<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 29, 1998
REGISTRATION NOS.: 33-81012
811-8600
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 6 [X]
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940 [X]
AMENDMENT NO. 7 [X]
----------------
TCW/DW TOTAL RETURN TRUST
(A MASSACHUSETTS BUSINESS TRUST)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 392-1600
BARRY FINK, ESQ.
TWO WORLD TRADE CENTER
NEW YORK, NEW YORK 10048
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copy to:
DAVID M. BUTOWSKY, ESQ.
GORDON ALTMAN BUTOWSKY
WEITZEN SHALOV & WEIN
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036
----------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this effective date of this amendment.
----------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX)
X
------ immediately upon filing pursuant to paragraph (b)
------ on (date), pursuant to paragraph (b)
------ 60 days after filing pursuant to paragraph (a)
------ on (date) pursuant to paragraph (a) of rule 485
AMENDING THE PROSPECTUS AND UPDATING FINANCIAL STATEMENTS
===============================================================================
<PAGE>
TCW/DW TOTAL RETURN TRUST
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
FORM N-1A
PART A
ITEM CAPTION PROSPECTUS
- ----------------- ----------------------------------------------------
<S> <C> <C>
1. .......... Cover Page
2. .......... Summary of Fund Expenses; Prospectus Summary
3. .......... Financial Highlights; Performance Information
4. .......... Investment Objective and Policies; The Fund and its
Management; Cover Page; Investment Restrictions;
Prospectus Summary
5. .......... The Fund and Its Management; Back Cover;
Investment Objective and Policies
6. .......... Dividends, Distributions and Taxes; Additional
Information
7. .......... Purchase of Fund Shares; Shareholder Services;
Repurchases and Redemptions
8. .......... Purchase of Fund Shares; Repurchases and
Redemptions; Shareholder Services
9. .......... Not Applicable
</TABLE>
<TABLE>
<CAPTION>
PART B
ITEM STATEMENT OF ADDITIONAL INFORMATION
- ----------------- ---------------------------------------------------
<S> <C> <C>
10. .......... Cover Page
11. .......... Table of Contents
12. .......... The Fund and Its Management
13. .......... Investment Practices and Policies; Investment
Restrictions; Portfolio Transactions and Brokerage
14. .......... The Fund and Its Management; Trustees and
Officers
15. .......... Trustees and Officers
16. .......... The Fund and Its Management; Custodian and
Transfer Agent; Independent Accountants
17. .......... Portfolio Transactions and Brokerage
18. .......... Description of Shares
19. .......... Purchase of Fund Shares; Repurchases and
Redemptions; Shareholder Services
20. .......... Dividends, Distributions and Taxes
21. .......... Purchase of Fund Shares; The Distributor
22. .......... Performance Information
23. .......... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of this Registration Statement.
<PAGE>
P R O S P E C T U S
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 / 6
The Fund and its Management / 9
Investment Objective and Policies / 10
Risk Considerations and Investment Practices / 12
Investment Restrictions / 15
Purchase of Fund Shares / 16
Shareholder Services / 26
Repurchases and Redemptions / 29
Dividends, Distributions and Taxes / 30
Performance Information / 31
Additional Information / 32
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
TCW/DW TOTAL RETURN TRUST
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
Morgan Stanley Dean Witter Distributors Inc.,
Distributor
<PAGE>
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------------------------------------
THE The Fund is organized as a Trust, commonly known as a Massachusetts business trust, and is an
FUND open-end, non-diversified management investment company investing primarily in equity and
equity-related securities.
- ------------------------------------------------------------------------------------------------------------------------------
SHARES Shares of beneficial interest with $0.01 par value (see page 32). The Fund offers four Classes of shares,
OFFERED each with a different combination of sales charges, ongoing fees and other features (see pages 16-26).
- ------------------------------------------------------------------------------------------------------------------------------
MINIMUM The minimum initial investment for each Class is $1,000 ($100 if the account is opened through
PURCHASE EasyInvestSM). 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 16).
- ------------------------------------------------------------------------------------------------------------------------------
INVESTMENT The investment objective of the Fund is high total return from capital growth and income.
OBJECTIVE Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), a wholly-owned subsidiary of
MANAGER 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 9).
- ------------------------------------------------------------------------------------------------------------------------------
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 9).
- ------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT The Manager receives a monthly fee at the annual rate of 0.45% of daily net assets. The Adviser receives
AND ADVISORY a monthly fee at an annual rate of 0.30% of daily net assets. (See page 9).
FEES
- ------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTOR AND Morgan Stanley Dean Witter Distributors Inc. (the "Distributor") is the Distributor of the Fund's shares.
DISTRIBUTION The Fund has adopted a distribution plan pursuant to Rule 12b-1 under the Investment Company Act
FEE (the "12b-1 Plan") with respect to the distribution fees paid by the 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 16 and 24).
- ------------------------------------------------------------------------------------------------------------------------------
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 16, 19 and 24).
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<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 16, 21 and 24).
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
16, 23 and 24).
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 16, 23 and 24).
- ------------------------------------------------------------------------------------------------------------------------------
DIVIDENDS AND Dividends from net investment income are paid at least annually. Distributions from net capital gains, if
CAPITAL GAINS any, are paid once per year. The Fund may, however, determine to retain all or part of any net long-term
DISTRIBUTIONS 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 26 and 30).
- ------------------------------------------------------------------------------------------------------------------------------
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 EasyInvestSM, if after twelve months the
shareholder has less than $1,000 in the account (see page 29).
- ------------------------------------------------------------------------------------------------------------------------------
RISK The net asset value of the Fund's shares will fluctuate with changes in the market value of the Fund's
CONSIDERATIONS portfolio securities. The Fund is a non-diversified management investment company and, as such, is not
subject to the diversification requirements of the Investment Company Act of 1940, as amended. As a
result, a relatively high percentage of the Fund's assets may be invested in a limited number of issuers.
However, the Fund intends to qualify as a regulated investment company under the federal income tax
laws and, as such, is subject to the diversification requirements of the Internal Revenue Code. The Fund
may invest in foreign securities and may purchase securities on a when-issued, delayed delivery or "when,
as and if issued" basis, which may involve certain special risks (see pages 12-15).
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above is qualified in its entirety by the detailed information appearing
elsewhere in this Prospectus and in the Statement of Additional Information.
3
<PAGE>
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
The following table illustrates all expenses and fees that a shareholder
of the Fund will incur. The expenses and fees set forth in the table are 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>
- ----------
(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").
4
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Examples 1 year 3 years 5 years 10 years
- -------------------------------------------------------------------- -------- --------- --------- ---------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) a 5% annual return and (2) redemption at the end of each time
period:
Class A .......................................................... $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.
5
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
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>
- ----------
* 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.
6
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<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>
- ----------
* 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
7
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
- --------------------------------------------------------------------------------
<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>
- ----------
* 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.
8
<PAGE>
THE FUND AND ITS MANAGEMENT
- --------------------------------------------------------------------------------
TCW/DW Total Return Trust (the "Fund") is an open-end, non-diversified
management investment company. The Fund is a trust of the type commonly known
as a "Massachusetts business trust" and was organized under the laws of
Massachusetts on June 29, 1994.
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.
9
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The investment objective of the Fund is high total return from capital
growth and income. This objective is fundamental and may not be changed without
shareholder approval. There is no assurance that the objective will be
achieved.
The Fund seeks to achieve its investment objective by investing under
normal circumstances at least 65% of its total assets in equity and
equity-related securities of domestic and foreign issuers. The equity and
equity-related securities in which the Fund may invest include common stocks
and convertible securities such as investment grade convertible bonds, notes,
debentures, preferred stocks or other securities convertible into common stock.
The Fund 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 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
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<PAGE>
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 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
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<PAGE>
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 Con-
12
<PAGE>
version"). 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 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
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<PAGE>
discount from their face amount, giving the purchaser the right to receive
their full value at maturity. The interest earned on such securities is,
implicitly, automatically compounded and paid out at maturity. While such
compounding at a constant rate eliminates the risk of receiving lower yields
upon reinvestment of interest if prevailing interest rates decline, the owner
of a zero coupon security will be unable to participate in higher yields upon
reinvestment of interest received on interest-paying securities if prevailing
interest rates rise.
A zero coupon security pays no interest to its holder during its life.
Therefore, to the extent the Fund invests in zero coupon securities, it will
not receive current cash available for distribution to shareholders. In
addition, zero coupon securities are subject to substantially greater price
fluctuations during periods of changing prevailing interest rates than are
comparable securities which pay interest on a current basis. Current federal
tax law requires that a holder (such as the Fund) of a zero coupon security
accrue a portion of the discount at which the security was purchased as income
each year even though the Fund receives no interest payments in cash on the
security during the year.
Investment in Real Estate Investment Trusts. The Fund may invest in real
estate investment trusts, which pool investors' funds for investments primarily
in commercial real estate properties. Investment in real estate investment
trusts may be the most practical available means for the Fund to invest in the
real estate industry (the Fund is prohibited from investing in real estate
directly). As a shareholder in a real estate investment trust, the Fund would
bear its ratable share of the real estate investment trust's expenses,
including 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 detrimen-
14
<PAGE>
tally 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.
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
The investment restrictions listed below are among the restrictions
which have been adopted by the Fund as fundamental policies. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. For purposes
of the following limitations: (i) all percentage limitations apply immediately
after a purchase or initial invest-ment, and (ii) any subsequent change in any
applicable percentage resulting from market fluctuations or other changes in
total or net assets does not require elimination of any security from the
portfolio.
The Fund may not:
1. Invest 25% or more of the value of its total assets in securities
of issuers in any one in- dustry. This restriction does not apply to
obliga-
15
<PAGE>
tions 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
16
<PAGE>
the transaction until the proper Class is identified. The minimum initial
purchase, in the case of investments through EasyInvestSM, an automatic
purchase plan (see "Shareholder Services"), is $100, provided that the schedule
of automatic investments will result in investments totalling at least $1,000
within the first twelve months. 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
17
<PAGE>
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 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.
18
<PAGE>
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 (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:
<PAGE>
<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
19
<PAGE>
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 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
20
<PAGE>
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 Retire-
21
<PAGE>
ment Plans for which MSDW Trust serves as Trustee or DWR's Retirement Plan
Services serves as recordkeeper pursuant to a written Recordkeeping Services
Agreement, shares held for three years or more after purchase (calculated as
described in the paragraph above) will not be subject to any CDSC upon
redemption. However, shares redeemed earlier than three years after purchase
may be subject to a CDSC (calculated as described in the paragraph above), the
percentage of which will depend on how long the shares have been held, as set
forth in the following table:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
CDSC Waivers. A CDSC will not be imposed on: (i) any amount which
represents an increase in value of shares purchased within the six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
preceding the redemption; (ii) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption; and (iii) the current
net asset value of shares purchased through reinvestment of dividends or
distributions. Moreover, in determining whether a CDSC is applicable it will be
assumed that amounts described in (i), (ii) and (iii) above (in that order) are
redeemed first.
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
22
<PAGE>
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.
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
23
<PAGE>
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. 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
24
<PAGE>
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
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<PAGE>
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 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
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<PAGE>
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 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
27
<PAGE>
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 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
28
<PAGE>
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.
29
<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,
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<PAGE>
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.
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.).
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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 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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TCW/DW Total Return Trust TCW/DW
Two World Trade Center Total Return
New York, New York 10048 Trust
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 PROSPECTUS
Harborside Financial Center SEPTEMBER 29, 1998
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.
<PAGE>
TCW/DW TOTAL RETURN
TRUST
STATEMENT OF ADDITIONAL INFORMATION
September 29, 1998
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TCW/DW Total Return Trust (the "Fund") is an open-end, non-diversified
management investment company, whose investment objective is high total return
from capital growth and income. The Fund seeks to achieve its investment
objective by investing primarily in equity and equity-related securities issued
by domestic and foreign companies. See "Investment Objective and Policies."
A Prospectus for the Fund dated September 29, 1998, which provides the
basic information you should know before investing in the Fund, may be obtained
without charge from the Fund at the address or telephone numbers listed below
or from the Fund's Distributor, Morgan Stanley Dean Witter Distributors Inc.,
or from Dean Witter Reynolds Inc. at any of its branch offices. This Statement
of Additional Information is not a Prospectus. It contains information in
addition to and more detailed than that set forth in the Prospectus. It is
intended to provide additional information regarding the activities and
operations of the Fund, and should be read in conjunction with the Prospectus.
TCW/DW Total Return Trust
Two World Trade Center
New York, New York 10048
(212) 392-2550 or
(800) 869-NEWS (toll-free)
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
The Fund and its Management ............................. 3
Trustees and Officers ................................... 6
Investment Practices and Policies ....................... 12
Investment Restrictions ................................. 16
Portfolio Transactions and Brokerage .................... 17
The Distributor ......................................... 18
Determination of Net Asset Value ........................ 22
Purchase of Fund Shares ................................. 23
Shareholder Services .................................... 25
Repurchases and Redemptions ............................. 29
Dividends, Distributions and Taxes ...................... 30
Performance Information ................................. 31
Description of Shares ................................... 32
Custodian and Transfer Agent ............................ 33
Independent Accountants ................................. 33
Reports to Shareholders ................................. 33
Legal Counsel ........................................... 33
Experts ................................................. 33
Registration Statement .................................. 33
Financial Statements--July 31, 1998 ..................... 34
Report of Independent Accountants ....................... 47
Appendix--Ratings of Corporate Debt Instruments ......... 48
</TABLE>
2
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THE FUND AND ITS MANAGEMENT
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THE FUND
The Fund is a trust of the type commonly known as a "Massachusetts
business trust" and was organized under the laws of the Commonwealth of
Massachusetts on June 29, 1994. The Fund is one of the TCW/DW Funds, which
currently consist, in addition to the Fund, of TCW/DW Small Cap Growth Fund,
TCW/DW North American Government Income Trust, TCW/DW Latin American Growth
Fund, TCW/DW Term Trust 2002, TCW/DW Income and Growth Fund, TCW/DW Term Trust
2003, TCW/DW Term Trust 2000, TCW/DW Mid-Cap Equity Trust, TCW/DW Emerging
Markets Opportunities Trust and TCW/DW Global Telecom Trust.
THE MANAGER
Morgan Stanley Dean Witter Services Company Inc. (the "Manager"), a
Delaware corporation, whose address is Two World Trade Center, New York, New
York 10048, is the Fund's Manager. The Manager is a wholly-owned subsidiary of
Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), a Delaware
corporation. MSDW Advisors is a wholly-owned subsidiary of Morgan Stanley Dean
Witter & Co. ("MSDW"), a Delaware corporation. The daily management of the Fund
is conducted by or under the direction of officers of the Fund and of the
Manager and Adviser (see below), subject to review by the Fund's Board of
Trustees. Information as to these Trustees and officers is contained under the
caption "Trustees and Officers."
Pursuant to a management agreement (the "Management Agreement") with the
Manager, the Fund has retained the Manager to manage the Fund's business
affairs, supervise the overall day-to-day operations of the Fund (other than
rendering investment advice) and provide all administrative services to the
Fund. Under the terms of the Management Agreement, the Manager also maintains
certain of the Fund's books and records and furnishes, at its own expense, such
office space, facilities, equipment, supplies, clerical help and bookkeeping
and certain legal services as the Fund may reasonably require in the conduct of
its business, including the preparation of prospectuses, statements of
additional information, proxy statements and reports required to be filed with
federal and state securities commissions (except insofar as the participation
or assistance of independent accountants and attorneys is, in the opinion of
the Manager, necessary or desirable). In addition, the Manager pays the
salaries of all personnel, including officers of the Fund, who are employees of
the Manager. The Manager also bears the cost of the Fund's telephone service,
heat, light, power and other utilities.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Manager, the Fund pays the Manager
monthly compensation calculated daily by applying the annual rate of 0.45% to
the daily net assets of the Fund determined as of the close of each business
day. While the total fees payable under the Management Agreement and the
Advisory Agreement (described below) are higher than that paid by most other
investment companies for similar services, the Board of Trustees determined
that the total fees payable under the Management Agreement and the Advisory
Agreement (described below) are reasonable in relation to the scope and quality
of services to be provided thereunder. In this regard, in evaluating the
Management Agreement and the Advisory Agreement, the Board of Trustees
recognized that the Manager and the Adviser had, pursuant to an agreement
described under the section entitled "The Adviser," agreed to a division as
between themselves of the total fees necessary for the management of the
business affairs of and the furnishing of investment advice to the Fund.
Accordingly, in reviewing the Management Agreement and Advisory Agreement, the
Board viewed as most significant the question as to whether the total fees
payable under the Management and Advisory Agreements were in the aggregate
reasonable in relation to the services to be provided thereunder. During the
fiscal year ended July 31, 1996, the Fund accrued total compensation to the
Manager under the Management Agreement in the amount of $204,371. During this
period, a portion of the fee payable under the Management Agreement ($26,700)
was waived by the Manager pursuant to undertakings described below. For the
fiscal years ended July 31, 1997 and 1998, the Fund accrued to the Manager
total compensation of $320,431 and $641,236, respectively. The management fee
is allocated among the Classes pro rata based on the net assets of the Fund
attributable to each Class.
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Manager is not liable to the Fund or any of its
investors for
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<PAGE>
any act or omission by the Manager or for any losses sustained by the Fund or
its investors. The Management Agreement in no way restricts the Manager from
acting as manager to others.
MSDW Advisors had undertaken to assume all Fund expenses (except for the
Plan of Distribution fee and brokerage fees) and the Manager had undertaken to
waive the compensation provided for in the Management Agreement for services
rendered, and the Adviser had undertaken to waive the compensation provided for
in its Advisory Agreement, until such time as the Fund had $50 million of net
assets or until six months from the date of commencement of operations,
whichever occurred first. After this period, MSDW Advisors assumed all
operating expenses (except for the Plan of Distribution fee and brokerage fees)
and the Manager and the Adviser waived their respective compensation until
September 27, 1995.
MSDW Advisors has paid the organizational expenses of the Fund
(approximately $127,000) incurred prior to the offering of the Fund's shares.
The Fund has reimbursed MSDW Advisors for such expenses. These expenses are
being deferred by the Fund and are being amortized on the straight line method
over a period not to exceed five years from the date of commencement of the
Fund's operations.
The Management Agreement was initially approved by the Trustees on April
20, 1995 and became effective on that date. The Management Agreement replaced a
prior management agreement in effect between the Fund and the Manager which was
approved by the Trustees on July 14, 1994. The nature and scope of the services
provided to the Fund, and the formula to determine fees paid by the Fund under
the Management Agreement, are identical to those of the Fund's previous
management agreement. The Management Agreement may be terminated at any time,
without penalty, on thirty days' notice by the Trustees of the Fund, or by the
Manager.
Under its terms, the Management Agreement had an initial term ending April
30, 1996, and will continue in effect from year to year thereafter, provided
continuance of the Agreement is approved at least annually by the vote of the
Trustees of the Fund, including the vote of a majority of the Trustees of the
Fund who are not parties to the Management or Advisory Agreement or "interested
persons" (as defined in the Investment Company Act of 1940, as amended (the
"Act")) of any such party (the "Independent Trustees"). At their meeting held
on April 30, 1998, the Board of Trustees, including a majority of Independent
Trustees, approved the most recent continuation of the Management Agreement
until April 30, 1999.
THE ADVISER
TCW Funds Management, Inc. (the "Adviser") is a wholly-owned subsidiary of
The TCW Group, Inc. ("TCW"), whose direct and indirect subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety
of trust, investment management and investment advisory services. As of August
31, 1998, the Adviser and its affiliates had approximately $50 billion under
management or committed to management. Trust Company of the West and its
affiliates have managed equity securities portfolios for institutional
investors since 1971. The Adviser is headquartered at 865 South Figueroa
Street, Suite 1800, Los Angeles, California 90017 and is registered as an
investment adviser under the Investment Advisers Act of 1940. In addition to
the Fund, the Adviser serves as investment adviser to ten other TCW/DW Funds:
TCW/DW Small Cap Growth Fund, TCW/DW North American Government Income Trust,
TCW/DW Latin American Growth Fund, TCW/DW Term Trust 2002, TCW/DW Income and
Growth Fund, TCW/DW Term Trust 2003, TCW/DW Term Trust 2000, TCW/DW Mid-Cap
Equity Trust, TCW/DW Emerging Markets Opportunities Trust and TCW/DW Global
Telecom Trust. The Adviser also serves as investment adviser to TCW Convertible
Securities Fund, Inc., a closed-end investment company listed on the New York
Stock Exchange, and to TCW Galileo Funds, Inc., an open-end management
investment company, and acts as adviser or sub-adviser to other investment
companies.
Robert A. Day, who is Chairman of the Board of Directors of TCW, may be
deemed to be a control person of the Adviser by virtue of the aggregate
ownership of Mr. Day and his family of more than 25% of the outstanding voting
stock of TCW.
Pursuant to an investment advisory agreement (the "Advisory Agreement")
with the Adviser, the Fund has retained the Adviser to invest the Fund's
assets, including the placing of orders for the purchase and sale of portfolio
securities. The Adviser obtains and evaluates such information and advice
relating to the economy,
4
<PAGE>
securities markets, and specific securities as it considers necessary or useful
to continuously manage the assets of the Fund in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
As full compensation for the services and facilities furnished to the Fund
and expenses of the Fund assumed by the Adviser, the Fund pays the Adviser
monthly compensation calculated daily by applying the annual rate of 0.30% to
the daily net assets of the Fund determined as of the close of each business
day. During the fiscal year ended July 31, 1996, the Fund accrued total
compensation to the Adviser under the Advisory Agreement of $136,247. During
this period, a portion of the fee payable under the Advisory Agreement
($17,800) was waived by the Adviser pursuant to undertakings described above.
For the fiscal years ended July 31, 1997 and 1998, the Fund accrued to the
Adviser total compensation of $213,621 and $427,491, respectively. The advisory
fee is allocated among the Classes pro rata based on the net assets of the Fund
attributable to each Class.
The Advisory Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable to the Fund or any of its
investors for any act or omission by the Adviser or for any losses sustained by
the Fund or its investors. The Advisory Agreement in no way restricts the
Adviser from acting as investment adviser to others.
The Advisory Agreement was initially approved by the Trustees on July 14,
1994 and by MSDW Advisors as then sole shareholder on August 24, 1994. The
Advisory Agreement may be terminated at any time, without penalty, on thirty
days' notice by the Trustees of the Fund, by the holders of a majority, as
defined in the Act, of the outstanding shares of the Fund, or by the Adviser.
The Agreement will automatically terminate in the event of its assignment (as
defined in the Act).
Under its terms, the Advisory Agreement had an initial term ending April
30, 1996, and provides that it will continue from year to year thereafter,
provided continuance of the Agreement is approved at least annually by the vote
of the holders of a majority, as defined in the Act, of the outstanding shares
of the Fund, or by the Trustees of the Fund; provided that in either event such
continuance is approved annually by the vote of a majority of the Independent
Trustees of the Fund, which vote must be cast in person at a meeting called for
the purpose of voting on such approval. At their meeting held on April 30,
1998, the Board of Trustees, including a majority of Independent Trustees,
approved the most recent continuation of the Advisory Agreement until April 30,
1999.
Expenses not expressly assumed by the Manager under the Management
Agreement, by the Adviser under the Advisory Agreement or by the Distributor of
the Fund's shares, Morgan Stanley Dean Witter Distributors Inc. ("MSDW
Distributors" or the "Distributor") (see "The Distributor"), will be paid by
the Fund. These expenses will be allocated among the four classes of shares of
the Fund (each, a Class) pro rata based on the net assets of the Fund
attributable to each Class, except as described below. Such expenses include,
but are not limited to: expenses of the Plan of Distribution pursuant to Rule
12b-1 (the "12b-1 fee") (see "The Distributor"); charges and expenses of any
registrar; custodian, stock transfer and dividend disbursing agent; brokerage
commissions and securities transaction costs; taxes; engraving and printing of
share certificates; registration costs of the Fund and its shares under federal
and state securities laws; the cost and expense of printing, including
typesetting, and distributing Prospectuses and Statements of Additional
Information of the Fund and supplements thereto to the Fund's shareholders; all
expenses of shareholders' and trustees' meetings and of preparing, printing and
mailing of proxy statements and reports to shareholders; fees and travel
expenses of trustees or members of any advisory board or committee who are not
employees of the Manager or Adviser or any corporate affiliate of either; all
expenses incident to any dividend, withdrawal or redemption options; charges
and expenses of any outside service used for pricing of the Fund's shares; fees
and expenses of legal counsel, including counsel to the Trustees who are not
interested persons of the Fund or of the Manager or the Adviser (not including
compensation or expenses of attorneys who are employees of the Manager or the
Adviser) and independent accountants; membership dues of industry associations;
interest on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and trustees) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims
and liabilities and litigation costs and any indemnification relating thereto);
and all other costs of the Fund's operation. The 12b-1 fees relating to a
particular Class will be allocated directly to that Class. In addition, other
expenses associated with a particular Class (except advisory or custodial fees)
may be allocated directly to that Class, provided that such expenses are
reasonably identified as specifically attributable to that Class and the direct
allocation to that Class is approved by the Trustees.
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The Fund has acknowledged that each of DWR and TCW owns its own name,
initials and logo. The Fund has agreed to change its name at the request of
either the Manager or the Adviser, if the Management Agreement between the
Manager and the Fund or the Advisory Agreement between the Adviser and the Fund
is terminated.
The following owned 5% or more of the outstanding shares of Class A on
September 3, 1998: Reed A. Larson & Joyce A. Larson JTWROS, N7766 Hwy 26,
Watertown, W.I. 53094-9440--18.28%. The following owned 25% or more of the
outstanding shares of Class A on September 3, 1998: James P. Rogers, 4628 IDS
Center, 80 South Eighth St, Minneapolis, M.N. 55402-2100--37.17%. The following
owned 5% or more of the outstanding shares of Class C on September 3, 1998:
Jeffery L. Stratton & Carol S. Stratton JTTEN, 12152 Southwick Circle,
Knoxville, T.N. 37922-1500--15.26%; Omar Legant & Jean L. Legant TTEES F/T Omar
& Jean L. Legant Revocable Trust DTD 2/22/90, 1000 Los Arboles NW, Albuquerque,
N.M. 87107-1142--6.53%; Elizabeth A. Seput, 247 D St. Apt. 106, San Rafael,
C.A. 94901-5036--5.54%. The following owned 25% or more of the outstanding
shares of Class D on September 3, 1998: MSDW Advisors Inc., Attn: Maurice
Bendrhem, 2 World Trade Center, New York NY, 10048--99.80%.
TRUSTEES AND OFFICERS
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The Trustees and Executive Officers of the Fund, their principal business
occupations during the last five years and their affiliations, if any, with the
Manager or the Adviser, and the affiliated companies of either, and the 11
TCW/DW Funds and with the 86 investment companies of which MSDW Advisors serves
as investment manager or investment adviser (the "Morgan Stanley Dean Witter
Funds"), are shown below.
<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------------
<S> <C>
John C. Argue (66) Of Counsel, Argue Pearson Harbison & Myers (law
c/o Argue Pearson Harbison & Myers firm); Director, Avery Dennison Corporation
Trustee (manufacturer of self-adhesive products and office
801 South Flower Street supplies) and CalMat Company (producer of aggregates,
Los Angeles, California asphalt and ready mixed concrete); Chairman, The Rio
Hondo Memorial Foundation (charitable foundation);
director or trustee of various business and not-for-profit
corporations; Director, TCW Galileo Funds, Inc.;
Director, TCW Convertible Securities Fund, Inc.;
Director, Apex Mortgage Capital, Inc. and Nationwide
Health Properties, Inc. (real estate investment trusts);
Trustee of the TCW/DW Funds.
Richard M. DeMartini* (45) President and Chief Operating Officer of Morgan
Trustee Stanley Dean Witter Individual Asset Management
Two World Trade Center Group, a business unit of Morgan Stanley Dean Witter;
New York, New York Director, President and COO of DWR, the Manager,
MSDW Advisors, MSDW Distributors and Morgan
Stanley Dean Witter Trust FSB ("MSDW Trust");
Trustee of the TCW/DW Funds and the Van Kampen
American Capital Funds; Director and/or officer of
various MSDW subsidiaries; Formerly Vice Chairman
of the Board of the National Association of Securities
Dealers, Inc. and Chairman of the Board of Directors of
the NASDAQ Market, Inc.
</TABLE>
6
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<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- --------------------------------------------------------
<S> <C>
Charles A. Fiumefreddo* (65) Chairman, Chief Executive Officer and Trustee of the
Chairman of the Board, Chief TCW/DW Funds; Chairman, Director or Trustee,
Executive Officer and Trustee President and Chief Executive Officer of the Morgan
Two World Trade Center Stanley Dean Witter Funds; formerly Chairman, Chief
New York, New York Executive Officer and Director of MSDW Advisors,
MSDW Distributors and MSDW Services, Executive
Vice President and Director of Dean Witter Reynolds
Inc. ("DWR"), Chairman and Director of Morgan
Stanley Dean Witter Trust FSB ("MSDW Trust"), and
Director and/or officer of various MSDW subsidiaries
(until June, 1998).
John R. Haire (73) Chairman of the Audit Committee and Trustee of the
Trustee TCW/DW Funds; Chairman of the Audit Committee
Two World Trade Center and Director or Trustee of each of the Morgan Stanley
New York, New York Dean Witter Funds; formerly Chairman of the
Committee of the Independent Directors or Trustees of
the Morgan Stanley Dean Witter Funds and the
TCW/DW Funds (until June, 1998); formerly
President, Council for Aid to Education (1978-1989)
and Chairman and Chief Executive Officer of Anchor
Corporation, an Investment Adviser (1964-1978).
Dr. Manuel H. Johnson (49) Senior Partner, Johnson Smick International, Inc., a
Trustee consulting firm; Co-Chairman and a founder of the
c/o Johnson Smick International Inc. Group of Seven Council (G7C), an international
1133 Connecticut Avenue, N.W. economic commission; Director of NASDAQ (since
Washington, D.C. June, 1995); Director of Greenwich Capital Markets,
Inc. (broker-dealer) and NVR, Inc. (home construction);
Chairman and Trustee of the Financial Accounting
Foundation (oversight organization of the Financial
Accounting Standards Board); formerly Vice Chairman
of the Board of Governors of the Federal Reserve
System (1986-1990) and Assistant Secretary of the U.S.
Treasury (1982-1986); Trustee of the TCW/DW Funds;
Director or Trustee of the Morgan Stanley Dean
Witter Funds.
Thomas E. Larkin, Jr.* (58) Executive Vice President and Director, The TCW
President and Trustee Group, Inc.; President and Director of Trust Company
865 South Figueroa Street of the West; Vice Chairman and Director of TCW
Los Angeles, California Asset Management Company; Chairman of the Adviser;
President and Director of TCW Galileo Funds, Inc.;
Senior Vice President of TCW Convertible Securities
Fund, Inc.; Member of the Board of Trustees of the
University of Notre Dame; Director of Orthopaedic
Hospital of Los Angeles; President and Trustee of the
TCW/DW Funds.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- ---------------------------------------------------------
<S> <C>
Michael E. Nugent (62) General Partner, Triumph Capital, L.P., a private
Trustee investment partnership; formerly Vice President,
c/o Triumph Capital, L.P. Bankers Trust Company and BT Capital Corporation
237 Park Avenue (1984-1988); Director of various business organizations;
New York, New York Trustee of the TCW/DW Funds; Director or Trustee
of the Morgan Stanley Dean Witter Funds.
John L. Schroeder (68) Retired; Trustee of the TCW/DW Funds; Director or
Trustee Trustee of the Morgan Stanley Dean Witter Funds;
c/o Gordon Altman Butowsky Weitzen Director of Citizens Utilities Company; formerly
Shalov & Wein Executive Vice President and Chief Investment Officer
Counsel to the Independent Trustees of the Home Insurance Company (August,
114 West 47th Street, 1991-September, 1995).
New York, New York
Marc I. Stern* (54) President and Director, The TCW Group, Inc.;
Trustee President and Director of the Adviser; Vice Chairman
865 South Figueroa Street and Director of TCW Asset Management Company;
Los Angeles, California Executive Vice President and Director of Trust
Company of the West; Chairman and Director of the
TCW Galileo Funds, Inc.; Trustee of the TCW/DW
Funds; Chairman of TCW Americas Development,
Inc.; Chairman of TCW Asia, Limited (since January,
1993); Chairman of TCW London International,
Limited (since March, 1993); formerly President of
SunAmerica, Inc. (financial services company; Director
of Qualcomm, Incorporated (wireless communications);
Director or Trustee of various not-for-profit
organizations.
Barry Fink (43) Senior Vice President (since March, 1997), Secretary
Vice President, Secretary and General Counsel (since February, 1997) and
and General Counsel Director (since July, 1998) of MSDW Advisors and
Two World Trade Center MSDW Services; Senior Vice President (since March,
New York, New York 1997) and Assistant Secretary and Assistant General
Counsel (since February, 1997) of MSDW Distributors;
Assistant Secretary of DWR (since August, 1996); Vice
President, Secretary and General Counsel of the Morgan
Stanley Dean Witter Funds and the TCW/DW Funds
(since February, 1997); previously First Vice President
(June, 1993-February, 1997), Vice President (until June,
1993) and Assistant Secretary and Assistant General
Counsel of the Manager and MSDW Advisors and
Assistant Secretary of the Morgan Stanley Dean Witter
Funds and the TCW/DW Funds.
James A. Tilton (58) Managing Director of the Adviser; Managing Director,
Vice President Equities of Trust Company of the West and TCW
865 South Figueroa Street Asset Management Company; Chairman of the Board
Los Angeles, California of Verdugo Hills Hospital and Chairman of the Board
of Councilors of the University of Southern California
School of Public Administration; director of various
other business organizations.
</TABLE>
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<TABLE>
<CAPTION>
NAME, AGE, POSITION WITH FUND AND ADDRESS PRINCIPAL OCCUPATION DURING LAST FIVE YEARS
- ------------------------------------------- -----------------------------------------------------
<S> <C>
Thomas K. Mckissick (37) Managing Director of the Adviser; Managing Director,
Vice President Equities of Trust Company of the West and TCW
865 South Figueroa Street Asset Management Company.
Los Angeles, California
Thomas F. Caloia (52) First Vice President and Assistant Treasurer of the
Treasurer Manager and MSDW Advisors and Treasurer of the
Two World Trade Center TCW/DW Funds and the Morgan Stanley Dean Witter
New York, New York Funds.
</TABLE>
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* Denotes Trustees who are "interested persons" of the Fund, as defined in
the Act.
In addition, Mitchell M. Merin, President, Chief Executive Officer and
Director of MSDW Advisors and MSDW Services, Chairman and Director of MSDW
Distributors and MSDW Trust, Executive Vice President and Director of DWR, and
Director of SPS Transaction Services, Inc. and various other MSDW subsidiaries,
Robert M. Scanlan, President, Chief Operating Officer and Director of the
Manager and MSDW Advisors, Executive Vice President of MSDW Distributors and
MSDW Trust and Director of MSDW Trust, and Robert S. Giambrone, Senior Vice
President of MSDW Advisors, MSDW Services, MSDW Distributors and MSDW Trust and
Director of MSDW Trust, are Vice Presidents of the Fund, and Marilyn K. Cranney
and Carsten Otto, First Vice Presidents and Assistant General Counsels of the
Manager and MSDW Advisors, Frank Bruttomesso, LouAnne D. McInnis and Ruth
Rossi, Vice Presidents and Assistant General Counsels of the Manager and MSDW
Advisors, and Todd Lebo, a Staff Attorney with MSDW Advisors, are Assistant
Secretaries of the Fund.
THE BOARD OF TRUSTEES, THE INDEPENDENT TRUSTEES, AND THE COMMITTEES
The Board of Trustees consists of nine (9) trustees. These same
individuals also serve as trustees for all of the TCW/DW Funds. As of the date
of this Statement of Additional Information, there are a total of 11 TCW/DW
Funds. As of July 31, 1998, the TCW/DW Funds had total net assets of
approximately $2.9 billion and approximately a quarter of a million
shareholders.
Five Trustees (56% of the total number) have no affiliation or business
connection with TCW Funds Management, Inc. or MSDW Services or any of their
affiliated persons and do not own any stock or other securities issued by MSDW
or TCW, the parent companies of MSDW Services and TCW Funds Management, Inc.,
respectively. These are the "disinterested" or "independent" Trustees. Four of
the five independent Trustees are also Independent Trustees of the Morgan
Stanley Dean Witter Funds.
Law and regulation establish both general guidelines and specific duties
for the Independent Trustees. The TCW/DW Funds seek as Independent Trustees
individuals of distinction and experience in business and finance, government
service or academia; these are people whose advice and counsel are in demand by
others and for whom there is often competition. To accept a position on the
Funds' Boards, such individuals may reject other attractive assignments because
the Funds make substantial demands on their time. Indeed, by serving on the
Funds' Boards, certain Trustees who would otherwise be qualified and in demand
to serve on bank boards would be prohibited by law from doing so.
All of the Independent Trustees serve as members of the Audit Committee.
Three of them also serve as members of the Derivatives Committee. In addition,
two of the Trustees, including one Independent Trustee, serve as members of the
Insurance Committee. During the calendar year ended December 31, 1997, the
Audit Committee, the Derivatives Committee and the Independent Trustees held a
combined total of sixteen meetings.
The Independent Trustees are charged with recommending to the full Board
approval of management, advisory and administration contracts, Rule 12b-1 plans
and distribution and underwriting agreements; continually reviewing Fund
performance; checking on the pricing of portfolio securities, brokerage
commissions, transfer agent costs and performance, and trading among Funds in
the same complex; and approving fidelity bond and related insurance coverage
and allocations, as well as other matters that arise from time to time. The
Independent Trustees are required to select and nominate individuals to fill
any Independent Trustee vacancy on the Board of any Fund that has a Rule 12b-1
plan of distribution. Each of the open-end TCW/DW Funds has such a plan.
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<PAGE>
The Audit Committee is charged with recommending to the full Board the
engagement or discharge of the Fund's independent accountants; directing
investigations into matters within the scope of the independent accountants'
duties, including the power to retain outside specialists; reviewing with the
independent accountants the audit plan and results of the auditing engagement;
approving professional services provided by the independent accountants and
other accounting firms prior to the performance of such services; reviewing the
independence of the independent accountants; considering the range of audit and
non-audit fees; and reviewing the adequacy of the Fund's system of internal
controls.
The Board of each Fund has formed a Derivatives Committee to approve
parameters for and monitor the activities of the Fund with respect to
derivative investments, if any, made by the Fund.
Finally, the Board of each Fund has formed an Insurance Committee to
review and monitor the insurance coverage maintained by the Fund.
ADVANTAGES OF HAVING SAME INDIVIDUALS AS INDEPENDENT TRUSTEES FOR ALL TCW/DW
FUNDS
The Independent Trustees and the Funds' management believe that having the
same Independent Trustees for each of the TCW/DW Funds avoids the duplication
of effort that would arise from having different groups of individuals serving
as Independent Trustees for each of the Funds or even of sub-groups of Funds.
They believe that having the same individuals serve as Independent Trustees of
all the Funds tends to increase their knowledge and expertise regarding matters
which affect the Fund complex generally and enhances their ability to negotiate
on behalf of each Fund with the Fund's service providers. This arrangement also
precludes the possibility of separate groups of Independent Trustees arriving
at conflicting decisions regarding operations and management of the Funds and
avoids the cost and confusion that would likely ensue. Finally, having the same
Independent Trustees serve on all Fund Boards enhances the ability of each Fund
to obtain, at modest cost to each separate Fund, the services of Independent
Trustees of the caliber, experience and business acumen of the individuals who
serve as Independent Trustees of the TCW/DW Funds.
COMPENSATION OF INDEPENDENT TRUSTEES
The Fund pays each Independent Trustee an annual fee of $2,225 plus a per
meeting fee of $200 for meetings of the Board of Trustees, the Independent
Trustees or Committees of the Board of Trustees attended by the Trustee (the
Fund pays the Chairman of the Audit Committee an additional annual fee of
$750). If a Board meeting and a meeting of the Independent Trustees or a
Committee meeting, or a meeting of the Independent Trustees and/or more than
one Committee meeting, take place on a single day, the Trustees are paid a
single meeting fee by the Fund. The Fund also reimburses such Trustees for
travel and other out-of-pocket expenses incurred by them in connection with
attending such meetings. Trustees and officers of the Fund who are or have been
employed by the Manager or the Adviser or an affiliated company of either
receive no compensation or expense reimbursement from the Fund for their
services as Trustee. Mr. Haire currently serves as Chairman of the Audit
Committee. Prior to June 1, 1998, Mr. Haire also served as Chairman of the
Independent Trustees, for which services the Fund paid him an additional annual
fee of $1,200. The Trustees of the TCW/DW Funds do not have retirement or
deferred compensation plans.
The following table illustrates the compensation paid to the Fund's
Independent Trustees by the Fund for the fiscal year ended July 31, 1998.
FUND COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
COMPENSATION
NAME OF INDEPENDENT TRUSTEE FROM THE FUND
- ------------------------------- --------------
<S> <C>
John C. Argue ................. $5,513
John R. Haire ................. 7,063
Dr. Manuel H. Johnson ......... 5,313
Michael E. Nugent ............. 5,313
John L. Schroeder ............. 5,513
</TABLE>
The following table illustrates the compensation paid to the Fund's
Independent Trustees for the calendar year ended December 31, 1997 for services
to the 14 TCW/DW Funds and, in the case of Messrs. Haire, Johnson,
10
<PAGE>
Nugent and Schroeder, the 84 Morgan Stanley Dean Witter Funds that were in
operation at December 31, 1997, and, in the case of Mr. Argue, TCW Galileo
Funds, Inc. and TCW Convertible Securities Fund, Inc. Mr. Haire serves as
Chairman of the Audit Committee of each TCW/DW Fund and each Morgan Stanley
Dean Witter Fund and, prior to June 1, 1998, also served as Chairman of the
Independent Directors or Trustees of those Funds. With respect to Messrs.
Haire, Johnson, Nugent and Schroeder, the Morgan Stanley Dean Witter Funds are
included solely because of a limited exchange privilege between various TCW/DW
Funds and five Morgan Stanley Dean Witter Money Market Funds. With respect to
Mr. Argue, TCW Galileo Funds, Inc. and TCW Convertible Securities Fund, Inc.
are included solely because the Fund's Adviser, TCW Funds Management, Inc.,
also serves as Adviser to those investment companies.
CASH COMPENSATION FROM FUND GROUPS
<TABLE>
<CAPTION>
FOR SERVICE
AS DIRECTOR OR
FOR SERVICE AS TRUSTEE AND
TRUSTEE AND COMMITTEE FOR SERVICE AS
COMMITTEE MEMBER DIRECTOR OF
MEMBER OF 84 TCW GALILEO
OF 14 MORGAN STANLEY FUNDS, INC. AND
TCW/DW DEAN WITTER TCW CONVERTIBLE
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS SECURITIES FUND, INC.
- ----------------------------- ---------------- ---------------- -----------------------
<S> <C> <C> <C>
John C. Argue ............... $71,125 -- $43,250
John R. Haire ............... 73,725 $149,702 --
Dr. Manuel H. Johnson........ 71,125 145,702 --
Michael E. Nugent ........... 73,725 149,702 --
John L. Schroeder ........... 73,725 149,702 --
<CAPTION>
FOR SERVICE AS
CHAIRMAN OF TOTAL
FOR SERVICES AS INDEPENDENT CASH COMPENSATION
CHAIRMAN OF DIRECTORS/ FOR SERVICES TO
INDEPENDENT TRUSTEES 84 MORGAN STANLEY
TRUSTEES AND AUDIT DEAN WITTER
AND AUDIT COMMITTEES FUNDS, 14
COMMITTEES OF 84 TCW/DW FUNDS,
OF 14 MORGAN STANLEY TCW GALILEO FUNDS, INC.
TCW/DW DEAN WITTER AND TCW CONVERTIBLE
NAME OF INDEPENDENT TRUSTEE FUNDS FUNDS SECURITIES FUND, INC.
- ----------------------------- ----------------- ---------------- ------------------------
<S> <C> <C> <C>
John C. Argue ............... -- -- $114,375
John R. Haire ............... $25,350 $157,463 406,240
Dr. Manuel H. Johnson........ -- -- 216,827
Michael E. Nugent ........... -- -- 223,427
John L. Schroeder ........... -- -- 223,427
</TABLE>
As of the date of this Statement of Additional Information, 57 of the
Morgan Stanley Dean Witter Funds have adopted a retirement program under which
an Independent Trustee who retires after serving for at least five years (or
such lesser period as may be determined by the Board) as an Independent
Director or Trustee of any Morgan Stanley Dean Witter Fund that has adopted the
retirement program (each such Fund referred to as an "Adopting Fund" and each
such Trustee referred to as an "Eligible Trustee") is entitled to retirement
payments upon reaching the eligible retirement age (normally, after attaining
age 72). Annual payments are based upon length of service. Currently, upon
retirement, each Eligible Trustee is entitled to receive from the Adopting
Fund, commencing as of his or her retirement date and continuing for the
remainder of his or her life, an annual retirement benefit (the "Regular
Benefit") equal to 29.41% of his or her Eligible Compensation plus 0.4901667%
of such Eligible Compensation for each full month of service as an Independent
Director or Trustee of any Adopting Fund in excess of five years up to a
maximumof 58.82% after ten years of service. The foregoing percentages may be
changed by the Board.(1) "Eligible Compensation" is one-fifth of the total
compensation earned by such Eligible Trustee for service to the Adopting Fund
in the five year period prior to the date of the Eligible Trustee's retirement.
Benefits under the retirement program are not secured or funded by the Adopting
Funds.
The following table illustrates the retirement benefits accrued to Messrs.
Haire, Johnson, Nugent and Schroeder by the 57 Morgan Stanley Dean Witter Funds
for the year ended December 31, 1997, and the estimated retirement benefits for
Messrs. Haire, Johnson, Nugent and Schroeder, to commence upon their
retirement, from the 57 Morgan Stanley Dean Witter Funds as of December 31,
1997.
<PAGE>
- ----------
(1) An Eligible Trustee may elect alternate payments of his or her retirement
benefits based upon the combined life expectancy of such Eligible Trustee
and his or her spouse on the date of such Eligible Trustee's retirement.
The amount estimated to be payable under this method, through the
remainder of the later of the lives of such Eligible Trustee and spouse,
will be the actuarial equivalent of the Regular Benefit. In addition, the
Eligible Trustee may elect that the surviving spouse's periodic payment
of benefits will be equal to either 50% or 100% of the previous periodic
amount, an election that, respectively, increases or decreases the
previous periodic amount so that the resulting payments will be the
actuarial equivalent of the Regular Benefit.
11
<PAGE>
RETIREMENT BENEFITS FROM ALL MORGAN STANLEY DEAN WITTER FUNDS
<TABLE>
<CAPTION>
ESTIMATED
CREDITED YEARS ESTIMATED RETIREMENT BENEFITS ESTIMATED ANNUAL BENEFITS
OF SERVICE AT PERCENTAGE OF ACCRUED AS EXPENSES UPON RETIREMENT
RETIREMENT ELIGIBLE BY ALL ADOPTING FROM ALL ADOPTING
NAME OF INDEPENDENT TRUSTEE (MAXIMUM 10) COMPENSATION FUNDS FUNDS(2)
- -------------------------------- ---------------- --------------- --------------------- --------------------------
<S> <C> <C> <C> <C>
John R. Haire .................. 10 58.82% $ (19,823)(3) $132,002
Dr. Manuel H. Johnson .......... 10 58.82 12,832 55,026
Michael E. Nugent .............. 10 58.82 22,546 55,026
John L. Schroeder .............. 8 49.02 39,350 46,123
</TABLE>
- ----------
(2) Based on current levels of compensation. Amount of annual benefits also
varies depending on the Trustee's elections described in Footnote (1)
above.
(3) This number reflects the effect of the extension of Mr. Haire's term as
Director or Trustee until May 1, 1999.
As of the date of this Statement of Additional Information, the aggregate
number of shares of beneficial interest of the Fund owned by the Fund's
officers and Trustees as a group was less than 1 percent of the Fund's shares
of beneficial interest outstanding.
INVESTMENT PRACTICES AND POLICIES
- --------------------------------------------------------------------------------
U.S. GOVERNMENT SECURITIES
As discussed in the Prospectus, the Fund may invest in, among other
securities, securities issued by the U.S. Government, its agencies or
instrumentalities. Such securities include:
(1) U.S. Treasury bills (maturities of one year or less), U.S. Treasury
notes (maturities of one to ten years) and U.S. Treasury bonds (generally
maturities of greater than ten years), all of which are direct obligations
of the U.S. Government and, as such, are backed by the "full faith and
credit" of the United States.
(2) Securities issued by agencies and instrumentalities of the U.S.
Government which are backed by the full faith and credit of the United
States. Among the agencies and instrumentalities issuing such obligations
are the Federal Housing Administration, the Government National Mortgage
Association ("GNMA"), the Department of Housing and Urban Development, the
Export-Import Bank, the Farmers Home Administration, the General Services
Administration, the Maritime Administration and the Small Business
Administration. The maturities of such obligations range from three months
to 30 years.
(3) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but whose issuing
agency or instrumentality has the right to borrow, to meet its obligations,
from an existing line of credit with the U.S. Treasury. Among the agencies
and instrumentalities issuing such obligations are the Tennessee Valley
Authority, the Federal National Mortgage Association ("FNMA"), the Federal
Home Loan Mortgage Corporation ("FHLMC") and the U.S. Postal Service. The
U.S. Treasury has no legal obligation to provide such line of credit and
may choose not to do so.
(4) Securities issued by agencies and instrumentalities which are not
backed by the full faith and credit of the United States, but which are
backed by the credit of the issuing agency or instrumentality. Among the
agencies and instrumentalities issuing such obligations are the Federal
Farm Credit System and the Federal Home Loan Banks.
<PAGE>
Neither the value nor the yield of the U.S. Government securities which
may be invested in by the Fund are guaranteed by the U.S. Government. Such
values and yield will fluctuate with changes in prevailing interest rates and
other factors. Generally, as prevailing interest rates rise, the value of any
U.S. Government securities held by the Fund will fall. Such securities with
longer maturities generally tend to produce higher yields and are subject to
greater market fluctuation as a result of changes in interest rates than debt
securities with shorter maturities. The Fund is not limited as to the
maturities of the U.S. Government securities in which it may invest.
12
<PAGE>
MONEY MARKET SECURITIES
As stated in the Prospectus, the money market instruments which the Fund
may purchase include U.S. Government securities, bank obligations, Eurodollar
certificates of deposit, obligations of savings institutions, fully insured
certificates of deposit and commercial paper. Such securities are limited to:
U.S. Government Securities. Obligations issued or guaranteed as to
principal and interest by the United States or its agencies (such as the
Export-Import Bank of the United States, Federal Housing Administration and
Government National Mortgage Association) or its instrumentalities (such as the
Federal Home Loan Bank), including Treasury bills, notes and bonds;
Bank Obligations. Obligations (including certificates of deposit, bankers'
acceptances, commercial paper (see below) and other debt obligations) of banks
subject to regulation by the U.S. Government and having total assets of $1
billion or more, and instruments secured by such obligations, not including
obligations of foreign branches of domestic banks except as permitted below;
Eurodollar Certificates of Deposit. Eurodollar certificates of deposit
issued by foreign branches of domestic banks having total assets of $1 billion
or more (investments in Eurodollar certificates may be affected by changes in
currency rates or exchange control regulations, or changes in governmental
administration or economic or monetary policy in the United States and abroad);
Obligations of Savings Institutions. Certificates of deposit of savings
banks and savings and loan associations, having total assets of $1 billion or
more (investments in savings institutions above $100,000 in principal amount
are not protected by Federal deposit insurance);
Fully Insured Certificates of Deposit. Certificates of deposit of banks
and savings institutions, having total assets of less than $1 billion, if the
principal amount of the obligation is insured by the Bank Insurance Fund or the
Savings Association Insurance Fund (each of which is administered by the
Federal Deposit Insurance Corporation), limited to $100,000 principal amount
per certificate and to 15% or less of the Fund's total assets in all such
obligations and in all illiquid assets, in the aggregate; and
Commercial Paper. Commercial paper rated within the two highest grades by
Standard & Poor's Corporation or Moody's Investors Service, Inc. or, if not
rated, issued by a company having an outstanding debt issue rated at least AAA
by Standard & Poor's or Aaa by Moody's.
LOWER RATED CONVERTIBLE SECURITIES
As stated in the Prospectus, the Fund may invest up to 5% of its net
assets in lower rated convertible securities, sometimes referred to as high
yield securities. Because of the special nature of high yield securities, the
Investment Adviser must take account of certain special considerations in
assessing the risks associated with such investments. Although the growth of
the high yield securities market in the 1980s had paralleled a long economic
expansion, since that time many issuers have been affected by adverse economic
and market conditions. It should be recognized that an economic downturn or
increase in interest rates is likely to have a negative effect on the high
yield bond market and on the value of the high yield securities held by the
Fund, as well as on the ability of the securities' issuers to repay principal
and interest on their borrowings.
The prices of high yield securities have been found to be less sensitive
to changes in prevailing interest rates than higher-rated investments, but are
likely to be more sensitive to adverse economic changes or individual corporate
developments. During an economic downturn or substantial period of rising
interest rates, highly leveraged issuers may experience financial stress which
would adversely affect their ability to service their principal and interest
payment obligations, to meet their projected business goals or to obtain
additional financing. If the issuer of a fixed-income security owned by the
Fund defaults, the Fund may incur additional expenses to seek recovery. In
addition, periods of economic uncertainty and change can be expected to result
in an increased volatility of market prices of high yield securities and a
concomitant volatility in the net asset value of a share of the Fund.
The secondary market for high yield securities may be less liquid than the
markets for higher quality securities and, as such, may have an adverse effect
on the market prices of certain securities. The limited liquidity of the market
may also adversely affect the ability of the Fund's Trustees to arrive at a
fair value for certain high yield securities at certain times and could make it
difficult for the Fund to sell certain securities.
13
<PAGE>
LENDING OF PORTFOLIO SECURITIES
Consistent with applicable regulatory requirements, the Fund may lend its
portfolio securities to brokers, dealers and other financial institutions,
provided that such loans are callable at any time by the Fund (subject to
notice provisions described below), and are at all times secured by cash or
money market instruments, which are maintained in a segregated account pursuant
to applicable regulations and that are equal to at least the market value,
determined daily, of the loaned securities. The advantage of such loans is that
the Fund continues to receive the income on the loaned securities while at the
same time earning interest on the cash amounts deposited as collateral, which
will be invested in short-term obligations. The Fund will not lend its
portfolio securities if such loans are not permitted by the laws or regulations
of any state in which its shares are qualified for sale and will not lend more
than 25% of the value of its total assets. A loan may be terminated by the
borrower on one business day's notice, or by the Fund on two business days'
notice. If the borrower fails to deliver the loaned securities within two days
after receipt of notice, the Fund could use the collateral to replace the
securities while holding the borrower liable for any excess of replacement cost
over collateral. As with any extensions of credit, there are risks of delay in
recovery and in some cases even loss of rights in the collateral should the
borrower of the securities fail financially. However, these loans of portfolio
securities will only be made to firms deemed by the Adviser to be creditworthy
and when the income which can be earned from such loans justifies the attendant
risks. Upon termination of the loan, the borrower is required to return the
securities to the Fund. Any gain or loss in the market price during the loan
period would inure to the Fund. The creditworthiness of firms to which the Fund
lends its portfolio securities will be monitored on an ongoing basis by the
Adviser pursuant to procedures adopted and reviewed, on an ongoing basis, by
the Board of Trustees of the Fund.
When voting or consent rights which accompany loaned securities pass to
the borrower, the Fund will follow the policy of calling the loaned securities,
to be delivered within one day after notice, to permit the exercise of such
rights if the matters involved would have a material effect on the Fund's
investment in such loaned securities. The Fund will pay reasonable finder's,
administrative and custodial fees in connection with a loan of its securities.
The Fund did not lend any of its portfolio securities during the fiscal year
ended July 31, 1998.
REPURCHASE AGREEMENTS
When cash may be available for only a few days, it may be invested by the
Fund in repurchase agreements until such time as it may otherwise be invested
or used for payments of obligations of the Fund. These agreements, which may be
viewed as a type of secured lending by the Fund, typically involve the
acquisition by the Fund of debt securities from a selling financial institution
such as a bank, savings and loan association or broker-dealer. The agreement
provides that the Fund will sell back to the institution, and that the
institution will repurchase, the underlying security ("collateral") at a
specified price and at a fixed time in the future, usually not more than seven
days from the date of purchase. The collateral will be maintained in a
segregated account and will be marked to market daily to determine that the
value of the collateral, as specified in the agreement, does not decrease below
the purchase price plus accrued interest. If such decrease occurs, additional
collateral will be requested and, when received, added to the account to
maintain full collateralization. The Fund will accrue interest from the
institution until the time when the repurchase is to occur. Although such date
is deemed by the Fund to be the maturity date of a repurchase agreement, the
maturities of securities subject to repurchase agreements are not subject to
any limits.
While repurchase agreements involve certain risks not associated with
direct investments in debt securities, the Fund follows procedures designed to
minimize such risks. These procedures include effecting repurchase transactions
only with large, well-capitalized and well-established financial institutions
whose financial condition will be continually monitored by the Adviser subject
to procedures established by the Board of Trustees of the Fund. In addition, as
described above, the value of the collateral underlying the repurchase
agreement will be at least equal to the repurchase price, including any accrued
interest earned on the repurchase agreement. In the event of a default or
bankruptcy by a selling financial institution, the Fund will seek to liquidate
such collateral. However, the exercising of the Fund's right to liquidate such
collateral could involve certain costs or delays and, to the extent that
proceeds from any sale upon a default of the obligation to repurchase were less
than the repurchase price, the Fund could suffer a loss. It is the current
policy of the Fund not to invest in repurchase
14
<PAGE>
agreements that do not mature within seven days if any such investment,
together with any other illiquid assets held by the Fund, amounts to more than
15% of its net assets. During the fiscal year ended July 31, 1998, the Fund's
investments in repurchase agreements did not exceed 5% of its total assets.
WARRANTS
The Fund may invest up to 5% of the value of its net assets in warrants,
including not more than 2% in warrants not listed on either the New York or
American Stock Exchange. Warrants are, in effect, an option to purchase equity
securities at a specific price, generally valid for a specific period of time,
and have no voting rights, pay no dividends and have no rights with respect to
the corporations issuing them. The Fund may acquire warrants attached to other
securities without reference to the foregoing limitations.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
From time to time, in the ordinary course of business, the Fund may
purchase securities on a when-issued or delayed delivery basis and may purchase
or sell securities on a forward commitment basis. When such transactions are
negotiated, the price is fixed at the time of the commitment, but delivery and
payment can take place a month or more after the date of the commitment. The
securities so purchased or sold are subject to market fluctuation and no
interest or dividends accrue to the purchaser prior to the settlement date.
While the Fund will only purchase securities on a when-issued, delayed delivery
or forward commitment basis with the intention of acquiring the securities, the
Fund may sell the securities before the settlement date, if it is deemed
advisable. At the time the Fund makes the commitment to purchase or sell
securities on a when-issued, delayed delivery or forward commitment basis, the
Fund will record the transaction and thereafter reflect the value, each day, of
such security purchased or, if a sale, the proceeds to be received, in
determining its net asset value. At the time of delivery of the securities, the
value may be more or less than the purchase or sale price. The Fund will also
establish a segregated account with the Fund's custodian bank in which it will
continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to commitments to purchase securities on a
when-issued, delayed delivery or forward commitment basis; subject to this
requirement, the Fund may purchase securities on such basis without limit. An
increase in the percentage of the Fund's assets committed to the purchase of
securities on a when-issued or delayed delivery basis may increase the
volatility of the Fund's net asset value. During the fiscal year ended July 31,
1998, the Fund did not purchase any such securities.
WHEN, AS AND IF ISSUED SECURITIES
The Fund may purchase securities on a "when, as and if issued" basis under
which the issuance of the security depends upon the occurrence of a subsequent
event, such as approval of a merger, corporate reorganization, leveraged buyout
or debt restructuring. The commitment for the purchase of any such security
will not be recognized in the portfolio of the Fund until the Adviser
determines that issuance of the security is probable. At such time, the Fund
will record the transaction and, in determining its net asset value, will
reflect the value of the security daily. At such time, the Fund will also
establish a segregated account with its custodian bank in which it will
continuously maintain cash or U.S. Government securities or other liquid
portfolio securities equal in value to recognized commitments for such
securities. Settlement of the trade will occur within five business days of the
occurrence of the subsequent event. Once a segregated account has been
established, if the anticipated event does not occur and the securities are not
issued the Fund will have lost an investment opportunity. The Fund may purchase
securities on such basis without limit. An increase in the percentage of the
Fund's assets committed to the purchase of securities on a "when, as and if
issued" basis may increase the volatility of its net asset value. The Fund may
also sell securities on a "when, as and if issued" basis provided that the
issuance of the security will result automatically from the exchange or
conversion of a security owned by the Fund at the time of the sale. During the
fiscal year ended July 31, 1998, the Fund did not purchase any such securities.
PORTFOLIO TURNOVER
It is anticipated that the Fund's portfolio turnover rate generally will
not exceed 300%. A 300% turnover rate would occur, for example, if 300% of the
securities held in the Fund's portfolio (excluding all securities whose
maturities at acquisition were one year or less) were sold and replaced within
one year. For the fiscal years ended July 31, 1996, 1997 and 1998, the Fund's
portfolio turnover rates were 261%, 198% and 93%, respectively.
15
<PAGE>
INVESTMENT RESTRICTIONS
- --------------------------------------------------------------------------------
In addition to the investment restrictions enumerated in the Prospectus,
the investment restrictions listed below have been adopted by the Fund as
fundamental policies, except as otherwise indicated. Under the Act, a
fundamental policy may not be changed without the vote of a majority of the
outstanding voting securities of the Fund, as defined in the Act. Such a
majority is defined as the lesser of (a) 67% or more of the shares present at a
meeting of shareholders, if the holders of 50% of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50% of the
outstanding shares of the Fund.
The Fund may not:
1. Purchase or sell real estate or interests therein (including limited
partnership interests), although the Fund may purchase securities of
issuers which engage in real estate operations and securities secured by
real estate or interests therein.
2. Purchase oil, gas or other mineral leases, rights or royalty
contracts or exploration or development programs, except that the Fund may
invest in the securities of companies which operate, invest in, or sponsor
such programs.
3. Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or acquisition of
assets.
4. Borrow money, except that the Fund may borrow from a bank for
temporary or emergency purposes in amounts not exceeding 5% (taken at the
lower of cost or current value) of its total assets (not including the
amount borrowed).
5. Pledge its assets or assign or otherwise encumber them except to
secure borrowings effected within the limitations set forth in restriction
(4). For the purpose of this restriction, collateral arrangements with
respect to initial or variation margin for futures are not deemed to be
pledges of assets.
6. Issue senior securities as defined in the Act except insofar as the
Fund may be deemed to have issued a senior security by reason of (a)
entering into any repurchase agreement; (b) purchasing any securities on a
when-issued or delayed delivery basis; (c) purchasing or selling any
financial futures contracts; (d) borrowing money in accordance with
restrictions described above; or (e) lending portfolio securities.
7. Make loans of money or securities, except: (a) by the purchase of
portfolio securities in which the Fund may invest consistent with its
investment objective and policies; (b) by investment in repurchase
agreements; or (c) by lending its portfolio securities.
8. Purchase or sell commodities or commodities contracts except that the
Fund may purchase or sell financial or stock index futures contracts or
options thereon.
9. Make short sales of securities.
10. Purchase securities on margin, except for such short-term loans as
are necessary for the clearance of portfolio securities. The deposit or
payment by the Fund of initial or variation margin in connection with
futures contracts is not considered the purchase of a security on margin.
11. Engage in the underwriting of securities, except insofar as the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security.
12. Invest for the purpose of exercising control or management of any
other issuer.
If a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of total or net assets will not be considered a
violation of any of the foregoing restrictions.
16
<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
- --------------------------------------------------------------------------------
Subject to the general supervision of the Trustees, the Adviser is
responsible for decisions to buy and sell securities for the Fund, the
selection of brokers and dealers to effect the transactions, and the
negotiation of brokerage commissions, if any. Purchases and sales of securities
on a stock exchange are effected through brokers who charge a commission for
their services. In the over-the-counter market, securities are generally traded
on a "net" basis with dealers acting as principal for their own accounts
without a stated commission, although the price of the security usually
includes a profit to the dealer. In addition, securities may be purchased at
times in underwritten offerings where the price includes a fixed amount of
compensation, generally referred to as the underwriter's concession or
discount. Futures transactions will usually be effected through a broker and a
commission will be charged. On occasion, the Fund may also purchase certain
money market instruments directly from an issuer, in which case no commissions
or discounts are paid. During the fiscal years ended July 31, 1996, 1997 and
1998, the Fund paid $208,471, $354,603 and $337,545 in brokerage commissions,
respectively.
The Adviser currently serves as investment adviser to a number of clients,
including other investment companies, and may in the future act as investment
adviser to others. It is the practice of the Adviser to cause purchase and sale
transactions to be allocated among the Fund and others whose assets it manages
in such manner as it deems equitable. In making such allocations among the Fund
and other client accounts, the main factors considered are the respective
investment objectives, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investments generally held and the opinions of the persons responsible for
managing the portfolios of the Fund and other client accounts.
The policy of the Fund regarding purchases and sales of securities for its
portfolio is that primary consideration will be given to obtaining the most
favorable prices and efficient executions of transactions. Consistent with this
policy, when securities transactions are effected on a stock exchange, the
Fund's policy is to pay commissions which are considered fair and reasonable
without necessarily determining that the lowest possible commissions are paid
in all circumstances. The Fund believes that a requirement always to seek the
lowest possible commission cost could impede effective portfolio management and
preclude the Fund and the Adviser from obtaining a high quality of brokerage
and research services. In seeking to determine the reasonableness of brokerage
commissions paid in any transaction, the Adviser relies upon its experience and
knowledge regarding commissions generally charged by various brokers and on its
judgment in evaluating the brokerage and research services received from the
broker effecting the transaction. Such determinations are necessarily
subjective and imprecise, as in most cases an exact dollar value for those
services is not ascertainable.
In seeking to implement the Fund's policies, the Adviser effects
transactions with those brokers and dealers who the Adviser believes provide
the most favorable prices and are capable of providing efficient executions. If
the Adviser believes such prices and executions are obtainable from more than
one broker or dealer, it may give consideration to placing portfolio
transactions with those brokers and dealers who also furnish research and other
services to the Fund or the Adviser. Such services may include, but are not
limited to, any one or more of the following: reports on industries and
companies, economic analyses and review of business conditions, portfolio
strategy, analytic computer software, account performance services, computer
terminals and various trading and/or quotation equipment. They also include
advice from broker-dealers as to the value of securities, availability of
securities, availability of buyers, and availability of sellers. In addition,
they include recommendations as to purchase and sale of individual securities
and timing of such transactions. The Fund will not purchase at a higher price
or sell at a lower price in connection with transactions effected with a
dealer, acting as principal, who furnishes research services to the Fund than
would be the case if no weight were given by the Fund to the dealer's
furnishing of such services. During the fiscal year ended July 31, 1998, the
Fund paid $140,400 in brokerage commissions in connection with transactions in
the aggregate amount of $90,546,016 to brokers because of research services
provided.
The information and services received by the Adviser from brokers and
dealers may be of benefit to the Adviser in the management of accounts of some
of its other clients and may not in all cases benefit the Fund directly. While
the receipt of such information and services is useful in varying degrees and
would generally reduce the amount of research or services otherwise performed
by the Adviser and thereby reduce its expenses, it is of indeterminable value
and the advisory fee paid to the Adviser is not reduced by any amount that may
be attributable to the value of such services.
17
<PAGE>
Consistent with the policy described above, brokerage transactions in
securities listed on exchanges or admitted to unlisted trading privileges may
be effected through DWR, Morgan Stanley & Co. Incorporated ("MS & Co.") and
other affiliated brokers and dealers. In order for an affiliated broker or
dealer to effect any portfolio transactions for the Fund, the commissions, fees
or other remuneration received by the affiliated broker or dealer must be
reasonable and fair compared to the commissions, fees or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on an exchange during a comparable
period of time. This standard would allow the affiliated broker or dealer to
receive no more than the remuneration which would be expected to be received by
an unaffiliated broker in a commensurate arm's-length transaction. Furthermore,
the Board of Trustees of and the Fund, including a majority of the Trustees who
are not "interested" persons of the Fund, as defined in the Act, have adopted
procedures which are reasonably designed to provide that any commissions, fees
or other remuneration paid to an affiliated broker or dealer are consistent
with the foregoing standard. The Fund does not reduce the management fee it
pays to the Manager or Adviser by any amount of the brokerage commissions it
may pay to an affiliated broker or dealer. During the fiscal years ended July
31, 1996 and 1997, the Fund paid $36,391 and $43,448, respectively, in
brokerage commissions to DWR. The Fund paid no brokerage commissions to DWR
during the fiscal year ended July 31, 1998. During the period June 1, 1997
through July 31, 1997 and during the fiscal year ended July 31, 1998, the Fund
paid a total of $1,850 and $8,215, respectively, in brokerage commissions to MS
& Co., which broker-dealer became an affiliate of the Distributor on May 31,
1997 upon consummation of the merger of Dean Witter, Discover & Co. with Morgan
Stanley Group Inc. During the fiscal year ended July 31, 1998, the brokerage
commissions paid to MS & Co. represented approximately 2.43% of the total
brokerage commissions paid by the Fund during the year and were paid on account
of transactions having an aggregate dollar value equal to approximately 2.14%
of the aggregate dollar value of all portfolio transactions of the Fund during
the year for which commissions were paid.
During the fiscal year ended July 31, 1998, the Fund purchased common
stock issued by JP Morgan & Co., Inc. and held common stock issued by J.P.
Morgan & Co., Inc. and Merrill Lynch & Co., Inc. which issuers were among the
ten brokers or dealers which executed transactions for or with the Fund in the
largest dollar amounts during the year. At July 31, 1998, the Fund held common
stock issued by J.P. Morgan & Co., Inc. and Merrill Lynch & Co. Inc. with
market values of $1,600,200 and $2,515,500, respectively.
THE DISTRIBUTOR
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As discussed in the Prospectus, during the continuous offering shares of
the Fund are distributed by Morgan Stanley Dean Witter Distributors Inc. (the
"Distributor"). The Distributor has entered into a selected dealer agreement
with DWR, which through its own sales organization sells shares of the Fund. In
addition, the Distributor may enter into selected dealer agreements with other
selected broker-dealers. The Distributor, a Delaware corporation, is a
wholly-owned subsidiary of MSDW. Trustees of the Fund, including a majority of
the Independent Trustees, approved, at their meeting held on June 30, 1997, the
current Distribution Agreement appointing the Distributor as exclusive
distributor of the Fund's shares and providing for the Distributor to bear
distribution expenses not borne by the Fund. By its terms, the Distribution
Agreement had an initial term ending April 30, 1998, and provides that it will
remain in effect from year to year thereafter if approved by the Board. At
their meeting held on April 30, 1998, the Trustees of the Fund, including a
majority of the Independent Trustees, approved the continuation of the
Distribution Agreement until April 30, 1999.
The Distributor bears all expenses it may incur in providing services
under the Distribution Agreement. Such expenses include the payment of
commissions for sales of the Fund's shares and incentive compensation to Morgan
Stanley Dean Witter Financial Advisors and other Selected Broker-Dealer
representatives. The Distributor also pays certain expenses in connection with
the distribution of the Fund's shares, including the costs of preparing,
printing and distributing advertising or promotional materials, and the costs
of printing and distributing prospectuses and supplements thereto used in
connection with the offering and sale of the Fund's shares. The Fund bears the
costs of initial typesetting, printing and distribution of prospectuses and
supplements thereto to shareholders. The Fund also bears the costs of
registering the Fund and its shares under federal securities laws and pays
filing fees in accordance with state securities laws. The Fund and the
Distributor have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. Under the
Distribution Agreement, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence
18
<PAGE>
of willful misfeasance, bad faith, gross negligence or reckless disregard of
its obligations, the Distributor is not liable to the Fund or any of its
shareholders for any error of judgment or mistake of law or for any act or
omission or for any losses sustained by the Fund or its shareholders.
PLAN OF DISTRIBUTION
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under
the Act (the "Plan") pursuant to which each Class, other than Class D, pays the
Distributor compensation accrued daily and payable monthly at the following
annual rates: 0.25% and 1.0% of the average daily net assets of Class A and
Class C, respectively, and with respect to Class B, 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
contingent deferred sales charge has been imposed or upon which such charge has
been waived; or (b) the average daily net assets of Class B. The Distributor
receives the proceeds of front-end sales charges and of contingent deferred
sales charges imposed on certain redemptions of shares, which are separate and
apart from payments made pursuant to the Plan (see "Purchase of Fund Shares" in
the Prospectus). The Distributor has informed the Fund that it and/or DWR
received (a) approximately $214,582, $180,978 and $316,290 in contingent
deferred sales charges from Class B for the fiscal years ended July 31, 1996,
1997 and 1998, respectively, (b) approximately $494 in contingent deferred
sales charges from Class C for the fiscal year ended July 31, 1998, and (c)
approximately $14,513 in front-end sales charges from Class A for the fiscal
year ended July 31, 1998, none of which was retained by the Distributor. No
front-end sales charges were received from Class A during the fiscal year ended
July 31, 1997, no contingent deferred sales charges were received from Class A
during the fiscal years ended July 31, 1997 and 1998, and no contingent
deferred sales charges were received from Class C during the fiscal year ended
July 31, 1997.
The Distributor has informed the Fund that the entire fee payable by Class
A and a portion of the fees payable by each of Class B and Class C each year
under the Plan, equal to 0.25% of such Class's average daily net assets, are
currently each characterized as a "service fee" under the Rules of the
Association of the National Association of Securities Dealers (of which the
Distributor is a member). The service fee is a payment made for personal
service and/or the maintenance of shareholder accounts. The remaining portion
of the Plan fees payable by a Class, if any, is characterized as an
"asset-based sales charge" as such is defined by the aforementioned Rules of
the Association.
The Plan was adopted by a majority vote of the Board of Trustees,
including all of the Trustees of the Fund who are not "interested persons" of
the Fund (as defined in the Act) and who have no direct or indirect financial
interest in the operation of the Plan (the "Independent 12b-1 Trustees"), cast
in person at a meeting called for the purpose of voting on the Plan, on July
14, 1997, and by MSDW Advisors as the sole shareholder on August 24, 1997. At
their meeting held on October 26, 1995, the Trustees of the Fund, including all
the Independent 12b-1 Trustees, approved an amendment to the Plan to permit
payments to be made under the Plan with respect to certain distribution
expenses incurred in connection with the distribution of shares, including
personal services to shareholders with respect to holdings of such shares, of
an investment company whose assets are acquired by the Fund in a tax-free
reorganization. At their meeting held on June 30, 1997, the Trustees, including
a majority of the Independent 12b-1 Trustees, approved amendments to the Plan
to reflect the multiple-class structure for the Fund, which took effect on July
28, 1997.
Under the Plan and as required by Rule 12b-1, the Trustees receive and
review promptly after the end of each fiscal quarter a written report provided
by the Distributor of the amounts expended under the Plan and the purpose for
which such expenditures were made. In the Trustees' quarterly reviews of the
Plan, they will consider its continued appropriateness and the level of
compensation provided therein. Class B shares of the Fund accrued $1,196,377
payable to the Distributor, under the Plan, for the fiscal year ended July 31,
1998. This is an accrual at an annual rate of 0.85% of the average daily net
assets of Class B for the fiscal year and was calculated pursuant to clause (a)
under the Plan. The 12b-1 fee is treated by the Fund as an expense in the year
it is accrued. 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.
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<PAGE>
The Plan was adopted in order to permit the implementation of the Fund's
method of distribution. Under this distribution method the Fund offers four
Classes of shares, each with a distribution arrangement as set forth in the
Prospectus.
With respect to Class A shares, DWR compensates its Financial Advisors by
paying them, from proceeds of the front-end sales charge, commissions for the
sale of Class A shares, currently a gross sales credit of up to 5.0% of the
amount sold (except as provided in the following sentence) and an annual
residual commission, currently a residual of up to 0.25% of the current value
of the respective accounts for which they are the Financial Advisors or dealers
of record in all cases. On orders of $1 million or more (for which no sales
charge was paid) or net asset value purchases by employer sponsored 401(k) and
other plans qualified under Section 401(a) of the Internal Revenue Code
("Qualified Retirement Plans") for which Morgan Stanley Dean Witter Trust FSB
("MSDW Trust") serves as Trustee or DWR's Retirement Plan Services serves as
recordkeeper pursuant to a written Recordkeeping Services Agreement, MSDW
Advisors compensates DWR's Financial Advisors by paying them, from its own
funds, a gross sales credit of 1.0% of the amount sold.
With respect to Class B shares, DWR compensates its Financial Advisors by
paying them, from its own funds, commissions for the sale of Class B shares,
currently a gross sales credit of up to 5.0% of the amount sold (except as
provided in the following sentence) and an annual residual commission,
currently a residual of up to 0.25% of the current value (not including
reinvested dividends or distributions) of the amount sold in all cases. In the
case of Class B shares purchased on or after July 28, 1997 by 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, MSDW Advisors compensates DWR's Financial Advisors by
paying them, from its own funds, a gross sales credit of 3.0% of the amount
sold.
With respect to Class C shares, DWR compensates its Financial Advisors by
paying them, from its own funds, commissions for the sale of Class C shares,
currently a gross sales credit of up to 1.0% of the amount sold and an annual
residual commission, currently a residual of up to 1.0% of the current value of
the respective accounts for which they are the Financial Advisors of record.
With respect to Class D shares other than shares held by participants in
the MSDW Advisors mutual fund asset allocation program, MSDW Advisors
compensates DWR's Financial Advisors by paying them, from its own funds,
commissions for the sale of Class D shares, currently a gross sales credit of
up to 1.0% of the amount sold. There is a chargeback of 100% of the amount paid
if the Class D shares are redeemed in the first year and a chargeback of 50% of
the amount paid if the Class D shares are redeemed in the second year after
purchase. MSDW Advisors also compensates DWR's Financial Advisors by paying
them, from its own funds, an annual residual commission, currently a residual
of up to 0.10% of the current value of the respective accounts for which they
are the Financial Advisors of record (not including accounts of participants in
the MSDW Advisors mutual fund asset allocation program).
The gross sales credit is a charge which reflects commissions paid by DWR
to its Financial Advisors and DWR's Fund-associated distribution-related
expenses, including sales compensation, and overhead and other branch office
distribution-related expenses including (a) the expenses of operating DWR's
branch offices in connection with the sale of Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies, (b) the costs of client sales seminars, (c) travel expenses of mutual
fund sales coordinators to promote the sale of Fund shares and (d) other
expenses relating to branch promotion of Fund sales. The distribution fee that
the Distributor receives from the Fund under the Plan, in effect, offsets
distribution expenses incurred under the Plan on behalf of the Fund and, in the
case of Class B shares, opportunity costs, such as the gross sales credit and
an assumed interest charge thereon ("carrying charge"). In the Distributor's
reporting of the distribution expenses to the Fund, in the case of Class B
shares, such assumed interest (computed at the "broker's call rate") has been
calculated on the gross credit as it is reduced by amounts received by the
Distributor under the Plan and any contingent deferred sales charges received
by the Distributor upon redemption of shares of the Fund. No other interest
charge is included as a distribution expense in the Distributor's calculation
of its distribution costs for this purpose. The broker's call rate is the
interest rate charged to securities brokers on loans secured by exchange-listed
securities.
The Fund is authorized to reimburse expenses incurred or to be incurred in
promoting the distribution of the Fund's Class A and Class C shares and in
servicing shareholder accounts. Reimbursement will be made through
20
<PAGE>
payments at the end of each month. The amount of each monthly payment may in no
event exceed an amount equal to a payment at the annual rate of 0.25%, in the
case of Class A, and 1.0%, in the case of Class C, of the average net assets of
the respective Class during the month. No interest or other financing charges,
if any, incurred on any distribution expenses on behalf of Class A and Class C
will be reimbursable under the Plan. With respect to Class A, in the case of
all expenses other than expenses representing the service fee, and, with
respect to Class C, in the case of all expenses other than expenses
representing a gross sales credit or a residual to Morgan Stanley Dean Witter
Financial Advisors and other selected broker-dealer representatives, such
amounts shall be determined at the beginning of each calendar quarter by the
Trustees, including, a majority of the Independent 12b-1 Trustees. Expenses
representing the service fee (for Class A) or a gross sales credit or a
residual to Morgan Stanley Dean Witter Financial Advisors and other selected
broker-dealer representatives (for Class C) may be reimbursed without prior
determination. In the event that the Distributor proposes that monies shall be
reimbursed for other than such expenses, then in making quarterly
determinations of the amounts that may be reimbursed by the Fund, the
Distributor will provide and the Trustees will review a quarterly budget of
projected distribution expenses to be incurred on behalf of the Fund, together
with a report explaining the purposes and anticipated benefits of incurring
such expenses. The Trustees will determine which particular expenses, and the
portions thereof, that may be borne by the Fund, and in making such a
determination shall consider the scope of the Distributor's commitment to
promoting the distribution of the Fund's Class A and Class C shares.
Each Class paid 100% of the amounts accrued under the Plan with respect to
the Class for the fiscal year ended July 31, 1998 to the Distributor. The
Distributor estimates it has spent, pursuant to the Plan, $7,957,442 on behalf
of Class B since the inception of the Plan. It is estimated that this amount
was spent in approximately the following ways: (i) 20.25%
($1,611,450)--advertising and promotional expenses; (ii) 2.10% ($167,008)--
printing of prospectuses for distribution to other than current stockholders;
and (iii) 77.65% ($6,178,984)--other expenses, including the gross sales credit
and the carrying charges of which 5.84% ($361,145) represents carrying charges,
38.51% ($2,379,496) represents commission credits to DWR branch offices and
other selected broker-dealers for payments of commissions to Morgan Stanley
Dean Witter Financial Advisors and other selected broker-dealer representatives
and 55.65% ($3,438,343) represents overhead and other branch office
distribution-related expenses. The term "overhead and other branch office
distribution-related expenses" represents (a) the expenses of operating DWR's
branch offices in connection with the sale of the Fund shares, including lease
costs, the salaries and employee benefits of operations and sales support
personnel, utility costs, communications costs and the costs of stationery and
supplies; (b) the costs of client sales seminars; (c) travel expenses of Mutual
Fund sales coordinators to promote the sale of Fund shares; and (d) other
expenses relating to branch promotion of Fund share sales. The amounts accrued
by Class A and Class C for distribution during the fiscal year ended July 31,
1998 were for expenses which relate to compensation of sales personnel and
associated overhead expenses.
In the case of Class B shares, at any given time, the expenses in
distributing shares of the Fund may be more or less than the total of (i) the
payments made by the Fund pursuant to the Plan and (ii) the proceeds of
contingent deferred sales charges paid by investors upon redemption of shares.
The Distributor has advised the Fund in the case of Class B shares that the
excess distribution expenses, including the carrying charge designed to
approximate the opportunity costs incurred by DWR which arise from it having
advanced monies without having received the amount of any sales charges imposed
at the time of the sale of the Fund's Class B shares, totalled $4,799,182 at
July 31, 1998. With respect to Class B shares there is no requirement under the
Plan that the Distributor be reimbursed for all expenses or any requirement
that the Plan be continued from year to year, this excess amount does not
constitute a liability of the Fund. Although there is no legal obligation for
the Fund to pay distribution expenses in excess of payments made under the Plan
and the proceeds of contingent deferred sales charges paid by investors upon
redemption of shares, if for any reason the Plan is terminated, the Trustees
will consider at that time the manner in which to treat such expenses. Any
cumulative expenses incurred, but not yet recovered through distribution fees
or contingent deferred sales charges, may or may not be recovered through
future distribution fees or contingent deferred sales charges.
Under the Plan, the Distributor uses its best efforts in rendering
services to the Fund, but in the absence of willful misfeasance, bad faith,
gross negligence or reckless disregard of its obligations, the Distributor is
not liable to the Fund or any of its shareholders for any error of judgment or
mistake of law or for any act or omission or for any losses sustained by the
Fund or its shareholders.
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<PAGE>
Under its terms, the Plan had an initial term ending April 30, 1995, and
will continue in effect from year to year thereafter, provided such continuance
is approved annually by a vote of the Trustees, in the manner described above.
The most recent continuance of the Plan for one year, until April 30, 1999 was
approved by the Board of Trustees of the Fund, including a majority of the
Independent 12b-1 Trustees, at a Board meeting held on April 30, 1998. Prior to
approving the continuation of the Plan, the Board requested and received from
the Distributor and reviewed all the information which it deemed necessary to
arrive at an informed determination. In making their determination to continue
the Plan, the Trustees considered: (1) the Fund's experience under the Plan and
whether such experience indicates that the Plan is operating as anticipated;
(2) the benefits the Fund had obtained, was obtaining and would be likely to
obtain under the Plan; and (3) what services had been provided and were
continuing to be provided under the Plan by the Distributor, DWR and other
selected broker-dealers to the Fund and its shareholders. Based upon their
review, the Trustees of the Fund, including each of the Independent 12b-1
Trustees, determined that continuation of the Plan would be in the best
interest of the Fund and would have a reasonable likelihood of continuing to
benefit the Fund and its shareholders. This determination was based upon the
conclusion of the Trustees that the Plan provides an effective means of
stimulating sales of shares of the Fund and of reducing or avoiding net
redemptions and the potentially adverse effects that may occur therefrom. In
the Trustees' quarterly review of the Plan, they will consider its continued
appropriateness and the level of compensation provided therein.
Any amendment to increase materially the maximum amount authorized to be
spent under the Plan must be approved by the shareholders of the affected Class
or Classes of the Fund, and all material amendments to the Plan must be
approved by the Trustees in the manner described above. The Plan may be
terminated at any time, without payment of any penalty, by vote of a majority
of the Independent 12b-1 Trustees or by a vote of the holders of a majority of
the outstanding voting securities of the Fund (as defined in the Act) on not
more than 30 days' written notice to any other party to the Plan. So long as
the Plan is in effect, the selection or nomination of the Independent Trustees
is committed to the discretion of the Independent Trustees.
No interested person of the Fund, nor any Trustee of the Fund who is not
an interested person of the Fund, as defined in the Act, has any direct or
indirect financial interest in the operation of the Plan except to the extent
that DWR, MSDW Advisors, the Distributor or the Manager or certain of their
employees, may be deemed to have such an interest as a result of benefits
derived from the successful operation of the Plan or as a result of receiving a
portion of the amounts expended thereunder by the Fund.
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
As stated in the Prospectus, short-term securities with remaining
maturities of sixty days or less at the time of purchase are valued at
amortized cost, unless the Trustees determine such does not reflect the
securities' market value, in which case these securities will be valued at
their fair value as determined by the Trustees. Other short-term debt
securities will be valued on a mark-to-market basis until such time as they
reach a remaining maturity of sixty days, whereupon they will be valued at
amortized cost using their value on the 61st day unless the Trustees determine
such does not reflect the securities' market value, in which case these
securities will be valued at their fair value as determined by the Trustees.
All other securities and other assets are valued at their fair value as
determined in good faith under procedures established by and under the
supervision of the Trustees.
Generally, trading in foreign securities, as well as corporate bonds,
United States government securities and money market instruments, is
substantially completed each day at various times prior to the close of the New
York Stock Exchange. The values of such securities used in computing the net
asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
New York Stock Exchange. Occasionally, events which may affect the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange and will
therefore not be reflected in the computation of the Fund's net asset value. If
events that may affect the value of such securities occur during such period,
then these securities may be valued at their fair value as determined in good
faith under procedures established by and under the supervision of the
Trustees.
The net asset value for each Class of shares of the Fund is determined
once daily at 4:00 p.m., New York time (or, on days when the New York Stock
Exchange closes prior to 4:00 p.m., at such earlier time), on each day that
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<PAGE>
the New York Stock Exchange is open. The New York Stock Exchange currently
observes the following holidays: New Year's Day, Reverend Dr. Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
PURCHASE OF FUND SHARES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund offers four Classes of shares as
follows:
INITIAL SALES CHARGE ALTERNATIVE--CLASS A SHARES
Class A shares are sold to investors with an initial sales charge that
declines to zero for larger purchases; however, Class A shares sold without an
initial sales charge are subject to a contingent deferred sales charge ("CDSC")
of 1.0% if redeemed within one year of purchase, except in the circumstances
discussed in the Prospectus.
Right of Accumulation. As discussed in the Prospectus, investors may
combine the current value of shares purchased in separate transactions for
purposes of benefitting from the reduced sales charges available for purchases
of shares of the Fund totalling at least $25,000 in net asset value. For
example, if any person or entity who qualifies for this privilege holds Class A
shares of the Fund and/or other TCW/DW Funds which are multiple class funds
("TCW/DW Multi-Class Funds") purchased at a price including a front-end sales
charge having a current value of $5,000, and purchases $20,000 of additional
shares of the Fund, the sales charge applicable to the $20,000 purchase would
be 4.75% of the offering price.
The Distributor must be notified by the selected broker-dealer or the
shareholder at the time a purchase order is placed that the purchase qualifies
for the reduced charge under the Right of Accumulation. Similar notification
must be made in writing by the selected broker-dealer or shareholder when such
an order is placed by mail. The reduced sales charge will not be granted if:
(a) such notification is not furnished at the time of the order; or (b) a
review of the records of the Distributor or Morgan Stanley Dean Witter Trust
FSB (the "Transfer Agent") fails to confirm the investor's represented
holdings.
Letter of Intent. As discussed in the Prospectus, reduced sales charges
are available to investors who enter into a written Letter of Intent providing
for the purchase, within a thirteen-month period, of Class A shares of the Fund
from the Distributor or from a single Selected Broker-Dealer.
A Letter of Intent permits an investor to establish a total investment
goal to be achieved by any number of purchases over a thirteen-month period.
Each purchase of Class A shares made during the period will receive the reduced
sales commission applicable to the amount represented by the goal, as if it
were a single purchase. A number of shares equal in value to 5% of the dollar
amount of the Letter of Intent will be held in escrow by the Transfer Agent, in
the name of the shareholder. The initial purchase under a Letter of Intent must
be equal to at least 5% of the stated investment goal.
The Letter of Intent does not obligate the investor to purchase, nor the
Fund to sell, the indicated amount. In the event the Letter of Intent goal is
not achieved within the thirteen-month period, the investor is required to pay
the difference between the sales charge otherwise applicable to the purchases
made during this period and sales charges actually paid. Such payment may be
made directly to the Distributor or, if not paid, the Distributor is authorized
by the shareholder to liquidate a sufficient number of his or her escrowed
shares to obtain such difference.
If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth above under "Right of Accumulation,"
but there will be no retroactive reduction of sales charges on previous
purchases. For the purpose of determining whether the investor is entitled to a
further reduced sales charge applicable to purchases at or above a sales charge
level which exceeds the stated goal of a Letter of Intent, the cumulative
current net asset value of any shares owned by the investor in any other TCW/DW
Multi-Class Funds held by the shareholder which were previously purchased at a
price including a
23
<PAGE>
front-end sales charge (including shares of the Fund, other TCW/DW Multi-Class
Funds or "Exchange Funds" (see "Shareholder Services--Exchange Privilege")
acquired in exchange for those shares, and including in each case shares
acquired through reinvestment of dividends and distributions) will be added to
the cost or net asset value of shares of the Fund owned by the investor.
However, shares of "Exchange Funds" and the purchase of shares of other TCW/DW
Funds will not be included in determining whether the stated goal of a Letter
of Intent has been reached.
At any time while a Letter of Intent is in effect, a shareholder may, by
written notice to the Distributor, increase the amount of the stated goal. In
that event, only shares purchased during the previous 90-day period and still
owned by the shareholder will be included in the new sales charge reduction.
The 5% escrow and minimum purchase requirements will be applicable to the new
stated goal. Investors electing to purchase shares of the Fund pursuant to a
Letter of Intent should carefully read such Letter of Intent.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE--CLASS B SHARES
Class B shares are sold without an initial sales charge but are subject to
a CDSC payable upon most redemptions within six years after purchase. As stated
in the Prospectus, a CDSC will be imposed on any redemption by an investor if
after such redemption the current value of the investor's Class B shares of the
Fund is less than the dollar amount of all payments by the shareholder for the
purchase of Class B shares during the preceding six years (or, in the case of
shares held by certain Qualified Retirement Plans, three years). However, no
CDSC will be imposed to the extent that the net asset value of the shares
redeemed does not exceed: (a) the current net asset value of shares purchased
more than six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) prior to the redemption, plus (b) the current
net asset value of shares purchased through reinvestment of dividends or
distributions of the Fund or another TCW/DW Fund (see "Shareholder
Services--Targeted Dividends"), plus (c) increases in the net asset value of
the investor's shares above the total amount of payments for the purchase of
Fund shares made during the preceding six (three) years. The CDSC will be paid
to the Distributor.
In determining the applicability of the CDSC to each redemption, the
amount which represents an increase in the net asset value of the investor's
shares above the amount of the total payments for the purchase of shares within
the last six years (or, in the case of shares held by certain Qualified
Retirement Plans, three years) will be redeemed first. In the event the
redemption amount exceeds such increase in value, the next portion of the
amount redeemed will be the amount which represents the net asset value of the
investor's shares purchased more than six (three) years prior to the redemption
and/or shares purchased through reinvestment of dividends or distributions. A
portion of the amount redeemed which exceeds an amount which represents both
such increase in value and the value of shares purchased more than six years
(or, in the case of shares held by certain Qualified Retirement Plans, three
years) prior to the redemption and/or shares purchased through reinvestment of
dividends or distributions will be subject to a CDSC.
The amount of the CDSC, if any, will vary depending on the number of years
from the time of payment for the purchase of Class B shares of the Fund until
the time of redemption of such shares. For purposes of determining the number
of years from the time of any payment for the purchase of shares, all payments
made during a month will be aggregated and deemed to have been made on the last
day of the month. The following table sets forth the rates of the CDSC
applicable to most Class B shares of the Fund:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- -------------------------------- ---------------------
<S> <C>
First .......................... 5.0%
Second ......................... 4.0%
Third .......................... 3.0%
Fourth ......................... 2.0%
Fifth .......................... 2.0%
Sixth .......................... 1.0%
Seventh and thereafter ......... None
</TABLE>
24
<PAGE>
The following table sets forth the rates of the CDSC applicable to 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:
<TABLE>
<CAPTION>
YEAR SINCE
PURCHASE CDSC AS A PERCENTAGE
PAYMENT MADE OF AMOUNT REDEEMED
- ------------------------------- ---------------------
<S> <C>
First ......................... 2.0%
Second ........................ 2.0%
Third ......................... 1.0%
Fourth and thereafter ......... None
</TABLE>
In determining the rate of the CDSC, it will be assumed that a redemption
is made of shares held by the investor for the longest period of time within
the applicable six-year or three-year period. This will result in any such CDSC
being imposed at the lowest possible rate. The CDSC will be imposed, in
accordance with the table shown above, on any redemptions within six years (or,
in the case of shares held by certain Qualified Retirement Plans, three years)
of purchase which are in excess of these amounts and which redemptions do not
qualify for waiver of the CDSC, as described in the Prospectus.
LEVEL LOAD ALTERNATIVE--CLASS C SHARES
Class C shares are sold without a sales charge but are subject to a CDSC
of 1.0% on most redemptions made within one year after purchase, except in the
circumstances discussed in the Prospectus.
NO LOAD ALTERNATIVE--CLASS D SHARES
Class D shares are offered without any sales charge on purchase or
redemption. Class D shares are offered only to those persons meeting the
qualifications set forth in the Prospectus.
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
Upon the purchase of shares of the Fund, a Shareholder Investment Account
is opened for the investor on the books of the Fund and maintained by the
Transfer Agent. This is an open account in which shares owned by the investor
are credited by the Transfer Agent in lieu of issuance of a share certificate.
If a share certificate is desired, it must be requested in writing for each
transaction. Certificates are issued only for full shares and may be
redeposited in the account at any time. There is no charge to the investor for
issuance of a certificate. Whenever a shareholder-instituted transaction takes
place in the Shareholder Investment Account, the shareholder will be mailed a
confirmation of the transaction from the Fund or from DWR or other selected
broker-dealer.
Automatic Investment of Dividends and Distributions. As stated in the
Prospectus, all income dividends and capital gains distributions are
automatically paid in full and fractional shares of the applicable Class of the
Fund, unless the shareholder requests that they be paid in cash. Each purchase
of shares of the Fund is made upon the condition that the Transfer Agent is
thereby automatically appointed as agent of the investor to receive all
dividends and capital gains distributions on shares owned by the investor. Such
dividends and distributions will be paid, at the net asset value per share, in
shares of the applicable Class of the Fund (or in cash if the shareholder so
requests) as of the close of business on the record date. At any time an
investor may request the Transfer Agent, in writing, to have subsequent
dividends and/or capital gains distributions paid to him or her in cash rather
than shares. To assure sufficient time to process the change, such request
should be received by the Transfer Agent at least five business days prior to
the record date of the dividend or distribution. In the case of recently
purchased shares for which registration instructions have not been received on
the record date, cash payments will be made to DWR or the other selected
broker-dealer, and which will be forwarded to the shareholder, upon the receipt
of proper instructions. It has been and remains the Fund's policy and practice
that, if checks for dividends and distributions paid in cash remain uncashed,
no interest will accrue on amounts represented by such uncashed checks.
Targeted Dividends.(SM) In states where it is legally permissible,
shareholders may also have all income dividends and capital gains distributions
automatically invested in shares of any Class of an open-end TCW/DW
25
<PAGE>
Fund other than TCW/DW Total Return Trust or in another Class of TCW/DW Total
Return Trust. Such investment will be made as described above for automatic
investment in shares of the applicable Class of the Fund, at the net asset
value per share of the selected TCW/DW Fund as of the close of business on the
payment date of the dividend or distribution and will begin to earn dividends,
if any, in the selected TCW/DW Fund the next business day. To participate in
the Targeted Dividends program, shareholders should contact their Morgan
Stanley Dean Witter Financial Advisor or other selected broker-dealer
representative or the Transfer Agent. Shareholders of the Fund must be
shareholders of the selected Class of the TCW/DW Fund targeted to receive
investments from dividends at the time they enter the Targeted Dividends
program. Investors should review the prospectus of the targeted TCW/DW Fund
before entering the program.
EasyInvest.(SM) Shareholders may subscribe to EasyInvest, an automatic
purchase plan which provides for any amount from $100 to $5,000 to be
transferred automatically from a checking or savings account or following
redemption of shares of a Morgan Stanley Dean Witter money market fund, on a
semi-monthly, monthly or quarterly basis, to the Transfer Agent for investment
in shares of the Fund. Shares purchased through EasyInvest will be added to the
shareholder's existing account at the net asset value calculated the same
business day the transfer of funds is effected (subject to any applicable sales
charges). Shares of the Morgan Stanley Dean Witter money market funds redeemed
in connection with EasyInvest are redeemed on the business day preceding the
transfer of funds. For further information or to subscribe to EasyInvest,
shareholders should contact their Morgan Stanley Dean Witter Financial Advisor
or other selected broker-dealer representative or the Transfer Agent.
Investment of Dividends or Distributions Received in Cash. As discussed in
the Prospectus, any shareholder who receives a cash payment representing a
dividend or distribution may invest such dividend or distribution in shares of
the applicable Class at the net asset value per share, without the imposition
of a CDSC upon redemption, by returning the check or the proceeds to the
Transfer Agent within 30 days after the payment date. If the shareholder
returns the proceeds of a dividend or distribution, such funds must be
accompanied by a signed statement indicating that the proceeds constitute a
dividend or distribution to be invested. Such investment will be made at the
net asset value per share next determined after receipt of the check or
proceeds by the Transfer Agent.
Systematic Withdrawal Plan. As discussed in the Prospectus, 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
Contingent Deferred Sales Charge ("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.
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 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.
26
<PAGE>
The Transfer Agent acts as agent for the shareholder in tendering to the
Fund for redemption sufficient full and fractional shares to provide the amount
of the periodic withdrawal payment designated in the application. The shares
will be redeemed at their net asset value determined, at the shareholder's
option, on the tenth or twenty-fifth day (or next following business day) of
the relevant month, quarter, or semi-annual or annual period and normally a
check for the proceeds will be mailed by the Transfer Agent, or amounts
credited to a shareholder's Dean Witter Reynolds Inc. or other selected
broker-dealer brokerage account, or amounts deposited electronically into the
shareholder's bank account via the Automated Clearing House, within five
business days after the date of redemption.
Withdrawal Plan payments should not be considered as dividends, yields or
income. If periodic withdrawal plan payments continuously exceed net investment
income and net capital gains, the shareholder's original investment will be
correspondingly reduced and ultimately exhausted. Each withdrawal constitutes a
redemption of shares and any gain or loss realized must be recognized for
federal income tax purposes. Although a shareholder may make additional
investments while participating in the Withdrawal Plan, withdrawals made
concurrently with purchases of additional shares are inadvisable because of
sales charges applicable to purchases or redemptions of shares (see "Purchase
of Fund Shares" in the Prospectus).
Any shareholder who wishes to have payments under the Withdrawal Plan made
to a third party or sent to an address other than the one listed on the account
must send complete written instructions to the Transfer Agent to enroll in the
Withdrawal Plan. The shareholder's signature on such instructions must be
guaranteed by an eligible guarantor acceptable to the Transfer Agent
(shareholders should contact the Transfer Agent for a determination as to
whether a particular institution is such an eligible guarantor). A shareholder
may, at any time, change the amount and interval of withdrawal payments through
his or her Morgan Stanley Dean Witter Financial Advisor or other selected
broker-dealer representative or by written notification to the Transfer Agent.
In addition, the party and/or the address to which checks are mailed may be
changed by written notification to the Transfer Agent, with signature
guarantees required in the manner described above. The shareholder may also
terminate the Withdrawal Plan at any time by written notice to the Transfer
Agent. In the event of such termination, the account will be continued as a
regular Shareholder Investment Account. The shareholder may also redeem all or
part of the shares held in the Withdrawal Plan account (see "Redemptions and
Repurchases" in the Prospectus) at any time.
Direct Investments through Transfer Agent. As discussed in the Prospectus,
shareholders may make additional investments in any Class of shares of the Fund
for which they qualify at any time by sending a check in any amount, not less
than $100, payable to TCW/DW Total Return Trust, and indicating the selected
Class directly to the Fund's Transfer Agent. In the case of Class A shares,
after deduction of any applicable sales charge, the balance will be applied to
the purchase of Fund shares, and, in the case of shares of the other Classes,
the entire amount will be applied to the purchase of Fund shares, at the net
asset value per share next computed after receipt of the check or purchase
payment by the Transfer Agent. The shares so purchased will be credited to the
investor's account.
EXCHANGE PRIVILEGE
As discussed in the Prospectus, the Fund makes available to its
shareholders an Exchange Privilege whereby shareholders of each Class of shares
of the Fund may exchange their shares for shares of the same Class of shares of
any other TCW/DW Multi-Class Fund without the imposition of an exchange fee.
Shares may also be exchanged for TCW/DW North American Government Income Trust
and five money market funds for which MSDW Advisors serves as investment
manager (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 will be treated for federal
income tax purposes the same as a repurchase or redemption of shares, on which
the shareholder may realize a capital gain or loss.
Shareholders utilizing the Fund's Exchange Privilege may subsequently
re-exchange such shares back to the Fund. However, no exchange privilege is
available between the Fund and any other fund managed by the Manager or MSDW
Advisors, except for other TCW/DW Funds and the five money market funds listed
in the Prospectus.
Any new account established through the Exchange Privilege will have the
same registration and cash dividend or dividend reinvestment plan as the
present account, unless the Transfer Agent receives written notification to the
contrary. For telephone exchanges, the exact registration of the existing
account and the account number must be provided.
27
<PAGE>
Any shares held in certificate form cannot be exchanged but must be
forwarded to the Transfer Agent and deposited into the shareholder's account
before being eligible for exchange. (Certificates mailed in for deposit should
not be endorsed.)
As described below, and in the Prospectus under the caption "Purchase of
Fund Shares," a CDSC may be imposed upon a redemption, depending on a number of
factors, including the number of years from the time of purchase until the time
of redemption or exchange ("holding period"). When shares of a TCW/DW
Multi-Class Fund are exchanged for shares of an Exchange Fund, the exchange is
executed at no charge to the shareholder, without the imposition of the CDSC at
the time of the exchange. During the period of time the shareholder remains in
the Exchange Fund (calculated from the last day of the month in which the
Exchange Fund shares were acquired), the holding period or "year since purchase
payment made" is frozen. When shares are redeemed out of the Exchange Fund,
they will be subject to a CDSC which would be based upon the period of time the
shareholder held shares in a TCW/DW Multi-Class Fund. However, in the case of
shares exchanged into an Exchange Fund, upon a redemption of shares which
results in a CDSC being imposed, a credit (not to exceed the amount of the
CDSC) will be given in an amount equal to the Exchange Fund 12b-1 distribution
fees which are attributable to those shares. Shareholders acquiring shares of
an Exchange Fund pursuant to this exchange privilege may exchange those shares
back into a TCW/DW Multi-Class Fund from the Exchange Fund, with no charge
being imposed on such exchange. The holding period previously frozen when
shares were first exchanged for shares of an Exchange Fund resumes on the last
day of the month in which shares of a TCW/DW Multi-Class Fund are reacquired. A
CDSC is imposed only upon an ultimate redemption, based upon the time
(calculated as described above) the shareholder was invested in a TCW/DW
Multi-Class Fund.
When shares initially purchased in a TCW/DW Multi-Class Fund are exchanged
for shares of a TCW/DW Multi-Class Fund or shares of an Exchange Fund, the date
of purchase of the shares of the fund exchanged into, for purposes of the CDSC
upon redemption, will be the last day of the month in which the shares being
exchanged were originally purchased. In allocating the purchase payments
between funds for purposes of the CDSC the amount which represents the current
net asset value of shares at the time of the exchange which were (i) purchased
more than one, three or six years (depending on the CDSC schedule applicable to
the shares) prior to the exchange and (ii) originally acquired through
reinvestment of dividends or distributions (all such shares called "Free
Shares") will be exchanged first. After an exchange, all dividends earned on
shares in the Exchange Fund will be considered Free Shares. If the exchanged
amount exceeds the value of such Free Shares, an exchange is made, on a
block-by-block basis, of non-Free Shares held for the longest period of time.
Shares equal to any appreciation in the value of non-Free Shares exchanged will
be treated as Free Shares, and the amount of the purchase payments for the
non-Free Shares of the fund exchanged into will be equal to the lesser of (a)
the purchase payments for, or (b) the current net asset value of, the exchanged
non-Free Shares. If an exchange between funds would result in exchange of only
part of a particular block of non-Free Shares, then shares equal to any
appreciation in the value of the block (up to the amount of the exchange) will
be treated as Free Shares and exchanged first, and the purchase payment for
that block will be allocated on a pro rata basis between the non-Free Shares of
that block to be retained and the non-Free Shares to be exchanged. The prorated
amount of such purchase payment attributable to the retained non-Free Shares
will remain as the purchase payment for such shares, and the amount of purchase
payment for the exchanged non-Free Shares will be equal to the lesser of (a)
the prorated amount of the purchase payment for, or (b) the current net asset
value of, those exchanged non-Free Shares. Based upon the procedures described
in the Prospectus under the caption "Purchase of Fund Shares," any applicable
CDSC will be imposed upon the ultimate redemption of shares of any fund,
regardless of the number of exchanges since those shares were originally
purchased.
With respect to the redemption or repurchase of shares of the Fund, the
application of proceeds to the purchase of new shares in the Fund or any other
of the funds and the general administration of the Exchange Privilege, the
Transfer Agent acts as agent for the Distributor and for the shareholder's
selected broker-dealer, if any, in the performance of such functions.
With respect to exchanges, redemptions or repurchases, the Transfer Agent
shall be liable for its own negligence and not for the default or negligence of
its correspondents or for losses in transit. The Fund shall not be liable for
any default or negligence of the Transfer Agent, the Distributor or any
selected broker-dealer.
The Distributor and any selected broker-dealer have authorized and
appointed the Transfer Agent to act as their agent in connection with the
application of proceeds of any redemption of Fund shares to the purchase of
28
<PAGE>
shares of any other fund and the general administration of the Exchange
Privilege. No commission or discounts will be paid to the Distributor or any
selected broker-dealer for any transactions pursuant to this Exchange
Privilege.
Exchanges are subject to the minimum investment requirement and any other
conditions imposed by each fund. (The minimum initial investment for the
Exchange Privilege account of each Class is $5,000 for Morgan Stanley Dean
Witter Liquid Asset Fund Inc., Morgan Stanley Dean Witter Tax-Free Daily Income
Trust, Morgan Stanley Dean Witter New York Municipal Money Market Trust and
Morgan Stanley Dean Witter California Tax-Free Daily Income Trust, although
those funds may, at their discretion, accept initial investments of as low as
$1,000. The minimum initial investment for the Exchange Privilege account of
each Class for Morgan Stanley Dean Witter U.S. Government Money Market Trust
and for all TCW/DW Funds is $1,000.) Upon exchange into an Exchange Fund, the
shares of that fund will be held in a special Exchange Privilege Account
separately from accounts of those shareholders who have acquired their shares
directly from that fund. As a result, certain services normally available to
shareholders of money market funds, including the check writing feature, will
not be available for funds held in that account.
The Fund, each of the other TCW/DW Funds and each of the money market
funds may limit the number of times this Exchange Privilege may be exercised by
any investor within a specified period of time. Also, the Exchange Privilege
may be terminated or revised at any time by the Fund and/or any of the funds
for which shares of the Fund have been exchanged, upon such notice as may be
required by applicable regulatory agencies (presently sixty days for
termination or material revision), provided that six months prior written
notice of termination will be given to the shareholders who hold shares of
Exchange Funds pursuant to this Exchange Privilege, and provided further that
the Exchange Privilege may be terminated or materially revised without notice
at times (a) when the New York Stock Exchange is closed for other than
customary weekends and holidays, (b) when trading on that Exchange is
restricted, (c) when an emergency exists as a result of which disposal by the
Fund of securities owned by it is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, (d) during any other period when the Securities and Exchange Commission
by order so permits (provided that applicable rules and regulations of the
Securities and Exchange Commission shall govern as to whether the conditions
prescribed in (b) or (c) exist) or (e) if the Fund would be unable to invest
amounts effectively in accordance with its investment objective, policies and
restrictions.
For further information regarding the Exchange Privilege, shareholders
should contact their Morgan Stanley Dean Witter Financial Advisor or other
selected broker-dealer representative or the Transfer Agent.
REPURCHASES AND REDEMPTIONS
- --------------------------------------------------------------------------------
Redemption. As stated in the Prospectus, shares of each Class of the Fund
can be redeemed for cash at any time at the net asset value per share next
determined; however, such redemption proceeds will be reduced by the amount of
any applicable CDSC. If shares are held in a shareholder's account without a
share certificate, a written request for redemption to the Fund's Transfer
Agent at P.O. Box 983, Jersey City, NJ 07303 is required. If certificates are
held by the shareholder, the shares may be redeemed by surrendering the
certificates with a written request for redemption. The share certificate, or
an accompanying stock power, and the request for redemption, must be signed by
the shareholder or shareholders exactly as the shares are registered. Each
request for redemption, whether or not accompanied by a share certificate, must
be sent to the Fund's Transfer Agent, which will redeem the shares at their net
asset value next computed (see "Purchase of Fund Shares") after it receives the
request, and certificate, if any, in good order. Any redemption request
received after such computation will be redeemed at the next determined net
asset value. The term "good order" means that the share certificate, if any,
and request for redemption are properly signed, accompanied by any
documentation required by the Transfer Agent, and bear signature guarantees
when required by the Fund or the Transfer Agent. If redemption is requested by
a corporation, partnership, trust or fiduciary, the Transfer Agent may require
that written evidence of authority acceptable to the Transfer Agent be
submitted before such request is accepted.
Whether certificates are held by the shareholder or shares are held in a
shareholder's account, if the proceeds are to be paid to any person other than
the record owner, or if the proceeds are to be paid to a corporation (other
than the Distributor or a selected broker-dealer for the account of the
shareholder), partnership, trust or fiduciary,
29
<PAGE>
or sent to the shareholder at an address other than the registered address,
signatures must be guaranteed by an eligible guarantor acceptable to the
Transfer Agent (shareholders should contact the Transfer Agent for a
determination as to whether a particular institution is such an eligible
guarantor). A stock power may be obtained from any dealer or commercial bank.
The Fund may change the signature guarantee requirements from time to time upon
notice to shareholders, which may be by means of a revised prospectus.
Repurchase. As stated in the Prospectus, DWR and other selected
broker-dealers are authorized to repurchase shares represented by a share
certificate which is delivered to any of their offices. Shares held in a
shareholder's account without a share certificate may also be repurchased by
DWR and other selected broker-dealers upon the telephonic request of the
shareholder. The repurchase price is the net asset value next computed after
such purchase order is received by DWR or other selected broker-dealer reduced
by any applicable CDSC.
Payment for Shares Repurchased or Redeemed. As discussed in the
Prospectus, payment for shares of any Class presented for repurchase or
redemption will be made by check within seven days after receipt by the
Transfer Agent of the certificate and/or written request in good order. Such
payment may be postponed or the right of redemption suspended at times (a) when
the New York Stock Exchange is closed for other than customary weekends and
holidays, (b) when trading on that Exchange is restricted, (c) when an
emergency exists as a result of which disposal by the Fund of securities owned
by it is not reasonably practicable or it is not reasonably practicable for the
Fund fairly to determine the value of its net assets, or (d) during any other
period when the Securities and Exchange Commission by order so permits;
provided that applicable rules and regulations of the Securities and Exchange
Commission shall govern as to whether the conditions prescribed in (b) or (c)
exist. If the shares to be redeemed have recently been purchased by check,
payment of the redemption proceeds may be delayed for the minimum time needed
to verify that the check used for investment has been honored (not more than
fifteen days from the time of receipt of the check by the Transfer Agent). It
has been and remains the Fund's policy and practice that, if checks for
redemption proceeds remain uncashed, no interest will accrue on amounts
represented by such uncashed checks. Shareholders maintaining margin accounts
with DWR or another selected broker-dealer are referred to their 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.
Transfers of Shares. In the event a shareholder requests a transfer of any
shares to a new registration, such shares will be transferred without sales
charge at the time of transfer. With regard to the status of shares which are
either subject to the CDSC or free of such charge (and with regard to the
length of time shares subject to the charge have been held), any transfer
involving less than all of the shares in an account will be made on a pro rata
basis (that is, by transferring shares in the same proportion that the
transferred shares bear to the total shares in the account immediately prior to
the transfer). The transferred shares will continue to be subject to any
applicable CDSC as if they had not been so transferred.
Reinstatement Privilege. As discussed in the Prospectus, a shareholder who
has had his or her shares redeemed or repurchased and has not previously
exercised this reinstatement privilege may within 35 days after the date of
redemption or repurchase reinstate any portion or all of the proceeds of such
redemption or repurchase in shares of the Fund in the same Class at the net
asset value next determined after a reinstatement request, together with such
proceeds, is received by the Transfer Agent.
Exercise of the reinstatement privilege will not affect the federal income
tax treatment of any gain or loss realized upon the redemption or repurchase,
except that if the redemption or repurchase resulted in a loss and
reinstatement is made in shares of the Fund, some or all of the loss, depending
on the amount reinstated, will not be allowed as a deduction for federal income
tax purposes, but will be applied to adjust the cost basis of the shares
acquired upon reinstatement.
DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
As discussed in the Prospectus, the Fund will determine either to
distribute or to retain all or part of any net long-term capital gains in any
year for reinvestment. If any such gains are retained, the Fund will pay
federal income tax thereon, and shareholders will be required to include such
undistributed gains in their taxable income and will be able to claim their
share of the tax paid by the Fund as a credit against their individual federal
income tax.
30
<PAGE>
Any dividend or capital gains distribution received by a shareholder from
any investment company will have the effect of reducing the net asset value of
the shareholder's stock in that company by the exact amount of the dividend or
capital gains distribution. Furthermore, capital gains distributions and
dividends are subject to federal income taxes. If the net asset value of the
shares should be reduced below a shareholder's cost as a result of the payment
of dividends or the distribution of realized net long-term capital gains, such
payment or distribution would be in part a return of the shareholder's
investment to the extent of such reduction below the shareholder's cost, but
nonetheless would be fully taxable at either ordinary or capital gain rates.
Therefore, an investor should consider the tax implications of purchasing Fund
shares immediately prior to a dividend or distribution record date.
Shareholders are urged to consult their attorneys or tax advisors
regarding specific questions as to federal, state or local taxes.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
As discussed in the Prospectus, from time to time the Fund may quote its
"total return" in advertisements and sales literature. These figures are
computed separately for Class A, Class B, Class C and Class D shares. The
Fund's "average annual total return" represents an annualization of the Fund's
total return over a particular period (of a year or more) and is computed by
finding the annual percentage rate which will result in the ending redeemable
value of a hypothetical $1,000 investment made at the beginning of a one, five
or ten year period, or for the period from the date of commencement of the
Fund's operations, if shorter than any of the foregoing. The ending redeemable
value is reduced by any CDSC at the end of the one, five or ten year or other
period. For the purpose of this calculation, it is assumed that all dividends
and distributions are reinvested. The formula for computing the average annual
total return involves a percentage obtained by dividing the ending redeemable
value by the amount of the initial investment, taking a root of the quotient
(where the root is equivalent to the number of years in the period) and
subtracting 1 from the result. The average annual total returns of Class B for
the fiscal year ended July 31, 1998 and for the period from November 30, 1994
(commencement of operations) through July 31, 1998 were 3.25% and 22.35%,
respectively. The average annual total returns of Class A for the fiscal year
ended July 31, 1998 and for the period July 28, 1997 (inception of the Class)
through July 31, 1998 were 3.22% and 6.51%, respectively. The average annual
total returns of Class C for the fiscal year ended July 31, 1998 and for the
period July 28, 1997 (inception of the Class) through July 31, 1998 were 7.12%
and 11.52%, respectively. The average annual total returns of Class D for the
fiscal year ended July 31, 1998 and for the period July 28, 1997 (inception of
the Class) through July 31, 1998 were 9.20% and 12.63%, respectively.
In addition to the foregoing, the Fund may advertise its total return for
each Class over different periods of time by means of aggregate, year-by-year
or other types of total return figures. Such calculations may or may not
reflect the imposition of the maximum front-end sales charge for Class A or the
deduction of the CDSC for each of Class B and Class C which, if reflected,
would reduce the performance quoted. For example, the average annual total
return of the Fund may be calculated in the manner described above, but without
deduction for any applicable sales charge. Based upon the foregoing, the
average annual total returns of Class B for the fiscal year ended July 31, 1998
and for the period November 30, 1994 through July 31, 1998 were 8.25% and
22.67%, respectively. Based on this calculation, the average annual total
returns of Class A for the fiscal year ended July 31, 1998 and for the period
July 28, 1997 through July 31, 1998 were 8.94% and 12.37%, respectively, the
average annual total returns of Class C for the fiscal year ended July 31, 1998
and for the period July 28, 1997 through July 31, 1998 were 8.12% and 11.52%,
respectively, and the average annual total returns of Class D for the fiscal
year ended July 31, 1998 and for the period July 28, 1997 through July 31, 1998
were 9.20% and 12.63%, respectively.
In addition, the Fund may compute its aggregate total return for each
Class for specified periods by determining the aggregate percentage rate which
will result in the ending value of a hypothetical $1,000 investment made at the
beginning of the period. For the purpose of this calculation, it is assumed
that all dividends and distributions are reinvested. The formula for computing
aggregate total return involves a percentage obtained by dividing the ending
value (without the reduction for any sales charge) by the initial $1,000
investment and subtracting 1 from the result. Based upon the foregoing
calculation, the total returns of Class B for the fiscal year ended July 31,
1998 and for the period November 30, 1994 through July 31, 1998 were 8.25% and
111.51%, respectively. Based on the foregoing calculations, the total returns
for Class A for the fiscal year ended July 31,
31
<PAGE>
1998 and for the period July 28, 1997 through July 31, 1998 were 8.94% and
12.47%, respectively, the total returns of Class C for the fiscal year ended
July 31, 1998 and for the period July 28, 1997 through July 31, 1998 were 8.12%
and 11.62%, respectively, and the total returns of Class D for the fiscal year
ended July 31, 1998 and for the period July 28, 1997 through July 31, 1998 were
9.20% and 12.73%, respectively.
The Fund may also advertise the growth of hypothetical investments of
$10,000, $50,000 and $100,000 in each Class of shares of the Fund by adding 1
to the Fund's aggregate total return to date (expressed as a decimal and
without taking into account the effect of any applicable CDSC) and multiplying
by $9,475, $48,000 and $97,000 in the case of Class A (investments of $10,000,
$50,000 or $100,000 adjusted for the initial sales charge), or by $10,000,
$50,000 and $100,000 in the case of each of Class B, Class C and Class D, as
the case may be. Investments of $10,000, $50,000 and $100,000 in each Class at
inception would have grown to the following amounts at July 31, 1998:
<TABLE>
<CAPTION>
INVESTMENT AT INCEPTION OF:
INCEPTION ------------------------------------
CLASS DATE $10,000 $50,000 $100,000
- ------------------ ---------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Class A ......... 7/28/97 $10,656 $ 53,986 $109,096
Class B ......... 11/30/94 21,151 105,755 211,510
Class C ......... 7/28/97 11,162 55,810 111,620
Class D ......... 7/28/97 11,273 56,365 112,730
</TABLE>
The Fund from time to time may also advertise its performance relative to
certain performance rankings and indexes compiled by independent organizations.
DESCRIPTION OF SHARES
- --------------------------------------------------------------------------------
The shareholders of the Fund are entitled to a full vote for each full
share held. All of the Trustees have been elected by MSDW Advisors as the sole
shareholder of the Fund prior to the public offering of the Fund's shares. Mr.
Schroeder was elected by the other Trustees of the Fund on April 20, 1995. The
Trustees themselves have the power to alter the number and the terms of office
of the Trustees, and they may at any time lengthen their own terms or make
their terms of unlimited duration and appoint their own successors, provided
that always at least a majority of the Trustees has been elected by the
shareholders of the Fund. Under certain circumstances the Trustees may be
removed by action of the Trustees. The shareholders also have the right to
remove the Trustees following a meeting called for that purpose requested in
writing by the record holders of not less than ten percent of the Fund's
outstanding shares. The voting rights of shareholders are not cumulative, so
that holders of more than 50 percent of the shares voting can, if they choose,
elect all Trustees being selected, while the holders of the remaining shares
would be unable to elect any Trustees.
The Declaration of Trust permits the Trustees to authorize the creation of
additional series of shares (the proceeds of which would be invested in
separate, independently managed portfolios) and additional classes of shares
within any series. The Trustees have not authorized any such additional series
or classes of shares other than as set forth in the Prospectus.
The Declaration of Trust provides that no Trustee, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, nor is any
Trustee, officer, employee or agent liable to any third persons in connection
with the affairs of the Fund, except as such liability may arise from his own
bad faith, willful misfeasance, gross negligence, or reckless disregard of his
duties. It also provides that all third persons shall look solely to the Fund's
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Declaration of Trust provides that a
Trustee, officer, employee or agent is entitled to be indemnified against all
liabilities in connection with the affairs of the Fund.
The Fund is authorized to issue an unlimited number of shares of
beneficial interest. The Fund shall be of unlimited duration subject to the
provisions of the Declaration of Trust concerning termination by action of the
shareholders.
32
<PAGE>
CUSTODIAN AND TRANSFER AGENT
- --------------------------------------------------------------------------------
The Bank of New York, 90 Washington Street, New York, New York 10286 is
the Custodian of the Fund's assets. Any of the Fund's cash balances with the
Custodian in excess of $100,000 are unprotected by federal deposit insurance.
Such balances may, at times, be substantial.
Morgan Stanley Dean Witter Trust FSB ("MSDW Trust"), Harborside Financial
Center, Plaza Two, Jersey City, New Jersey 07311 is the Transfer Agent of the
Fund's shares and Dividend Disbursing Agent for payment of dividends and
distributions on Fund shares and Agent for shareholders under various
investment plans described herein. MSDW Trust is an affiliate of Morgan Stanley
Dean Witter Services Company Inc., the Fund's Manager, and of Morgan Stanley
Dean Witter Distributors Inc., the Fund's Distributor. As Transfer Agent and
Dividend Disbursing Agent, MSDW Trust's responsibilities include maintaining
shareholder accounts, disbursing cash dividends and reinvesting dividends,
processing account registration changes, handling purchase and redemption
transactions, mailing prospectuses and reports, mailing and tabulating proxies,
processing share certificate transactions, and maintaining shareholder records
and lists. For these services MSDW Trust receives a per shareholder account
fee.
INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
PricewaterhouseCoopers LLP serves as the independent accountants of the
Fund. The independent accountants are responsible for auditing the annual
financial statements of the Fund.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
The Fund will send to shareholders, at least semi-annually, reports
showing the Fund's portfolio and other information. An annual report containing
financial statements audited by independent accountants will be sent to
shareholders each year.
The Fund's fiscal year ends on July 31. The financial statements of the
Fund must be audited at least once a year by independent accountants whose
selection is made annually by the Fund's Board of Trustees.
LEGAL COUNSEL
- --------------------------------------------------------------------------------
Barry Fink, Esq., who is an officer and the General Counsel of the
Manager, is an officer and the General Counsel of the Fund.
EXPERTS
- --------------------------------------------------------------------------------
The financial statements of the Fund for the fiscal year ended July 31,
1998 included in this Statement of Additional Information and incorporated by
reference in the Prospectus have been so included and incorporated in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
REGISTRATION STATEMENT
- --------------------------------------------------------------------------------
This Statement of Additional Information and the Prospectus do not contain
all of the information set forth in the Registration Statement the Fund has
filed with the Securities and Exchange Commission. The complete Registration
Statement may be obtained from the Securities and Exchange Commission upon
payment of the fee prescribed by the rules and regulations of the Commission.
33
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1998
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------ ------------------
<S> <C> <C>
COMMON STOCKS (99.2%)
Aircraft & Aerospace (6.4%)
97,000 Boeing Co. ............................. $ 3,764,812
87,600 Coltec Industries, Inc.* ............... 1,494,675
161,400 Hexcel Corp.* .......................... 2,259,600
44,700 Sundstrand Corp. ....................... 2,338,369
------------
9,857,456
------------
Banking (5.2%)
17,400 BankAmerica Corp. ...................... 1,561,650
15,200 Citicorp ............................... 2,584,000
11,100 Wells Fargo & Co. ...................... 3,950,212
------------
8,095,862
------------
Banks -- Money Center (1.0%)
12,700 Morgan (J.P.) & Co., Inc. .............. 1,600,200
------------
Beverages -- Soft Drinks (2.3%)
24,700 Coca Cola Co. .......................... 1,992,981
41,750 PepsiCo, Inc. .......................... 1,620,422
------------
3,613,403
------------
Brokerage (6.0%)
30,900 Marsh & McLennan Companies,
Inc. ................................... 1,886,831
25,800 Merrill Lynch & Co., Inc. .............. 2,515,500
128,100 Schwab (CHARLES) Corp. ................. 4,803,750
------------
9,206,081
------------
Building Materials (1.4%)
101,500 Calmat Co. ............................. 2,112,469
------------
Chemicals -- Specialty (2.0%)
121,100 General Chemical Group Inc. ............ 3,103,187
------------
Communications -- Equipment &
Software (3.0%)
49,050 Cisco Systems, Inc.* ................... 4,696,537
------------
Computer Software (2.2%)
31,000 Microsoft Corp.* ....................... 3,408,062
------------
Drugs (14.4%)
63,700 Amgen Inc.* ............................ 4,673,987
21,200 Johnson & Johnson ...................... 1,637,700
60,400 Lilly (Eli) & Co. ...................... 4,061,900
18,000 Merck & Co., Inc. ...................... 2,219,625
28,200 Pfizer, Inc. ........................... 3,102,000
29,900 Schering-Plough Corp. .................. 2,892,825
47,100 Warner-Lambert Co. ..................... 3,558,994
------------
22,147,031
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------ ------------------
<S> <C> <C>
Electrical Equipment (4.5%)
34,200 Honeywell, Inc. ........................ $ 2,866,387
249,200 Wyman-Gordon Co.* ...................... 4,111,800
------------
6,978,187
------------
Electronics -- Defense (2.3%)
35,900 Hewlett-Packard Co. .................... 1,992,450
27,800 Raytheon Co. (Class B) ................. 1,537,687
------------
3,530,137
------------
Electronics -- Semiconductors/
Components (11.8%)
39,000 General Electric Co. ................... 3,483,188
64,800 Intel Corp. ............................ 5,467,500
88,000 Motorola, Inc. ......................... 4,598,000
78,900 Texas Instruments, Inc. ................ 4,679,756
------------
18,228,444
------------
Financial (1.5%)
13,500 Fannie Mae ............................. 837,000
32,000 Freddie Mac ............................ 1,512,000
------------
2,349,000
------------
Household Products (2.6%)
61,100 Fort James Corp. ....................... 2,062,125
23,700 Procter & Gamble Co. ................... 1,881,188
------------
3,943,313
------------
Insurance (3.9%)
18,300 American International Group, Inc. 2,759,869
55,100 Hartford Life, Inc. (Class A) .......... 3,188,913
------------
5,948,782
------------
Lodging -- Hotels (3.0%)
183,300 Hilton Hotels Corp. .................... 4,616,869
------------
Oil & Gas Products (1.3%)
122,800 Enron Oil & Gas Co. .................... 1,949,450
------------
Oil -- Exploration & Production (1.3%)
113,400 Mitchell Energy & Development
Corp. (Class A) ........................ 2,076,638
------------
Oil -- Foreign (3.2%)
13,600 Chevron Corp. .......................... 1,123,700
54,600 Exxon Corp. ............................ 3,828,825
------------
4,952,525
------------
Oil Drilling & Services (1.9%)
217,900 ENSCO International, Inc. .............. 2,955,269
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
34
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1998, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ ---------------
<S> <C> <C>
Oil Integrated -- International (1.1%)
32,400 Royal Dutch Petroleum Co.
(Netherlands) ....................... $ 1,652,400
------------
Oil Well Equipment & Service (0.4%)
15,100 Halliburton Co. ..................... 548,319
------------
Paper & Forest Products (0.0%)
600 Weyerhaeuser Co. .................... 25,200
------------
Publishing -- Newspaper (0.5%)
11,500 Tribune Co. ......................... 773,375
------------
Real Estate Investment Trust (2.5%)
185,600 IndyMac Mortgage Holdings, Inc....... 3,909,200
------------
Restaurants (3.2%)
34,700 McDonald's Corp. .................... 2,318,394
74,810 TRICON Global Restaurants, Inc.* 2,646,404
------------
4,964,798
------------
Retail -- Department Stores (2.4%)
59,800 Wal-Mart Stores, Inc. ............... 3,774,875
------------
Retail -- General Merchandise (2.1%)
72,920 Fred Meyer, Inc.* ................... 3,213,038
------------
Semiconductor Equipment (3.3%)
150,000 Applied Materials, Inc.* ............ 5,015,625
------------
Wholesale Distributor (2.5%)
78,100 Supervalu, Inc. ..................... 3,870,831
------------
TOTAL COMMON STOCKS
(Identified Cost $127,223,755)....... $153,116,563
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ---------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.6%)
REPURCHASE AGREEMENT
$ 893 The Bank of New York 5.50%
due 08/03/98 (dated 07/31/98;
proceeds $893,378) (a)
(Identified Cost $892,969) .......... $ 892,969
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $128,116,724) (b)..... 99.8% 154,009,532
OTHER ASSETS IN EXCESS OF
LIABILITIES ........................... 0.2 314,423
----- -----------
NET ASSETS ............................ 100.0% $154,323,955
===== ============
</TABLE>
- --------------------------------
* Non-income producing security.
(a) Collateralized by $569,213 U.S. Treasury Bond 11.125% due 08/15/03
valued at $734,593 and $169,286 U.S. Treasury Note 7.75% due
11/30/99 valued at $176,234.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$34,611,294 and the aggregate gross unrealized depreciation is
$8,718,486, resulting in net unrealized appreciation of $25,892,808.
SEE NOTES TO FINANCIAL STATEMENTS
35
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $128,116,724)................................... $ 154,009,532
Receivable for:
Investments sold ................................................ 1,436,571
Shares of beneficial interest sold .............................. 689,137
Dividends ....................................................... 150,839
Deferred organizational expenses .................................. 40,503
Prepaid expenses and other assets ................................. 43,369
--------------
TOTAL ASSETS .................................................... 156,369,951
--------------
LIABILITIES :
Payable for:
Investments purchased ........................................... 923,013
Shares of beneficial interest repurchased ....................... 831,121
Plan of distribution fee ........................................ 115,170
Management fee .................................................. 62,069
Investment advisory fee ......................................... 41,380
Accrued expenses and other payables ............................... 73,243
--------------
TOTAL LIABILITIES ............................................... 2,045,996
--------------
NET ASSETS ...................................................... $ 154,323,955
==============
COMPOSITION OF NET ASSETS :
Paid-in-capital ................................................... $ 120,657,014
Net unrealized appreciation ....................................... 25,892,808
Accumulated undistributed net investment income ................... 3,083
Accumulated undistributed net realized gain ....................... 7,771,050
--------------
NET ASSETS ...................................................... $ 154,323,955
==============
CLASS A SHARES :
Net Assets ........................................................ $ 1,254,354
Shares Outstanding (unlimited authorized, $.01 par value).......... 74,736
NET ASSET VALUE PER SHARE ....................................... $ 16.78
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $ 17.71
==============
CLASS B SHARES :
Net Assets ........................................................ $ 152,358,435
Shares Outstanding (unlimited authorized, $.01 par value) ......... 9,134,394
NET ASSET VALUE PER SHARE ....................................... $ 16.68
==============
CLASS C SHARES:
Net Assets ........................................................ $ 699,874
Shares Outstanding (unlimited authorized, $.01 par value) ......... 42,011
NET ASSET VALUE PER SHARE ....................................... $ 16.66
==============
CLASS D SHARES :
Net Assets ........................................................ $ 11,292
Shares Outstanding (unlimited authorized, $.01 par value) ......... 671
NET ASSET VALUE PER SHARE ....................................... $ 16.83
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
36
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended July 31, 1998
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME :
INCOME
Dividends (net of $4,357 foreign withholding tax) ......... $ 1,707,676
Interest .................................................. 276,135
-----------
TOTAL INCOME ............................................ 1,983,811
-----------
EXPENSES
Plan of distribution fee (Class A shares) ................. 1,129
Plan of distribution fee (Class B shares) ................. 1,196,377
Plan of distribution fee (Class C shares) ................. 4,605
Management fee ............................................ 641,236
Investment advisory fee ................................... 427,491
Transfer agent fees and expenses .......................... 138,552
Registration fees ......................................... 90,383
Shareholder reports and notices ........................... 50,834
Professional fees ......................................... 49,780
Trustees' fees and expenses ............................... 38,711
Organizational expenses ................................... 30,313
Custodian fees ............................................ 19,137
Other ..................................................... 12,934
-----------
TOTAL EXPENSES .......................................... 2,701,482
-----------
NET INVESTMENT LOSS ..................................... (717,671)
-----------
NET REALIZED AND UNREALIZED GAIN :
Net realized gain ......................................... 10,549,425
Net change in unrealized appreciation ..................... 1,702,988
-----------
NET GAIN ................................................ 12,252,413
-----------
NET INCREASE .............................................. $11,534,742
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
37
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1998 JULY 31, 1997*
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income (loss) ......................... $ (717,671) $ 202,878
Net realized gain .................................... 10,549,425 7,872,093
Net change in unrealized appreciation ................ 1,702,988 23,391,695
------------ ------------
NET INCREASE ....................................... 11,534,742 31,466,666
------------ ------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class B shares ...................................... -- (243,888)
Net realized gain
Class A shares ...................................... (7,061) --
Class B shares ...................................... (9,224,024) (5,079,906)
Class C shares ...................................... (24,164) --
Class D shares ...................................... (712) --
------------ ------------
TOTAL DIVIDENDS AND DISTRIBUTIONS .................. (9,255,961) (5,323,794)
------------ ------------
Net increase from transactions in shares of beneficial
interest ........................................... 34,945,345 42,432,561
------------ ------------
NET INCREASE ....................................... 37,224,126 68,575,433
NET ASSETS :
Beginning of period .................................. 117,099,829 48,524,396
------------ ------------
END OF PERIOD
(Including undistributed net investment income of
$3,083 and $5,972, respectively) .................. $154,323,955 $117,099,829
============ ============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
38
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1998
1. ORGANIZATION AND ACCOUNTING POLICIES
TCW/DW Total Return Trust (the "Fund") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a non-diversified, open-end
management investment company. The Fund's investment objective is high total
return from capital growth and income. The Fund seeks to achieve its objective
by investing primarily in equity and equity-related securities issued by
domestic and foreign companies. The Fund was organized as a Massachusetts
business trust on June 29, 1994 and commenced operations on November 30, 1994.
On July 28, 1997, the Fund commenced offering three additional classes of
shares, with the then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year,
six years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures. Actual results could differ
from those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at
the latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by TCW Funds Management, Inc. (the "Adviser") that sale and bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees; and (4)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
39
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1998, continued
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are charged to
each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are allocated directly to the
respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the record date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which
may differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc.,
formerly Dean Witter InterCapital Inc., an affiliate of Morgan Stanley Dean
Witter Services Company Inc. (the "Manager"), paid the organizational expenses
of the Fund in the amount of approximately $127,000 of which approximately
$122,000 has been reimbursed. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Manager a management fee,
accrued daily and payable monthly, by applying the annual rate of 0.45% to the
net assets of the Fund determined as of the close of each business day.
40
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1998, continued
Under the terms of the Management Agreement, the Manager maintains certain of
the Fund's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
pays the salaries of all personnel, including officers of the Fund who are
employees of the Manager. The Manager also bears the cost of telephone
services, heat, light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT
Pursuant to an Investment Advisory Agreement with the Adviser, the Fund pays an
advisory fee, accrued daily and payable monthly, by applying the annual rate of
0.30% to the net assets of the Fund determined as of the close of each business
day.
Under the terms of the Investment Advisory Agreement, the Fund has retained the
Adviser to invest the Fund's assets, including placing orders for the purchase
and sale of portfolio securities. The Adviser obtains and evaluates such
information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Fund in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -- up to
0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
lesser of: (a) the average daily aggregate gross sales of the Class B shares
since the inception of the Fund (not including reinvestment of dividend or
capital gain distributions) less the average daily aggregate net asset value of
the Class B shares redeemed since the Fund's inception upon which a contingent
deferred sales charge has been imposed or waived; or (b) the average daily net
assets of Class B; and (iii) Class C -- up to 1.0% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for
services provided and the expenses borne by it and others in the distribution
of the shares of these Classes, including the payment of commissions for sales
of these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
41
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1998, continued
telephone expenses; printing and distribution of prospectuses and reports used
in connection with the offering of these shares to other than current
shareholders; and preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and Distributor,
and other selected broker-dealers for their opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the Trustees will consider at that time the manner in which to treat such
expenses. The Distributor has advised the Fund that such excess amounts,
including carrying charges, totaled $4,799,182 at
July 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended July 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 1998, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $316,290 and $494, respectively and
received $14,513 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the year ended July 31, 1998 aggregated
$154,729,887 and $130,352,065, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $13,289,711 and
$13,535,242, respectively.
42
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1998, continued
For the year ended July 31, 1998, the Fund incurred brokerage commissions of
$8,215 with Morgan Stanley & Co., Inc., an affiliate of the Manager, for
portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent. At July 31, 1998, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1998 JULY 31, 1997*
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 77,071 $ 1,323,814 624 $ 10,020
Reinvestment of distributions ....................... 473 7,061 -- --
Redeemed ............................................ (3,432) (58,689) -- --
------ ------------- --- -------------
Net increase -- Class A ............................. 74,112 1,272,186 624 10,020
------ ------------- --- -------------
CLASS B SHARES
Sold ................................................ 3,642,674 60,041,237 3,902,145 54,982,768
Reinvestment of dividends and distributions ......... 553,040 8,234,768 356,843 4,658,943
Redeemed ............................................ (2,117,176) (35,250,499) (1,245,479) (17,266,663)
---------- ------------- ---------- -------------
Net increase -- Class B ............................. 2,078,538 33,025,506 3,013,509 42,375,048
---------- ------------- ---------- -------------
CLASS C SHARES
Sold ................................................ 42,555 699,553 2,311 37,473
Reinvestment of distributions ....................... 1,578 23,504 -- --
Redeemed ............................................ (4,433) (76,116) -- --
---------- ------------- ---------- -------------
Net increase -- Class C ............................. 39,700 646,941 2,311 37,473
---------- ------------- ---------- -------------
CLASS D SHARES
Sold ................................................ -- -- 624 10,020
Reinvestment of distributions ....................... 47 712 -- --
---------- ------------- ---------- -------------
Net increase -- Class D ............................. 47 712 624 10,020
---------- ------------- ---------- -------------
Net increase in Fund ................................ 2,192,397 $ 34,945,345 3,017,068 $ 42,432,561
========== ============= ========== =============
</TABLE>
- ---------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date)
through July 31, 1997.
7. FEDERAL INCOME TAX STATUS
At July 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales and permanent book/tax
differences primarily attributable to a net operating loss. To reflect
reclassifications arising from the permanent differences, accumulated
undistributed net realized gain was charged and accumulated undistributed net
investment income was credited $714,782.
43
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE 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>
- -------------
* 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.
SEE NOTES TO FINANCIAL STATEMENTS
44
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<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>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized
(2) Annualized
SEE NOTES TO FINANCIAL STATEMENTS
45
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<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>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
46
<PAGE>
TCW/DW TOTAL RETURN TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW TOTAL RETURN TRUST
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of TCW/DW Total Return Trust (the
"Fund") at July 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at July 31, 1998 by correspondence with the custodian and brokers,
provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
September 11, 1998
1998 FEDERAL TAX NOTICE (unaudited)
For the year ended July 31, 1998, the Fund paid to its shareholders $0.32
per share from long-term capital gains. Of this $0.32 distribution, $0.29
is taxable as 28% rate gain and $.03 is taxable as 20% rate gain. For
such period, 24.72% of the income paid qualified for the dividends
received deduction available to corporations.
47
<PAGE>
APPENDIX
- --------------------------------------------------------------------------------
RATINGS OF CORPORATE DEBT INSTRUMENTS
MOODY'S INVESTORS SERVICE INC. ("MOODY'S")
BOND RATINGS
<TABLE>
<S> <C>
Aaa Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group
they comprise what are generally known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes and are to be considered as upper
medium grade obligations. Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime in the future.
Baa Bonds which are rated Baa are considered as medium grade obligations; i.e., they are neither highly
protected nor poorly secured. Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically unreliable over any great length
of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics
as well.
Bonds rated Aaa, Aa, A and Baa are considered investment grade bonds.
Ba Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal payments may be very moderate, and therefore
not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes
bonds in this class.
B Bonds which are rated B generally lack characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any long period of time may be
small.
Caa Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present
elements of danger with respect to principal or interest.
Ca Bonds which are rated Ca present obligations which are speculative in a high degree. Such issues are often
in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real investment standing.
</TABLE>
Rating Refinements: Moody's may apply numerical modifiers, 1, 2, and 3 in
each generic rating classification from Aa through B in its municipal bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and a modifier 3 indicates that the issue ranks in the lower end if
its generic rating category.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability to repay
punctually promissory obligations not having an original maturity in excess of
nine months. The ratings apply to Municipal Commercial Paper as well
48
<PAGE>
as taxable Commercial Paper. Moody's employs the following three designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers: Prime-1, Prime-2, Prime-3.
Issuers rated Prime-1 have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2 have a strong capacity for
repayment of short-term promissory obligations; and Issuers rated Prime-3 have
an acceptable capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S CORPORATION ("STANDARD & POOR'S")
BOND RATINGS
A Standard & Poor's bond rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers,
or lessees.
The ratings are based on current information furnished by the issuer or
obtained by Standard & Poor's from other sources it considers reliable. The
ratings are based, in varying degrees, on the following considerations:
(1) likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligation; (2) nature of and provisions of the obligation; and
(3) protection afforded by, and relative position of, the obligation in the
event of bankruptcy, reorganization or other arrangement under the laws of
bankruptcy and other laws affecting creditors' rights.
Standard & Poor's does not perform an audit in connection with any rating
and may, on occasion, rely on unaudited financial information. The ratings may
be changed, suspended or withdrawn as a result of changes in, or unavailability
of, such information, or for other reasons.
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay
principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic conditions than debt in
higher-rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and repay principal. Whereas
it normally exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt
in this category than for debt in higher-rated categories.
Bonds rated AAA, AA, A and BBB are considered investment grade bonds.
BB Debt rated "BB" has less near-term vulnerability to default than other speculative grade debt. However,
it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions
which could lead to inadequate capacity or willingness to pay interest and repay principal.
B Debt rated "B" has a greater vulnerability to default but presently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic conditions would likely
impair capacity or willingness to pay interest and repay principal.
CCC Debt rated "CCC" has a current identifiable vulnerability to default, and is dependent upon favorable
business, financial and economic conditions to meet timely payments of interest and repayments of
principal. In the event of adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal.
CC The rating "CC" is typically applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC" rating.
</TABLE>
49
<PAGE>
<TABLE>
<S> <C>
C The rating "C" is typically applied to debt subordinated to senior debt which is assigned an actual or
implied "CCC-" debt rating.
Cl The rating "Cl" is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in payment default. The `D' rating category is used when interest payments or principal
payments are not made on the date due even if the applicable grace period has not expired, unless Standard
& Poor's believes that such payments will be made during such grace period. The `D' rating also will be
used upon the filing of a bankruptcy petition if debt service payments are jeopardized.
NR Indicates that no rating has been requested, that there is insufficient information on which to base a rating
or that Standard & Poor's does not rate a particular type of obligation as a matter of policy.
Bonds rated "BB", "B", "CCC", "CC" and "C" are regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. "BB" indicates the least degree
of speculation and "C" the highest degree of speculation. While such debt will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or major risk exposures to
adverse conditions.
Plus (+) or minus (-): The rating from "AA" to "CCC" may be modified by the addition of a plus or minus
sign to show relative standing within the major ratings categories.
</TABLE>
COMMERCIAL PAPER RATINGS
Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days. The commercial paper rating is not a recommendation to purchase
or sell a security. The ratings are based upon current information furnished by
the issuer or obtained by Standard & Poor's from other sources it considers
reliable. The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information. Ratings are graded into group
categories, ranging from "A" for the highest quality obligations to "D" for the
lowest. Ratings are applicable to both taxable and tax-exempt commercial paper.
The categories are as follows:
Issues assigned A ratings are regarded as having the greatest capacity for
timely payment. Issues in this category are further refined with the
designation 1, 2, and 3 to indicate the relative degree of safety.
<TABLE>
<S> <C>
A-1 indicates that the degree of safety regarding timely payment is very strong.
A-2 indicates capacity for timely payment on issues with this designation is strong. However, the relative
degree of safety is not as overwhelming as for issues designated "A-1."
A-3 indicates a satisfactory capacity for timely payment. Obligations carrying this designation are, however,
somewhat more vulnerable to the adverse effects of changes in circumstances than obligations carrying the
higher designations.
</TABLE>
50
<PAGE>
TCW/DW TOTAL RETURN TRUST
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits
<TABLE>
<CAPTION>
Page in
Prospectus
----------
<S> <C> <C>
(a) Financial Statements
(1) Financial statements and schedules, included in Prospectus (Part A):
Financial Highlights for the period November 30, 1994
(commencement of operations) through July 31, 1995 and the
fiscal years ended July 31, 1996, 1997 and 1998 (Class B) ................ 6
Financial Highlights for the period July 28, 1997 through July
31, 1997 and the fiscal year ended July 31, 1998(Classes A, C and D)...... 7
(2) Financial statements included in the Statement of Additional
Information (Part B):
Page in
SAI
---
Portfolio of Investments at July 31, 1998 ................................ 34
Statement of Assets and Liabilities at July 31, 1998 ..................... 36
Statement of operations for the year ended July 31, 1998.................. 37
Statement of changes in net assets for the fiscal years ended
July 31, 1997 and 1998.................................................... 38
Notes to Financial Statements at July 31, 1998............................ 39
Financial Highlights for the period November 30, 1994 (commencement
of operations) through July 31, 1995 and the fiscal years ended July 31,
1996, 1997 and 1998 (Class B)............................................. 44
Financial Highlights for the period July 28, 1997 through July 31,
1997 and the fiscal year ended July 31, 1998 (Class A, C and D)........... 45
(3) Financial statements included in Part C:
None.
</TABLE>
1
<PAGE>
Exhibits
- --------
2. -- By-Laws of the Registrant dated October 23, 1997
8. -- Form of Amended and Restated Transfer Agency and Services
Agreement between the Registrant and Morgan Stanley Dean Witter
Trust FSB
11. -- Consent of Independent Accountants
16. -- Schedules for Computations of Performance
27. -- Financial Data Schedules
- ---------------
All other exhibits were previously filed via EDGAR and are hereby incorporated
by reference
Item 25. Persons Controlled by or Under Common Control With Registrant.
None
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class at August 31, 1998
-------------- ------------------
Class A 115
Class B 11,089
Class C 77
Class D 2
Item 27. Indemnification.
Pursuant to Section 5.3 of the Registrant's Declaration of Trust and
under Section 4.8 of the Registrant's By-Laws, the indemnification of the
Registrant's trustees, officers, employees and agents is permitted if it is
determined that they acted under the belief that their actions were in or not
opposed to the best interest of the Registrant, and, with respect to any
criminal proceeding, they had reasonable cause to believe their conduct was not
unlawful. In addition, indemnification is permitted only if it is determined
that the actions in question did not render them liable by reason of willful
misfeasance, bad faith or gross negligence in the performance of their duties
or by reason of reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be indemnified for
the expense of litigation if it is determined that they are entitled to
indemnification against any liability established in such litigation. The
Registrant may also advance money for these expenses provided that they give
their undertakings to repay the Registrant unless their conduct is later
determined to permit indemnification.
2
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Pursuant to Section 5.2 of the Registrant's Declaration of Trust and
paragraph 8 of the Registrant's Management and Advisory Agreements, none of the
Manager, the Adviser or any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except in the case
of bad faith, willful misfeasance, gross negligence or reckless disregard of
duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the successful
defense of any action, suit or proceeding) is asserted against the Registrant
by such trustee, officer or controlling person in connection with the shares
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act, and will be governed by the
final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its by-laws in a manner consistent with Release
11330 of the Securities and Exchange Commission under the Investment Company
Act of 1940, so long as the interpretation of Sections 17(h) and 17(i) of such
Act remains in effect.
Registrant, in conjunction with the Manager, Registrant's Trustees,
and other registered investment management companies managed by the Manager,
maintains insurance on behalf of any person who is or was a Trustee, officer,
employee, or agent of Registrant, or who is or was serving at the request of
Registrant as a trustee, director, officer, employee or agent of another trust
or corporation, against any liability asserted against him and incurred by him
or arising out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which Registrant itself
is not permitted to indemnify him.
Item 28. Business and Other Connections of Investment Adviser.
The TCW Funds Management, Inc. ("TCW") is a 100% owned subsidiary of
The TCW Group, Inc., a Nevada corporation. TCW presently serves as investment
adviser to: (1) TCW/DW North American Government Income Trust, an open-end,
non-diversified management company; (2) TCW/DW Income and Growth Fund, an
open-end, non-diversified management company; (3) TCW/DW Latin American Growth
Fund, an open-end, non-diversified management company; (4) TCW/DW Small Cap
Growth Fund, an open-end non-diversified management company; (5) TCW/DW Term
Trust 2000, a closed-end, diversified management company; (6) TCW/DW Term Trust
2002, a closed-end diversified management company; (7) TCW/DW Term Trust 2003,
a closed-end diversified management company; (8) TCW/DW Emerging Markets
Opportunities Trust, an open-end, non-diversified management company; (9)
TCW/DW Total Return Trust, an open-end non-diversified management investment
company; (10) TCW/DW Mid-Cap Equity Trust, an open-end, diversified management
investment company; and (11) TCW/DW Global Telecom Trust, an open-end
diversified management investment company. TCW also serves as investment
adviser or sub-adviser to other
3
<PAGE>
investment companies, including foreign investment companies. The list required
by this Item 28 of the officers and directors of TCW together with information
as to any other business, profession, vocation or employment of a substantive
nature engaged in by TCW and such officers and directors during the past two
years, is incorporated by reference to Form ADV (File No. 801-29075) filed by
TCW pursuant to the Investment Advisers Act.
Item 29. Principal Underwriters.
(a) Morgan Stanley Dean Witter Distributors Inc. ("MSDW Distributors"), a
Delaware corporation,is the principal underwriter of the Registrant. MSDW
Distributors is also the principal underwriter of the following investment
companies:
(1) Active Assets California Tax-Free Trust
(2) Active Assets Government Securities Trust
(3) Active Assets Money Trust
(4) Active Assets Tax-Free Trust
(5) Morgan Stanley Dean Witter American Value Fund
(6) Morgan Stanley Dean Witter Balanced Growth Fund
(7) Morgan Stanley Dean Witter Balanced Income Fund
(8) Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
(9) Morgan Stanley Dean Witter California Tax-Free Income Fund
(10) Morgan Stanley Dean Witter Capital Appreciation Fund
(11) Morgan Stanley Dean Witter Capital Growth Securities
(12) Morgan Stanley Dean Witter Competitive Edge Fund, "Best Ideas Portfolio"
(13) Morgan Stanley Dean Witter Convertible Securities Trust
(14) Morgan Stanley Dean Witter Developing Growth Securities Trust
(15) Morgan Stanley Dean Witter Diversified Income Trust
(16) Morgan Stanley Dean Witter Dividend Growth Securities Inc.
(17) Morgan Stanley Dean Witter Equity Fund
(18) Morgan Stanley Dean Witter European Growth Fund Inc.
(19) Morgan Stanley Dean Witter Federal Securities Trust
(20) Morgan Stanley Dean Witter Financial Services Trust
(21) Morgan Stanley Dean Witter Fund of Funds
(22) Morgan Stanley Dean Witter Global Dividend Growth Securities
(23) Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
(24) Morgan Stanley Dean Witter Global Utilities Fund
(25) Morgan Stanley Dean Witter Growth Fund
(26) Morgan Stanley Dean Witter Hawaii Municipal Trust
(27) Morgan Stanley Dean Witter Health Sciences Trust
(28) Morgan Stanley Dean Witter High Yield Securities Inc.
(29) Morgan Stanley Dean Witter Income Builder Fund
(30) Morgan Stanley Dean Witter Information Fund
(31) Morgan Stanley Dean Witter Intermediate Income Securities
(32) Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
(33) Morgan Stanley Dean Witter International SmallCap Fund
(34) Morgan Stanley Dean Witter Japan Fund
4
<PAGE>
(35) Morgan Stanley Dean Witter Limited Term Municipal Trust
(36) Morgan Stanley Dean Witter Liquid Asset Fund Inc.
(37) Morgan Stanley Dean Witter Market Leader Trust
(38) Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
(39) Morgan Stanley Dean Witter Mid-Cap Growth Fund
(40) Morgan Stanley Dean Witter Multi-State Municipal Series Trust
(41) Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
(42) Morgan Stanley Dean Witter New York Municipal Money Market Trust
(43) Morgan Stanley Dean Witter New York Tax-Free Income Fund
(44) Morgan Stanley Dean Witter Pacific Growth Fund Inc.
(45) Morgan Stanley Dean Witter Precious Metals and Minerals Trust
(46) Morgan Stanley Dean Witter Prime Income Trust
(47) Morgan Stanley Dean Witter S&P 500 Index Fund
(48) Morgan Stanley Dean Witter S&P 500 Select Fund
(49) Morgan Stanley Dean Witter Short-Term Bond Fund
(50) Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
(51) Morgan Stanley Dean Witter Special Value Fund
(52) Morgan Stanley Dean Witter Strategist Fund
(53) Morgan Stanley Dean Witter Tax-Exempt Securities Trust
(54) Morgan Stanley Dean Witter Tax-Free Daily Income Trust
(55) Morgan Stanley Dean Witter U.S. Government Money Market Trust
(56) Morgan Stanley Dean Witter U.S. Government Securities Trust
(57) Morgan Stanley Dean Witter Utilities Fund
(58) Morgan Stanley Dean Witter Value-Added Market Series
(59) Morgan Stanley Dean Witter Value Fund
(60) Morgan Stanley Dean Witter Variable Investment Series
(61) Morgan Stanley Dean Witter World Wide Income Trust
(1) TCW/DW Emerging Markets Opportunities Trust
(2) TCW/DW Global Telecom Trust
(3) TCW/DW Income and Growth
(4) TCW/DW Latin American Growth Fund
(5) TCW/DW Mid-Cap Equity Trust
(6) TCW/DW North American Government Income Trust
(7) TCW/DW Small Cap Growth Fund
(8) TCW/DW Total Return Trust
(b) The following information is given regarding directors and officers of
MSDW Distributors not listed in Item 28 above. The principal address of
MSDW Distributors is Two World Trade Center, New York, New York 10048.
None of the following persons has any position or office with the
Registrant.
POSITION AND OFFICE WITH MSDW DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- -------------------------------------
Philip J. Purcell Director of MSDW Distributors.
Richard M. DeMartini Director of MSDW Distributors and Trustee of
the Registrant.
5
<PAGE>
POSITION AND OFFICE WITH MSDW DISTRIBUTORS
NAME AND THE REGISTRANT
- ---- -----------------------------------------
James F. Higgins Director of MSDW Distributors.
Christine A. Edwards Executive Vice President, Secretary, Chief
Legal Officer and Director of MSDW
Distributors.
Mitchell M. Merin Executive Vice President of MSDW
Distributors and Vice President of the
Registrant.
John B. Kemp III President of MSDW Distributors
Robert Scanlan Executive Vice President of MSDW
Distributors and Vice President of the
Registrant.
Robert S. Giambrone Senior Vice President of MSDW Distributors
and Vice President of the Registrant.
Barry Fink Senior Vice President, Assistant General
Counsel and Assistant Secretary of
MSDW Distributors and Vice President,
Secretary and General Counsel of the
Registrant.
Frederick K. Kubler Senior Vice President, Assistant Secretary
and Chief Compliance Officer of MSDW
Distributors.
Michael T. Gregg Vice President and Assistant Secretary of
MSDW Distributors.
Thomas F. Caloia Assistant Treasurer of MSDW Distributors and
Treasurer of the Registrant.
Michael Interrante Assistant Treasurer of MSDW Distributors.
Item 30. Location of Accounts and Records
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder
are maintained by the Manager at its offices, except records relating to
holders of shares issued by the Registrant, which are maintained by the
Registrant's Transfer Agent, at its place of business as shown in the
prospectus.
Item 31. Management Services
Registrant is not a party to any such management-related service
contract.
6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and State of New York on the 29th day of September, 1998.
TCW/DW TOTAL RETURN TRUST
By: /s/ Barry Fink
-----------------------------
Barry Fink
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 6 has been signed below by the following persons
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
(1) Principal Executive Officer President, Chief Executive Officer,
Trustee and Chairman
By: /s/ Charles A. Fiumefreddo 09/29/98
--------------------------------
Charles A. Fiumefreddo
(2) Principal Financial Officer Treasurer and Principal Accounting
Officer
By: /s/ Thomas F. Caloia 09/29/98
--------------------------------
Thomas F. Caloia
(3) Majority of the Trustees
Charles A. Fiumefreddo (Chairman)
Thomas E. Larkin, Jr.
Richard M. DeMartini
Marc I. Stern
By: /s/ Barry Fink 09/29/98
--------------------------------
Barry Fink
Attorney-in-Fact
John C. Argue Michael E. Nugent
John R. Haire John L. Schroeder
Manuel H. Johnson
By: /s/ David M. Butowsky 09/29/98
--------------------------------
David M. Butowsky
Attorney-in-Fact
</TABLE>
<PAGE>
TCW/DW TOTAL RETURN TRUST
EXHIBIT INDEX
2. -- By-Laws of the Registrant dated October 23, 1997
8. -- Form of Amended and Restated Transfer Agency and Services
Agreement between the Registrant and Morgan Stanley Dean
Witter Trust FSB
11. -- Consent of Independent Accountants
16. -- Schedules for Computations of Performance
27. -- Financial Data Schedules
<PAGE>
BY-LAWS
OF
TCW/DW TOTAL RETURN TRUST
AMENDED AND RESTATED AS OF OCTOBER 23, 1997
ARTICLE I
DEFINITIONS
The terms "Commission," "Declaration," "Distributor," "Investment
Adviser," "Majority Shareholder Vote," "1940 Act," "Shareholder," "Shares,"
"Transfer Agent," "Trust," "Trust Property," and "Trustees" have the respective
meanings given them in the Declaration of Trust of TCW/DW Total Return Trust
dated June 29, 1994.
ARTICLE II
OFFICES
SECTION 2.1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in the Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
SECTION 2.2. Other Offices. In addition to its principal office in the
Commonwealth of Massachusetts, the Trust may have an office or offices in the
City of New York, State of New York, and at such other places within and
without the Commonwealth as the Trustees may from time to time designate or the
business of the Trust may require.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 3.1. Place of Meetings. Meetings of Shareholders shall be held at
such place, within or without the Commonwealth of Massachusetts, as may be
designated from time to time by the Trustees.
SECTION 3.2. Meetings. Meetings of Shareholders of the Trust shall be held
whenever called by the Trustees or the President of the Trust and whenever
election of a Trustee or Trustees by Shareholders is required by the provisions
of Section 16(a) of the 1940 Act, for that purpose. Meetings of Shareholders
shall also be called by the Secretary upon the written request of the holders
of Shares entitled to vote as otherwise required by Section 16(c) of the 1940
Act and to the extent required by the corporate or business statute of any
state in which the Shares of the Trust are sold, as made applicable to the
Trust by the provisions of Section 2.3 of the Declaration. Such request shall
state the purpose or purposes of such meeting and the matters proposed to be
acted on thereat. Except to the extent otherwise required by Section 16(c) of
the 1940 Act, as made applicable to the Trust by the provisions of Section 2.3
of the Declaration, the Secretary shall inform such Shareholders of the
reasonable estimated cost of preparing and mailing such notice of the meeting,
and upon payment to the Trust of such costs, the Secretary shall give notice
stating the purpose or purposes of the meeting to all entitled to vote at such
meeting. No meeting need be called upon the request of the holders of Shares
entitled to cast less than a majority of all votes entitled to be cast at such
meeting, to consider any matter which is substantially the same as a matter
voted upon at any meeting of Shareholders held during the preceding twelve
months.
SECTION 3.3. Notice of Meetings. Written or printed notice of every
Shareholders' meeting stating the place, date, and purpose or purposes thereof,
shall be given by the Secretary not less than ten (10) nor more than ninety
(90) days before such meeting to each Shareholder entitled to vote at such
meeting. Such notice shall be deemed to be given when deposited in the United
States mail, postage prepaid, directed to the Shareholder at his address as it
appears on the records of the Trust.
SECTION 3.4. Quorum and Adjournment of Meetings. Except as otherwise
provided by law, by the Declaration or by these By-Laws, at all meetings of
Shareholders, the holders of a majority of the Shares
66576 TOTALRETUR
<PAGE>
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall be requisite and shall constitute a quorum for the
transaction of business. In the absence of a quorum, the Shareholders present
or represented by proxy and entitled to vote thereat shall have the power to
adjourn the meeting from time to time. The Shareholders present in person or
represented by proxy at any meeting and entitled to vote thereat also shall
have the power to adjourn the meeting from time to time if the vote required to
approve or reject any proposal described in the original notice of such meeting
is not obtained (with proxies being voted for or against adjournment consistent
with the votes for and against the proposal for which the required vote has not
been obtained). The affirmative vote of the holders of a majority of the Shares
then present in person or represented by proxy shall be required to adjourn any
meeting. Any adjourned meeting may be reconvened without further notice or
change in record date. At any reconvened meeting at which a quorum shall be
present, any business may be transacted that might have been transacted at the
meeting as originally called.
SECTION 3.5. Voting Rights, Proxies. At each meeting of Shareholders, each
holder of record of Shares entitled to vote thereat shall be entitled to one
vote in person or by proxy, executed in writing by the Shareholder or his duly
authorized attorney-in-fact, for each Share of beneficial interest of the Trust
and for the fractional portion of one vote for each fractional Share entitled
to vote so registered in his name on the records of the Trust on the date fixed
as the record date for the determination of Shareholders entitled to vote at
such meeting. No proxy shall be valid after eleven months from its date, unless
otherwise provided in the proxy. At all meetings of Shareholders, unless the
voting is conducted by inspectors, all questions relating to the qualification
of voters and the validity of proxies and the acceptance or rejection of votes
shall be decided by the chairman of the meeting. Pursuant to a resolution of a
majority of the Trustees, proxies may be solicited in the name of one or more
Trustees or Officers of the Trust.
SECTION 3.6. Vote Required. Except as otherwise provided by law, by the
Declaration of Trust, or by these By-Laws, at each meeting of Shareholders at
which a quorum is present, all matters shall be decided by Majority Shareholder
Vote.
SECTION 3.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the chairman of any meeting of Shareholders may, and on the request
of any Shareholder or his proxy shall, appoint Inspectors of Election of the
meeting. In case any person appointed as Inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at the meeting by the person
acting as chairman. The Inspectors of Election shall determine the number of
Shares outstanding, the Shares represented at the meeting, the existence of a
quorum, the authenticity, validity and effect of proxies, shall receive votes,
ballots or consents, shall hear and determine all challenges and questions in
any way arising in connection with the right to vote, shall count and tabulate
all votes or consents, determine the results, and do such other acts as may be
proper to conduct the election or vote with fairness to all Shareholders. On
request of the chairman of the meeting, or of any Shareholder or his proxy, the
Inspectors of Election shall make a report in writing of any challenge or
question or matter determined by them and shall execute a certificate of any
facts found by them.
SECTION 3.8. Inspection of Books and Records. Shareholders shall have such
rights and procedures of inspection of the books and records of the Trust as
are granted to Shareholders under Section 32 of the Corporations Law of the
State of Massachusetts.
SECTION 3.9. Action by Shareholders Without Meeting. Except as otherwise
provided by law, the provisions of these By-Laws relating to notices and
meetings to the contrary notwithstanding, any action required or permitted to
be taken at any meeting of Shareholders may be taken without a meeting if a
majority of the Shareholders entitled to vote upon the action consent to the
action in writing and such consents are filed with the records of the Trust.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
SECTION 3.10. Presence at Meetings. Presence at meetings of shareholders
requires physical attendance by the shareholder or his or her proxy at the
meeting site and does not encompass attendance by telephonic or other
electronic means.
2
<PAGE>
ARTICLE IV
TRUSTEES
SECTION 4.1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or special meetings of the Trustees. Regular
meetings of the Trustees may be held at such time and place as shall be
determined from time to time by the Trustees without further notice. Special
meetings of the Trustees may be called at any time by the Chairman and shall be
called by the Chairman or the Secretary upon the written request of any two (2)
Trustees.
SECTION 4.2. Notice of Special Meetings. Written notice of special
meetings of the Trustees, stating the place, date and time thereof, shall be
given not less than two (2) days before such meeting to each Trustee,
personally, by telegram, by mail, or by leaving such notice at his place of
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, directed to
the Trustee at his address as it appears on the records of the Trust. Subject
to the provisions of the 1940 Act, notice or waiver of notice need not specify
the purpose of any special meeting.
SECTION 4.3. Telephone Meetings. Subject to the provisions of the 1940
Act, any Trustee, or any member or members of any committee designated by the
Trustees, may participate in a meeting of the Trustees, or any such committee,
as the case may be, by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
SECTION 4.4. Quorum, Voting and Adjournment of Meetings. At all meetings
of the Trustees, a majority of the Trustees shall be requisite to and shall
constitute a quorum for the transaction of business. If a quorum is present,
the affirmative vote of a majority of the Trustees present shall be the act of
the Trustees, unless the concurrence of a greater proportion is expressly
required for such action by law, the Declaration or these By-Laws. If at any
meeting of the Trustees there be less than a quorum present, the Trustees
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall have been obtained.
SECTION 4.5. Action by Trustees Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of the Trustees may be taken without a meeting if a consent in writing
setting forth the action shall be signed by all of the Trustees entitled to
vote upon the action and such written consent is filed with the minutes of
proceedings of the Trustees.
SECTION 4.6. Expenses and Fees. Each Trustee may be allowed expenses, if
any, for attendance at each regular or special meeting of the Trustees, and
each Trustee who is not an officer or employee of the Trust or of its
investment manager or underwriter or of any corporate affiliate of any of said
persons shall receive for services rendered as a Trustee of the Trust such
compensation as may be fixed by the Trustees. Nothing herein contained shall be
construed to preclude any Trustee from serving the Trust in any other capacity
and receiving compensation therefor.
SECTION 4.7. Execution of Instruments and Documents and Signing of Checks
and Other Obligations and Transfers. All instruments, documents and other
papers shall be executed in the name and on behalf of the Trust and all checks,
notes, drafts and other obligations for the payment of money by the Trust shall
be signed, and all transfer of securities standing in the name of the Trust
shall be executed, by the Chairman, the President, any Vice President or the
Treasurer or by any one or more officers or agents of the Trust as shall be
designated for that purpose by vote of the Trustees; notwithstanding the above,
nothing in this Section 4.7 shall be deemed to preclude the electronic
authorization, by designated persons, of the Trust's Custodian (as described
herein in Section 9.1) to transfer assets of the Trust, as provided for herein
in Section 9.1.
SECTION 4.8. Indemnification of Trustees, Officers, Employees and
Agents. (a) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
3
<PAGE>
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Trustee, officer, employee, or agent of the Trust. The
indemnification shall be against expenses, including attorneys' fees,
judgments, fines, and amounts paid in settlement, actually and reasonably
incurred by him in connection with the action, suit, or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Trust, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
(b) The Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or on behalf of the Trust to obtain a judgment or decree in its favor
by reason of the fact that he is or was a Trustee, officer, employee, or agent
of the Trust. The indemnification shall be against expenses, including
attorneys' fees actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Trust; except that no indemnification shall be made in respect of any
claim, issue, or matter as to which the person has been adjudged to be liable
for negligence or misconduct in the performance of his duty to the Trust,
except to the extent that the court in which the action or suit was brought, or
a court of equity in the county in which the Trust has its principal office,
determines upon application that, despite the adjudication of liability but in
view of all circumstances of the case, the person is fairly and reasonably
entitled to indemnity for those expenses which the court shall deem proper,
provided such Trustee, officer, employee or agent is not adjudged to be liable
by reason of his willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(c) To the extent that a Trustee, officer, employee, or agent of the Trust
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to in subsection (a) or (b) or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(d) (1) Unless a court orders otherwise, any indemnification under
subsections (a) or (b) of this section may be made by the Trust only as
authorized in the specific case after a determination that indemnification of
the Trustee, officer, employee, or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in subsections (a) or
(b).
(2) The determination shall be made:
(i) By the Trustees, by a majority vote of a quorum which consists
of Trustees who were not parties to the action, suit or proceeding; or
(ii) If the required quorum is not obtainable, or if a quorum of
disinterested Trustees so directs, by independent legal counsel in a
written opinion; or
(iii) By the Shareholders.
(3) Notwithstanding any provision of this Section 4.8, no person shall
be entitled to indemnification for any liability, whether or not there is
an adjudication of liability, arising by reason of willful misfeasance, bad
faith, gross negligence, or reckless disregard of duties as described in
Section 17(h) and (i) of the Investment Company Act of 1940 ("disabling
conduct"). A person shall be deemed not liable by reason of disabling
conduct if, either:
(i) a final decision on the merits is made by a court or other body
before whom the proceeding was brought that the person to be
indemnified ("indemnitee") was not liable by reason of disabling
conduct; or
(ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the indemnitee was not liable by
reason of disabling conduct, is made by either--
4
<PAGE>
(A) a majority of a quorum of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19)
of the Investment Company Act of 1940, nor parties to the action,
suit or proceeding, or
(B) an independent legal counsel in a written opinion.
(e) Expenses, including attorneys' fees, incurred by a Trustee, officer,
employee or agent of the Trust in defending a civil or criminal action, suit or
proceeding may be paid by the Trust in advance of the final disposition thereof
if:
(1) authorized in the specific case by the Trustees; and
(2) the Trust receives an undertaking by or on behalf of the Trustee,
officer, employee or agent of the Trust to repay the advance if it is not
ultimately determined that such person is entitled to be indemnified by the
Trust; and
(3) either, (i) such person provides a security for his undertaking, or
(ii) the Trust is insured against losses by reason of any lawful
advances, or
(iii) a determination, based on a review of readily available
facts, that there is reason to believe that such person ultimately will
be found entitled to indemnification, is made by either--
(A) a majority of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section
2(a)(19) of the 1940 Act, nor parties to the action, suit or
proceeding, or
(B) an independent legal counsel in a written opinion.
(f) The indemnification provided by this Section shall not be deemed
exclusive of any other rights to which a person may be entitled under any
by-law, agreement, vote of Shareholders or disinterested Trustees or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding the office, and shall continue as to a person who has ceased to
be a Trustee, officer, employee, or agent and inure to the benefit of the
heirs, executors and administrators of such person; provided that no person may
satisfy any right of indemnity or reimbursement granted herein or to which he
may be otherwise entitled except out of the property of the Trust, and no
Shareholder shall be personally liable with respect to any claim for indemnity
or reimbursement or otherwise.
(g) The Trust may purchase and maintain insurance on behalf of any person
who is or was a Trustee, officer, employee, or agent of the Trust, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such. However, in no event will the Trust purchase
insurance to indemnify any officer or Trustee against liability for any act for
which the Trust itself is not permitted to indemnify him.
(h) Nothing contained in this Section shall be construed to protect any
Trustee or officer of the Trust against any liability to the Trust or to its
security holders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office.
ARTICLE V
COMMITTEES
SECTION 5.1. Executive and Other Committees. The Trustees, by resolution
adopted by a majority of the Trustees, may designate an Executive Committee
and/or committees, each committee to consist of two (2) or more of the Trustees
of the Trust and may delegate to such committees, in the intervals between
meetings of the Trustees, any or all of the powers of the Trustees in the
management of the business and affairs of the Trust. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint a Trustee to act in place
of such absent member. Each such committee shall keep a record of its
proceedings.
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The Executive Committee and any other committee shall fix its own rules or
procedure, but the presence of at least fifty percent (50%) of the members of
the whole committee shall in each case be necessary to constitute a quorum of
the committee and the affirmative vote of the majority of the members of the
committee present at the meeting shall be necessary to take action.
All actions of the Executive Committee shall be reported to the Trustees
at the meeting thereof next succeeding to the taking of such action.
SECTION 5.2. Advisory Committee. The Trustees may appoint an advisory
committee which shall be composed of persons who do not serve the Trust in any
other capacity and which shall have advisory functions with respect to the
investments of the Trust but which shall have no power to determine that any
security or other investment shall be purchased, sold or otherwise disposed of
by the Trust. The number of persons constituting any such advisory committee
shall be determined from time to time by the Trustees. The members of any such
advisory committee may receive compensation for their services and may be
allowed such fees and expenses for the attendance at meetings as the Trustees
may from time to time determine to be appropriate.
SECTION 5.3. Committee Action Without Meeting. The provisions of these
By-Laws covering notices and meetings to the contrary notwithstanding, and
except as required by law, any action required or permitted to be taken at any
meeting of any Committee of the Trustees appointed pursuant to Section 5.1 of
these By-Laws may be taken without a meeting if a consent in writing setting
forth the action shall be signed by all members of the Committee entitled to
vote upon the action and such written consent is filed with the records of the
proceedings of the Committee.
ARTICLE VI
OFFICERS
SECTION 6.1. Executive Officers. The executive officers of the Trust shall
be a Chairman, a President, one or more Vice Presidents, a Secretary and a
Treasurer. The Chairman shall be selected from among the Trustees but none of
the other executive officers need be a Trustee. Two or more offices, except
those of President and any Vice President, may be held by the same person, but
no officer shall execute, acknowledge or verify any instrument in more than one
capacity. The executive officers of the Trust shall be elected annually by the
Trustees and each executive officer so elected shall hold office until his
successor is elected and has qualified.
SECTION 6.2. Other Officers and Agents. The Trustees may also elect one or
more Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers
and may elect, or may delegate to the Chairman the power to appoint, such other
officers and agents as the Trustees shall at any time or from time to time deem
advisable.
SECTION 6.3. Term and Removal and Vacancies. Each officer of the Trust
shall hold office until his successor is elected and has qualified. Any officer
or agent of the Trust may be removed by the Trustees whenever, in their
judgment, the best interests of the Trust will be served thereby, but such
removal shall be without prejudice to the contractual rights, if any, of the
person so removed.
SECTION 6.4. Compensation of Officers. The compensation of officers and
agents of the Trust shall be fixed by the Trustees, or by the Chairman to the
extent provided by the Trustees with respect to officers appointed by the
Chairman.
SECTION 6.5. Power and Duties. All officers and agents of the Trust, as
between themselves and the Trust, shall have such authority and perform such
duties in the management of the Trust as may be provided in or pursuant to
these By-Laws, or to the extent not so provided, as may be prescribed by the
Trustees; provided, that no rights of any third party shall be affected or
impaired by any such By-Law or resolution of the Trustees unless he has
knowledge thereof.
SECTION 6.6. The Chairman. (a) The Chairman shall be the chief executive
officer of the Trust; he shall preside at all meetings of the Shareholders and
of the Trustees; he shall have general and active management of the business of
the Trust, shall see that all orders and resolutions of the Trustees are
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carried into effect, and, in connection therewith, shall be authorized to
delegate to the President or to one or more Vice Presidents such of his powers
and duties at such times and in such manner as he may deem advisable; he shall
be a signatory on all Annual and Semi-Annual Reports as may be sent to
shareholders, and he shall perform such other duties as the Trustees may from
time to time prescribe.
(b) In the absence of the Chairman, the Board shall determine who shall
preside at all meetings of the shareholders and the Board of Trustees.
SECTION 6.7. The President. The President shall perform such duties as the
Board of Trustees and the Chairman may from time to time prescribe.
SECTION 6.8. The Vice Presidents. The Vice Presidents shall be of such
number and shall have such titles as may be determined from time to time by the
Trustees. The Vice President, or, if there be more than one, the Vice
Presidents in the order of their seniority as may be determined from time to
time by the Trustees or the Chairman, shall, in the absence or disability of
the President, exercise the powers and perform the duties of the President, and
he or they shall perform such other duties as the Trustees or the Chairman may
from time to time prescribe.
SECTION 6.9. The Assistant Vice Presidents. The Assistant Vice President,
or, if there be more than one, the Assistant Vice Presidents, shall perform
such duties and have such powers as may be assigned them from time to time by
the Trustees or the Chairman.
SECTION 6.10. The Secretary. The Secretary shall attend all meetings of
the Trustees and all meetings of the Shareholders and record all the
proceedings of the meetings of the Shareholders and of the Trustees in a book
to be kept for that purpose, and shall perform like duties for the standing
committees when required. He shall give, or cause to be given, notice of all
meetings of the Shareholders and special meetings of the Trustees, and shall
perform such other duties and have such powers as the Trustees, or the
Chairman, may from time to time prescribe. He shall keep in safe custody the
seal of the Trust and affix or cause the same to be affixed to any instrument
requiring it, and, when so affixed, it shall be attested by his signature or by
the signature of an Assistant Secretary.
SECTION 6.11. The Assistant Secretaries. The Assistant Secretary, or, if
there be more than one, the Assistant Secretaries in the order determined by
the Trustees or the Chairman, shall, in the absence or disability of the
Secretary, perform the duties and exercise the powers of the Secretary and
shall perform such duties and have such other powers as the Trustees or the
Chairman may from time to time prescribe.
SECTION 6.12. The Treasurer. The Treasurer shall be the chief financial
officer of the Trust. He shall keep or cause to be kept full and accurate
accounts of receipts and disbursements in books belonging to the Trust, and he
shall render to the Trustees and the Chairman, whenever any of them require it,
an account of his transactions as Treasurer and of the financial condition of
the Trust; and he shall perform such other duties as the Trustees, or the
Chairman, may from time to time prescribe.
SECTION 6.13. The Assistant Treasurers. The Assistant Treasurer, or, if
there shall be more than one, the Assistant Treasurers in the order determined
by the Trustees or the Chairman, shall, in the absence or disability of the
Treasurer, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Trustees, or
the Chairman, may from time to time prescribe.
SECTION 6.14. Delegation of Duties. Whenever an officer is absent or
disabled, or whenever for any reason the Trustees may deem it desirable, the
Trustees may delegate the powers and duties of an officer or officers to any
other officer or officers or to any Trustee or Trustees.
ARTICLE VII
DIVIDENDS AND DISTRIBUTIONS
Subject to any applicable provisions of law and the Declaration, dividends
and distributions upon the Shares may be declared at such intervals as the
Trustees may determine, in cash, in securities or other property, or in Shares,
from any sources permitted by law, all as the Trustees shall from time to time
determine.
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Inasmuch as the computation of net income and net profits from the sales
of securities or other properties for federal income tax purposes may vary from
the computation thereof on the records of the Trust, the Trustees shall have
power, in their discretion, to distribute as income dividends and as capital
gain distributions, respectively, amounts sufficient to enable the Trust to
avoid or reduce liability for federal income taxes.
ARTICLE VIII
CERTIFICATES OF SHARES
SECTION 8.1. Certificates of Shares. Certificates for Shares of each
series or class of Shares shall be in such form and of such design as the
Trustees shall approve, subject to the right of the Trustees to change such
form and design at any time or from time to time, and shall be entered in the
records of the Trust as they are issued. Each such certificate shall bear a
distinguishing number; shall exhibit the holder's name and certify the number
of full Shares owned by such holder; shall be signed by or in the name of the
Trust by the Chairman, the President, or a Vice President, and countersigned by
the Secretary or an Assistant Secretary or the Treasurer and an Assistant
Treasurer of the Trust; shall be sealed with the seal; and shall contain such
recitals as may be required by law. Where any certificate is signed by a
Transfer Agent or by a Registrar, the signature of such officers and the seal
may be facsimile, printed or engraved. The Trust may, at its option, determine
not to issue a certificate or certificates to evidence Shares owned of record
by any Shareholder.
In case any officer or officers who shall have signed, or whose facsimile
signature or signatures shall appear on, any such certificate or certificates
shall cease to be such officer or officers of the Trust, whether because of
death, resignation or otherwise, before such certificate or certificates shall
have been delivered by the Trust, such certificate or certificates shall,
nevertheless, be adopted by the Trust and be issued and delivered as though the
person or persons who signed such certificate or certificates or whose
facsimile signature or signatures shall appear therein had not ceased to be
such officer or officers of the Trust.
No certificate shall be issued for any share until such share is fully
paid.
SECTION 8.2. Lost, Stolen, Destroyed and Mutilated Certificates. The
Trustees may direct a new certificate or certificates to be issued in place of
any certificate or certificates theretofore issued by the Trust alleged to have
been lost, stolen or destroyed, upon satisfactory proof of such loss, theft, or
destruction; and the Trustees may, in their discretion, require the owner of
the lost, stolen or destroyed certificate, or his legal representative, to give
to the Trust and to such Registrar, Transfer Agent and/or Transfer Clerk as may
be authorized or required to countersign such new certificate or certificates,
a bond in such sum and of such type as they may direct, and with such surety or
sureties, as they may direct, as indemnity against any claim that may be
against them or any of them on account of or in connection with the alleged
loss, theft or destruction of any such certificate.
ARTICLE IX
CUSTODIAN
SECTION 9.1. Appointment and Duties. The Trust shall at times employ a
bank or trust company having capital, surplus and undivided profits of at least
five million dollars ($5,000,000) as custodian with authority as its agent, but
subject to such restrictions, limitations and other requirements, if any, as
may be contained in these By-Laws and the 1940 Act:
(1) to receive and hold the securities owned by the Trust and deliver the
same upon written or electronically transmitted order;
(2) to receive and receipt for any moneys due to the Trust and deposit
the same in its own banking department or elsewhere as the Trustees may
direct;
(3) to disburse such funds upon orders or vouchers;
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all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote, the custodian
shall deliver and pay over all property of the Trust held by it as specified in
such vote.
The Trustees may also authorize the custodian to employ one or more
sub-custodians from time to time to perform such of the acts and services of
the custodian and upon such terms and conditions as may be agreed upon between
the custodian and such sub-custodian and approved by the Trustees.
SECTION 9.2. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
custodian to deposit all or any part of the securities owned by the Trust in a
system for the central handling of securities established by a national
securities exchange or a national securities association registered with the
Commission under the Securities Exchange Act of 1934, or such other person as
may be permitted by the Commission, or otherwise in accordance with the 1940
Act, pursuant to which system all securities of any particular class or series
of any issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of such
securities, provided that all such deposits shall be subject to withdrawal only
upon the order of the Trust.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice of the time, place or purpose of any meeting of
Shareholders, Trustees, or of any committee is required to be given in
accordance with law or under the provisions of the Declaration or these
By-Laws, a waiver thereof in writing, signed by the person or persons entitled
to such notice and filed with the records of the meeting, whether before or
after the holding thereof, or actual attendance at the meeting of shareholders,
Trustees or committee, as the case may be, in person, shall be deemed
equivalent to the giving of such notice to such person.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Location of Books and Records. The books and records of the
Trust may be kept outside the Commonwealth of Massachusetts at such place or
places as the Trustees may from time to time determine, except as otherwise
required by law.
SECTION 11.2. Record Date. The Trustees may fix in advance a date as the
record date for the purpose of determining the Shareholders entitled to (i)
receive notice of, or to vote at, any meeting of Shareholders, or (ii) receive
payment of any dividend or the allotment of any rights, or in order to make a
determination of Shareholders for any other proper purpose. The record date, in
any case, shall not be more than one hundred eighty (180) days, and in the case
of a meeting of Shareholders not less than ten (10) days, prior to the date on
which such meeting is to be held or the date on which such other particular
action requiring determination of Shareholders is to be taken, as the case may
be. In the case of a meeting of Shareholders, the meeting date set forth in the
notice to Shareholders accompanying the proxy statement shall be the date used
for purposes of calculating the 180 day or 10 day period, and any adjourned
meeting may be reconvened without a change in record date. In lieu of fixing a
record date, the Trustees may provide that the transfer books shall be closed
for a stated period but not to exceed, in any case, twenty (20) days. If the
transfer books are closed for the purpose of determining Shareholders entitled
to notice of a vote at a meeting of Shareholders, such books shall be closed
for at least ten (10) days immediately preceding the meeting.
SECTION 11.3. Seal. The Trustees shall adopt a seal, which shall be in
such form and shall have such inscription thereon as the Trustees may from time
to time provide. The seal of the Trust may be affixed to any document, and the
seal and its attestation may be lithographed, engraved or otherwise printed on
any document with the same force and effect as if it had been imprinted and
attested manually in the same manner and with the same effect as if done by a
Massachusetts business corporation under Massachusetts law.
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SECTION 11.4. Fiscal Year. The fiscal year of the Trust shall end on such
date as the Trustees may by resolution specify, and the Trustees may by
resolution change such date for future fiscal years at any time and from time
to time.
SECTION 11.5. Orders for Payment of Money. All orders or instructions for
the payment of money of the Trust, and all notes or other evidences of
indebtedness issued in the name of the Trust, shall be signed by such officer
or officers or such other person or persons as the Trustees may from time to
time designate, or as may be specified in or pursuant to the agreement between
the Trust and the bank or trust company appointed as Custodian of the
securities and funds of the Trust.
ARTICLE XII
COMPLIANCE WITH FEDERAL REGULATIONS
The Trustees are hereby empowered to take such action as they may deem to
be necessary, desirable or appropriate so that the Trust is or shall be in
compliance with any federal or state statute, rule or regulation with which
compliance by the Trust is required.
ARTICLE XIII
AMENDMENTS
These By-Laws may be amended, altered, or repealed, or new By-Laws may be
adopted, (a) by a Majority Shareholder Vote, or (b) by the Trustees; provided,
however, that no By-Law may be amended, adopted or repealed by the Trustees if
such amendment, adoption or repeal requires, pursuant to law, the Declaration,
or these By-Laws, a vote of the Shareholders. The Trustees shall in no event
adopt By-Laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
ARTICLE XIV
DECLARATION OF TRUST
The Declaration of Trust establishing TCW/DW Total Return Trust, dated
June 29, 1994, a copy of which is on file in the office of the Secretary of the
Commonwealth of Massachusetts, provides that the name TCW/DW Total Return Trust
refers to the Trustees under the Declaration collectively as Trustees, but not
as individuals or personally; and no Trustee, Shareholder, officer, employee or
agent of TCW/DW Total Return Trust shall be held to any personal liability, nor
shall resort be had to their private property for the satisfaction of any
obligation or claim or otherwise, in connection with the affairs of said TCW/DW
Total Return Trust, but the Trust Estate only shall be liable.
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AMENDED AND RESTATED
TRANSFER AGENCY AND SERVICE AGREEMENT
with
MORGAN STANLEY DEAN WITTER TRUST FSB
[open-end funds]
<PAGE>
TABLE OF CONTENTS
Page
----
Article 1 Terms of Appointment......................................... 1
Article 2 Fees and Expenses............................................ 5
Article 3 Representations and Warranties of MSDW TRUST................. 6
Article 4 Representations and Warranties of the Fund................... 7
Article 5 Duty of Care and Indemnification............................. 7
Article 6 Documents and Covenants of the Fund and MSDW TRUST........... 10
Article 7 Duration and Termination of Agreement........................ 13
Article 8 Assignment................................................... 14
Article 9 Affiliations................................................. 14
Article 10 Amendment.................................................... 15
Article 11 Applicable Law............................................... 15
Article 12 Miscellaneous................................................ 15
Article 13 Merger of Agreement.......................................... 17
Article 14 Personal Liability........................................... 17
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AMENDED AND RESTATED TRANSFER AGENCY AND SERVICE AGREEMENT
AMENDED AND RESTATED AGREEMENT made as of the 22nd day of
June, 1998 by and between each of the Funds listed on the signature pages
hereof, each of such Funds acting severally on its own behalf and not jointly
with any of such other Funds (each such Fund hereinafter referred to as the
"Fund"), each such Fund having its principal office and place of business at
Two World Trade Center, New York, New York, 10048, and MORGAN STANLEY DEAN
WITTER TRUST FSB ("MSDW TRUST"), a federally chartered savings bank, having its
principal office and place of business at Harborside Financial Center, Plaza
Two, Jersey City, New Jersey 07311.
WHEREAS, the Fund desires to appoint MSDW TRUST as its
transfer agent, dividend disbursing agent and shareholder servicing agent and
MSDW TRUST desires to accept such appointment;
NOW THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
Article 1 Terms of Appointment; Duties of MSDW TRUST
1.1 Subject to the terms and conditions set forth in this
Agreement, the Fund hereby employs and appoints MSDW TRUST to act as, and MSDW
TRUST agrees to act as, the transfer agent for each series and class of shares
of the Fund, whether now or hereafter authorized or issued ("Shares"), dividend
disbursing agent and shareholder servicing agent in
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connection with any accumulation, open-account or similar plans provided to the
holders of such Shares ("Shareholders") and set out in the currently effective
prospectus and statement of additional information ("prospectus") of the Fund,
including without limitation any periodic investment plan or periodic
withdrawal program.
1.2 MSDW TRUST agrees that it will perform the following
services:
(a) In accordance with procedures established from time to
time by agreement between the Fund and MSDW TRUST, MSDW TRUST shall:
(i) Receive for acceptance, orders for the purchase of
Shares, and promptly deliver payment and appropriate documentation therefor to
the custodian of the assets of the Fund (the "Custodian");
(ii) Pursuant to purchase orders, issue the appropriate
number of Shares and issue certificates therefor or hold such Shares in book
form in the appropriate Shareholder account;
(iii) Receive for acceptance redemption requests and
redemption directions and deliver the appropriate documentation therefor to the
Custodian;
(iv) At the appropriate time as and when it receives monies
paid to it by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed by the
redeeming Shareholders;
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<PAGE>
(v) Effect transfers of Shares by the registered owners
thereof upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions declared by the Fund;
(vii) Calculate any sales charges payable by a Shareholder on
purchases and/or redemptions of Shares of the Fund as such charges may be
reflected in the prospectus;
(viii) Maintain records of account for and advise the Fund
and its Shareholders as to the foregoing; and
(ix) Record the issuance of Shares of the Fund and maintain
pursuant to Rule 17Ad-10(e) under the Securities Exchange Act of 1934 ("1934
Act") a record of the total number of Shares of the Fund which are authorized,
based upon data provided to it by the Fund, and issued and outstanding. MSDW
TRUST shall also provide to the Fund on a regular basis the total number of
Shares that are authorized, issued and outstanding and shall notify the Fund in
case any proposed issue of Shares by the Fund would result in an overissue. In
case any issue of Shares would result in an overissue, MSDW TRUST shall refuse
to issue such Shares and shall not countersign and issue any certificates
requested for such Shares. When recording the issuance of Shares, MSDW TRUST
shall have no obligation to take cognizance of any Blue Sky laws relating to
the issue of sale of such Shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth
in the above paragraph (a), MSDW TRUST shall:
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<PAGE>
(i) perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, shareholder servicing agent
in connection with dividend reinvestment, accumulation, open-account or similar
plans (including without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to, maintaining all Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports and prospectuses to current
Shareholders, withholding taxes on U.S. resident and non-resident alien
accounts, preparing and filing appropriate forms required with respect to
dividends and distributions by federal tax authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and mailing activity statements
for Shareholders and providing Shareholder account information;
(ii) open any and all bank accounts which may be necessary or
appropriate in order to provide the foregoing services; and
(iii) provide a system that will enable the Fund to monitor
the total number of Shares sold in each State or other jurisdiction.
(c) In addition, the Fund shall:
(i) identify to MSDW TRUST in writing those transactions and
assets to be treated as exempt from Blue Sky reporting for each State; and
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<PAGE>
(ii) verify the inclusion on the system prior to activation
of each State in which Fund shares may be sold and thereafter monitor the daily
purchases and sales for shareholders in each State. The responsibility of MSDW
TRUST for the Fund's status under the securities laws of any State or other
jurisdiction is limited to the inclusion on the system of each State as to
which the Fund has informed MSDW TRUST that shares may be sold in compliance
with state securities laws and the reporting of purchases and sales in each
such State to the Fund as provided above and as agreed from time to time by the
Fund and MSDW TRUST.
(d) MSDW TRUST shall provide such additional services and
functions not specifically described herein as may be mutually agreed between
MSDW TRUST and the Fund. Procedures applicable to such services may be
established from time to time by agreement between the Fund and MSDW TRUST.
Article 2 Fees and Expenses
2.1 For performance by MSDW TRUST pursuant to this Agreement,
each Fund agrees to pay MSDW TRUST an annual maintenance fee for each
Shareholder account and certain transactional fees, if applicable, as set out
in the respective fee schedule attached hereto as Schedule A. Such fees and
out-of-pocket expenses and advances identified under Section 2.2 below may be
changed from time to time subject to mutual written agreement between the Fund
and MSDW TRUST.
2.2 In addition to the fees paid under Section 2.1 above, the
Fund agrees to reimburse MSDW TRUST for out of pocket expenses in connection
with the services rendered
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<PAGE>
by MSDW TRUST hereunder. In addition, any other expenses incurred by MSDW TRUST
at the request or with the consent of the Fund will be reimbursed by the Fund.
2.3 The Fund agrees to pay all fees and reimbursable expenses
within a reasonable period of time following the mailing of the respective
billing notice. Postage for mailing of dividends, proxies, Fund reports and
other mailings to all Shareholder accounts shall be advanced to MSDW TRUST by
the Fund upon request prior to the mailing date of such materials.
Article 3 Representations and Warranties of MSDW TRUST
MSDW TRUST represents and warrants to the Fund that:
3.1 It is a federally chartered savings bank whose principal
office is in New Jersey.
3.2 It is and will remain registered with the U.S. Securities
and Exchange Commission ("SEC") as a Transfer Agent pursuant to the
requirements of Section 17A of the 1934 Act.
3.3 It is empowered under applicable laws and by its charter
and By-Laws to enter into and perform this Agreement.
3.4 All requisite corporate proceedings have been taken to
authorize it to enter into and perform this Agreement.
3.5 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
-6-
<PAGE>
Article 4 Representations and Warranties of the Fund The
Fund represents and warrants to MSDW TRUST that:
4.1 It is a corporation duly organized and existing and in
good standing under the laws of Delaware or Maryland or a trust duly organized
and existing and in good standing under the laws of Massachusetts, as the case
may be.
4.2 It is empowered under applicable laws and by its Articles
of Incorporation or Declaration of Trust, as the case may be, and under its
By-Laws to enter into and perform this Agreement.
4.3 All corporate proceedings necessary to authorize it to
enter into and perform this Agreement have been taken.
4.4 It is an investment company registered with the SEC under
the Investment Company Act of 1940, as amended (the "1940 Act").
4.5 A registration statement under the Securities Act of 1933
(the "1933 Act") is currently effective and will remain effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of the Fund being offered for sale.
Article 5 Duty of Care and Indemnification
5.1 MSDW TRUST shall not be responsible for, and the Fund
shall indemnify and hold MSDW TRUST harmless from and against, any and all
losses, damages, costs,
-7-
<PAGE>
charges, counsel fees, payments, expenses and liability arising out of or
attributable to:
(a) All actions of MSDW TRUST or its agents or subcontractors
required to be taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's refusal or failure to comply with the terms of
this Agreement, or which arise out of the Fund's lack of good faith, negligence
or willful misconduct or which arise out of breach of any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by MSDW TRUST or its agents or
subcontractors of information, records and documents which (i) are received by
MSDW TRUST or its agents or subcontractors and furnished to it by or on behalf
of the Fund, and (ii) have been prepared and/or maintained by the Fund or any
other person or firm on behalf of the Fund.
(d) The reliance on, or the carrying out by MSDW TRUST or its
agents or subcontractors of, any instructions or requests of the Fund.
(e) The offer or sale of Shares in violation of any
requirement under the federal securities laws or regulations or the securities
or Blue Sky laws of any State or other jurisdiction that notice of offering of
such Shares in such State or other jurisdiction or in violation of any stop
order or other determination or ruling by any federal agency or any State or
other jurisdiction with respect to the offer or sale of such Shares in such
State or other jurisdiction.
-8-
<PAGE>
5.2 MSDW TRUST shall indemnify and hold the Fund harmless
from or against any and all losses, damages, costs, charges, counsel fees,
payments, expenses and liability arising out of or attributable to any action
or failure or omission to act by MSDW TRUST as a result of the lack of good
faith, negligence or willful misconduct of MSDW TRUST, its officers, employees
or agents.
5.3 At any time, MSDW TRUST may apply to any officer of the
Fund for instructions, and may consult with legal counsel to the Fund, with
respect to any matter arising in connection with the services to be performed
by MSDW TRUST under this Agreement, and MSDW TRUST and its agents or
subcontractors shall not be liable and shall be indemnified by the Fund for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. MSDW TRUST, its agents and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records or documents provided to MSDW TRUST or its agents or
subcontractors by machine readable input, telex, CRT data entry or other
similar means authorized by the Fund, and shall not be held to have notice of
any change of authority of any person, until receipt of written notice thereof
from the Fund. MSDW TRUST, its agents and subcontractors shall also be
protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signature of the
officers of the Fund, and the proper countersignature of any former transfer
agent or registrar, or of a co-transfer agent or co-registrar.
-9-
<PAGE>
5.4 In the event either party is unable to perform its
obligations under the terms of this Agreement because of acts of God, strikes,
equipment or transmission failure or damage reasonably beyond its control, or
other causes reasonably beyond its control, such party shall not be liable for
damages to the other for any damages resulting from such failure to perform or
otherwise from such causes.
5.5 Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any act or failure to act hereunder.
5.6 In order that the indemnification provisions contained in
this Article 5 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such claim. The
party who may be required to indemnify shall have the option to participate
with the party seeking indemnification in the defense of such claim. The party
seeking indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to indemnify it
except with the other party's prior written consent.
Article 6 Documents and Covenants of the Fund and MSDW TRUST
6.1 The Fund shall promptly furnish to MSDW TRUST the
following, unless previously furnished to Dean Witter Trust Company, the prior
transfer agent of the Fund:
-10-
<PAGE>
(a) If a corporation:
(i) A certified copy of the resolution of the Board of
Directors of the Fund authorizing the appointment of MSDW TRUST and the
execution and delivery of this Agreement;
(ii) A certified copy of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto;
(iii) Certified copies of each vote of the Board of Directors
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in
the form approved by the Board of Directors, with a certificate of the
Secretary of the Fund as to such approval;
(b) If a business trust:
(i) A certified copy of the resolution of the Board of
Trustees of the Fund authorizing the appointment of MSDW TRUST and the
execution and delivery of this Agreement;
(ii) A certified copy of the Declaration of Trust and By-Laws
of the Fund and all amendments thereto;
-11-
<PAGE>
(iii) Certified copies of each vote of the Board of Trustees
designating persons authorized to give instructions on behalf of the Fund and
signature cards bearing the signature of any officer of the Fund or any other
person authorized to sign written instructions on behalf of the Fund;
(iv) A specimen of the certificate for Shares of the Fund in
the form approved by the Board of Trustees, with a certificate of the Secretary
of the Fund as to such approval;
(c) The current registration statements and any amendments
and supplements thereto filed with the SEC pursuant to the requirements of the
1933 Act or the 1940 Act;
(d) All account application forms or other documents relating
to Shareholder accounts and/or relating to any plan, program or service offered
or to be offered by the Fund; and
(e) Such other certificates, documents or opinions as MSDW
TRUST deems to be appropriate or necessary for the proper performance of its
duties.
6.2 MSDW TRUST hereby agrees to establish and maintain
facilities and procedures reasonably acceptable to the Fund for safekeeping of
Share certificates, check forms and facsimile signature imprinting devices, if
any; and for the preparation or use, and for keeping account of, such
certificates, forms and devices.
-12-
<PAGE>
6.3 MSDW TRUST shall prepare and keep records relating to the
services to be performed hereunder, in the form and manner as it may deem
advisable and as required by applicable laws and regulations. To the extent
required by Section 31 of the 1940 Act, and the rules and regulations
thereunder, MSDW TRUST agrees that all such records prepared or maintained by
MSDW TRUST relating to the services performed by MSDW TRUST hereunder are the
property of the Fund and will be preserved, maintained and made available in
accordance with such Section 31 of the 1940 Act, and the rules and regulations
thereunder, and will be surrendered promptly to the Fund on and in accordance
with its request.
6.4 MSDW TRUST and the Fund agree that all books, records,
information and data pertaining to the business of the other party which are
exchanged or received pursuant to the negotiation or the carrying out of this
Agreement shall remain confidential and shall not be voluntarily disclosed to
any other person except as may be required by law or with the prior consent of
MSDW TRUST and the Fund.
6.5 In case of any request or demands for the inspection of
the Shareholder records of the Fund, MSDW TRUST will endeavor to notify the
Fund and to secure instructions from an authorized officer of the Fund as to
such inspection. MSDW TRUST reserves the right, however, to exhibit the
Shareholder records to any person whenever it is advised by its counsel that it
may be held liable for the failure to exhibit the Shareholder records to such
person.
Article 7 Duration and Termination of Agreement
7.1 This Agreement shall remain in full force and effect
until August 1,
-13-
<PAGE>
2000 and from year-to-year thereafter unless terminated by either party as
provided in Section 7.2 hereof.
7.2 This Agreement may be terminated by the Fund on 60 days
written notice, and by MSDW TRUST on 90 days written notice, to the other party
without payment of any penalty.
7.3 Should the Fund exercise its right to terminate, all
out-of-pocket expenses associated with the movement of records and other
materials will be borne by the Fund. Additionally, MSDW TRUST reserves the
right to charge for any other reasonable fees and expenses associated with such
termination.
Article 8 Assignment
8.1 Except as provided in Section 8.3 below, neither this
Agreement nor any rights or obligations hereunder may be assigned by either
party without the written consent of the other party.
8.2 This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted successors and assigns.
8.3 MSDW TRUST may, in its sole discretion and without
further consent by the Fund, subcontract, in whole or in part, for the
performance of its obligations and duties hereunder with any person or entity
including but not limited to companies which are affiliated with MSDW TRUST;
provided, however, that such person or entity has and maintains the
qualifications, if any, required to perform such obligations and duties, and
that MSDW TRUST
-14-
<PAGE>
shall be as fully responsible to the Fund for the acts and omissions of any
agent or subcontractor as it is for its own acts or omissions under this
Agreement.
Article 9 Affiliations
9.1 MSDW TRUST may now or hereafter, without the consent of
or notice to the Fund, function as transfer agent and/or shareholder servicing
agent for any other investment company registered with the SEC under the 1940
Act and for any other issuer, including without limitation any investment
company whose adviser, administrator, sponsor or principal underwriter is or
may become affiliated with Morgan Stanley Dean Witter & Co. or any of its
direct or indirect subsidiaries or affiliates.
9.2 It is understood and agreed that the Directors or
Trustees (as the case may be), officers, employees, agents and shareholders of
the Fund, and the directors, officers, employees, agents and shareholders of
the Fund's investment adviser and/or distributor, are or may be interested in
MSDW TRUST as directors, officers, employees, agents and shareholders or
otherwise, and that the directors, officers, employees, agents and shareholders
of MSDW TRUST may be interested in the Fund as Directors or Trustees (as the
case may be), officers, employees, agents and shareholders or otherwise, or in
the investment adviser and/or distributor as directors, officers, employees,
agents, shareholders or otherwise.
Article 10 Amendment
10.1 This Agreement may be amended or modified by a written
agreement executed by both parties and authorized or approved by a resolution
of the Board of Directors or the Board of Trustees (as the case may be) of the
Fund.
-15-
<PAGE>
Article 11 Applicable Law
11.1 This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of the State of New
York.
Article 12 Miscellaneous
12.1 In the event that one or more additional investment
companies managed or administered by Morgan Stanley Dean Witter Advisors Inc.
or any of its affiliates ("Additional Funds") desires to retain MSDW TRUST to
act as transfer agent, dividend disbursing agent and/or shareholder servicing
agent, and MSDW TRUST desires to render such services, such services shall be
provided pursuant to a letter agreement, substantially in the form of Exhibit A
hereto, between MSDW TRUST and each Additional Fund.
12.2 In the event of an alleged loss or destruction of any
Share certificate, no new certificate shall be issued in lieu thereof, unless
there shall first be furnished to MSDW TRUST an affidavit of loss or
non-receipt by the holder of Shares with respect to which a certificate has
been lost or destroyed, supported by an appropriate bond satisfactory to MSDW
TRUST and the Fund issued by a surety company satisfactory to MSDW TRUST,
except that MSDW TRUST may accept an affidavit of loss and indemnity agreement
executed by the registered holder (or legal representative) without surety in
such form as MSDW TRUST deems appropriate indemnifying MSDW TRUST and the Fund
for the issuance of a replacement certificate, in cases where the alleged loss
is in the amount of $1,000 or less.
12.3 In the event that any check or other order for payment
of money on the
-16-
<PAGE>
account of any Shareholder or new investor is returned unpaid for any reason,
MSDW TRUST will (a) give prompt notification to the Fund's distributor
("Distributor") (or to the Fund if the Fund acts as its own distributor) of
such non-payment; and (b) take such other action, including imposition of a
reasonable processing or handling fee, as MSDW TRUST may, in its sole
discretion, deem appropriate or as the Fund and, if applicable, the Distributor
may instruct MSDW TRUST.
12.4 Any notice or other instrument authorized or required by
this Agreement to be given in writing to the Fund or to MSDW TRUST shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Fund:
[Name of Fund]
Two World Trade Center
New York, New York 10048
Attention: General Counsel
To MSDW TRUST:
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, New Jersey 07311
Attention: President
Article 13 Merger of Agreement
13.1 This Agreement constitutes the entire agreement between
the parties hereto and supersedes any prior agreement with respect to the
subject matter hereof whether oral or written.
-17-
<PAGE>
Article 14 Personal Liability
14.1 In the case of a Fund organized as a Massachusetts
business trust, a copy of the Declaration of Trust of the Fund is on file with
the Secretary of The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Board of Trustees of the Fund
as Trustees and not individually and that the obligations of this instrument
are not binding upon any of the Trustees or shareholders individually but are
binding only upon the assets and property of the Fund; provided, however, that
the Declaration of Trust of the Fund provides that the assets of a particular
Series of the Fund shall under no circumstances be charged with liabilities
attributable to any other Series of the Fund and that all persons extending
credit to, or contracting with or having any claim against, a particular Series
of the Fund shall look only to the assets of that particular Series for payment
of such credit, contract or claim.
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Agreement to be executed in their names and on their
behalf by and through their duly authorized officers, as of the day and year
first above written.
MORGAN STANLEY DEAN WITTER FUNDS
MONEY MARKET FUNDS
1. Morgan Stanley Dean Witter Liquid Asset Fund Inc.
2. Active Assets Money Trust
3. Morgan Stanley Dean Witter U.S. Government Money Market Trust
4. Active Assets Government Securities Trust
5. Morgan Stanley Dean Witter Tax-Free Daily Income Trust
6. Active Assets Tax-Free Trust
7. Morgan Stanley Dean Witter California Tax-Free Daily Income Trust
8. Morgan Stanley Dean Witter New York Municipal Money Market Trust
9. Active Assets California Tax-Free Trust
-18-
<PAGE>
EQUITY FUNDS
10. Morgan Stanley Dean Witter American Value Fund
11. Morgan Stanley Dean Witter Mid-Cap Growth Fund
12. Morgan Stanley Dean Witter Dividend Growth Securities Inc.
13. Morgan Stanley Dean Witter Capital Growth Securities
14. Morgan Stanley Dean Witter Global Dividend Growth Securities
15. Morgan Stanley Dean Witter Income Builder Fund
16. Morgan Stanley Dean Witter Natural Resource Development Securities Inc.
17. Morgan Stanley Dean Witter Precious Metals and Minerals Trust
18. Morgan Stanley Dean Witter Developing Growth Securities Trust
19. Morgan Stanley Dean Witter Health Sciences Trust
20. Morgan Stanley Dean Witter Capital Appreciation Fund
21. Morgan Stanley Dean Witter Information Fund
22. Morgan Stanley Dean Witter Value-Added Market Series
23. Morgan Stanley Dean Witter European Growth Fund Inc.
24. Morgan Stanley Dean Witter Pacific Growth Fund Inc.
25. Morgan Stanley Dean Witter International SmallCap Fund
26. Morgan Stanley Dean Witter Japan Fund
27. Morgan Stanley Dean Witter Utilities Fund
28. Morgan Stanley Dean Witter Global Utilities Fund
29. Morgan Stanley Dean Witter Special Value Fund
30. Morgan Stanley Dean Witter Financial Services Trust
31. Morgan Stanley Dean Witter Market Leader Trust
32. Morgan Stanley Dean Witter Fund of Funds
33. Morgan Stanley Dean Witter S&P 500 Index Fund
34. Morgan Stanley Dean Witter Competitive Edge Fund
35. Morgan Stanley Dean Witter Mid-Cap Dividend Growth Securities
36. Morgan Stanley Dean Witter Equity Fund
37. Morgan Stanley Dean Witter Growth Fund
BALANCED FUNDS
38. Morgan Stanley Dean Witter Balanced Growth Fund
39. Morgan Stanley Dean Witter Balanced Income Trust
ASSET ALLOCATION FUNDS
40. Morgan Stanley Dean Witter Strategist Fund
41. Dean Witter Global Asset Allocation Fund
-19-
<PAGE>
FIXED INCOME FUNDS
42. Morgan Stanley Dean Witter High Yield Securities Inc.
43. Morgan Stanley Dean Witter High Income Securities
44. Morgan Stanley Dean Witter Convertible Securities Trust
45. Morgan Stanley Dean Witter Intermediate Income Securities
46. Morgan Stanley Dean Witter Short-Term Bond Fund
47. Morgan Stanley Dean Witter World Wide Income Trust
48. Morgan Stanley Dean Witter Global Short-Term Income Fund Inc.
49. Morgan Stanley Dean Witter Diversified Income Trust
50. Morgan Stanley Dean Witter U.S. Government Securities Trust
51. Morgan Stanley Dean Witter Federal Securities Trust
52. Morgan Stanley Dean Witter Short-Term U.S. Treasury Trust
53. Morgan Stanley Dean Witter Intermediate Term U.S. Treasury Trust
54. Morgan Stanley Dean Witter Tax-Exempt Securities Trust
55. Morgan Stanley Dean Witter Limited Term Municipal Trust
56. Morgan Stanley Dean Witter California Tax-Free Income Fund
57. Morgan Stanley Dean Witter New York Tax-Free Income Fund
58. Morgan Stanley Dean Witter Hawaii Municipal Trust
59. Morgan Stanley Dean Witter Multi-State Municipal Series Trust
60. Morgan Stanley Dean Witter Select Municipal Reinvestment Fund
SPECIAL PURPOSE FUNDS
61. Dean Witter Retirement Series
62. Morgan Stanley Dean Witter Variable Investment Series
63. Morgan Stanley Dean Witter Select Dimensions Investment Series
TCW/DW FUNDS
64. TCW/DW North American Government Income Trust
65. TCW/DW Latin American Growth Fund
66. TCW/DW Income and Growth Fund
67. TCW/DW Small Cap Growth Fund
68. TCW/DW Total Return Trust
-20-
<PAGE>
69. TCW/DW Global Telecom Trust
70. TCW/DW Mid-Cap Equity Trust
71. TCW/DW Emerging Markets Opportunities Trust
By:
-----------------------------------
Barry Fink
Vice President and General Counsel
ATTEST:
- -----------------------------------
Assistant Secretary
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-----------------------------------
John Van Heuvelen
President
ATTEST:
- -----------------------------------
Executive Vice President
-21-
<PAGE>
Exhibit A
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center
Plaza Two
Jersey City, NJ 07311
Gentlemen:
The undersigned, (inset name of investment company) a
(Massachusetts business trust/Maryland corporation) (the "Fund"), desires to
employ and appoint Morgan Stanley Dean Witter Trust FSB ("MSDW TRUST") to act
as transfer agent for each series and class of shares of the Fund, whether now
or hereafter authorized or issued ("Shares"), dividend disbursing agent and
shareholder servicing agent, registrar and agent in connection with any
accumulation, open-account or similar plan provided to the holders of Shares,
including without limitation any periodic investment plan or periodic
withdrawal plan.
The Fund hereby agrees that, in consideration for the payment
by the Fund to MSDW TRUST of fees as set out in the fee schedule attached
hereto as Schedule A, MSDW TRUST shall provide such services to the Fund
pursuant to the terms and conditions set forth in the Transfer Agency and
Service Agreement annexed hereto, as if the Fund was a signatory thereto.
-22-
<PAGE>
Please indicate MSDW TRUST's acceptance of employment and
appointment by the Fund in the capacities set forth above by so indicating in
the space provided below.
Very truly yours,
(name of fund)
By:
-----------------------------------
Barry Fink
Vice President and General Counsel
ACCEPTED AND AGREED TO:
MORGAN STANLEY DEAN WITTER TRUST FSB
By:
-----------------------
Its:
----------------------
Date:
---------------------
-23-
<PAGE>
SCHEDULE A
Fund: TCW/DW Total Return Trust
Fees: (1) Annual maintenance fee of $12.65 per shareholder account,
payable monthly.
(2) A fee equal to 1/12 of the fee set forth in (1) above, for
providing Forms 1099 for accounts closed during the year, payable
following the end of the calendar year.
(3) Out-of-pocket expenses in accordance with Section 2.2 of the
Agreement.
(4) Fees for additional services not set forth in this Agreement
shall be as negotiated between the parties.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
September 11, 1998, relating to the financial statements and financial
highlights of TCW/DW Total Return Trust, which appears in such Statement of
Additional Information, and to the incorporation by reference of our report
into the Prospectus which constitutes part of this Registration Statement.
We also consent to the references to us under the headings "Independent
Accountants" and "Experts" in such Statement of Additional Information and to
the reference to us under the heading "Financial Highlights" in such
Prospectus.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
September 28, 1998
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW TOTAL RETURN TRUST (A)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ --------- ----------------
31-Jul-97 $1,032.20 3.22% 1.00 3.22%
28-Jul-97 $1,065.60 6.56% 1.01 6.51%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
31-Jul-97 $1,089.40 8.94% 1.00 8.94%
28-Jul-97 $1,124.70 12.47% 1.01 12.37%
(D) GROWTH OF $10,000*
(E) GROWTH OF $50,000*
(F) GROWTH OF $100,000*
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR = TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
28-Jul-97 12.47 $10,656 $53,986 $109,096
</TABLE>
* INITIAL INVESTMENT $9,475, $48,000 & 97,000 RESPECTIVELY REFLECTS A 5.25%, 4%
& 3% SALES CHARGE
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW TOTAL RETURN TRUST (B)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ --------- ----------------
31-Jul-97 $1,032.50 3.25% 1.00 3.25%
30-Nov-94 $2,095.10 109.51% 3.67 22.35%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
31-Jul-97 $1,082.50 8.25% 1.00 8.25%
30-Nov-94 $2,115.10 111.51% 3.67 22.67%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
30-Nov-94 111.51 $21,151 $105,755 $211,510
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW TOTAL RETURN TRUST (C)
(A) AVERAGE ANNUAL TOTAL RETURNS (I.E. STANDARDIZED COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | ERV |
T = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
T = AVERAGE ANNUAL TOTAL RETURN
n = NUMBER OF YEARS
ERV = ENDING REDEEMABLE VALUE
P = INITIAL INVESTMENT
(A)
$1,000 ERV AS OF AGGREGATE NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 TOTAL RETURN YEARS - n TOTAL RETURN - T
- ------------ --------- ------------ --------- ----------------
31-Jul-97 $1,071.20 7.12% 1.00 7.12%
28-Jul-97 $1,116.20 11.62% 1.01 11.52%
(B) AVERAGE ANNUAL TOTAL RETURNS WITHOUT DEDUCTION FOR APPLICABLE
SALES CHARGE (NON STANDARD COMPUTATIONS)
(C) TOTAL RETURN WITHOUT DEDUCTION FOR APPLICABLE SALES CHARGE
(NON STANDARD COMPUTATIONS)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL TOTAL RETURN
(NO DEDUCTION FOR APPLICABLE SALES CHARGE)
n = NUMBER OF YEARS
EV = ENDING VALUE (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
P = INITIAL INVESTMENT
TR = TOTAL RETURN (NO DEDUCTION FOR APPLICABLE SALES CHARGE)
(C) (B)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
31-Jul-97 $1,081.20 8.12% 1.00 8.12%
28-Jul-97 $1,116.20 11.62% 1.01 11.52%
(D) GROWTH OF $10,000
(E) GROWTH OF $50,000
(F) GROWTH OF $100,000
FORMULA: G= (TR+1)*P
G= GROWTH OF INITIAL INVESTMENT
P= INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (D) GROWTH OF (E) GROWTH OF (F) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
28-Jul-97 11.62 $11,162 $55,810 $111,620
</TABLE>
<PAGE>
SCHEDULE FOR COMPUTATIONS OF PERFORMANCE QUOTATIONS
TCW/DW TOTAL RETURN TRUST (D)
(A) AVERAGE ANNUAL TOTAL RETURNS (NO LOAD FUND)
(B) TOTAL RETURN (NO LOAD FUND)
_ _
| ____________________ |
FORMULA: | | |
| /\ n | EV |
t = | \ | ------------- | - 1
| \ | P |
| \| |
|_ _|
EV
TR = ---------- - 1
P
t = AVERAGE ANNUAL COMPOUND RETURN
n = NUMBER OF YEARS
EV = ENDING VALUE
P = INITIAL INVESTMENT
TR = TOTAL RETURN
(B) (A)
$1,000 EV AS OF TOTAL NUMBER OF AVERAGE ANNUAL
INVESTED - P 31-Jul-98 RETURN - TR YEARS - n TOTAL RETURN - t
- ------------ --------- ----------- --------- ----------------
31-Jul-97 $1,092.00 9.20% 1.00 9.20%
28-Jul-97 $1,127.30 12.73% 1.01 12.63%
(C) GROWTH OF $10,000
(D) GROWTH OF $50,000
(E) GROWTH OF $100,000
FORMULA: G = (TR+1)*P
G = GROWTH OF INITIAL INVESTMENT
P = INITIAL INVESTMENT
TR= TOTAL RETURN SINCE INCEPTION
<TABLE>
<CAPTION>
$10,000 TOTAL (C) GROWTH OF (D) GROWTH OF (E) GROWTH OF
INVESTED-P RETURN-TR $10,000 INVESTMENT-G $50,000 INVESTMENT-G $100,000 INVESTMENT-G
- ---------- --------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
28-Jul-97 12.73 $11,273 $56,365 $112,730
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> TCW/DW TOTAL RETURN TRUST ANNUAL 7/31/98 CLASS A
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 128,116,724
<INVESTMENTS-AT-VALUE> 154,009,532
<RECEIVABLES> 2,276,547
<ASSETS-OTHER> 83,872
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,369,951
<PAYABLE-FOR-SECURITIES> 923,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,122,983
<TOTAL-LIABILITIES> 2,045,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,657,014
<SHARES-COMMON-STOCK> 74,736
<SHARES-COMMON-PRIOR> 624
<ACCUMULATED-NII-CURRENT> 3,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,771,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,892,808
<NET-ASSETS> 1,254,354
<DIVIDEND-INCOME> 1,707,676
<INTEREST-INCOME> 276,135
<OTHER-INCOME> 0
<EXPENSES-NET> 2,701,482
<NET-INVESTMENT-INCOME> (717,671)
<REALIZED-GAINS-CURRENT> 10,549,425
<APPREC-INCREASE-CURRENT> 1,702,988
<NET-CHANGE-FROM-OPS> 11,534,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (7,061)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 77,071
<NUMBER-OF-SHARES-REDEEMED> (3,432)
<SHARES-REINVESTED> 473
<NET-CHANGE-IN-ASSETS> 37,224,126
<ACCUMULATED-NII-PRIOR> 5,972
<ACCUMULATED-GAINS-PRIOR> 7,192,368
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,068,727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,701,482
<AVERAGE-NET-ASSETS> 454,867
<PER-SHARE-NAV-BEGIN> 16.59
<PER-SHARE-NII> (.01)
<PER-SHARE-GAIN-APPREC> 1.34
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.78
<EXPENSE-RATIO> 1.31
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 02
<NAME> TCW/DW TOTAL RETURN TRUST ANNUAL 7/31/98 CLASS B
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 128,116,724
<INVESTMENTS-AT-VALUE> 154,009,532
<RECEIVABLES> 2,276,547
<ASSETS-OTHER> 83,872
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,369,951
<PAYABLE-FOR-SECURITIES> 923,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,122,983
<TOTAL-LIABILITIES> 2,045,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,657,014
<SHARES-COMMON-STOCK> 9,134,394
<SHARES-COMMON-PRIOR> 7,055,856
<ACCUMULATED-NII-CURRENT> 3,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,771,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,892,808
<NET-ASSETS> 152,358,435
<DIVIDEND-INCOME> 1,707,676
<INTEREST-INCOME> 276,135
<OTHER-INCOME> 0
<EXPENSES-NET> 2,701,482
<NET-INVESTMENT-INCOME> (717,671)
<REALIZED-GAINS-CURRENT> 10,549,425
<APPREC-INCREASE-CURRENT> 1,702,988
<NET-CHANGE-FROM-OPS> 11,534,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (9,224,024)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,642,674
<NUMBER-OF-SHARES-REDEEMED> (2,117,176)
<SHARES-REINVESTED> 553,040
<NET-CHANGE-IN-ASSETS> 37,224,126
<ACCUMULATED-NII-PRIOR> 5,972
<ACCUMULATED-GAINS-PRIOR> 7,192,368
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,068,727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,701,482
<AVERAGE-NET-ASSETS> 141,570,669
<PER-SHARE-NAV-BEGIN> 16.59
<PER-SHARE-NII> (.08)
<PER-SHARE-GAIN-APPREC> 1.31
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.68
<EXPENSE-RATIO> 1.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> TCW/DW TOTAL RETURN TRUST ANNUAL 7/31/98 CLASS C
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 128,116,724
<INVESTMENTS-AT-VALUE> 154,009,532
<RECEIVABLES> 2,276,547
<ASSETS-OTHER> 83,872
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,369,951
<PAYABLE-FOR-SECURITIES> 923,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,122,983
<TOTAL-LIABILITIES> 2,045,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,657,014
<SHARES-COMMON-STOCK> 42,011
<SHARES-COMMON-PRIOR> 2,311
<ACCUMULATED-NII-CURRENT> 3,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,771,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,892,808
<NET-ASSETS> 699,874
<DIVIDEND-INCOME> 1,707,676
<INTEREST-INCOME> 276,135
<OTHER-INCOME> 0
<EXPENSES-NET> 2,701,482
<NET-INVESTMENT-INCOME> (717,671)
<REALIZED-GAINS-CURRENT> 10,549,425
<APPREC-INCREASE-CURRENT> 1,702,988
<NET-CHANGE-FROM-OPS> 11,534,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (24,164)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 42,555
<NUMBER-OF-SHARES-REDEEMED> (4,433)
<SHARES-REINVESTED> 1,578
<NET-CHANGE-IN-ASSETS> 37,224,126
<ACCUMULATED-NII-PRIOR> 5,972
<ACCUMULATED-GAINS-PRIOR> 7,192,368
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,068,727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,701,482
<AVERAGE-NET-ASSETS> 460,500
<PER-SHARE-NAV-BEGIN> 16.59
<PER-SHARE-NII> (.12)
<PER-SHARE-GAIN-APPREC> 1.33
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.66
<EXPENSE-RATIO> 2.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 04
<NAME> TCW/DW TOTAL RETURN TRUST ANNUAL 7/31/98 CLASS D
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-END> JUL-31-1998
<INVESTMENTS-AT-COST> 128,116,724
<INVESTMENTS-AT-VALUE> 154,009,532
<RECEIVABLES> 2,276,547
<ASSETS-OTHER> 83,872
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 156,369,951
<PAYABLE-FOR-SECURITIES> 923,013
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,122,983
<TOTAL-LIABILITIES> 2,045,996
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 120,657,014
<SHARES-COMMON-STOCK> 671
<SHARES-COMMON-PRIOR> 624
<ACCUMULATED-NII-CURRENT> 3,083
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 7,771,050
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25,892,808
<NET-ASSETS> 11,292
<DIVIDEND-INCOME> 1,707,676
<INTEREST-INCOME> 276,135
<OTHER-INCOME> 0
<EXPENSES-NET> 2,701,482
<NET-INVESTMENT-INCOME> (717,671)
<REALIZED-GAINS-CURRENT> 10,549,425
<APPREC-INCREASE-CURRENT> 1,702,988
<NET-CHANGE-FROM-OPS> 11,534,742
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (712)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 37,224,126
<ACCUMULATED-NII-PRIOR> 5,972
<ACCUMULATED-GAINS-PRIOR> 7,192,368
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,068,727
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,701,482
<AVERAGE-NET-ASSETS> 10,882
<PER-SHARE-NAV-BEGIN> 16.59
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.32
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (1.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.83
<EXPENSE-RATIO> 1.06
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
