 investment made at the beginning of the
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing aggregate total
return involves a percentage obtained by dividing the ending value (without
the reduction for any contingent deferred sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based upon the foregoing
calculation, the Fund's total return for the fiscal year ended July 31, 1996
and for the period November 30, 1994 through July 31, 1996 was 8.23% and
28.83%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in 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 $10,000,
$50,000 or $100,000, as the case may be. Investments of $10,000, $50,000 and
$100,000 in the Fund at inception would have grown to $12,883, $64,415 and
$128,830, respectively, at July 31, 1996.
27
<PAGE>
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 were elected by InterCapital as the then sole
shareholder of the Fund prior to the public offering of the Fund's shares.
Mr. Schroeder was elected by the other Trustees of the Fund on April 20,
1995. The Trustees themselves have the power to alter the number and the
terms of office of the Trustees, and they may at any time lengthen their own
terms or make their terms of unlimited duration and appoint their own
successors, provided that always at least a majority of the Trustees has been
elected by the shareholders of the Fund. Under certain circumstances the
Trustees may be removed by action of the Trustees. The shareholders also have
the right to remove the Trustees following a meeting called for that purpose
requested in writing by the record holders of not less than ten percent of
the Fund's outstanding shares. The voting rights of shareholders are not
cumulative, so that holders of more than 50 percent of the shares voting can,
if they choose, elect all Trustees being selected, while the holders of the
remaining shares would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series (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). However, the Trustees have
not authorized any such additional series or classes of shares.
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 Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Dean Witter Trust Company, 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. Dean Witter Trust Company 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, Dean
Witter Trust Company's responsibilities include maintaining shareholder
accounts including providing subaccounting and recordkeeping services for
certain retirement accounts; disbursing cash dividends and reinvesting
dividends; processing account registration changes; handling purchase and
redemption transactions; mailing prospectuses and reports; mailing and
tabulating proxies; processing share certificate transactions; and
maintaining shareholder records and lists. For these services Dean Witter
Trust Company 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.
28
<PAGE>
REPORTS TO SHAREHOLDERS
- -----------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report
containing financial statements audited by independent accountants will be
sent to shareholders each year.
The Fund's fiscal year ends on July 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
- -----------------------------------------------------------------------------
Sheldon Curtis, Esq., who is an officer and the General Counsel of the
Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- -----------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended July 31,
1996 included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- -----------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
29
<PAGE>
TCW/DW TOTAL RETURN TRUST
Report of Independent Accountants
- -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Total Return 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 Total
Return Trust (the "Fund") at July 31, 1996, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period November 30, 1994
(commencement of operations) through July 31, 1995, 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 July
31, 1996 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
September 13, 1996
1996 FEDERAL TAX NOTICE (unaudited)
For the year ended July 31, 1996, 8% of ordinary income dividends
(including short-term capital gain distributions) paid to shareholders
qualified for the dividends received deduction available to corporations.
30
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<S> <C> <C>
COMMON STOCKS (82.9%)
AIRCRAFT & AEROSPACE (11.1%)
17,000 Boeing Co. ........................... $ 1,504,500
107,600 Coltec Industries, Inc.* ............. 1,519,850
50,600 Continental Airlines, Inc. (Class B)* 1,277,650
9,500 United Technologies Corp. ............ 1,069,937
-------------
5,371,937
-------------
AUTOMOTIVE (6.2%)
40,000 Chrysler Corp. ....................... 1,135,000
36,000 Ford Motor Co. ....................... 1,170,000
14,600 General Motors Corp. ................. 711,750
-------------
3,016,750
-------------
BANKING (2.0%)
11,100 Morgan (J.P.) & Co., Inc. ............ 954,600
-------------
BANKS -INTERNATIONAL (2.0%)
11,600 Citicorp ............................. 949,750
-------------
BROKERAGE (4.6%)
15,200 Marsh & McLennan Companies, Inc. .... 1,377,500
14,600 Merrill Lynch & Co., Inc. ............ 881,475
-------------
2,258,975
-------------
COMMERCIAL SERVICES (5.6%)
40,200 America Online, Inc.* ................ 1,226,100
48,000 Corrections Corp. of America* ....... 1,488,000
-------------
2,714,100
-------------
COMMUNICATIONS -
EQUIPMENT & SOFTWARE (3.0%)
7,700 Ascend Communications, Inc.* ......... 372,487
6,800 Cascade Communications Corp.* ....... 417,350
13,400 Cisco Systems, Inc.* ................. 693,450
-------------
1,483,287
-------------
COMPUTER EQUIPMENT (2.9%)
42,000 Storage Technology Corp.* ............ 1,422,750
-------------
CONSUMER PRODUCTS (2.7%)
17,300 Kimberly-Clark Corp. ................. 1,314,800
-------------
ELECTRONICS -DEFENSE (2.8%)
30,800 Hewlett-Packard Co. .................. 1,355,200
-------------
ELECTRONICS -SEMICONDUCTORS/
COMPONENTS (6.0%)
20,100 Intel Corp. .......................... 1,507,500
25,900 Motorola, Inc. ....................... 1,398,600
-------------
2,906,100
-------------
ENTERTAINMENT (2.2%)
34,600 Circus Circus Enterprises, Inc.* .... 1,063,950
-------------
FINANCIAL (2.0%)
11,500 Federal Home Loan Mortgage Corp. .... 968,875
-------------
HEALTHCARE -DRUGS (2.8%)
21,400 Merck & Co., Inc. .................... $ 1,374,950
-------------
HOUSEHOLD PRODUCTS (2.0%)
23,200 Tupperware Corp.* .................... 991,800
-------------
METALS (2.8%)
57,200 Titanium Metals Corp.* ............... 1,365,650
-------------
OIL -FOREIGN (2.5%)
20,800 Chevron Corp. ........................ 1,203,800
-------------
OIL WELL -MACHINERY (1.9%)
11,600 Schlumberger, Ltd. ................... 928,000
-------------
REAL ESTATE INVESTMENT TRUST (11.6%)
88,700 CWM Mortgage Holdings, Inc. .......... 1,530,075
24,800 Developers Diversified Realty Corp. . 778,100
50,700 General Growth Properties, Inc. ..... 1,248,488
47,900 Security Capital Pacific Trust ...... 993,925
38,100 Spieker Properties, Inc. ............. 1,085,850
-------------
5,636,438
-------------
RETAIL -SPECIALTY (6.1%)
40,900 Corporate Express, Inc.* ............. 1,528,638
41,100 CUC International, Inc.* ............. 1,428,225
-------------
2,956,863
-------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $39,336,045) ...... 40,238,575
-------------
CONVERTIBLE PREFERRED STOCK (3.0%)
INDUSTRIALS
59,700 James River Corp. of Virginia
(Series P) $1.55 (Identified Cost
$1,567,578) ......................... 1,447,725
-------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- -------------
<S> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH CERTIFICATE (2.2%)
$1,091 Federal Home Loan Mortgage Corp. PC
Gold 6.50% due 05/01/11
(Identified Cost $1,063,492) ..... 1,053,432
-------------
U.S. GOVERNMENT OBLIGATION (8.9%)
4,300 U.S. Treasury Note 6.875% due
05/15/06 (Identified Cost
$4,293,976) ....................... 4,319,484
-------------
SHORT-TERM INVESTMENTS (7.7%)
U.S. GOVERNMENT AGENCY (a) (4.1%)
2,000 Federal Home Loan Banks 5.18% due
08/01/96 .......................... 2,000,000
-------------
31
</TABLE>
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1996 (continued)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- -------------
REPURCHASE AGREEMENT (3.6%)
$1,753 The Bank of New York 5.75% due
08/01/96 (dated 07/31/96; proceeds
$1,753,731; collateralized by
$2,079,191 Federal Mortgage
Acceptance Corp. 7.00% due
04/01/24 valued at $1,788,520)
(Identified Cost $1,753,451) ..... $1,753,451
-------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $3,753,451) ..... 3,753,451
-------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $50,014,542) (B) 104.7% $50,812,667
LIABILITIES IN EXCESS
OF OTHER ASSETS .................. (4.7) (2,288,271)
-------------
NET ASSETS ........................ 100.0% $48,524,396
=============
</TABLE>
- ------------
* Non-income producing security.
(a) Security was purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $50,017,407. The
aggregate gross unrealized appreciation is $2,879,301 and the aggregate
gross unrealized depreciation is $2,084,041, resulting in net
unrealized appreciation of $795,260.
See Notes to Financial Statements
32
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $50,014,542) ............. $50,812,667
Receivable for:
Investments sold .......................... 492,840
Shares of beneficial interest sold ....... 78,224
Dividends ................................. 69,444
Interest .................................. 68,954
Deferred organizational expenses ........... 101,129
Prepaid expenses ........................... 24,385
-------------
TOTAL ASSETS ............................. 51,647,643
-------------
LIABILITIES:
Payable for:
Investments purchased ..................... 2,994,773
Plan of distribution fee .................. 39,219
Management fee ............................ 15,520
Investment advisory fee ................... 13,274
Shares of beneficial interest repurchased 2,148
Accrued expenses ........................... 58,313
-------------
TOTAL LIABILITIES ........................ 3,123,247
-------------
NET ASSETS:
Paid-in-capital ............................ 43,279,108
Net unrealized appreciation ................ 798,125
Accumulated undistributed net investment
income .................................... 46,982
Accumulated undistributed net realized gain 4,400,181
-------------
NET ASSETS ............................... $48,524,396
=============
NET ASSET VALUE PER SHARE, 4,042,347 shares
outstanding (unlimited shares authorized
of $.01 par value) ........................ $ 12.00
=============
</TABLE>
STATEMENT OF OPERATIONS
For the year ended July 31, 1996
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends (net of $6,304 foreign
withholding tax) .................. $ 916,695
Interest ........................... 576,438
-------------
TOTAL INCOME ...................... 1,493,133
-------------
EXPENSES
Plan of distribution fee ........... 394,800
Management fee ..................... 204,371
Investment advisory fee ............ 136,247
Professional fees .................. 83,759
Transfer agent fees and expenses .. 51,034
Shareholder reports and notices ... 48,482
Trustees' fees and expenses ....... 31,410
Organizational expenses ............ 30,396
Custodian fees ..................... 14,604
Registration fees .................. 8,968
Other .............................. 2,231
-------------
TOTAL EXPENSES BEFORE AMOUNTS
WAIVED/REIMBURSED ................ 1,006,302
LESS: AMOUNTS WAIVED/REIMBURSED .. (105,262)
-------------
TOTAL EXPENSES AFTER AMOUNTS
WAIVED/REIMBURSED ................ 901,040
-------------
NET INVESTMENT INCOME ............. 592,093
-------------
NET REALIZED AND UNREALIZED GAIN
(LOSS):
Net realized gain .................. 4,933,040
Net change in unrealized
appreciation ...................... (2,291,729)
-------------
NET GAIN .......................... 2,641,311
-------------
NET INCREASE ...................... $ 3,233,404
=============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JULY 31, NOVEMBER 30, 1994*
1996 THROUGH JULY 31, 1995
----------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ....................................... $ 592,093 $ 564,613
Net realized gain ........................................... 4,933,040 1,236,101
Net change in unrealized appreciation ....................... (2,291,729) 3,089,854
----------------- ---------------------
Net increase ............................................... 3,233,404 4,890,568
----------------- ---------------------
Dividends and distributions from:
Net investment income ....................................... (762,557) (347,167)
Net realized gain ........................................... (1,768,960) --
----------------- ---------------------
Total ...................................................... (2,531,517) (347,167)
----------------- ---------------------
Net increase from transactions in shares of beneficial
interest .................................................... 11,804,931 31,374,177
----------------- ---------------------
Total increase ............................................. 12,506,818 35,917,578
NET ASSETS:
Beginning of period .......................................... 36,017,578 100,000
----------------- ---------------------
END OF PERIOD (including undistributed net investment income
of $46,982 and $217,446, respectively) ...................... $48,524,396 $36,017,578
================= =====================
</TABLE>
- ------------
* Commencement of operations.
See Notes to Financial Statements
33
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1996
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES --TCW/DW Total Return Trust (the
"Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a non-diversified, open-end management investment company.
The Fund's investment objective is high total return from capital growth and
income. The Fund seeks to achieve its objective by investing primarily in
equity and equity-related securities issued by domestic and foreign
companies. The Fund was organized as a Massachusetts business trust on June
29, 1994 and on August 22, 1994 the Fund issued 10,000 shares of beneficial
interest to Dean Witter InterCapital Inc. ("InterCapital"), an affiliate of
Dean Witter Services Company Inc. (the "Manager"), for $100,000 to effect the
Fund's initial capitalization. The Fund commenced operations on November 30,
1994.
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 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 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 Trustees; and (4) short-term debt securities
having a maturity date of more than sixty days at the 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 securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. Accounting for Investments --Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized
gains and losses on security transactions are determined by the
identified cost method. Discounts are accreted over the life of the
respective securities. Dividend income and other distributions are
recorded on the ex-dividend date. Interest income is accrued daily.
C. 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.
D. Dividends and Distributions to Shareholders --The Fund records
dividends and distributions to its shareholders on the record 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
34
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1996 (continued)
- -----------------------------------------------------------------------------
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.
E. Organizational Expenses --InterCapital paid the organizational
expenses of the Fund in the amount of approximately $127,000 which was
reimbursed exclusive of $4,817 which has been absorbed by InterCapital.
Such expenses have been deferred and are being amortized on the
straight-line method over a period not to exceed five years from the
commencement of operations.
2. MANAGEMENT AGREEMENT --Pursuant to a Management Agreement, the Fund pays
the Manager a management fee, accrued daily and payable monthly, by applying
the annual rate of 0.45% to the net assets of the Fund determined as of the
close of each business day.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Fund who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. INVESTMENT ADVISORY AGREEMENT --Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays an
advisory fee, accrued daily and payable monthly, by applying the annual rate
of 0.30% to the net assets of the Fund determined as of the close of each
business day.
Under the terms of the Investment Advisory Agreement, the Fund has
retained the Adviser to invest the Fund's assets, including placing orders
for the purchase and sale of portfolio securities. The Adviser obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
InterCapital assumed all operating expenses (except for any 12b-1 and/or
brokerage fees), the Manager waived the compensation provided for in its
Management Agreement and the Adviser waived the compensation provided for in
its Advisory Agreement until September 27, 1995.
4. PLAN OF DISTRIBUTION --Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager. The Fund
has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act pursuant to which the Fund pays the Distributor compensation, accrued
daily and payable monthly, at an annual rate of 1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Fund's shares since the Fund's
inception (not including reinvestment of dividend or capital gains
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, account executives of Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Manager and Distributor, and other
employees and selected broker-dealers who engage in or
35
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1996 (continued)
- -----------------------------------------------------------------------------
support distribution of the Fund's 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 the
preparation,printing and distribution of sales literature and advertising
materials. In addition, the Distributor may be compensated under the Plan for
its opportunity costs in advancing such amounts, which compensation would be
in the form of a carrying charge on any unreimbursed expenses by the
Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
Although there is no legal obligation for the Fund to pay expenses
incurred in excess of payments made to the Distributor under the Plan and the
proceeds of contingent deferred sales charges paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. The
Distributor has advised the Fund that such excess amounts, included carrying
charges, totaled $2,360,033 at July 31, 1996.
The Distributor has informed the Fund that for the year ended July 31,
1996, it received approximately $215,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares. The Fund's shareholders pay
such charges which are not an expense of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES --The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended July 31, 1996 aggregated
$124,790,261 and $116,022,724, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $31,329,713 and
$30,264,376, respectively.
For the year ended July 31, 1996, the Fund incurred brokerage commissions
of $36,391 with DWR for portfolio transactions executed on behalf of the
Fund. At July 31, 1996, the Fund's payable for investments purchased included
unsettled trades with DWR of $217,555.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At July 31, 1996, the Fund had transfer agent fees
and expenses payable of approximately $5,100.
6. SHARES OF BENEFICIAL INTEREST --Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR ENDED NOVEMBER 30, 1994*
JULY 31, 1996 THROUGH JULY 31, 1995
SHARES AMOUNT SHARES AMOUNT
------------------ --------------------- ----------- -------------
<S> <C> <C> <C> <C>
Sold ........................................ 1,659,330 $ 20,294,836 3,312,310 $34,211,447
Reinvestment of dividends and distributions 190,676 2,261,482 28,873 312,496
------------------ --------------------- ----------- -------------
1,850,006 22,556,318 3,341,183 34,523,943
Repurchased ................................. (872,725) (10,751,387) (286,117) (3,149,766)
------------------ --------------------- ----------- -------------
Net increase ................................ 977,281 $ 11,804,931 3,055,066 $31,374,177
================== ===================== =========== =============
</TABLE>
- ------------
*Commencement of operations.
36
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE PERIOD
ENDED JULY 31, NOVEMBER 30, 1994*
1996 THROUGH JULY 31, 1995
--------------- ---------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $11.75 $ 10.00
--------------- ---------------------
Net investment income .................. 0.15 0.21
Net realized and unrealized gain ...... 0.80 1.68
--------------- ---------------------
Total from investment operations ...... 0.95 1.89
--------------- ---------------------
Less dividends and distributions from:
Net investment income ................. (0.21) (0.14)
Net realized gain ..................... (0.49) --
--------------- ---------------------
Total dividends and distributions ..... (0.70) (0.14)
--------------- ---------------------
Net asset value, end of period ......... $12.00 $ 11.75
=============== =====================
TOTAL INVESTMENT RETURN+ ............... 8.23% 19.04%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 1.98%(4) 0.94%(2)(3)
Net investment income .................. 1.30%(4) 3.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $48,524 $36,018
Portfolio turnover rate ................ 261% 91%(1)
Average commission rate paid ........... $0.0582 --
</TABLE>
- ------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or
waived by the Manager and Investment Adviser, the above annualized
expense and net investment ratios would have been 2.66% and 1.47%,
respectively.
(4) If the Fund had borne all of its expenses that were reimbursed or
waived by the Manager and Adviser, the above annualized expense and net
investment ratios would have been 2.21% and 1.07%, respectively.
See Notes to Financial Statements
37
<PAGE>
APPENDIX
- -----------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
<TABLE>
<CAPTION>
<S> <C>
Aaa Bonds 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 Bonds 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 bonds. They are rated lower than the best bonds 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 Bonds 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 Bonds 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.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
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 bonds in this class.
B Bonds 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 Bonds 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 Bonds 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 Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having extremely
poor prospects of ever attaining any real investment standing.
</TABLE>
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
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 if
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.
38
<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")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations: (1)
likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings
may be changed, suspended or withdrawn as a result of changes in, or
unavailability of, such information, or for other reasons.
<TABLE>
<CAPTION>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest-rated
issues only in small degree.
A Debt rated "A" has 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 debt in higher-rated categories.
BBB Debt rated "BBB" is 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 debt in this category than for debt in higher-rated
categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative grade debt. 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 Debt rated "B" has 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 Debt rated "CCC" has 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 debt subordinated to senior debt which is assigned an actual or implied "CCC"
rating.
C The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or implied "CCC-"
debt rating.
39
<PAGE>
Cl The rating "Cl" is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in payment default. The 'D' rating category is used when interest payments or principal payments
are not made on the date due even if the applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the filing of a bankruptcy petition if
debt service payments are jeopardized.
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.
Bonds 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 debt 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 within the major ratings categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard and Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to
purchase or sell a security. The ratings are based upon current information
furnished by the issuer or obtained by S&P from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into
group categories, ranging from "A" for the highest quality obligations to "D"
for the lowest. Ratings are applicable to both taxable and tax-exempt
commercial paper. The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.
<TABLE>
<CAPTION>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However, the relative degree
of safety is not as overwhelming as for issues designated "A-1".
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this designation are, however, somewhat
more vulnerable to the adverse effects of changes in circumstances than obligations carrying the higher designations.
</TABLE>
40
<PAGE>
TCW/DW TOTAL RETURN TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial statements and schedules, included
in Prospectus (Part A):
Page in
Prospectus
----------
Financial Highlights for the period November 30, 1994
(commencement of operations) through July 31, 1995
and the fiscal year ended July 31, 1996 .................. 4
(2) Financial statements included in the Statement of
Additional Information (Part B):
Portfolio of Investments at July 31, 1996 ................ 31
Statement of Assets and Liabilities at July 31, 1996 ..... 33
Statement of operations for the fiscal year ended
July 31, 1996 ............................................ 33
Statement of changes in net assets for the period ended
July 31, 1995 and the fiscal year ended July 31, 1996..... 33
Notes to Financial Statements............................. 34
Financial Highlights for the period November 30, 1994
through July 31, 1995 and the fiscal year ended July
31, 1996.................................................. 37
(3) Financial statements included in Part C:
None.
Exhibit
Number Description
- ------ -----------
8. -- Form of Amendment to the Custodian Agreement between Registrant
and The Bank of New York
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution between
Registrant and Dean Witter Distributors Inc.
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
------------------
All other exhibits previously filed and 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 August 31, 1996
-------------- ------------------------
Shares of Beneficial Interest 4,286
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 and Advisory Agreements, none of the
Manager, the Adviser or any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such 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
2
<PAGE>
trustee, officer or controlling person in connection with the shares being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the indemnification
provision of its by-laws in a manner consistent with Release 11330 of the
Securities and Exchange Commission under the Investment Company Act of 1940, so
long as the interpretation of Sections 17(h) and 17(i) of such Act remains in
effect.
Registrant, in conjunction with the Manager, Registrant's Trustees, and
other registered investment management companies managed by the Manager,
maintains insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the request of
Registrant as a trustee, director, officer, employee or agent of another trust
or corporation, against any liability asserted against him and incurred by him
or arising out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant itself
is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
The TCW Funds Management, Inc. (the "Adviser") is a 100% owned subsidiary
of The TCW Group, Inc., a Nevada corporation. The Adviser 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 Core Equity Trust, an
open-end, non-diversified management company, (4) TCW/DW North American
Government Income Trust, an open-end, non-diversified management company, (5)
TCW/DW Income and Growth Fund, an open-end, non-diversified management company,
(6) TCW/DW Latin American Growth Fund, an open-end non-diversified management
company, (7) TCW/DW Small Cap Growth Fund, an open-end non-diversified
management company, (8) TCW/DW Term Trust 2000, a closed-end, diversified
management company, (9) TCW/DW Term Trust 2002, a closed-end diversified
management company, (10) TCW/DW Term Trust 2003, a closed-end diversified
management company, (11) TCW/DW Balanced Fund, an open-end, diversified
management company, (12) TCW/DW Emerging Markets Opportunities Trust, a
closed-end, non-diversified management company, (13) TCW/DW Total Return Trust,
an open-end non-diversified management investment company, (14) TCW/DW Mid-Cap
Equity Trust, an open-end, diversified management investment company and (15)
TCW/DW Global Telecom Trust, an open-end diversified management company. The
Adviser 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 the Adviser together with information
as to any other business, profession, vocation or employment of a substantive
nature engaged in by the Adviser and such officers and directors during the
past two years, is incorporated by reference to Form ADV (File No. 801-29075)
filed by the Adviser pursuant to the Investment Advisers Act.
3
<PAGE>
Item 29. Principal Underwriters.
(a) Dean Witter Distributors Inc. ("Distributors"), a Delaware
corporation, is the principal underwriter of the Registrant. Distributors is
also the principal underwriter of the following investment companies:
(1) Dean Witter Liquid Asset Fund Inc.
(2) Dean Witter Tax-Free Daily Income Trust
(3) Dean Witter California Tax-Free Daily Income Trust
(4) Dean Witter Retirement Series
(5) Dean Witter Dividend Growth Securities Inc.
(6) Dean Witter Natural Resource Development Securities Inc.
(7) Dean Witter World Wide Investment Trust
(8) Dean Witter Capital Growth Securities
(9) Dean Witter Convertible Securities Trust
(10) Active Assets Tax-Free Trust
(11) Active Assets Money Trust
(12) Active Assets California Tax-Free Trust
(13) Active Assets Government Securities Trust
(14) Dean Witter Global Utilities Fund
(15) Dean Witter Federal Securities Trust
(16) Dean Witter U.S. Government Securities Trust
(17) Dean Witter High Yield Securities Inc.
(18) Dean Witter New York Tax-Free Income Fund
(19) Dean Witter Tax-Exempt Securities Trust
(20) Dean Witter California Tax-Free Income Fund
(21) Dean Witter Limited Term Municipal Trust
(22) Dean Witter World Wide Income Trust
(23) Dean Witter Utilities Fund
(24) Dean Witter Strategist Fund
(25) Dean Witter New York Municipal Money Market Trust
(26) Dean Witter Intermediate Income Securities
(27) Prime Income Trust
(28) Dean Witter European Growth Fund Inc.
(29) Dean Witter Developing Growth Securities Trust
(30) Dean Witter Precious Metals and Minerals Trust
(31) Dean Witter Pacific Growth Fund Inc.
(32) Dean Witter Multi-State Municipal Series Trust
(33) Dean Witter Premier Income Trust
(34) Dean Witter Short-Term U.S. Treasury Trust
(35) Dean Witter Diversified Income Trust
(36) Dean Witter Health Sciences Trust
(37) Dean Witter Global Dividend Growth Securities
(38) Dean Witter American Value Fund
(39) Dean Witter U.S. Government Money Market Trust
(40) Dean Witter Global Short-Term Income Fund Inc.
(41) Dean Witter Variable Investment Series
(42) Dean Witter Value-Added Market Series
(43) Dean Witter Short-Term Bond Fund
(44) Dean Witter National Municipal Trust
(45) Dean Witter High Income Securities
4
<PAGE>
(46) Dean Witter International SmallCap Fund
(47) Dean Witter Hawaii Municipal Trust
(48) Dean Witter Balanced Growth Fund
(49) Dean Witter Balanced Income Fund
(50) Dean Witter Intermediate Term U.S. Treasury Trust
(51) Dean Witter Global Asset Allocation Fund
(52) Dean Witter Mid-Cap Growth Fund
(53) Dean Witter Capital Appreciation Fund
(54) Dean Witter Intermediate Term U.S. Treasury Trust
(55) Dean Witter Information Fund
(56) Dean Witter Japan Fund
(57) Dean Witter Income Builder Fund
(58) Dean Witter Special Value Fund
(1) TCW/DW Core Equity Trust
(2) TCW/DW North American Government Income Trust
(3) TCW/DW Latin American Growth Fund
(4) TCW/DW Income and Growth Fund
(5) TCW/DW Small Cap Growth Fund
(6) TCW/DW Balanced Fund
(7) TCW/DW Total Return Trust
(8) TCW/DW Mid-Cap Equity Trust
(9) TCW/DW Global Telecom Trust
(b) 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.
Positions 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
Director of the Registrant.
James F. Higgins Director of Distributors.
Thomas C. Schneider Executive Vice President, Chief
Financial Officer and Director
of Distributors.
5
<PAGE>
Positions and
Office with Distributors
Name and the Registrant
- ---- ------------------
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.
Robert S. Giambrone Senior Vice President of
Distributors and Vice President
of the Registrant.
Sheldon Curtis Senior Vice President,
Assistant General Counsel and
Assistant Secretary of
Distributors and Vice President,
Secretary and General Counsel of
the Registrant.
Frederick K. Kubler Senior Vice President,
Assistant Secretary and Chief
Compliance Officer of
Distributors.
Michael T. Gregg Vice President and Assistant
Secretary of Distributors.
Edward C. Oelsner III Vice President of Distributors.
Samuel Wolcott III Vice President of Distributors.
Thomas F. Caloia Assistant Treasurer of
Distributors and Treasurer of
the Registrant.
Michael Interrante Assistant Treasurer of
Distributors.
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.
6
<PAGE>
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.
7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 26th day of September, 1996
TCW/DW TOTAL RETURN TRUST
By: /s/ Sheldon Curtis
Sheldon Curtis
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 3 has been signed below by the following persons
in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
(1) Principal Executive Officer Chairman, Chief
Executive Officer
By:/s/ Charles A. Fiumefreddo and Trustee 09/26/96
--------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal
Accounting Officer
By:/s/ Thomas F. Caloia 09/26/96
--------------------
Thomas F. Caloia
(3) Majority of the Trustees Trustee
Charles A. Fiumefreddo (Chairman)
Thomas E. Larkin, Jr.
Marc I. Stern
Richard M. DeMartini
By:/s/ Sheldon Curtis 09/26/96
------------------
Sheldon Curtis
Attorney-in-Fact
John C. Argue Manuel H. Johnson
John R. Haire Michael E. Nugent
John L. Schroeder
By:/s/ David M. Butowsky 09/26/96
---------------------
David M. Butowsky
Attorney-in-Fact
<PAGE>
TCW/DW TOTAL RETURN TRUST
EXHIBIT INDEX
8. -- Form of Amendment to the Custodian Agreement
11. -- Consent of Independent Accountants
15. -- Form of Amended and Restated Plan of Distribution
pursuant to Rule 12b-1
16. -- Schedule for Computation of Performance Quotations
27. -- Financial Data Schedule
AMENDMENT TO CUSTODY AGREEMENT
Amendment made as of this 17th day of April, 1996 by and between
TCW\DW Total Return Trust (the "Fund") and The Bank of New York (the
"Custodian") to the Custody Agreement between the Fund and the Custodian dated
July 13, 1994 (the "Custody Agreement"). The Custody Agreement is hereby
amended as follows:
Article XV Section 8 of the Custody Agreement shall be deleted and be
replaced by Sections 8.(a), 8.(b) and 8.(c) as set forth below:
"8. (a) The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of Securities and moneys
owned by the Fund. The Custodian shall indemnify the Fund against and save the
Fund harmless from all liability, claims, losses and demands whatsoever,
including attorneys' fees, howsoever arising or incurred as the result of the
failure of a subcustodian which is a banking institution located in a foreign
country and identified on Schedule A attached hereto (each, a "Subcustodian")
to exercise reasonable care with respect to the safekeeping of such Securities
and moneys to the same extent that the Custodian would be liable to the Fund
if the Custodian were holding such securities and moneys in New York. In the
event of any loss to the Fund by reason of the failure of the Custodian or a
Subcustodian to utilize reasonable care, the Custodian shall be liable to the
Fund only to the extent of the Fund's direct damages, to be determined based
on the market value of the Securities and moneys which are the subject of the
loss at the date of discovery of such loss and without reference to any
special conditions or circumstances.
8. (b) The Custodian shall not be liable for any loss which results
from (i) the general risk of investing, or (ii) investing or holding
Securities and moneys in a particular country including, but not limited to,
losses resulting from nationalization, banking or securities industry;
currency restrictions, devaluations or fluctuations; or market conditions
which prevent the orderly execution of securities transactions or affect the
value of Securities or moneys.
8. (c) Neither party shall be liable to the other for any loss due
to forces beyond its control including, but not limited to, strikes or work
stoppages, acts of war or terrorism, insurrection, revolution, nuclear fusion,
fission or radiation, or acts of God."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective Officers, thereunto duly authorized and their
respective seals to be hereunto affixed, as of the day and year first above
written.
TCW\DW Total Return Trust
[SEAL] By:__________________
Attest:
- ------------------
THE BANK OF NEW YORK
[SEAL] By:___________________
Attest:
- -------------------
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
Argentina The Bank of Boston
Australia ANZ Banking Group Limited
Austria Girocredit Bank AG
Bangladesh* Standard Chartered Bank
Belgium Banque Bruxelles Lambert
Botswana* Stanbic Bank Botswana Ltd.
Brazil The Bank of Boston
Canada Royal Trust/Royal Bank of Canada
Chile The Bank of Boston/Banco de
Chile
China Standard Chartered Bank
Colombia Citibank, N.A.
Denmark Den Danske Bank
Euromarket CEDEL
Euroclear
First Chicago Clearing Centre
Finland Union Bank of Finland
France Banque Paribas/Credit Commercial
de France
Germany Dresdner Bank A.G.
Ghana* Merchant Bank Ghana Ltd.
Greece Alpha Credit Bank
Hong Kong Hong Kong and Shanghai Banking
Corp.
Indonesia Hong Kong and Shanghai Banking
Corp.
Ireland Allied Irish Bank
Israel Israel Discount Bank
Italy Banca Commerciale Italiana
Japan Yasuda Trust & Banking Co., Lt.
Korea Bank of Seoul
Luxembourg Kredietbank S.A.
Malaysia Hong Kong Bank Malaysia Berhad
Mexico Banco Nacional de Mexico
(Banamex)
Netherlands Mees Pierson
New Zealnad ANZ Banking Group Limited
Norway Den Norske Bank
Pakistan Standard Chartered Bank
Peru Citibank, N.A.
Philippines Hong Kong and Shanghai Banking
Corp.
Poland Bank Handlowy w Warsawie
Portugal Banco Comercial Portugues
Singapore United Overseas Bank
South Africa Standard Bank of South Africa
Limited
Spain Banco Bilbao Vizcaya
Sri Lanka Standard Chartered Bank
<PAGE>
SCHEDULE A
COUNTRY/MARKET SUBCUSTODIAN
Sweden Skandinaviska Enskilda Banken
Switzerland Union Bank of Switzerland
Taiwan Hong Kong and Shanghai Banking Corp.
Thailand Siam Commercial Bank
Turkey Citibank, N.A.
United Kingdom The Bank of New York
United States The Bank of New York
Uruguay The Bank of Boston
Venezuela Citibank N.A.
Zimbabwe* Stanbic Bank Zimbabwe Ltd.
* Not yet 17(f)5 compliant
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 3 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 13, 1996, relating to the financial statements and financial
highlights of TCW/DW Total Return 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
September 13, 1996
AMENDED AND RESTATED PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
TCW/DW TOTAL RETURN TRUST
WHEREAS, TCW/DW Total Return Trust (the "Fund") is engaged in business as
an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, on September 27, 1994, the Fund adopted a Plan of Distribution
pursuant to Rule 12b-1 under the Act, and the Trustees then determined that
there was a reasonable likelihood that adoption of the Plan of Distribution
would benefit the Fund and its shareholders; and
WHEREAS, the Trustees believe that continuation of said Plan of
Distribution, as amended and restated herein, is reasonably likely to continue
to benefit the Fund and its shareholders; and
WHEREAS, the Fund and the Distributor entered into a separate Distribution
Agreement dated as of September 27, 1994, pursuant to which the Fund has
employed the Distributor in such capacity during the continuous offering of
shares of the Fund.
NOW, THEREFORE, the Fund hereby amends the Plan of Distribution previously
adopted, and the Distributor hereby agrees to the terms of said Plan of
Distribution (the "Plan"), as amended herein, in accordance with Rule 12b-1
under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of securities
of which the Fund is the issuer, compensation for distribution of its shares
at the rate of the lesser of (i) 1.0% per annum of the average daily aggregate
sales of the shares of the Fund since its inception (not including
reinvestment of dividends and capital gains distributions from the Fund) less
the average daily aggregate net asset value of the shares of the Fund redeemed
since the Fund's inception upon which a contingent deferred sales charge has
been imposed or upon which such charge has been waived, or (ii) 1.0% per annum
of the Fund's average daily net assets. Such compensation shall be calculated
and accrued daily and paid monthly or at such other intervals as the Trustees
shall determine. The Distributor may direct that all or any part of the
amounts receivable by it under this Plan be paid directly to Dean Witter
Reynolds Inc. ("DWR"), its affiliates or other broker-dealers who provide
distribution and shareholder services. All payments made hereunder pursuant to
the Plan shall be in accordance with the terms and limitations of the Rules of
Fair Practice of the National Association of Securities Dealers, Inc.
2. The amount set forth in paragraph 1 of this Plan shall be paid for
services of the Distributor, DWR, its affiliates and other broker-dealers it
may select, in connection with the distribution of the Fund's shares,
including personal services to shareholders with respect to their holdings of
Fund shares, and may be spent by the Distributor, DWR, its affiliates and such
broker-dealers on any activities or expenses related to the distribution of
the Fund's shares or services to shareholders, including, but not limited to:
compensation to, and expenses of, account executives or other employees of the
Distributor, DWR, its affiliates or other broker-dealers; overhead and other
branch office distribution-related expenses and telephone expenses of persons
who engage in or support distribution of shares or who provide personal
services to shareholders; printing of prospectuses and reports for other than
existing shareholders; preparation, printing and distribution of sales
literature and advertising materials and opportunity costs in incurring the
foregoing expenses (which may be calculated as a carrying charge on the excess
of the distribution expenses incurred by the Distributor, DWR, its affiliates
or other broker-dealers over distribution revenues received by them, such
excess being hereinafter referred to as "carryover expenses"). The overhead
and other branch office distribution-related expenses referred to in this
paragraph 2 may include: (a) the expenses of operating the branch offices of
the Distributor or other broker-dealers, including DWR, 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. Payments may also be made with respect to distribution expenses
incurred in connection with the distribution of shares, including personal
services to shareholders with respect to holdings of such shares, of an
investment company whose assets are acquired by the Fund in a tax-free
reorganization, provided that carryover expenses as a percentage of Fund
assets will not be materially increased thereby.
1
<PAGE>
3. This Plan, as amended and restated, shall not take effect until it has
been approved, together with any related agreements, by votes of a majority of
the Board of Trustees of the Fund and of the Trustees who are not "interested
persons" of the Fund (as defined in the Act) and have no direct or indirect
financial interest in the operation of this Plan or any agreements related to
it (the "Rule 12b-1 Trustees"), cast in person at a meeting (or meetings)
called for the purpose of voting on this Plan and such related agreements.
4. This Plan shall continue in effect until April 30, 1996, and from year
to year thereafter, provided such continuance is specifically approved at
least annually in the manner provided for approval of this Plan in paragraph 3
hereof.
5. The Distributor shall provide to the Trustees of the Fund and the
Trustees shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made. In this
regard, the Trustees shall request the Distributor to specify such items of
expenses as the Trustees deem appropriate. The Trustees shall consider such
items as they deem relevant in making the determinations required by paragraph
4 hereof.
6. This Plan may be terminated at any time by vote of a majority of the
Rule 12b-1 Trustees, or by vote of a majority of the outstanding voting
securities of the Fund. In the event of any such termination or in the event
of nonrenewal, the Fund shall have no obligation to pay expenses which have
been incurred by the Distributor, DWR, its affiliates or other broker-dealers
in excess of payments made by the Fund pursuant to this Plan. However, this
shall not preclude consideration by the Trustees of the manner in which such
excess expenses shall be treated.
7. This Plan may not be amended to increase materially the amount the Fund
may spend for distribution provided in paragraph 1 hereof unless such
amendment is approved by a vote of at least a majority (as defined in the Act)
of the outstanding voting securities of the Fund, and no material amendment to
the Plan shall be made unless approved in the manner provided for approval in
paragraph 3 hereof.
8. While this Plan is in effect, the selection and nomination of Trustees
who are not interested persons (as defined in the Act) of the Fund shall be
committed to the discretion of the Trustees who are not interested persons.
9. The Fund shall preserve copies of this Plan and any related agreements
and all reports made pursuant to paragraph 5 hereof, for a period of not less
than six years from the date of this Plan, any such agreement or any such
report, as the case may be, the first two years in an easily accessible place.
10. The Declaration of Trust establishing TCW/DW Total Return Trust, dated
June 29, 1994, a copy of which, together with all amendments thereto (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth
of Massachusetts, provides that the name TCW/DW Total Return Trust refers to
the Trustees under the Declaration collectively as Trustees but not as
individuals or personally; and no Trustee, shareholder, officer, employee or
agent of TCW/DW Total Return Trust shall be held to any personal liability,
nor shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said
TCW/DW Total Return Trust, but the Trust Estate only shall be liable.
IN WITNESS WHEREOF, the Fund and the Distributor have executed this
amended and restated Plan of Distribution as of the day and year set forth
below in New York, New York.
Date: September 27, 1994 TCW/DW TOTAL RETURN TRUST
As amended on October 26, 1995
By
.............................
Attest:
.............................
DEAN WITTER DISTRIBUTORS INC.
By
.............................
Attest:
.............................
2
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW TOTAL RETURN TRUST
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ --------- ----------------
31-Jul-95 $1,032.30 3.23% 1.00 3.23%
30-Nov-94 $1,248.30 24.83% 1.67 14.23%
(B) AVERAGE ANNUAL TOTAL RETURNS (STANDARIZED COMPUTATIONS) WITHOUT WAIVER OF
FEES AND ASSUMPTION OF EXPENSES.
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EVb |
tb = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
tb = AVERAGE ANNUAL COMPOUND RETURN
(DEDUCTION FOR EXPENSES ASSUMED BY FUND MANAGER)
n = NUMBER OF YEARS
EVb = ENDING VALUE (DEDUCTION FOR EXPENSES
ASSUMED BY FUND MANAGER)
P = INITIAL INVESTMENT
(B)
$1,000 EVb AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 TOTAL RETURN YEARS - n COMPOUND RETURN - t
- ------------ --------- ------------ --------- -------------------
31-Jul-95 $1,029.50 2.95% 1.00 2.95%
30-Nov-94 $1,233.30 23.33% 1.67 13.40%
(C) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(D) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ______________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(D) (C)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-96 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
31-Jul-95 $1,082.30 8.23% 1.00 8.23%
30-Nov-94 $1,288.30 28.83% 1.67 16.41%
(E) GROWTH OF $10,000
(F) GROWTH OF $50,000
(G) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (E) GROWTH OF (F) GROWTH OF (G) GROWTH OF
INVESTED - P RETURN - TR $10,000 INVESTMENT - G $50,000 INVESTMENT- G $100,000 INVESTMENT- G
- ------------ ----------- ---------------------- --------------------- ----------------------
<C> <C> <C> <C> <C> <C>
30-Nov-94 28.83 $12,883 $64,415 $128,830
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<S> <C>
<NAME> TCW/DW TOTAL RETURN TRUST
<CIK> 0000926272
<CURRENCY> U.S. DOLLARS
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 50,014,542
<INVESTMENTS-AT-VALUE> 50,812,667
<RECEIVABLES> 709,462
<ASSETS-OTHER> 125,514
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 51,647,643
<PAYABLE-FOR-SECURITIES> 2,994,773
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 128,474
<TOTAL-LIABILITIES> 3,123,247
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 43,279,108
<SHARES-COMMON-STOCK> 4,042,347
<SHARES-COMMON-PRIOR> 3,065,066
<ACCUMULATED-NII-CURRENT> 46,982
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4,400,181
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 798,125
<NET-ASSETS> 48,524,396
<DIVIDEND-INCOME> 916,695
<INTEREST-INCOME> 576,438
<OTHER-INCOME> 0
<EXPENSES-NET> 901,040
<NET-INVESTMENT-INCOME> 592,093
<REALIZED-GAINS-CURRENT> 4,933,040
<APPREC-INCREASE-CURRENT> (2,291,729)
<NET-CHANGE-FROM-OPS> 3,233,404
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 762,557
<DISTRIBUTIONS-OF-GAINS> 1,768,960
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,659,330
<NUMBER-OF-SHARES-REDEEMED> 872,725
<SHARES-REINVESTED> 190,676
<NET-CHANGE-IN-ASSETS> 12,506,818
<ACCUMULATED-NII-PRIOR> 217,446
<ACCUMULATED-GAINS-PRIOR> 1,236,101
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 136,247
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,006,302
<AVERAGE-NET-ASSETS> 45,415,761
<PER-SHARE-NAV-BEGIN> 11.75
<PER-SHARE-NII> .15
<PER-SHARE-GAIN-APPREC> .80
<PER-SHARE-DIVIDEND> .21
<PER-SHARE-DISTRIBUTIONS> .49
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.00
<EXPENSE-RATIO> 1.98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
