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Filed Pursuant to Rule 497(e)
Registration File No.: 33-81012
T C W / D W
TOTAL RETURN TRUST
PROSPECTUS
SEPTEMBER 29, 1998
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."
The Fund offers four classes of shares (each, a "Class"), each with a different
combination of sales charges, ongoing fees and other features. The different
distribution arrangements permit an investor to choose the method of purchasing
shares that the investor believes is most beneficial given the amount of the
purchase, the length of time the investor expects to hold the shares and other
relevant circumstances. See "Purchase of Fund Shares--Alternative Purchase
Arrangements."
This Prospectus sets forth concisely the information you should know before
investing in the Fund. It should be read and retained for future reference.
Additional information about the Fund is contained in the Statement of
Additional Information, dated September 29, 1998, which has been filed with the
Securities and Exchange Commission, and which is available at no charge upon
request of the Fund at the address or telephone numbers listed on this page.
The Statement of Additional Information is incorporated herein by reference.
TABLE OF CONTENTS
Prospectus Summary 2
Summary of Fund Expenses 4
Financial Highlights 5
The Fund and its Management 8
Investment Objective and Policies 8
Risk Considerations and Investment Practices 10
Investment Restrictions 14
Purchase of Fund Shares 14
Shareholder Services 22
Repurchases and Redemptions 24
Dividends, Distributions and Taxes 25
Performance Information 26
Additional Information 26
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
TCW/DW TOTAL RETURN TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Morgan Stanley Dean Witter Distributors Inc.,
Distributor
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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<CAPTION>
PROSPECTUS SUMMARY
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<S> <C>
THE The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is
FUND an open-end, non-diversified management investment company investing primarily in equity
and equity-related securities.
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SHARES Shares of beneficial interest with $0.01 par value (see page 25). The Fund offers four Classes
OFFERED of shares, each with a different combination of sales charges, ongoing fees and other features
(see pages 13-20).
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MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account is opened
PURCHASE through EasyInvest(SM)). Class D shares are only available to persons investing $5 million ($25
million for certain qualified plans) or more and to certain other limited categories of investors.
For the purpose of meeting the minimum $5 million (or $25 million) investment for Class D
shares, and subject to the $1,000 minimum initial investment for each Class of the Fund, an
investor's existing holdings of Class A shares and concurrent investments in Class D shares of
the Fund and other multiple class funds for which Morgan Stanley Dean Witter Services
Company Inc. serves as manager and TCW Funds Management, Inc. serves as investment
adviser will be aggregated. The minimum subsequent investment is $100 (see page 13).
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INVESTMENT The investment objective of the Fund is high total return from capital growth and income.
OBJECTIVE
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MANAGER Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), a wholly-owned
subsidiary of Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), is the Fund's
manager. The Manager also serves as manager to ten other investment companies advised by
TCW Funds Management, Inc. (the "TCW/DW Funds"). The Manager and MSDW
Advisors serve in various investment management, advisory, management and administrative
capacities to a total of 101 investment companies and other portfolios with assets of
approximately $110 billion at August 31, 1998. (See page 8).
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ADVISER TCW Funds Management, Inc. (the "Adviser") is the Fund's investment adviser. In addition
to the Fund, the Adviser serves as investment adviser to ten other TCW/DW Funds. As of
August 31, 1998, the Adviser and its affiliates had approximately $50 billion under management or
committed to management in various fiduciary or advisory capacities, primarily to institutional
investors. (See page 8).
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MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.45% of daily net assets. The
AND ADVISORY Adviser receives a monthly fee at an annual rate of 0.30% of daily net assets. (See page 8).
FEES
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DISTRIBUTOR Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") is the Distributor of the
AND Fund's shares. The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the
DISTRIBUTION Investment Company Act (the "12b-1 Plan") with respect to the distribution fees paid by the
FEE Class A, Class B and Class C shares of the Fund to the Distributor. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of Class B and Class C equal
to 0.25% of the average daily net assets of the Class are currently each characterized as a
service fee within the meaning of the National Association of Securities Dealers, Inc.
guidelines. The remaining portion of the 12b-1 fee, if any, is characterized as an asset-based
sales charge (see pages 13 and 19).
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ALTERNATIVE Four classes of shares are offered:
PURCHASE
ARRANGEMENTS o Class A shares are offered with a front-end sales charge, starting at 5.25% and reduced for
larger purchases. Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charge at the time of purchase but a
contingent deferred sales charge ("CDSC") of 1.0% may be imposed on redemptions within
one year of purchase. The Fund is authorized to reimburse the Distributor for specific
expenses incurred in promoting the distribution of the Fund's Class A shares and servicing
shareholder accounts pursuant to the Fund's 12b-1 Plan. Reimbursement may in no event
exceed an amount equal to payments at an annual rate of 0.25% of average daily net assets of
the Class (see pages 13, 15 and 19).
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</TABLE>
2
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<TABLE>
<CAPTION>
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<S> <C>
o Class B shares are offered without a front-end sales charge, but will in most cases be subject
to a CDSC (scaled down from 5.0% to 1.0%) if redeemed within six years after purchase. The
CDSC will be imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate amount of the
investor's purchase payments made during the six years preceding the redemption. A different
CDSC schedule applies to investments by certain qualified plans. Class B shares are also
subject to a 12b-1 fee assessed at the annual rate of 1.0% of the lesser of: (a) the average daily
net sales of the Fund's Class B shares or (b) the average daily net assets of Class B. All shares
of the Fund held prior to July 28, 1997 have been designated Class B shares. Shares held before
May 1, 1997 will convert to Class A shares in May, 2007. In all other instances, Class B shares
convert to Class A shares approximately ten years after the date of the original purchase (see
pages 13, 17 and 19).
o Class C shares are offered without a front-end sales charge, but will in most cases be subject
to a CDSC of 1.0% if redeemed within one year after purchase. The Fund is authorized to
reimburse the Distributor for specific expenses incurred in promoting the distribution of the
Fund's Class C shares and servicing shareholder accounts pursuant to the Fund's 12b-1 Plan.
Reimbursement may in no event exceed an amount equal to payments at an annual rate of
1.0% of average daily net assets of the Class (see pages 13 and 19).
o Class D shares are offered only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans) and to certain other limited categories of
investors. Class D shares are offered without a front-end sales charge or CDSC and are not
subject to any 12b-1 fee (see pages 13 and 19).
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DIVIDENDS AND Dividends from net investment income are paid at least annually. Distributions from net
CAPITAL GAINS capital gains, if any, are paid once per year. The Fund may, however, determine to retain all
DISTRIBUTIONS or part of any net long-term capital gains in any year for reinvestment. Dividends and capital
gains distributions paid on shares of a Class are automatically reinvested in additional shares
of the same Class at net asset value unless the shareholder elects to receive cash. Shares
acquired by dividend and distribution reinvestment will not be subject to any sales charge or
CDSC (see pages 21 and 24).
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REDEMPTION Shares are redeemable by the shareholder at net asset value less any applicable CDSC on
Class A, Class B or Class C shares. An account may be involuntarily redeemed if the total value
of the account is less than $100 or, if the account was opened through EasyInvest(SM), if after
twelve months the shareholder has less than $1,000 in the account (see page 23).
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RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the
CONSIDERATIONS Fund's 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 10-12).
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The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
3
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SUMMARY OF FUND EXPENSES
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The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are based
on the expenses and fees for the fiscal year ended July 31, 1998.
<TABLE>
<CAPTION>
Class A Class B Class C Class D
--------------- --------------- --------------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) ...................................................... 5.25%(1) None None None
Sales Charge Imposed on Dividend Reinvestments ........................ None None None None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase price or redemption proceeds) .. None(2) 5.00%(3) 1.00%(4) None
Redemption Fees ....................................................... None None None None
Exchange Fee .......................................................... None None None None
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management and Advisory Fees (5) ...................................... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (6) (7) .................................................... 0.25% 0.85% 1.00% None
Other Expenses (5) .................................................... 0.30% 0.30% 0.30% 0.30%
Total Fund Operating Expenses ......................................... 1.30% 1.90% 2.05% 1.05%
</TABLE>
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(1) Reduced for purchases of $25,000 and over (see "Purchase of Fund
Shares--Initial Sales Charge Alternative--Class A Shares").
(2) Investments that are not subject to any sales charge at the time of
purchase are subject to a CDSC of 1.00% that will be imposed on
redemptions made within one year after purchase, except for certain
specific circumstances (see "Purchase of Fund Shares--Initial Sales
Charge Alternative--Class A Shares").
(3) The CDSC is scaled down to 1.00% during the sixth year, reaching zero
thereafter.
(4) Only applicable to redemptions made within one year after purchase (see
"Purchase of Fund Shares--Level Load Alternative--Class C Shares").
(5) Management Fees, Advisory Fees and other expenses are based on the Fund's
actual aggregate expenses.
(6) The 12b-1 fee is accrued daily and payable monthly. The entire 12b-1 fee
payable by Class A and a portion of the 12b-1 fee payable by each of
Class B and Class C equal to 0.25% of the average daily net assets of the
Class are currently each characterized as a service fee within the
meaning of National Association of Securities Dealers, Inc. ("NASD")
guidelines and are payments made for personal service and/or maintenance
of shareholder accounts. The remainder of the 12b-1 fee, if any, is an
asset-based sales charge, and is a distribution fee paid to the
Distributor to compensate it for the services provided and the expenses
borne by the Distributor and others in the distribution of the Fund's
shares (see "Purchase of Fund Shares--Plan of Distribution").
(7) Upon conversion of Class B shares to Class A shares, such shares will be
subject to the lower 12b-1 fee applicable to Class A shares. No sales
charge is imposed at the time of conversion of Class B shares to Class A
shares. Class C shares do not have a conversion feature and, therefore,
are subject to an ongoing 1.00% distribution fee (see "Purchase of Fund
Shares--Alternative Purchase Arrangements").
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<CAPTION>
EXAMPLES 1 Year 3 Years 5 Years 10 Years
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<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) a 5% annual return and (2) redemption at the end of each
time period:
Class A ........................................................... $65 $92 $120 $201
Class B ........................................................... $69 $90 $123 $222
Class C ........................................................... $31 $64 $110 $238
Class D ........................................................... $11 $33 $ 58 $128
You would pay the following expenses on the same $1,000 investment
assuming no redemption at the end of the period:
Class A ........................................................... $65 $92 $120 $201
Class B ........................................................... $19 $60 $103 $222
Class C ........................................................... $21 $64 $110 $238
Class D ........................................................... $11 $33 $ 58 $128
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES OF EACH CLASS MAY BE GREATER OR
LESS THAN THOSE SHOWN.
The purpose of this table is to assist the investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. For a more complete description of these costs and expenses, see
"The Fund and its Management," "Purchase of Fund Shares--Plan of Distribution"
and "Repurchases and Redemptions."
Long-term shareholders of Class B and Class C may pay more in sales
charges, including distribution fees, than the economic equivalent of the
maximum front-end sales charges permitted by the NASD.
4
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FINANCIAL HIGHLIGHTS
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The following ratios and per share data for a share of beneficial interest
outstanding throughout each period have been audited by PricewaterhouseCoopers
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.
<TABLE>
<CAPTION>
For the Period
For the Year Ended July 31, November 30, 1994*
------------------------------------------------- through
1998++ 1997** 1996 July 31, 1995
--------------- -------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............ $ 16.59 $ 12.00 $ 11.75 $ 10.00
---------- --------- ---------- -------------
Net investment income (loss) .................... (0.08) 0.04 0.15 0.21
Net realized and unrealized gain ................ 1.31 5.81 0.80 1.68
---------- --------- ---------- -------------
Total from investment operations ................ 1.23 5.85 0.95 1.89
---------- --------- ---------- -------------
Less dividends and distributions from:
Net investment income .......................... -- (0.06) (0.21) (0.14)
Net realized gain .............................. (1.14) (1.20) (0.49) --
---------- ---------- ---------- -------------
Total dividends and distributions ............... (1.14) (1.26) (0.70) (0.14)
---------- ---------- ---------- -------------
Net asset value, end of period .................. $ 16.68 $ 16.59 $ 12.00 $ 11.75
========== ========== ========== =============
TOTAL INVESTMENT RETURN+ ........................ 8.25 % 51.66% 8.23% 19.04%(1)
RATIOS TO AVERAGE NET ASSETS
Expenses ........................................ 1.90 % 2.05% 1.98%(3) 0.94%(2)(3)
Net investment income (loss) .................... (0.50)% 0.28% 1.30%(3) 3.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $152,358 $117,041 $48,524 $36,018
Portfolio turnover rate ......................... 93 % 198% 261% 91%(1)
</TABLE>
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* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived
by the Manager and Adviser, the above annualized expense and net
investment income ratios would have been 2.21% and 1.07%, respectively,
for the year ended July 31, 1996 and 2.66% and 1.47%, respectively, for
the period ended July 31, 1995.
5
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FINANCIAL HIGHLIGHTS (continued)
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<TABLE>
<CAPTION>
For the Period
For the Year July 28, 1997*
Ended through
July 31, 1998++ July 31, 1997
----------------- ---------------
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $ 16.59 $ 16.07
------- --------
Net investment income (loss) ...................... (0.01) 0.01
Net realized and unrealized gain .................. 1.34 0.51
------- --------
Total from investment operations .................. 1.33 0.52
------- --------
Less distributions from net realized gain ......... (1.14) --
------- --------
Net asset value, end of period .................... $ 16.78 $ 16.59
======= ========
TOTAL INVESTMENT RETURN+ .......................... 8.94 % 3.24%(1)
RATIOS TO AVERAGE NET ASSETS
Expenses .......................................... 1.31 % 1.31%(2)
Net investment income (loss) ...................... (0.07)% 4.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,254 $10
Portfolio turnover rate ........................... 93 % 198%
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $ 16.59 $ 16.07
-------- -----------
Net investment income (loss) ...................... (0.12) 0.01
Net realized and unrealized gain .................. 1.33 0.51
-------- -----------
Total from investment operations .................. 1.21 0.52
-------- -----------
Less distributions from net realized gain ......... (1.14) --
-------- -----------
Net asset value, end of period .................... $ 16.66 $ 16.59
======== ===========
TOTAL INVESTMENT RETURN+ ......................... 8.12 % 3.24%(1)
RATIOS TO AVERAGE NET ASSETS
Expenses .......................................... 2.06 % 2.06%(2)
Net investment income (loss) ...................... (0.70)% 2.75%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $700 $38
Portfolio turnover rate ........................... 93 % 198%
</TABLE>
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* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized
(2) Annualized
6
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FINANCIAL HIGHLIGHTS (continued)
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<TABLE>
<CAPTION>
For the Period
For The Year July 28, 1997*
Ended through
July 31, 1998++ July 31, 1997
----------------- ---------------
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .............. $ 16.59 $ 16.07
------- --------
Net investment income ............................. 0.06 0.01
Net realized and unrealized gain .................. 1.32 0.51
------- --------
Total from investment operations .................. 1.38 0.52
------- --------
Less distributions from net realized gain ......... (1.14) --
-------- --------
Net asset value, end of period .................... $ 16.83 $ 16.59
======== ========
TOTAL INVESTMENT RETURN+ .......................... 9.20% 3.24%(1)
RATIOS TO AVERAGE NET ASSETS
Expenses .......................................... 1.06% 1.06%(2)
Net investment income ............................. 0.34% 4.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $11 $10
Portfolio turnover rate ........................... 93% 198%
</TABLE>
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* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
7
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THE FUND AND ITS MANAGEMENT
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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.
Morgan Stanley 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 Morgan Stanley Dean Witter
Advisors Inc. ("MSDW Advisors"). MSDW Advisors is a wholly-owned subsidiary of
Morgan Stanley Dean Witter & Co., a preeminent global financial services firm
that maintains leading market positions in each of its three primary
businesses--securities, asset management and credit services.
The Manager acts as manager to ten other TCW/DW Funds. The Manager and
MSDW Advisors serve in various investment management, advisory, management and
administrative capacities to a total of 101 investment companies, 28 of which
are listed on the New York Stock Exchange, with combined assets of
approximately $105.9 billion as of August 31, 1998. MSDW Advisors also manages
and advises portfolios of pension plans, other institutions and individuals
which aggregated approximately $4.1 billion at such date.
The Fund has retained the Manager to manage its business affairs,
supervise its overall day-to-day operations (other than providing investment
advice) and provide all administrative services.
TCW Funds Management, Inc. (the "Adviser"), whose address is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017, is the Fund's
investment adviser. The Adviser was organized in 1987 as a wholly-owned
subsidiary of The TCW Group, Inc. ("TCW"), whose subsidiaries, including Trust
Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. Robert A. Day,
who is Chairman of the Board of Directors of TCW, may be deemed to be a control
person of the Adviser by virtue of the aggregate ownership by Mr. Day and his
family of more than 25% of the outstanding voting stock of TCW. The Adviser
serves as investment adviser to ten other TCW/DW Funds in addition to the Fund.
As of August 31, 1998, the Adviser and its affiliated companies had
approximately $50 billion under management or committed to management,
primarily from institutional investors.
The Fund has retained the Adviser to invest the Fund's assets.
The Fund's Trustees review the various services provided by the Manager
and the Adviser to ensure that the Fund's general investment policies and
programs are being properly carried out and that administrative services are
being provided to the Fund in a satisfactory manner.
As full compensation for the services and facilities furnished to the
Fund and for expenses of the Fund assumed by the Manager, the Fund pays the
Manager monthly compensation calculated daily by applying the annual rate of
0.45% to the Fund's net assets. 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. For the fiscal year ended
July 31, 1998, the Fund accrued total compensation to the Manager and the
Adviser amounting to 0.45% and 0.30%, respectively, of the Fund's average daily
net assets and total expenses of each Class amounted to 1.31%, 1.90%, 2.06% and
1.06% of the average daily net assets of Class A, Class B, Class C and Class D,
respectively.
INVESTMENT OBJECTIVE AND POLICIES
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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 may invest up to 5% of its total assets in convertible securities
rated below investment grade.
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
8
<PAGE>
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.
Additionally, with respect to 5% of its total assets, the Fund may invest in
convertible securities rated below investment grade by Moody's or S&P. Lower
rated fixed-income securities are considered to be speculative investments and
while producing higher yields than investment grade securities, are subject to
greater credit risks. See the Statement of Additional Information for a
discussion of lower rated fixed-income securities. If a 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 and, if more than 5% of the
Fund's total assets invested in convertible securities are below investment
grade, the Fund will sell such securities as soon as is practicable without
undue market or tax consequences to the Fund.
A convertible security is a bond, debenture, note, preferred stock or
other security that may be converted into or exchanged for a prescribed amount
of common stock of the same or a different issuer within a particular period of
time at a specified price or formula. Convertible securities rank senior to
common stocks in a corporation's capital structure and, therefore, entail less
risk than the corporation's common stock. The value of a convertible security
is a function of its "investment value" (its value as if it did not have a
conversion privilege), and its "conversion value" (the security's worth if it
were to be exchanged for the underlying security, at market value, pursuant to
its conversion privilege). 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
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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
governmental administration or economic or monetary policy (in the United
States and abroad) or changed circumstances in dealings between nations.
Fluctuations in the relative rates of exchange between different currencies
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.
When purchasing foreign securities, the Fund will generally enter into foreign
currency exchange transactions or forward foreign exchange contracts to
facilitate settlement. The Fund will utilize forward foreign exchange contracts
in these instances as an attempt to limit the effect of changes in the
relationship between the U.S. dollar and the foreign currency during the period
between the trade date and the settlement date for the transaction.
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.
Many European countries are about to adopt a single European currency,
the euro (the "Euro Conversion"). The consequences of the Euro Conversion for
foreign exchange rates, interest rates and the value of European Securities
eligible for purchase by the Fund are presently
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<PAGE>
unclear. Such consequences may adversely affect the value and/or increase the
volatility of the securities held by the Fund.
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 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
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trust's expenses, including its advisory and administration fees. At the same
time the Fund would continue to pay its own investment management fees and
other expenses, as a result of which the Fund and its shareholders in effect
will be absorbing duplicate levels of fees with respect to investments in 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.
Year 2000. The management services provided to the Fund by the Manager,
the investment advisory services provided to the Fund by the Adviser and the
services provided to shareholders by the Distributor and the Transfer Agent
depend on the smooth functioning of their computer systems. Many computer
software systems in use today cannot recognize the year 2000, but revert to
1900 or some other date, due to the manner in which dates were encoded and
calculated. That failure could have a negative impact on the handling of
securities trades, pricing and account services. The Manager, the Adviser, the
Distributor and the Transfer Agent have been actively working on necessary
changes to their own computer systems to prepare for the year 2000 and expect
that their systems will be adapted before that date, but there can be no
assurance that they will be successful, or that interaction with other
non-complying computer systems will not impair their services at that time.
In addition, it is possible that the markets for securities in which the
Fund invests may be detrimentally affected by computer failures throughout the
financial services industry beginning January 1, 2000. Improperly functioning
trading systems may result in settlement problems and liquidity issues. In
addition, corporate and governmental data processing errors may result in
production problems for individual companies and overall economic
uncertainties. Earnings of individual issuers will be affected by remediation
costs, which may be substantial and may be reported inconsistently in U.S. and
foreign financial statements. Accordingly, the Fund's investments may be
adversely affected.
PORTFOLIO MANAGEMENT
The Fund's portfolio is actively managed by its Adviser with a view to
achieving the Funds' investment objective. James A. Tilton, Managing Director
of the Adviser and Thomas K. McKissick, a member of TCW's Equity Policy
Committee, are the primary portfolio managers of the Fund. Mr. Tilton has been
a portfolio manager of the Fund since its inception and has been a portfolio
manager with affiliates of TCW since 1980. Mr. McKissick has been a portfolio
manager of the Fund since October 1997 and has been employed by TCW since 1985
first as an equity analyst and since 1990 as a portfolio manager in TCW's Large
Cap Equity Group.
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., Morgan Stanley & Co. Incorporated and other
broker-dealers that are affiliates of the Manager, and others regarding
economic developments and interest rate trends, and the Adviser's own analysis
of factors it deems relevant.
Orders for transactions in portfolio securities and commodities are
placed for the Fund with a number of brokers and dealers, including Dean Witter
Reynolds Inc., Morgan Stanley & Co. Incorporated and other brokers and dealers
that are affiliates of the Manager or Adviser. The Fund may incur brokerage
commissions on transactions conducted through such affiliates. 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.
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INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions which
have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial investment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities
of issuers in any one industry. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
2. Invest more than 5% of the value of its total assets in securities
of issuers having a record, together with predecessors, of less than
three years of continuous operation. This restriction does not apply to
obligations issued or guaranteed by the United States Government, its
agencies or instrumentalities.
In addition, as a non-fundamental policy, the Fund may not, as to 75% of
its total assets, purchase more than 10% of the voting securities of any
issuer.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
GENERAL
The Fund offers each class of its shares to the public on a continuous
basis. Pursuant to a Distribution Agreement between the Fund and Morgan Stanley
Dean Witter Distributors Inc. ("MSDW Distributors" or the "Distributor"), an
affiliate of the Manager, shares of the Fund are distributed by the Distributor
and offered by Dean Witter Reynolds Inc. ("DWR"), a selected dealer and
subsidiary of Morgan Stanley Dean Witter & Co., 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"). It is anticipated that DWR will undergo a change of corporate name
which is expected to incorporate the brand name of "Morgan Stanley Dean
Witter," pending approval at various regulatory authorities. The principal
executive office of the Distributor is located at Two World Trade Center, New
York, New York 10048.
The Fund offers four classes of shares (each, a "Class"). Class A shares
are sold to investors with an initial sales charge that declines to zero for
larger purchases; however, Class A shares sold without an initial sales charge
are subject to a contingent deferred sales charge ("CDSC") of 1.0% if redeemed
within one year of purchase, except for certain specific circumstances. Class B
shares are sold without an initial sales charge but are subject to a CDSC
(scaled down from 5.0% to 1.0%) payable upon most redemptions within six years
after purchase. (Class B shares purchased by certain qualified plans are
subject to a CDSC scaled down from 2.0% to 1.0% if redeemed within three years
after purchase.) Class C shares are sold without an initial sales charge but
are subject to a CDSC of 1.0% on most redemptions made within one year after
purchase. Class D shares are sold without an initial sales charge or CDSC and
are available only to investors meeting an initial investment minimum of $5
million ($25 million for certain qualified plans), and to certain other limited
categories of investors. At the discretion of the Board of Trustees of the
Fund, Class A shares may be sold to categories of investors in addition to
those set forth in this prospectus at net asset value without a front-end sales
charge, and Class D shares may be sold to certain other categories of
investors, in each case as may be described in the then current prospectus of
the Fund. See "Alternative Purchase Arrangements--Selecting a Particular Class"
for a discussion of factors to consider in selecting which Class of shares to
purchase.
The minimum initial purchase is $1,000 for each Class of shares, although
Class D shares are only available to persons investing $5 million ($25 million
for certain qualified plans) or more and to certain other limited categories of
investors. For the purpose of meeting the minimum $5 million (or $25 million)
initial investment for Class D shares, and subject to the $1,000 minimum
initial investment for each Class of the Fund, an investor's existing holdings
of Class A shares and concurrent investments in Class D shares of the Fund and
other TCW/DW Funds which are multiple class funds ("TCW/DW Multi-Class Funds")
will be aggregated. Subsequent purchases of $100 or more may be made by sending
a check, payable to TCW/DW Total Return Trust, directly to Morgan Stanley Dean
Witter Trust FSB (the "Transfer Agent" or "MSDW Trust") at P.O. Box 1040,
Jersey City, NJ 07303, or by contacting a Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative. When purchasing shares
of the Fund, investors must specify whether the purchase is for Class A, Class
B, Class C or Class D shares. If no Class is specified, the Transfer Agent will
not process the transaction until the proper Class is identified. The minimum
initial purchase, in the case of investments through EasyInvest(SM), an
automatic
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<PAGE>
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. The minimum initial purchase in the case of an
"Education IRA" is $500, if the Distributor has reason to believe that
additional investments will increase the investment in the account to $1,000
within three years. In the case of investments pursuant to (i) Systematic
Payroll Deduction Plans (including Individual Retirement Plans), (ii) the MSDW
Advisors mutual fund asset allocation program and (iii) fee-based programs
approved by the Distributor, pursuant to which participants pay an asset based
fee for services in the nature of investment advisory, administrative and/or
brokerage services, the Fund, in its discretion, may accept investments without
regard to any minimum amounts which would otherwise be required, provided, in
the case of Systematic Payroll Deduction Plans, that the Distributor has reason
to believe that additional investments will increase the investment in all
accounts under such Plans to at least $1,000. Certificates for shares purchased
will not be issued unless a request is made by the shareholder in writing to
the Transfer Agent.
Shares of the Fund are sold through the Distributor on a normal three
business day settlement basis; that is, payment is due on the third business
day (settlement date) after the order is placed with the Distributor. Since DWR
and other Selected Broker-Dealers forward investors' funds on settlement date,
they will benefit from the temporary use of the funds if payment is made prior
thereto. As noted above, orders placed directly with the Transfer Agent must be
accompanied by payment. Investors will be entitled to receive income dividends
and capital gains distributions if their order is received by the close of
business on the day prior to the record date for such dividends and
distributions.
Sales personnel of a Selected Broker-Dealer are compensated for selling
shares of the Fund by the Distributor or any of its affiliates and/or the
Selected Broker-Dealer. In addition, some sales personnel of the Selected
Broker-Dealer will receive various types of non-cash compensation 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.
ALTERNATIVE PURCHASE ARRANGEMENTS
The Fund offers several Classes of shares to investors designed to
provide them with the flexibility of selecting an investment best suited to
their needs. The general public is offered three Classes of shares: Class A
shares, Class B shares and Class C shares, which differ principally in terms of
sales charges and rate of expenses to which they are subject. A fourth Class of
shares, Class D shares, is offered only to limited categories of investors (see
"No Load Alternative--Class D Shares" below).
Each Class A, Class B, Class C or Class D share of the Fund represents an
identical interest in the investment portfolio of the Fund except that Class A,
Class B and Class C shares bear the expenses of the ongoing shareholder service
fees, Class B and Class C shares bear the expenses of the ongoing distribution
fees and Class A, Class B and Class C shares which are redeemed subject to a
CDSC bear the expense of the additional incremental distribution costs
resulting from the CDSC applicable to shares of those Classes. The ongoing
distribution fees that are imposed on Class A, Class B and Class C shares will
be imposed directly against those Classes and not against all assets of the
Fund and, accordingly, such charges against one Class will not affect the net
asset value of any other Class or have any impact on investors choosing another
sales charge option. See "Plan of Distribution" and "Repurchases and
Redemptions."
Set forth below is a summary of the differences between the Classes and
the factors an investor should consider when selecting a particular Class. This
summary is qualified in its entirety by detailed discussion of each Class that
follows this summary.
Class A Shares. Class A shares are sold at net asset value plus an
initial sales charge of up to 5.25%. The initial sales charge is reduced for
certain purchases. Investments of $1 million or more (and investments by
certain other limited categories of investors) are not subject to any sales
charges at the time of purchase but are subject to a CDSC of 1.0% on
redemptions made within one year after purchase, except for certain specific
circumstances. Class A shares are also subject to a 12b-1 fee of up to 0.25% of
the average daily net assets of the Class. See "Initial Sales Charge
Alternative--Class A Shares."
Class B Shares. Class B shares are offered at net asset value with no
initial sales charge but are subject to a CDSC (scaled down from 5.0% to 1.0%)
if redeemed within six years of purchase. (Class B shares purchased by certain
qualified plans are subject to a CDSC scaled down from 2.0% to 1.0% if redeemed
within three years after purchase.) This CDSC may be waived for certain
redemptions. Class B shares are also subject to an annual 12b-1 fee of 1.0% of
the lesser of: (a) the average daily aggregate gross sales of the Fund's Class
B 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 Class B shares redeemed since the Fund's inception
upon which a CDSC has been imposed or waived, or (b) the average daily net
assets of Class B. The Class B shares' distribution fee will cause that Class
to have higher expenses and pay lower dividends than Class A or Class D shares.
After approximately ten (10) years, Class B shares will convert
automatically to Class A shares of the Fund, based on the relative net asset
values of the shares of the two Classes on the conversion date. In addition, a
certain portion of Class B shares that have been acquired through
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<PAGE>
the reinvestment of dividends and distributions will be converted at that time.
See "Contingent Deferred Sales Charge Alternative--Class B Shares."
Class C Shares. Class C shares are sold at net asset value with no
initial sales charge but are subject to a CDSC of 1.0% on redemptions made
within one year after purchase. This CDSC may be waived for certain
redemptions. They are subject to an annual 12b-1 fee of up to 1.0% of the
average daily net assets of the Class C shares. The Class C shares'
distribution fee may cause that Class to have higher expenses and pay lower
dividends than Class A or Class D shares. See "Level Load Alternative--Class C
Shares."
Class D Shares. Class D shares are available only to limited categories
of investors (see "No Load Alternative--Class D Shares" below). Class D shares
are sold at net asset value with no initial sales charge or CDSC. They are not
subject to any 12b-1 fees. See "No Load Alternative--Class D Shares."
Selecting a Particular Class. In deciding which Class of Fund shares to
purchase, investors should consider the following factors, as well as any other
relevant facts and circumstances:
The decision as to which Class of shares is more beneficial to an
investor depends on the amount and intended length of his or her investment.
Investors who prefer an initial sales charge alternative may elect to purchase
Class A shares. Investors qualifying for significantly reduced or, in the case
of purchases of $1 million or more, no initial sales charges may find Class A
shares particularly attractive because similar sales charge reductions are not
available with respect to Class B or Class C shares. Moreover, Class A shares
are subject to lower ongoing expenses than are Class B or Class C shares over
the term of the investment. As an alternative, Class B and Class C shares are
sold without any initial sales charge so the entire purchase price is
immediately invested in the Fund. Any investment return on these additional
investment amounts may partially or wholly offset the higher annual expenses of
these Classes. Because the Fund's future return cannot be predicted, however,
there can be no assurance that this would be the case.
Finally, investors should consider the effect of the CDSC period and any
conversion rights of the Classes in the context of their own investment time
frame. For example, although Class C shares are subject to a significantly
lower CDSC upon redemptions, they do not, unlike Class B shares, convert into
Class A shares after approximately ten years, and, therefore, are subject to an
ongoing 12b-1 fee of 1.0% (rather than the 0.25% fee applicable to Class A
shares) for an indefinite period of time. Thus, Class B shares may be more
attractive than Class C shares to investors with longer term investment
outlooks. Other investors, however, may elect to purchase Class C shares if,
for example, they determine that they do not wish to be subject to a front-end
sales charge and they are uncertain as to the length of time they intend to
hold their shares.
For the purpose of meeting the $5 million (or $25 million) minimum
investment amount for Class D shares, holdings of Class A shares in all TCW/DW
Multi-Class Funds, and holdings of shares of "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") for which Class A shares have been exchanged,
will be included together with the current investment amount.
Sales personnel may receive different compensation for selling each Class
of shares. Investors should understand that the purpose of a CDSC is the same
as that of the initial sales charge in that the sales charges applicable to
each Class provide for the financing of the distribution of shares of that
Class.
Set forth below is a chart comparing the sales charge, 12b-1 fees and
conversion options applicable to each Class of shares:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
CONVERSION
CLASS SALES CHARGE 12b-1 FEE FEATURE
- ------- ------------------------ ----------- -----------------
<S> <C> <C> <C>
A Maximum 5.25% 0.25% No
initial sales charge
reduced for
purchases of
$25,000 and over;
shares sold without
an initial sales
charge generally
subject to a 1.0%
CDSC during first
year.
- --------------------------------------------------------------------
B Maximum 5.0% 1.0% B shares convert
CDSC during the first to A shares
year decreasing automatically
to 0 after six years after
approximately
ten years
- --------------------------------------------------------------------
C 1.0% CDSC during 1.0% No
first year
- --------------------------------------------------------------------
D None None No
- --------------------------------------------------------------------
</TABLE>
See "Purchase of Fund Shares" and "The Fund and its Management" for a
complete description of the sales charges and service and distribution fees for
each Class of shares and "Determination of Net Asset Value," "Dividends,
Distributions and Taxes" and "Shareholder Services--Exchange Privilege" for
other differences between the Classes of shares.
INITIAL SALES CHARGE ALTERNATIVE--
CLASS A SHARES
Class A shares are sold at net asset value plus an initial sales charge.
In some cases, reduced sales charges may be available, as described below.
Investments of $1 million or more (and investments by certain other limited
categories of investors) are not subject to any sales charges at the time of
purchase but are subject to a CDSC of 1.0% on redemptions made within one year
after purchase
15
<PAGE>
(calculated from the last day of the month in which the shares were purchased),
except for certain specific circumstances. The CDSC will be assessed on an
amount equal to the lesser of the current market value or the cost of the
shares being redeemed. The CDSC will not be imposed (i) in the circumstances
set forth below in the section "Contingent Deferred Sales Charge
Alternative--Class B Shares--CDSC Waivers," except that the references to six
years in the first paragraph of that section shall mean one year in the case of
Class A shares, and (ii) in the circumstances identified in the section
"Additional Net Asset Value Purchase Options" below. Class A shares are also
subject to an annual 12b-1 fee of up to 0.25% of the average daily net assets
of the Class.
The offering price of Class A shares will be the net asset value per
share next determined following receipt of an order (see "Determination of Net
Asset Value" below), plus a sales charge (expressed as a percentage of the
offering price) on a single transaction as shown in the following table:
<TABLE>
<CAPTION>
SALES CHARGE
------------------------------------
PERCENTAGE OF APPROXIMATE
AMOUNT OF SINGLE PUBLIC OFFERING PERCENTAGE OF
TRANSACTION PRICE AMOUNT INVESTED
- ----------------------------- ----------------- ----------------
<S> <C> <C>
Less than $25,000 ........... 5.25% 5.54%
$25,000 but less
than $50,000 ............. 4.75% 4.99%
$50,000 but less
than $100,000 ............ 4.00% 4.17%
$100,000 but less
than $250,000 ............ 3.00% 3.09%
$250,000 but less
than $1 million .......... 2.00% 2.04%
$1 million and over ......... 0 0
</TABLE>
Upon notice to all Selected Broker-Dealers, the Distributor may reallow
up to the full applicable sales charge as shown in the above schedule during
periods specified in such notice. During periods when 90% or more of the sales
charge is reallowed, such Selected Broker-Dealers may be deemed to be
underwriters as that term is defined in the Securities Act of 1933.
The above schedule of sales charges is applicable to purchases in a
single transaction by, among others: (a) an individual; (b) an individual, his
or her spouse and their children under the age of 21 purchasing shares for his,
her or their own accounts; (c) a trustee or other fiduciary purchasing shares
for a single trust estate or a single fiduciary account; (d) a pension,
profit-sharing or other employee benefit plan qualified or non-qualified under
Section 401 of the Internal Revenue Code; (e) tax-exempt organizations
enumerated in Section 501(c)(3) or (13) of the Internal Revenue Code; (f)
employee benefit plans qualified under Section 401 of the Internal Revenue Code
of a single employer or of employers who are "affiliated persons" of each other
within the meaning of Section 2(a)(3)(c) of the Act; and for investments in
Individual Retirement Accounts of employees of a single employer through
Systematic Payroll Deduction plans; or (g) any other organized group of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount.
Combined Purchase Privilege. Investors may have the benefit of reduced
sales charges in accordance with the above schedule by combining purchases of
Class A shares of the Fund in single transactions with the purchase of Class A
shares of other TCW/DW Multi-Class Funds. The sales charge payable on the
purchase of the Class A shares of the Fund and the Class A shares of the other
TCW/DW Multi-Class Funds will be at their respective rates applicable to the
total amount of the combined concurrent purchases of such shares.
Right of Accumulation. The above persons and entities may benefit from a
reduction of the sales charges in accordance with the above schedule if the
cumulative net asset value of Class A shares purchased in a single transaction,
together with shares of the Fund and other TCW/DW Multi-Class Funds previously
purchased at a price including a front-end sales charge (including shares of
the Fund, other TCW/DW Multi-Class Funds or "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") acquired in exchange for those shares, and
including in each case shares acquired through reinvestment of dividends and
distributions), which are held at the time of such transaction, amounts to
$25,000 or more. If such investor has a cumulative net asset value of Class A
and Class D shares that, together with the current investment amount, is equal
to at least $5 million ($25 million for certain qualified plans), such investor
is eligible to purchase Class D shares subject to the $1,000 minimum initial
investment requirement of that Class of the Fund. See "No Load
Alternative--Class D Shares" below.
The Distributor must be notified by DWR or a Selected Broker-Dealer or
the shareholder at the time a purchase order is placed that the purchase
qualifies for the reduced charge under the Right of Accumulation. Similar
notification must be made in writing by the dealer or shareholder when such an
order is placed by mail. The reduced sales charge will not be granted if: (a)
such notification is not furnished at the time of the order; or (b) a review of
the records of the Selected Broker-Dealer or the Transfer Agent fails to
confirm the investor's represented holdings.
Letter of Intent. The foregoing schedule of reduced sales charges will
also be available to investors who enter into a written Letter of Intent
providing for the purchase, within a thirteen-month period, of Class A shares
of the Fund from DWR or other Selected Broker-Dealers. The cost of Class A
shares of the Fund or Class A shares of other TCW/DW Multi-Class Funds which
were previously purchased at a price including a front-end sales charge during
the 90-day period prior to the date of receipt by the Distributor of the Letter
of Intent, or of Class A shares of the Fund or other TCW/DW
16
<PAGE>
Multi-Class Funds or shares of "Exchange Funds" (see "Shareholder
Services--Exchange Privilege") acquired in exchange for Class A shares of such
funds purchased during such period at a price including a front-end sales
charge, which are still owned by the shareholder, may also be included in
determining the applicable reduction.
Additional Net Asset Value Purchase Options. In addition to investments
of $1 million or more, Class A shares also may be purchased at net asset value
by the following:
(1) trusts for which MSDW Trust (which is an affiliate of the Manager)
provides discretionary trustee services;
(2) persons participating in a fee-based program approved by the
Distributor, pursuant to which such persons pay an asset based fee for services
in the nature of investment advisory, administrative and/or brokerage services
(such investments are subject to all of the terms and conditions of such
programs, which may include termination fees, mandatory redemption upon
termination and such other circumstances as specified in the programs'
agreements, and restrictions on transferability of Fund shares);
(3) employer-sponsored 401(k) and other plans qualified under Section
401(a) of the Internal Revenue Code ("Qualified Retirement Plans") with at
least 200 eligible employees and for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement;
(4) Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement whose Class B shares have converted to Class A
shares, regardless of the plan's asset size or number of eligible employees;
(5) investors who are clients of a Morgan Stanley Dean Witter Financial
Advisor who joined Morgan Stanley Dean Witter from another investment firm
within six months prior to the date of purchase of Fund shares by such
investors, if the shares are being purchased with the proceeds from a
redemption of shares of an open-end proprietary mutual fund of the Financial
Advisor's previous firm which imposed either a front-end or deferred sales
charge, provided such purchase was made within sixty days after the redemption
and the proceeds of the redemption had been maintained in the interim in cash
or a money market fund; and
(6) other categories of investors, at the discretion of the Board, as
disclosed in the then current prospectus of the Fund.
No CDSC will be imposed on redemptions of shares purchased pursuant to
paragraphs (1), (2) or (5), above.
For further information concerning purchases of the Fund's shares,
contact DWR or another Selected Broker-Dealer or consult the Statement of
Additional Information.
CONTINGENT DEFERRED SALES CHARGE
ALTERNATIVE--CLASS B SHARES
Class B shares are sold at net asset value next determined without an
initial sales charge so that the full amount of an investor's purchase payment
may be immediately invested in the Fund. A CDSC, however, will be imposed on
most Class B shares redeemed within six years after purchase. The CDSC will be
imposed on any redemption of shares if after such redemption the aggregate
current value of a Class B account with the Fund falls below the aggregate
amount of the investor's purchase payments for Class B shares made during the
six years (or, in the case of shares held by certain Qualified Retirement
plans, three years) preceding the redemption. In addition, Class B shares are
subject to an annual 12b-1 fee of 1.0% of the lesser of: (a) the average daily
aggregate gross sales of the Fund's Class B 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 Class B shares
redeemed since the Fund's inception upon which a CDSC has been imposed or
waived, or (b) the average daily net assets of Class B.
Except as noted below, Class B shares of the Fund which are held for six
years or more after purchase (calculated from the last day of the month in
which the shares were purchased) will not be subject to any CDSC upon
redemption. Shares redeemed earlier than six years after purchase may, however,
be subject to a CDSC which will be a percentage of the dollar amount of shares
redeemed and will be assessed on an amount equal to the lesser of the current
market value or the cost of the shares being redeemed. The size of this
percentage will depend upon how long the shares have been held, as set forth in
the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------------- ---------------------
<S> <C>
First .......................... 5.0%
Second ......................... 4.0%
Third .......................... 3.0%
Fourth ......................... 2.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Seventh and thereafter ......... None
</TABLE>
In the case of Class B shares of the Fund purchased on or after July 28,
1997 by Qualified Retirement Plans for which MSDW Trust serves as Trustee or
DWR's Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement, shares held for three years or more after
purchase (calculated as described in the paragraph above) will not be subject
to any CDSC upon redemption. However, shares redeemed earlier than three years
after purchase may be subject to a CDSC (calculated as described in the
paragraph above),
17
<PAGE>
the percentage of which will depend on how long the shares have been held, as
set forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first.
In addition, the CDSC, if otherwise applicable, will be waived in the
case of:
(1) redemptions of shares held at the time a shareholder dies or becomes
disabled, only if the shares are: (A) registered either in the name of an
individual shareholder (not a trust), or in the names of such shareholder and
his or her spouse as joint tenants with right of survivorship; or (B) held in
a qualified corporate or self-employed retirement plan, Individual Retirement
Account ("IRA") or Custodial Account under Section 403(b)(7) of the Internal
Revenue Code ("403(b) Custodial Account"), provided in either case that the
redemption is requested within one year of the death or initial determination
of disability;
(2) redemptions in connection with the following retirement plan
distributions: (A) lump-sum or other distributions from a qualified corporate
or self-employed retirement plan following retirement (or, in the case of a
"key employee" of a "top heavy" plan, following attainment of age 59 1/2);
(B) distributions from an IRA or 403(b) Custodial Account following
attainment of age 59 1/2; or (C) a tax-free return of an excess contribution
to an IRA;
(3) all redemptions of shares held for the benefit of a participant in a
Qualified Retirement Plan which offers investment companies managed by the
Manager or its parent, Morgan Stanley Dean Witter Advisors Inc., as
self-directed investment alternatives and for which MSDW Trust serves as
Trustee or DWR's Retirement Plan Services serves as recordkeeper pursuant to a
written Recordkeeping Services Agreement ("Eligible Plan"), provided that
either: (A) the plan continues to be an Eligible Plan after the redemption;
or (B) the redemption is in connection with the complete termination of the
plan involving the distribution of all plan assets to participants; and
(4) certain redemptions pursuant to the Fund's Systematic Withdrawal Plan
(see "Shareholder Services--Systematic Withdrawal Plan").
With reference to (1) above, for the purpose of determining disability,
the Distributor utilizes the definition of disability contained in Section
72(m)(7) of the Internal Revenue Code, which relates to the inability to engage
in gainful employment. With reference to (2) above, the term "distribution"
does not encompass a direct transfer of IRA, 403(b) Custodial Account or
retirement plan assets to a successor custodian or trustee. All waivers will be
granted only following receipt by the Distributor of confirmation of the
shareholder's entitlement.
Conversion to Class A Shares. All shares of the Fund held prior to July
28, 1997 have been designated Class B shares. Shares held before May 1, 1997
will convert to Class A shares in May, 2007. In all other instances Class B
shares will convert automatically to Class A shares, based on the relative net
asset values of the shares of the two Classes on the conversion date, which
will be approximately ten (10) years after the date of the original purchase.
The ten year period is calculated from the last day of the month in which the
shares were purchased or, in the case of Class B shares acquired through an
exchange or a series of exchanges, from the last day of the month in which the
original Class B shares were purchased, provided that shares originally
purchased before May 1, 1997 will convert to Class A shares in May, 2007. The
conversion of shares purchased on or after May 1, 1997 will take place in the
month following the tenth anniversary of the purchase. There will also be
converted at that time such proportion of Class B shares acquired through
automatic reinvestment of dividends and distributions owned by the shareholder
as the total number of his or her Class B shares converting at the time bears
to the total number of outstanding Class B shares purchased and owned by the
shareholder. In the case of Class B shares held by a Qualified Retirement Plan
for which MSDW Trust serves as Trustee or DWR's Retirement Plan Services serves
as recordkeeper pursuant to a written Recordkeeping Services Agreement, the
plan is treated as a single investor and all Class B shares will convert to
Class A shares on the conversion date of the first shares of a TCW/DW
Multi-Class Fund purchased by that plan. In the case of Class B shares
previously exchanged for shares of an "Exchange Fund" (see "Shareholder
Services--Exchange Privilege"), the period of time the shares were held in the
Exchange Fund (calculated from the last day of the month in which the Exchange
Fund shares were acquired) is excluded from the holding period for conversion.
If those shares are subsequently re-exchanged for Class B shares of a TCW/DW
Multi-Class Fund, the holding period resumes on the last day of the month in
which Class B shares are reacquired.
18
<PAGE>
If a shareholder has received share certificates for Class B shares, such
certificates must be delivered to the Transfer Agent at least one week prior to
the date for conversion. Class B shares evidenced by share certificates that
are not received by the Transfer Agent at least one week prior to any
conversion date will be converted into Class A shares on the next scheduled
conversion date after such certificates are received.
Effectiveness of the conversion feature is subject to the continuing
availability of a ruling of the Internal Revenue Service or an opinion of
counsel that (i) the conversion of shares does not constitute a taxable event
under the Internal Revenue Code, (ii) Class A shares received on conversion
will have a basis equal to the shareholder's basis in the converted Class B
shares immediately prior to the conversion, and (iii) Class A shares received
on conversion will have a holding period that includes the holding period of
the converted Class B shares. The conversion feature may be suspended if the
ruling or opinion is no longer available. In such event, Class B shares would
continue to be subject to Class B 12b-1 fees.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold at net asset value next determined without an
initial sales charge but are subject to a CDSC of 1.0% on most redemptions made
within one year after purchase (calculated from the last day of the month in
which the shares were purchased). The CDSC will be assessed on an amount equal
to the lesser of the current market value or the cost of the shares being
redeemed. The CDSC will not be imposed in the circumstances set forth above in
the section "Contingent Deferred Sales Charge Alternative--Class B Shares--CDSC
Waivers," except that the references to six years in the first paragraph of
that section shall mean one year in the case of Class C shares. Class C shares
are subject to an annual 12b-1 fee of up to 1.0% of the average daily net
assets of the Class. Unlike Class B shares, Class C shares have no conversion
feature and, accordingly, an investor that purchases Class C shares will be
subject to 12b-1 fees applicable to Class C shares for an indefinite period
subject to annual approval by the Fund's Board of Trustees and regulatory
limitations.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption and without any 12b-1 fee. Class D shares are offered only to
investors meeting an initial investment minimum of $5 million ($25 million for
Qualified Retirement Plans for which MSDW Trust serves as Trustee or DWR's
Retirement Plan Services serves as recordkeeper pursuant to a written
Recordkeeping Services Agreement) and the following categories of investors:
(i) investors participating in the MSDW Advisors mutual fund asset allocation
program pursuant to which such persons pay an asset based fee; (ii) persons
participating in a fee-based program approved by the Distributor, pursuant to
which such persons pay an asset based fee for services in the nature of
investment advisory, administrative and/or brokerage services (subject to all
of the terms and conditions of such programs referred to in (i) and (ii) above,
which may include termination fees, mandatory redemption upon termination and
such other circumstances as specified in the programs' agreements, and
restrictions on transferability of Fund shares); (iii) certain Unit Investment
Trusts sponsored by DWR; (iv) certain other open-end investment companies whose
shares are distributed by the Distributor; and (v) other categories of
investors, at the discretion of the Board, as disclosed in the then current
prospectus of the Fund. Investors who require a $5 million (or $25 million)
minimum initial investment to qualify to purchase Class D shares may satisfy
that requirement by investing that amount in a single transaction in Class D
shares of the Fund and other TCW/DW Multi-Class Funds, subject to the $1,000
minimum initial investment required for that Class of the Fund. In addition,
for the purpose of meeting the $5 million (or $25 million) minimum investment
amount, holdings of Class A shares in all TCW/DW Multi-Class Funds, and
holdings of shares of "Exchange Funds" (see "Shareholder Services--Exchange
Privilege") for which Class A shares have been exchanged, will be included
together with the current investment amount. If a shareholder redeems Class A
shares and purchases Class D shares, such redemption may be a taxable event.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act with respect to the distribution of Class A, Class B and Class C shares
of the Fund. In the case of Class A and Class C shares, the Plan provides that
the Fund will reimburse the Distributor and others for the expenses of certain
activities and services incurred by them specifically on behalf of those
shares. Reimbursements for these expenses will be made in monthly payments by
the Fund to the Distributor, which will in no event exceed amounts equal to
payments at the annual rates of 0.25% and 1.0% of the average daily net assets
of Class A and Class C, respectively. In the case of Class B shares, the Plan
provides that the Fund will pay the Distributor a fee, which is accrued daily
and paid monthly, at the annual rate of 1.0% of the lesser of: (a) the average
daily aggregate gross sales of the Fund's Class B 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
Class B shares redeemed since the Fund's inception upon which a CDSC has been
imposed or waived, or (b) the average daily net assets of Class B. The fee is
treated by the Fund as an expense in the year it is accrued. In the case of
Class A shares, the entire amount of the fee currently represents a service fee
within the meaning of the NASD guidelines.
19
<PAGE>
In the case of Class B and Class C shares, a portion of the fee payable
pursuant to the Plan, equal to 0.25% of the average daily net assets of each of
these Classes, is currently characterized as a service fee. A service fee is a
payment made for personal service and/or the maintenance of shareholder
accounts.
Additional amounts paid under the Plan in the case of Class B and Class C
shares are paid to the Distributor for services provided and the expenses borne
by the Distributor and others in the distribution of the shares of those
Classes, including the payment of commissions for sales of the shares of those
Classes and incentive compensation to and expenses of Morgan Stanley Dean
Witter Financial Advisors and others who engage in or support distribution of
shares or who service shareholder accounts, including overhead and telephone
expenses; printing and distribution of prospectuses and reports used in
connection with the offering of the Fund's shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan in the case of Class B shares to compensate DWR and other
Selected Broker-Dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
For the fiscal year ended July 31, 1998, Class B shares of the Fund
accrued payments under the Plan amounting to $1,196,377, which amount is equal
to 0.85% of the average daily net assets of Class B for the fiscal year. These
payments were calculated pursuant to clause (a) of the compensation formula
under the Plan. For the fiscal year ended July 31, 1998, Class A and Class C
shares of the Fund accrued payments under the plan amounting to $1,129 and
$4,605, respectively, which amounts are equal to 0.25% and 1.00% of the average
daily net assets of Class A and Class C, respectively, for the fiscal year.
In the case of Class B shares, at any given time, the expenses in
distributing Class B shares of the Fund may be in excess of the total of (i)
the payments made by the Fund pursuant to the Plan, and (ii) the proceeds of
CDSCs paid by investors upon the redemption of Class B shares. For example, if
$1 million in expenses in distributing Class B shares of the Fund had been
incurred and $750,000 had been received as described in (i) and (ii) above, the
excess expense would amount to $250,000. The Distributor has advised the Fund
that such excess amounts, including the carrying charge described above,
totalled $4,799,182 at July 31, 1998, which was equal to 3.15% of the net
assets of Class B on such date. Because there is no requirement under the Plan
that the Distributor be reimbursed for all distribution expenses or any
requirement that the Plan be continued from year to year, such excess amount
does not constitute a liability of the Fund. Although there is no legal
obligation for the Fund to pay expenses incurred in excess of payments made to
the Distributor under the Plan, and the proceeds of CDSCs paid by investors
upon redemption of shares, if for any reason the Plan is terminated the
Trustees will consider at that time the manner in which to treat such expenses.
Any cumulative expenses incurred, but not yet recovered through distribution
fees or CDSCs, may or may not be recovered through future distribution fees or
CDSCs.
In the case of Class A and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales commission credited to Morgan Stanley Dean Witter Financial
Advisors and other Selected Broker-Dealer representatives at the time of sale
may be reimbursed in the subsequent calendar year. The Distributor has advised
the Fund that unreimbursed expenses representing a gross sales commission
credited to Morgan Stanley Dean Witter Financial Advisors and other Selected
Broker-Dealer representatives at the time of sale totalled $2,435 in the case
of Class C at December 31, 1997, which was equal to 0.69% of the net assets of
Class C on such date, and that there were no such expenses which may be
reimbursed in the subsequent year in the case of Class A on such date. No
interest or other financing charges will be incurred on any Class A or Class C
distribution expenses incurred by the Distributor under the Plan or on any
unreimbursed expenses due to the Distributor pursuant to the Plan.
DETERMINATION OF NET ASSET VALUE
The net asset value per share is determined once daily at 4:00 p.m., New
York time (or, on days when the New York Stock Exchange closes prior to 4:00
p.m., at such earlier time), on each day that the New York Stock Exchange is
open by taking the net assets of the Fund, dividing by the number of shares
outstanding and adjusting to the nearest cent. The assets belonging to the
Class A, Class B, Class C and Class D shares will be invested together in a
single portfolio. The net asset value of each Class, however, will be
determined separately by subtracting each Class's accrued expenses and
liabilities. The net asset value per share will not be determined on Good
Friday and on such other federal and non-federal holidays as are observed by
the New York Stock Exchange.
In the calculation of the Fund's net asset value: (1) an equity portfolio
security listed or traded on the New York or American Stock Exchange or other
domestic or foreign stock exchange is valued at its latest sale price on that
exchange; 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
20
<PAGE>
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
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Automatic Investment of Dividends and Distributions. All income dividends
and capital gains distributions are automatically paid in full and fractional
shares of the applicable Class of the Fund (or, if specified by the
shareholder, in shares of any other open-end TCW/DW Fund) unless the
shareholder requests that they be paid in cash. Shares so acquired are acquired
at net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Repurchases and Redemptions").
Investment of Dividends or Distributions Received in Cash. Any shareholder
who receives a cash payment representing a dividend or capital gains
distribution may invest such dividend or distribution in shares of the
applicable Class at the net asset value per share next determined after receipt
by the Transfer Agent, by returning the check or the proceeds to the Transfer
Agent within 30 days after the payment date. Shares so acquired are acquired at
net asset value and are not subject to the imposition of a front-end sales
charge or a CDSC (see "Repurchases and Redemptions").
EasyInvestSM. Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account, or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Fund's Transfer Agent for
investment in shares of the Fund (see "Purchase of Fund Shares" and
"Repurchases and Redemptions--Involuntary Redemption").
Systematic Withdrawal Plan. A systematic withdrawal plan (the "Withdrawal
Plan") is available for shareholders whose shares of TCW/DW Funds have an
aggregate value of $10,000 or more. Shares of any Fund from which redemptions
will be made pursuant to the Plan must have a value of $1,000 or more (referred
to as a "SWP Fund"). The required share values are determined on the date the
shareholder establishes the Withdrawal Plan. The Withdrawal Plan provides for
monthly, quarterly, semi-annual or annual payments in any amount not less than
$25, or in any whole percentage of the value of the SWP Funds' shares, on an
annualized basis. Any applicable CDSC will be imposed on shares redeemed under
the Withdrawal Plan (see "Purchase of Fund Shares"), except that the CDSC, if
any, will be waived on redemptions under the Withdrawal Plan of up to 12%
annually of the value of each SWP Fund account, based on the share values next
determined after the shareholder establishes the Withdrawal Plan. (For
shareholders who established the Withdrawal Plan prior to October 1, 1998, the
value of each SWP Fund account for the purpose of the 12% CDSC waiver will be
determined at 4:00 p.m., New York time, on October 2, 1998.) Redemptions for
which this CDSC waiver policy applies may be in amounts up to 1% per month, 3%
per quarter, 6% semi-annually or 12% annually. Under this CDSC waiver policy,
amounts withdrawn each period will be paid by first redeeming shares not
subject to a CDSC because the shares were purchased by the reinvestment of
dividends or capital gains distributions, the CDSC period has elapsed or some
other waiver of the CDSC applies. If shares subject to a CDSC must be redeemed,
shares held for the longest period of time will be redeemed first and
continuing with shares held the next longest period of time until shares held
the shortest period of time are redeemed. Any shareholder participating in the
Withdrawal Plan will have sufficient shares redeemed from his or her account so
that the proceeds (net of any
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applicable CDSC) to the shareholder will be the designated monthly, quarterly,
semi-annual or annual amount.
A shareholder may suspend or terminate participation in the Withdrawal
Plan at any time. A shareholder who has suspended participation may resume
payments under the Withdrawal Plan, without requiring a new determination of
the account value for the 12% CDSC waiver. The Withdrawal Plan may be
terminated or revised at any time by the Fund.
Prior to adding an additional SWP Fund to an existing Withdrawal Plan,
the required $10,000/$1,000 share values must be met, to be calculated on the
date the shareholder adds the additional SWP Fund. However, the addition of a
new SWP Fund will not change the account value for the 12% CDSC waiver for the
SWP Funds already participating in the Withdrawal Plan.
Withdrawal Plan payments should not be considered dividends, yields or
income. If periodic Withdrawal Plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative 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 advisor.
For further information regarding plan administration, custodial fees and
other details, investors should contact their Morgan Stanley Dean Witter
Financial Advisor or other Selected Broker-Dealer representative or the
Transfer Agent.
EXCHANGE PRIVILEGE
Shares of each Class may be exchanged for shares of the same Class of any
other TCW/DW Multi-Class Fund without the imposition of any exchange fee.
Shares may also be exchanged for shares of TCW/DW North American Government
Income Trust and for shares of five money market funds for which MSDW Advisors
serves as investment manager: Morgan Stanley Dean Witter Liquid Asset Fund
Inc., Morgan Stanley Dean Witter U.S. Government Money Market Trust, Morgan
Stanley Dean Witter Tax-Free Daily Income Trust, Morgan Stanley Dean Witter
California Tax-Free Daily Income Trust and Morgan Stanley Dean Witter New York
Municipal Money Market Trust (the foregoing six funds are hereinafter
collectively referred to as the "Exchange Funds"). Exchanges may be made after
the shares of the Fund acquired by purchase (not by exchange or dividend
reinvestment) have been held for thirty days. There is no waiting period for
exchanges of shares acquired by exchange or dividend reinvestment.
An exchange to another TCW/DW Multi-Class 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, shares of the Fund are
redeemed out of the Fund at their next calculated net asset value and the
proceeds of the redemption are used to purchase shares of the money market fund
at their net asset value determined the following business day. Subsequent
exchanges between any of the money market funds and any of the TCW/DW
Multi-Class Funds or any Exchange Fund that is not a money market fund can be
effected on the same basis.
No CDSC is imposed at the time of any exchange of shares, although any
applicable CDSC will be imposed upon ultimate redemption. During the period of
time the shareholder remains in an Exchange Fund (calculated from the last day
of the month in which the Exchange Fund shares were acquired), the holding
period (for the purpose of determining the rate of the CDSC) is frozen. If
those shares are subsequently re-exchanged for shares of a TCW/DW Multi-Class
Fund, the holding period previously frozen when the first exchange was made
resumes on the last day of the month in which shares of a TCW/DW Multi-Class
Fund are reacquired. Thus, the CDSC is based upon the time (calculated as
described above) the shareholder was invested in shares of a TCW/DW Multi-Class
Fund (see "Purchase of Fund Shares"). 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. (Exchange Fund 12b-1 distribution fees are
described in the prospectuses for those funds.)
Additional Information Regarding Exchanges. Purchases and exchanges
should be made for investment purposes only. A pattern of frequent exchanges
may be deemed by the Manager to be abusive and contrary to the best interests
of the Fund's other shareholders and, at the Manager's discretion, may be
limited by the Fund's refusal to accept additional purchases and/or exchanges
from the investor. Although the Fund does not have any specific definition of
what constitutes a pattern of frequent exchanges, and will consider all
relevant factors in determining whether a particular situation is abusive and
contrary to the best interests of the Fund and its other shareholders,
investors should be aware that the Fund, each of the other TCW/DW Funds and
each of the money market funds may in their discretion limit or otherwise
restrict the number of times this Exchange Privilege may be exercised by any
investor. Any such
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<PAGE>
restriction will be made by the Fund on a prospective basis only, upon notice
to the shareholder not later than ten days following such shareholder's most
recent exchange. Also, the Exchange Privilege may be terminated or revised at
any time by the Fund and/or any of such TCW/DW Funds or money market funds for
which shares of the Fund have been exchanged, upon such notice as may be
required by applicable regulatory agencies. Shareholders maintaining margin
accounts with DWR or another Selected Broker-Dealer are referred to their
Morgan Stanley Dean Witter Financial Advisor or other Selected Broker-Dealer
representative regarding restrictions on exchange of shares of the Fund pledged
in the margin account.
The current prospectus for each fund describes its investment
objective(s) and policies, and shareholders should obtain a copy and examine it
carefully before investing. Exchanges are subject to the minimum investment
requirement of each Class of shares and any other conditions imposed by each
fund. In the case of a shareholder holding a share certificate or certificates,
no exchanges may be made until all applicable share certificates have been
received by the Transfer Agent and deposited in the shareholder's account. An
exchange will be treated for federal income tax purposes the same as a
repurchase or redemption of shares, on which the shareholder may realize a
capital gain or loss. However, the ability to deduct capital losses on an
exchange may be limited in situations where there is an exchange of shares
within ninety days after the shares are purchased. The Exchange Privilege is
only available in states where an exchange may legally be made.
If DWR or another Selected Broker-Dealer is the current dealer of record
and its account numbers are part of the account information, shareholders may
initiate an exchange of shares of the Fund for shares of any of the funds for
which the Exchange Privilege is available pursuant to this Exchange Privilege
by contacting their Morgan Stanley Dean Witter Financial Advisor or other
Selected Broker-Dealer representative (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 Morgan Stanley
Dean Witter Financial Advisor or other Selected Broker-Dealer representative,
if appropriate, or make a written exchange request. Shareholders are advised
that during periods of drastic economic or market changes, it is possible that
the telephone exchange procedures may be difficult to implement, although this
has not been the case in the past with other funds managed by the Manager.
Shareholders should contact their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative or the Transfer Agent
for further information about the Exchange Privilege.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
Repurchases. 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 request of the shareholder. The repurchase price is the net asset
value 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.
The CDSC, if any, will be the only fee imposed by the Fund or the
Distributor. 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 "Redemptions."
Redemptions. Shares of each Class of the Fund can be redeemed for cash at
any time at the net asset value per share next determined less the amount of
any applicable CDSC in the case of Class A, Class B or Class C shares (see
"Purchase of Fund Shares"). If shares are held in a shareholder's account
without a share certificate, a written request for redemption to the Fund's
Transfer Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If
certificates are held by the shareholder, the shares may be redeemed by
surrendering the certificates with a written request for redemption along with
any additional documentation required by the Transfer Agent.
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<PAGE>
Payment for Shares Redeemed or Repurchased. Payment for shares presented
for repurchase or redemption will be made by check within seven days after
receipt by the Transfer Agent of the certificate and/or written request in good
order. Such payment may be postponed or the right of redemption suspended under
unusual circumstances, e.g., when normal trading is not taking place on the New
York Stock Exchange. If the shares to be redeemed have recently been purchased
by check, payment of the redemption proceeds may be delayed for the minimum
time needed to verify that the check used for investment has been honored (not
more than fifteen days from the time of receipt of the check by the Transfer
Agent). Shareholders maintaining margin accounts with DWR or another Selected
Broker-Dealer are referred to their Morgan Stanley Dean Witter Financial
Advisor or other Selected Broker-Dealer representative 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 35 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 in the same Class from which such shares were redeemed or
repurchased, at their net asset value next determined after a reinstatement
request, together with the proceeds, is received by the Transfer Agent and
receive a pro rata credit for any CDSC paid in connection with such repurchase
or redemption.
Involuntary Redemption. The Fund reserves the right, on 60 days' notice,
to redeem, at their net asset value, the shares of any shareholder (other than
shares held in an Individual Retirement Account or custodial account under
Section 403(b)(7) of the Internal Revenue Code) whose shares due to redemptions
by the shareholder have a value of less than $100 or such lesser amount as may
be fixed by the Trustees or, in the case of an account opened through
EasyInvestSM, if after twelve months the shareholder has invested less than
$1,000 in the account. However, before the Fund redeems such shares and sends
the proceeds to the shareholder, it will notify the shareholder that the value
of the shares is less than the applicable amount and allow the shareholder 60
days to make an additional investment in an amount which will increase the
value of his or her account to at least the applicable amount before the
redemption is processed. No CDSC will be imposed on any involuntary redemption.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
Dividends and Distributions. The Fund declares dividends separately for
each Class of shares and intends to pay income dividends at least annually and
to distribute net short-term and net long-term capital gains, if any, at least
once per year. The Fund may, however, determine either to distribute or to
retain all or part of any net long-term capital gains in any year for
reinvestment.
All dividends and any capital gains distributions will be paid in
additional shares of the same Class and automatically credited to the
shareholder's account without issuance of a share certificate unless the
shareholder requests in writing that all dividends and/or distributions be paid
in cash. Shares acquired by dividend and distribution reinvestments will not be
subject to any front-end sales charge or CDSC. Class B shares acquired through
dividend and distribution reinvestments will become eligible for conversion to
Class A shares on a pro rata basis. Distributions paid on Class A and Class D
shares will be higher than for Class B and Class C shares because distribution
fees paid by Class B and Class C shares are higher. (See "Shareholder
Services--Automatic Investment of Dividends and Distributions.")
Taxes. Because the Fund intends to distribute all of its net investment
income and capital gains to shareholders and otherwise 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 and local income taxes, on the
dividends and distributions they receive from the Fund. Such dividends and
distributions, to the extent that they are derived from net investment income
or net short-term capital gains, are taxable to the shareholder as ordinary
income regardless of whether the shareholder receives such payments in
additional shares or in cash. Any dividends declared in the last quarter of any
calendar year which are paid in the following year prior to February 1 will be
deemed, for tax purposes, to have been 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 within a 90 day period
beginning 45 days before the ex-dividend date of each qualifying dividend
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.
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<PAGE>
The Fund may at times make payments from sources other than income or net
capital gains. Payments from such sources would, in effect, represent a return
of a portion of each shareholder's investment. All, or a portion, of such
payments would not be taxable to shareholders.
After the end of the calendar year, shareholders will be sent full
information on their dividends and capital gains distributions for tax
purposes. Shareholders will also be notified of their proportionate share of
long-term capital gains distributions that are eligible for a reduced rate of
tax under the Taxpayer Relief Act of 1997. To avoid being subject to a 31%
federal backup withholding tax on taxable dividends, capital gains
distributions and on the proceeds of redemptions and repurchases, shareholders'
taxpayer identification numbers must be furnished and certified as to their
accuracy.
Shareholders should consult their tax advisors as to the applicability of
the foregoing to their current situation.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund may quote its "total return" in advertisements
and sales literature. These figures are treated separately for Class A, Class
B, Class C and Class D shares. The total return of the Fund is based on
historical earnings and is not intended to indicate future performance. The
"average annual total return" of the Fund refers to a figure reflecting the
average annualized percentage increase (or decrease) in the value of an initial
investment in a Class of the Fund of $1,000 over periods of one, five and ten
years, 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
applicable Class and all sales charges which would be incurred by shareholders,
for the stated periods. It also assumes reinvestment of all dividends and
distributions paid by the Fund.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, average, and
year-by-year or other types of total return figures. Such calculations may or
may not reflect the deduction of any sales charge which, if reflected, would
reduce the performance quoted. The Fund may also advertise the growth of
hypothetical investments of $10,000, $50,000 and $100,000 in each Class of
shares of the Fund. The Fund from time to time may also advertise its
performance relative to certain performance rankings and indexes compiled by
independent organizations (such as mutual fund performance rankings of Lipper
Analytical Services, Inc.).
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
Voting Rights. All shares of beneficial interest of the Fund are of $0.01
par value and are equal as to earnings, assets and voting privileges except
that each Class will have exclusive voting privileges with respect to matters
relating to distribution expenses borne solely by such Class or any other
matter in which the interests of one Class differ from the interests of any
other Class. In addition, Class B shareholders will have the right to vote on
any proposed material increase in Class A 's expenses, if such proposal is
submitted separately to Class A shareholders. Also, as discussed herein, Class
A, Class B and Class C bear the expenses related to the distribution of their
respective shares.
The Fund is not required to hold Annual Meetings of Shareholders and in
ordinary circumstances the Fund does not intend to hold such meetings. The
Trustees may call Special Meetings of Shareholders for action by shareholder
vote as may be required by the Act or the Declaration of Trust. Under certain
circumstances, the Trustees may be removed by action of the Trustees or by the
shareholders.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for 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
25
<PAGE>
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 Fund; (e) a prohibition, with respect
to certain investment personnel, from profiting in the purchase and sale, or
sale and purchase, of the same (or equivalent) securities within 60 calendar
days; and (f) a prohibition against acquiring any security which is subject to
firm wide or, if applicable, a department restriction of the Adviser. The Code
of Ethics provides that exemptive relief may be given from certain of its
requirements, upon application. The Adviser's Code of Ethics complies with
regulatory requirements and, insofar as it relates to persons associated with
registered investment companies, the 1994 Report of the Advisory Group on
Personal Investing of the Investment Company Institute.
Shareholder Inquiries. All inquiries regarding the Fund should be
directed to the Fund at the telephone numbers or address set forth on the front
cover of this Prospectus.
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<PAGE>
TCW/DW TOTAL RETURN TRUST
Two World Trade Center
New York, New York 10048
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
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
Barry Fink
Vice President, Secretary and
General Counsel
James A. Tilton
Vice President
Thomas K. McKissick
Vice President
Thomas F. Caloia
Treasurer
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
