STATEMENT OF ADDITIONAL INFORMATION
February 28, 2014
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U.S. Equity Funds
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U.S. Fixed Income Funds
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International Funds
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TCW Concentrated Value Fund
Class I Ticker TGFFX
Class N Ticker
TGFVX
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TCW Core Fixed Income Fund
Class I Ticker TGCFX
Class N Ticker
TGFNX
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TCW Emerging Markets Income Fund
Class I Ticker TGEIX
Class N Ticker TGINX
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TCW Growth Fund
Class I Ticker
TGGIX
Class N Ticker TGGYX
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TCW Enhanced Commodity Strategy Fund
Class I Ticker: TGGWX
Class N Ticker: TGABX
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TCW Emerging Markets Local Currency Income Fund
Class I Ticker TGWIX
Class N Ticker TGWNX
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TCW Growth Equities Fund
Class
I Ticker TGGEX
Class N Ticker TGDNX
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TCW High Yield Bond Fund
Class
I Ticker TGHYX
Class N Ticker TGHNX
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TCW Emerging Markets Multi-Asset Opportunities Fund
Class I Ticker TGMAX
Class N Ticker TGMEX
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TCW Relative Value Dividend
Appreciation Fund
(formerly known as the TCW Dividend Focused Fund)
Class I Ticker TGDFX
Class N Ticker TGIGX
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TCW Short Term Bond Fund
Class
I Ticker TGSMX
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TCW Global Bond Fund
Class I
Ticker: TGGBX
Class N Ticker: TGGFX
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TCW Relative Value Large Cap Fund
Class I Ticker TGDIX
Class N Ticker TGDVX
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TCW Total Return Bond Fund
Class I Ticker TGLMX
Class N Ticker
TGMNX
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TCW International Growth Fund
Class I Ticker: TGIBX
Class N Ticker:
TGIDX
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TCW Select Equities Fund
Class
I Ticker TGCEX
Class N Ticker TGCNX
TCW Small Cap Growth Fund
Class I Ticker
TGSCX
Class N Ticker TGSNX
TCW SMID Cap Growth Fund
Class I Ticker
TGSDX
Class N Ticker TGMDX
TCW Value Opportunities Fund
Class I Ticker
TGVOX
Class N Ticker TGVNX
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Asset Allocation Fund
TCW Conservative Allocation Fund
Class I Ticker
TGPCX
Class N Ticker TGPNX
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TCW International Small Cap Fund
Class I Ticker TGICX
Class N Ticker
TGNIX
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This Statement of Additional Information is not a prospectus but contains information in addition to, and more detailed
than that set forth in the Prospectus dated the same date, which describes each of the separate investment series (each, a “
Fund
” and collectively, the “
Funds
”) of TCW Funds, Inc. This Statement of
Additional Information should be read in conjunction with the Prospectus. A Prospectus may be obtained without charge by writing TCW Funds, Inc., Attention: Investor Relations Department, 865 South Figueroa Street, Suite 1800, Los Angeles,
California 90017 or by calling the Investor Relations Department at (800) FUND TCW. This Statement of Additional Information, although not in itself a prospectus, is incorporated by reference into the Prospectus in its entirety.
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TABLE OF CONTENTS
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GENERAL INFORMATION
TCW Funds, Inc. (the “
Corporation
”) was incorporated as a Maryland corporation on September 15, 1992 and is registered with
the U.S. Securities and Exchange Commission (“
SEC
”) as an open-end, management investment company. The Corporation has acknowledged that the name “TCW” is owned by The TCW Group, Inc.
(“
TCW
”), the parent of TCW Investment Management Company (the “
Advisor
”). The Corporation has agreed to change its name and the name of the Funds at the request of TCW if any advisory agreement into
which TCW or any of its affiliates and the Corporation may enter is terminated.
The Funds offer two classes of shares: Class I shares and
Class N shares, except for the TCW Short Term Bond Fund, which only offers Class I shares. The TCW Conservative Allocation Fund is a lifestyle allocation fund of funds, which seeks to achieve its investment objective by investing primarily in the
Class I shares of the other Funds of the Corporation (the “
TCW Funds
”) and certain of the Metropolitan West Funds (together, the “
Underlying Funds
”).
The TCW Concentrated Value, TCW Growth, TCW Growth Equities, TCW Relative Value Dividend Appreciation, TCW Relative Value Large Cap, TCW Select Equities,
TCW Small Cap Growth, TCW SMID Cap Growth, TCW Value Opportunities, TCW Core Fixed Income, TCW Emerging Markets Income, TCW International Small Cap, TCW High Yield Bond, TCW Short Term Bond and TCW Total Return Bond Funds are each classified as a
diversified fund under the Investment Company Act of 1940, as amended (“
1940 Act
”). The other TCW Funds are classified as non-diversified funds under the 1940 Act.
For information concerning the Fidelity Prime Money Market Portfolio, which is an unaffiliated separately managed money market mutual fund, please refer to the prospectus for the Fidelity Prime Money
Market Portfolio. A copy of the prospectus for the Fidelity Prime Money Market Portfolio is available by calling (800)
386-3829.
INVESTMENT PRACTICES
In attempting to achieve its investment objective, a Fund may utilize, among others, one or more of the strategies or securities set forth below. The Funds may also invest in other instruments (including
derivative investments) or use other investment strategies that are developed or become available in the future and that are consistent with their objectives and restrictions. The investment strategies described below may be pursued directly by the
Underlying Funds. As a general matter, the TCW Conservative Allocation Fund does not invest directly in securities. However, the TCW Conservative Allocation Fund is subject to the strategies and risks described below indirectly through its
investments in the Underlying Funds.
In addition, the TCW Enhanced Commodity Strategy Fund may pursue its investment objective by investing
in the TCW Cayman Enhanced Commodity Fund, Ltd., a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “
Subsidiary
”). The Subsidiary is advised by the Advisor, and has the same investment
objective and will generally be subject to the same fundamental, non-fundamental and certain other investment restrictions as the Fund; however, the Subsidiary may invest in commodity-linked swap agreements and other commodity-linked derivative
instruments to an extent greater than the Fund may make such investments. The Fund and the Subsidiary may test for compliance with certain investment restrictions on a consolidated basis, except that with respect to its investments in certain
securities that may involve leverage, the Subsidiary will comply with asset segregation or “earmarking” requirements to the same extent as the Fund. By investing in the Subsidiary, the Fund is indirectly exposed to the risks associated
with the Subsidiary’s investments. The derivatives and other investments held by the Subsidiary are generally similar to those held by the Fund and are subject to the same risks that apply to similar investments if held directly by the Fund.
Strategies and Investments Available to All Funds
Money Market Instruments
. All Funds may invest in money market instruments and will generally do so for temporary and defensive purposes only. These instruments include, but are not 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).
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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 $250,000 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 $250,000 principal amount
per certificate and to 15% or less of a Fund’s net assets in all such obligations and in all illiquid assets, in the aggregate.
Commercial Paper
. Commercial paper rated within the two highest ratings categories by Standard & Poor’s Corporation (“
S&P
”) or Moody’s Investors
Service, Inc. (“
Moody’s
”) or, if not rated, that is determined by the Funds’ Advisor to be of comparable quality.
Money Market Mutual Funds
. Shares of United States money market investment companies.
Repurchase Agreements
. Repurchase agreements, which may be viewed as a type of secured lending by a Fund, typically involve the acquisition
by a Fund of debt securities from a selling financial institution such as a bank, savings and loan association or broker-dealer. The repurchase agreements will provide 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, with respect to United States repurchase agreements, will be marked to market daily to ensure that the full value of the collateral, as specified in the repurchase agreement, does not decrease below the repurchase price plus accrued interest.
If such a decrease occurs, additional collateral will be requested and, when received, added to the account to maintain full collateralization. A Fund will accrue interest from the institution until the date the repurchase occurs. Although this date
is deemed by each Fund to be the maturity date of a repurchase agreement, the maturities of the collateral securities are not subject to any limits and may exceed one year. Repurchase agreements maturing in more than seven days will be considered
illiquid for purposes of the restriction on each Fund’s investment in illiquid and restricted securities.
Investments in Other
Investment Company Securities
. Under the 1940 Act, a Fund (other than the TCW Conservative Allocation Fund) may not own more than 3% of the outstanding voting stock of an investment company, invest more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in the securities of investment companies. Such investments may include open-end investment companies, closed-end investment companies and unit investment trusts
(“
UITs
”). In some instances, a Fund may invest in an investment company in excess of these limits. This may occur, for instance, in “cash sweep” arrangements in which a Fund invests all or a portion of its available
cash in a money market fund. Any expenses incurred by investing in other investment companies, including advisory fees and operating costs charged by those vehicles, are in addition to the expenses a Fund pays in connection with its own operations.
In addition, a Fund would pay brokerage costs associated with its purchases of shares of these vehicles. These limitations do not apply to investments in investment companies that are not registered with the SEC, such as private funds and offshore
funds.
The 1940 Act permits the TCW Conservative Allocation Fund to invest beyond the limitations discussed above so long as the investments
are in funds that are part of the “same group of investment companies” as the TCW Conservative Allocation Fund (other TCW Funds and Metropolitan West Funds). The TCW Conservative Allocation Fund may, generally, also purchase shares of
funds that are not part of the same group of investment companies as the TCW Conservative Allocation Fund (subject to the limits discussed above for unaffiliated funds) as well as stocks, bonds and other securities not issued by a Fund. The TCW
Conservative Allocation Fund may also invest in money market funds. Alternatively, the TCW Conservative Allocation Fund may limit its investments to not more than 3% of any unaffiliated fund and will not be subject to the 5% and 10% limit if it and
all of its affiliated persons choose to adhere to such 3% limit.
In addition, certain ETFs have obtained exemptive orders from the SEC that
allows the Funds to invest in those ETFs beyond the limits described above. As the shareholder of another investment company, a Fund would bear, along with other shareholders, its pro rata portion of the other investment company’s expenses,
including advisory fees.
Despite the possibility of greater fees and expenses, investments in other investment companies may be attractive
nonetheless for several reasons, especially in connection with foreign investments. Because of restrictions on direct investment by U.S. entities in certain countries, investing indirectly in such countries (by purchasing shares of another fund that
is permitted to invest in such countries) may be the most practical and efficient way for a Fund to invest in such countries. In other cases, when a portfolio manager desires to make only a relatively small investment in a particular country,
investing through another fund that holds a diversified portfolio in that country may be more effective than investing directly in issuers in that country.
Among the types of investment companies in which a Fund may invest are Portfolio Depository Receipts (“
PDRs
”) and Index Fund Shares (PDRs and Index Fund Shares are collectively
referred to as “exchange traded funds”(“
ETFs
”). ETFs are investment companies that invest in a portfolio of securities designed to track a particular market segment or index and whose shares are bought
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and sold on a securities exchange. ETFs, like mutual funds, have expenses associated with their operation, including advisory fees. When a Fund invests in an ETF, in addition to directly bearing
expenses associated with its own operations, it will bear a pro rata portion of the ETF’s expenses. As with any exchange listed security, ETF shares purchased in the secondary market are subject to customary brokerage charges. In addition,
certain ETFs have obtained exemptive orders from the SEC that allows the Funds to invest in those ETFs beyond the limits described above.
PDRs represent interests in a UIT holding a fund of securities that may be obtained from the UIT or purchased in the secondary market. Each PDR is
intended to track the underlying securities, trade like a share of common stock, and pay to PDR holders periodic dividends proportionate to those paid with respect to the underlying securities, less certain expenses. Index Fund Shares are shares
issued by an open-end management investment company that seeks to provide investment results that correspond generally to the price and yield performance of a specified foreign or domestic equity index (“
Index Fund
”). ETFs
include, among others, Standard & Poor’s Depository Receipts (“
SPDRs
”), Optimized Funds as Listed Securities (“
OPALS
”), Dow Jones Industrial Average Instruments (Diamonds), NASDAQ 100
tracking shares (QQQ) and I-Shares.
SPDRs. SPDR
s track the performance of a basket of stocks intended to track the price performance
and dividend yields of the S&P 500 until a specified maturity date. SPDRs are listed on the NYSE MKT. Holders of SPDRs are entitled to receive quarterly distributions corresponding to dividends received on shares contained in the underlying
basket of stocks net of expenses. On the maturity date of the SPDRs’ UIT, the holders will receive the value of the underlying basket of stocks.
OPALS
. OPALS track the performance of adjustable baskets of stocks until a specified maturity date. Holders of OPALS are entitled to receive semi-annual distributions corresponding to dividends
received on shares contained in the underlying basket of stocks, net of expenses. On the maturity date of the OPALS’ UIT, the holders will receive the physical securities comprising the underlying baskets.
I-Shares
™. I-Shares track the performance of specified equity market indexes, including the S&P 500. I-Shares are listed on the NYSE MKT
and the Chicago Board Option Exchange. Holders of I-Shares are entitled to receive distributions not less frequently than annually corresponding to dividends and other distributions received on shares contained in the underlying basket of stocks net
of expenses. I-Shares are Index Fund Shares. Individual investments in PDRs generally are not redeemable, except upon termination of the UIT. Similarly, individual investments in Index Fund Shares generally are not redeemable. However, large
quantities of PDRs known as “Creation Units” are redeemable from the sponsor of the UIT.
Similarly, block sizes of Index Fund
Shares, also known as “Creation Units,” are redeemable from the issuing Index Fund. The liquidity of small holdings of ETFs, therefore, will depend upon the existence of a secondary market.
The price of ETFs is derived from and based upon the securities held by the UIT or Index Fund, and a Fund investing in ETFs will indirectly bear the risk
of those investments.
Accordingly, the level of risk involved in the purchase or sale of an ETF is similar to the risk involved in the
purchase or sale of traditional common stock, with the exception that the pricing mechanism for an ETF is based on a basket of stocks. Disruptions in the markets for the securities underlying ETFs purchased or sold by a Fund could result in losses
on investments in ETFs. ETFs represent an unsecured obligation and therefore carry with them the risk that the counterparty will default and the Fund may not be able to recover the current value of its investment.
Strategies and Investments Available to all Funds (except the TCW Conservative Allocation Fund)
Lending of Portfolio Securities
. Each of the Funds may, consistent with applicable regulatory requirements, lend its portfolio securities to
brokers, dealers and other financial institutions, provided such loans are callable at any time by the Funds (subject to the notice provisions described below), and are at all times secured by cash, bank letters of credit, other money market
instruments rated A-1, P-1 or the equivalent, or securities of the United States Government (or its agencies or instrumentalities), which are maintained in a segregated account and that are equal to at least the market value, determined daily, of
the loaned securities. The advantage of such loans is that the Funds continue 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. A Fund 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 a 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 extension of credit, there are risks of
delay in recovery and in some cases even loss of rights in the collateral should the borrower fail financially. However, loans of portfolio securities will only be made to firms deemed by the Advisor to be creditworthy. Upon termination of the loan,
the borrower is required to return the securities to the Funds. Any gain or loss in the marketplace during the loan period would inure to the Fund. A Fund will pay reasonable finder’s, administrative and custodian fees in connection with a loan
of securities. Also voting rights with respect to the loaned securities may pass with the lending of the securities.
Borrowing
.
Except as described below, a Fund may borrow money to the extent permitted under the 1940 Act, and as interpreted, modified or otherwise permitted by regulatory authority having jurisdiction, from time to time. This means that, in general, a Fund
may borrow money from banks for any purpose in an amount up to 1/3 of the Fund’s net assets. A Fund also may borrow money for temporary administrative purposes in an amount not to exceed 5% of the Fund’s total assets.
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Specifically, provisions of the 1940 Act require a Fund to maintain continuous asset coverage (that is,
total assets including borrowings, less liabilities exclusive of borrowings) of 300% of the amount borrowed, with an exception for borrowing not in excess of 5% of the Fund’s total assets made for temporary administrative purposes. Any
borrowings for temporary administrative purposes in excess of 5% of the Fund’s total assets must maintain continuous asset coverage. If the 300% asset coverage should decline as a result of market fluctuations or other reasons, the Fund may be
required to sell some of its portfolio holdings within three days to reduce the debt and restore the 300% asset coverage, even though it may be disadvantageous from an investment standpoint to sell securities at that time.
Borrowing will tend to exaggerate the effect on net asset value of any increase or decrease in the market value of a Fund’s portfolio. Money
borrowed will be subject to interest costs which may or may not be recovered by appreciation of the securities purchased. A Fund also may be required to maintain minimum average balances in connection with such borrowing or to pay a commitment or
other fee to maintain a line of credit; either of these requirements would increase the cost of borrowing over the stated interest rate.
When-Issued and Delayed Delivery Securities and Forward Commitments
. From time to time, in the ordinary course of business, a Fund may
purchase securities on a when-issued or delayed delivery basis and may purchase or sell securities on a forward commitment basis. (These types of transactions are negotiated directly with a counterparty, rather than through an exchange). 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 a 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 a 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 such time, the Fund will also establish a segregated account in which it will continuously maintain
cash or U.S. Government securities or other liquid securities equal in value to recognized commitments for such securities. At the time of delivery of the securities, the value may be more or less than the purchase or sale price. An increase in the
percentage of a 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.
When, As and If Issued Securities
. A 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 Advisor 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 securities equal in value to recognized commitments for such securities. Settlement of the trade will ordinarily occur within three 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. Each 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. Each 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.
Options
.
Each of the Funds may purchase and write (sell) call and put options, including options listed on U.S. or foreign
securities exchanges or written in over-the-counter transactions (“
OTC Options
”). A Fund may purchase and sell American or European style options. If an option is American style, it may be exercised on any day up to its
expiration date. A European style option may be exercised only on its expiration date.
Exchange-listed options are issued by the Options
Clearing Corporation (“
OCC
”) (in the U.S.) or other clearing corporation or exchange which assures that all transactions in such options are properly executed. OTC Options are purchased from or sold (written) to dealers or
financial institutions which have entered into direct agreements with a Fund. With OTC Options, such variables as expiration date, exercise price and premium will be agreed upon between a Fund and the transacting dealer, without the intermediation
of a third party such as the OCC. If the transacting dealer fails to make or take delivery of the securities or amount of foreign currency underlying an option it has written, in accordance with the terms of that option, a Fund would lose the
premium paid for the option as well as any anticipated benefit of the transaction. Each Fund will engage in OTC Option transactions only with brokers or financial institutions deemed creditworthy by the Advisor.
As investment companies registered with the SEC, the Funds must “set aside” (often referred to as “asset segregation”) liquid assets
equal in value to market value of the underlying securities (less margin on deposit) or strike price to “cover” any written call or put options it enters into. Alternatively, a Fund may cover a written call option by holding the underlying
security or purchasing an offsetting call option (
see “
Covered Call Writing
” below
). Similarly, a Fund may cover a written put option by selling the underlying security short at the strike price or purchasing an
offsetting put option (
see “
Covered Put Writing
” below
).
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Covered Call Writing
. Each of the Funds is permitted to write covered call options on
securities, the U.S. dollar and foreign currencies. Generally, a call option is “covered” if a Fund owns, or has the right to acquire, without additional cash consideration (or for additional cash consideration held for the Fund by its
custodian in a segregated account) the underlying security (currency) subject to the option, or otherwise segregates sufficient cash or other liquid assets to cover the outstanding position. A call option is also covered if a Fund holds a call on
the same security as the underlying security (currency) of the written option, where the exercise price of the call used for coverage is equal to or less than the exercise price of the call written or greater than the exercise price of the call
written if the marked to market difference is maintained by a Fund in cash or other liquid assets which a Fund has segregated for this purpose.
The writer of an option receives from the purchaser, in return for a call it has written, a “premium”;
i.e.
, the price of the option.
Receipt of these premiums may better enable a Fund to earn a higher level of current income than it would earn from holding the underlying securities (currencies) alone. Moreover, the premium received will offset a portion of the potential loss
incurred by the Fund if the securities (currencies) underlying the option are ultimately sold (exchanged) by the Fund at a loss. Furthermore, a premium received on a call written on a foreign currency will ameliorate any potential loss of value on
the portfolio security due to a decline in the value of the currency.
However, during the option period, the covered call writer has, in
return for the premium on the option, given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security (or the exchange rate of the currency in which it is denominated) increase, but has
retained the risk of loss should the price of the underlying security (or the exchange rate of the currency in which it is denominated) decline. The premium received will fluctuate with varying economic market conditions. If the market value of the
portfolio securities (or the currencies in which they are denominated) upon which call options have been written increases, a Fund may receive a lower total return from the portion of its portfolio upon which calls have been written than it would
have had such calls not been written.
As regards listed options and certain OTC Options, during the option period, a Fund may be required, at
any time, to deliver the underlying security (currency) against payment of the exercise price on any calls it has written (exercise of certain listed and OTC Options may be limited to specific expiration dates). This obligation is terminated upon
the expiration of the option period or at such earlier time when the writer effects a closing purchase transaction. A closing purchase transaction is accomplished by purchasing an option of the same series as the option previously written. However,
once the Fund has been assigned an exercise notice, the Fund will be unable to effect a closing purchase transaction.
Closing purchase
transactions are ordinarily effected to realize a profit on an outstanding call option, to prevent an underlying security (currency) from being called, to permit the sale of an underlying security (or the exchange of the underlying currency) or to
enable a Fund to write another call option on the underlying security (currency) with either a different exercise price or expiration date or both. A Fund may realize a net gain or loss from a closing purchase transaction depending upon whether the
amount of the premium received on the call option is more or less than the cost of effecting the closing purchase transaction. Any loss incurred in a closing purchase transaction may be wholly or partially offset by unrealized appreciation in the
market value of the underlying security (currency). Conversely, a gain resulting from a closing purchase transaction could be offset in whole or in part or exceeded by a decline in the market value of the underlying security (currency).
If a call option expires unexercised, a Fund realizes a gain in the amount of the premium on the option less the commission paid. Such a gain, however,
may be offset by depreciation in the market value of the underlying security (currency) during the option period. If a call option is exercised, a Fund realizes a gain or loss from the sale of the underlying security (currency) equal to the
difference between the purchase price of the underlying security (currency) and the proceeds of the sale of the security (currency) plus the premium received on the option less the commission paid.
Covered Put Writing
. Each of the Funds is permitted to write covered put options. As a writer of a covered put option, a Fund incurs an
obligation to buy the security underlying the option from the purchaser of the put, at the option’s exercise price at any time during the option period, at the purchaser’s election (certain listed and OTC put options written by a Fund will
be exercisable by the purchaser only on a specific date). A put is “covered” if, at all times, the Fund maintains, in a segregated account, cash or other liquid assets in an amount equal to at least the exercise price of the option, at all
times during the option period. Similarly, a short put position could be covered by the Fund by its purchase of a put option on the same security (currency) as the underlying security of the written option, where the exercise price of the purchased
option is equal to or more than the exercise price of the put written or less than the exercise price of the put written if the marked to market difference is maintained by the Fund in cash or other liquid assets which the Fund holds in a segregated
account. In writing puts, a Fund assumes the risk of loss should the market value of the underlying security (currency) decline below the exercise price of the option (any loss being decreased by the receipt of the premium on the option written). In
the case of listed options, during the option period, the Fund may be required, at any time, to make payment of the exercise price against delivery of the underlying security (currency). The operation of and limitations on covered put options in
other respects are substantially identical to those of call options.
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Purchasing Call and Put Options
. Each of the Funds may purchase a call option in order to
close out a covered call position (see “
Covered Call Writing
” above), to protect against an increase in price of a security it anticipates purchasing or, in the case of a call option on foreign currency, to hedge against an
adverse exchange rate move of the currency in which the security it anticipates purchasing is denominated vis-a-vis the currency in which the exercise price is denominated. The purchase of the call option to effect a closing transaction on a call
written over-the-counter may be a listed or an OTC Option. In either case, the call purchased is likely to be on the same securities (currencies) and have the same terms as the written option. If purchased over-the-counter, the option would
generally be acquired from the dealer or financial institution which purchased the call written by the Fund.
The Funds may purchase put
options on securities or currencies which it holds in its portfolio to protect itself against a decline in the value of the security and to close out written put option positions. If the value of the underlying security or currency were to fall
below the exercise price of the put purchased in an amount greater than the premium paid for the option, the Fund would incur no additional loss. In addition, a Fund may sell a put option which it has previously purchased prior to the sale of the
securities (currencies) underlying such option. Such a sale would result in a net gain or loss depending whether the amount received on the sale is more or less than the premium and other transaction costs paid on the put option which is sold. Such
gain or loss could be offset in whole or in part by a change in the market value of the underlying security (currency). If a put option purchased by a Fund expired without being sold or exercised, the premium would be lost.
Limitations on the Use of Futures, Options and Swaps.
The Advisor currently claims an exclusion from the definition of the term
“commodity pool operator” (“
CPO
”) under the Commodity Exchange Act (“
CEA
”) and, therefore, is not subject to registration or regulation as CPO under the CEA in respect of TCW Core Fixed
Income Fund, TCW Emerging Markets Income Fund, TCW Emerging Markets Local Currency Income Fund, TCW Emerging Markets Multi-Asset Opportunities Fund, TCW Global Bond Fund, TCW High Yield Bond Fund, TCW International Growth Fund, TCW International
Small Cap Fund, TCW Short Term Bond Fund and TCW Total Return Bond Fund. [As of the date of this SAI, the Adviser does not expect to register as a CPO of the Funds listed above. However, there is no certainty that the Funds or the Adviser will be
able to rely on an exclusion in the future as the Funds’ investments change over time.] These Funds may enter into futures, options, forwards, and swaps that do not constitute bona fide hedging if, immediately thereafter, (i) the amount of
initial margin and premiums for all such contracts does not exceed 5% of the Fund’s liquidation value, or (ii) that the aggregate net notional value or obligation of all such contracts does not exceed the Fund’s liquidation value, in
each case after taking into account unrealized profits and losses on such futures contracts, provided, however, that in the case of an option that is in-the-money (the exercise price of the call (put) option is less (more) than the market price of
the underlying security) at the time of purchase, the in-the-money amount may be excluded.
The Adviser is registered with the Commodity
Futures Trading Commission as a CPO with respect to TCW Enhanced Commodity Strategy Fund and the Subsidiary, and is a member of the National Futures Association (
“
NFA
”
) in such capacity. However, the Adviser
currently operates pursuant to regulations under the CEA that exempt the Adviser from many of the requirements otherwise applicable to CPOs.
Futures Contracts
.
Each of the Funds may purchase and sell interest rate, currency, and index futures contracts (“
futures
contracts
”), on securities eligible for purchase by the Fund. Subject to certain limitations, a Fund may enter into futures contracts or options on such contracts to attempt to protect against possible changes in the market value of
securities held in or to be purchased by the Fund resulting from interest rate or market fluctuations, to protect the Fund’s unrealized gains in the value of its portfolio securities, to facilitate the sale of such securities for investment
purposes, to manage its effective maturity or duration, or to establish a position in the derivatives markets as a temporary substitute for purchasing or selling particular securities.
In connection with the purchase or sale of futures contracts, a Fund will be required to either (i) segregate sufficient cash or other liquid assets to cover the outstanding position or
(ii) cover the futures contract by either owning the instruments underlying the futures contracts or by holding a portfolio of securities with characteristics substantially similar to the underlying index or stock index comprising the futures
contracts or by holding a separate offsetting option permitting it to purchase or sell the same futures contract. With respect to forwards and futures contracts that are not contractually required to “cash-settle,” a Fund must cover its
open positions by segregating or “earmarking” liquid assets equal to the contracts’ full, notional value. With respect to forwards and futures that are contractually required to “cash-settle,” a Fund is permitted to
segregate or “earmark” liquid assets in an amount equal to the Fund’s daily marked-to-market (net) obligation (
i.e.
, the Fund’s daily net liability, if any) rather than the notional value. By setting aside assets equal to
only its net obligation under cash-settled forwards or futures, a Fund will have the ability to employ leverage to a greater extent than if the Fund were required to segregate or “earmark” assets equal to the full notional value of such
contracts.
A Fund may purchase or sell interest rate futures for the purpose of hedging some or all of the value of its portfolio securities
against changes in prevailing interest rates or to manage its duration or effective maturity. If the Advisor anticipates that interest rates may rise and, concomitantly, the price of certain of its portfolio securities may fall, the Fund may sell
futures contracts. If declining interest.
8
rates are anticipated, the Fund may purchase futures contracts to protect against a potential increase in the price of securities the Fund intends to purchase. Subsequently, appropriate
securities may be purchased by the Fund in an orderly fashion; as securities are purchased, corresponding futures positions would be terminated by offsetting sales of contracts. A Fund may purchase or sell futures on various currencies in which its
portfolio securities are denominated for the purpose of hedging against anticipated changes in currency exchange rates. A Fund will enter into currency futures contracts to “lock in” the value of a security purchased or sold in a given
currency vis-a-vis a different currency or to hedge against an adverse currency exchange rate movement of a portfolio security’s denominated currency vis-a-vis a different currency. Foreign currency futures contracts would be entered into for
the same reason and under the same circumstances as foreign currency forward contracts. The Advisor will assess such factors as cost spreads, liquidity and transaction costs in determining whether to utilize futures contracts or forward contracts in
its foreign currency transactions and hedging strategy.
Initial margin in futures transactions is different from margin in securities
transactions in that initial margin does not involve the borrowing of funds by a broker’s client but is, rather, a good faith deposit on the futures contract which will be returned to a Fund upon the proper termination of the futures contract.
Initial margin requirements are established by the exchanges on which futures contracts trade and may, from time to time, change. In addition, brokers may establish margin deposit requirements in excess of those required by the exchanges.
All futures contracts are marked to market and settled daily. A Fund may be required to deposit cash or U.S. Government securities, called
“variation margin,” with the Fund’s futures commission merchant (“FCM”) to satisfy its losses due to price fluctuations in the futures contract. Conversely, a Fund may request that its FCM deliver any gains due to price
fluctuations in the futures account to the Fund’s custodian.
At any time prior to expiration of a futures contract, a Fund may elect to
close the position by taking an opposite position which will operate to terminate the Fund’s position in the futures contract. A final determination of any variation margin is then made, additional cash is required to be paid by or released to
the Fund and the Fund realizes a loss or gain.
Although many futures contracts call for actual commitment or acceptance of securities, the
contracts usually are closed out before the settlement date without making or taking delivery. A short futures position is usually closed out by purchasing futures contracts for the same aggregate amount of the underlying instruments and with the
same delivery date. If the sale price exceeds the offsetting purchase price, the seller would be paid the difference and realize a gain. If the offsetting purchase price exceeds the sales price, the seller would pay the difference and would realize
a loss. Similarly, a long futures position in usually closed out by effecting a futures contract sale for the same aggregate amount of the specific type of security (currency) and the same delivery date. If the offsetting sales price exceeds the
purchase price, the purchaser would realize a gain, whereas if the purchase price exceeds the offsetting sale price, the purchaser would realize a loss. There is no assurance that a Fund will be able to enter into a closing transactions.
A Fund’s investments in foreign futures will depend on the laws and regulations of the appropriate foreign jurisdiction. Neither the CFTC, NFA, SEC,
nor any domestic exchange regulates the trading activities in any foreign exchange or boards of trade or has the power to compel enforcement of the rules of those organizations or any applicable foreign law. As such, foreign futures transactions may
not provide a Fund with the same amount of protection as available under U.S. securities and commodities laws.
Options on Futures
Contracts
. Each of the Funds may also purchase and write call and put options on futures contracts which are traded on an exchange and enter into closing transactions with respect to such options to terminate an existing position. An option
on a futures contract gives the purchaser the right (in return for the premium paid) to assume a position in a futures contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at
any time during the term of the option.
The Funds will purchase and write options on futures contracts for identical purposes to those set
forth above for the purchase of a futures contract (purchase of a call option or sale of a put option) and the sale of a futures contract (purchase of a put option or sale of a call option), or to close out a long or short position in futures
contracts. Any premiums received in the writing of options on futures contracts may, of course, provide a further hedge against losses resulting from price declines in portions of a Fund’s portfolio.
Options on Foreign Currencies
.
Each of the Funds may purchase and write options on foreign currencies for purposes similar to those
involved with investing in foreign currency forward contracts. For example, in order to protect against declines in the dollar value of portfolio securities which are denominated in a foreign currency, a Fund may purchase put options on an amount of
such foreign currency equivalent to the current value of the portfolio securities involved. As a result, the Fund would be enabled to sell the foreign currency for a fixed amount of U.S. dollars, thereby “locking in” the dollar value of
the portfolio securities (less the amount of the premiums paid for the options). Conversely, a Fund may purchase call options on foreign currencies in which securities it anticipates purchasing are denominated to secure a set U.S. dollar price for
such securities and protect against a decline in the value of the U.S. dollar against such foreign currency. Each of these Funds may also purchase call and put options to close out written option positions.
9
Each of these Funds may also write call options on foreign currency to protect against potential declines in
its portfolio securities which are denominated in foreign currencies. If the U.S. dollar value of the portfolio securities falls as a result of a decline in the exchange rate between the foreign currency in which it is denominated and the U.S.
dollar, then a loss to a Fund occasioned by such value decline would be ameliorated by receipt of the premium on the option sold. At the same time, however, the Fund gives up the benefit of any rise in value of the relevant portfolio securities
above the exercise price of the option and, in fact, only receives a benefit from the writing of the option to the extent that the value of the portfolio securities falls below the price of the premium received. A Fund may also write options to
close out long call option positions. A put option on a foreign currency would be written by the Fund for the same reason it would purchase a call option, namely, to hedge against an increase in the U.S. dollar value of a foreign security which a
Fund anticipates purchasing. Here, the receipt of the premium would offset, to the extent of the size of the premium, any increased cost to a Fund resulting from an increase in the U.S. dollar value of the foreign security. However, a Fund could not
benefit from any decline in the cost of the foreign security which is greater than the price of the premium received. A Fund may also write options to close out long put and call option positions.
The markets for certain foreign currency options are relatively new and a Fund’s ability to establish and close out positions on such options is
subject to the maintenance of a liquid secondary market. Although the Funds will not purchase or write such options unless and until, in the opinion of the Advisor, the market for them has developed sufficiently to ensure that the risks in
connection with such options are not greater than the risks in connection with the underlying currency, there can be no assurance that a liquid secondary market will exist for a particular option at any specific time. In addition, options on foreign
currencies are affected by all of those factors which influence foreign exchange rates and investments generally.
The value of a foreign
currency option depends upon the value of the underlying currency relative to the U.S. dollar. As a result, the price of the option position may vary with changes in the value of either or both currencies and have no relationship to the investment
merits of a foreign security, including foreign securities held in a “hedged” investment portfolio. Because foreign currency transactions occurring in the interbank market involve substantially larger amounts than those that may be
involved in the use of foreign currency options, investors may be disadvantaged by having to deal in an odd lot market (generally consisting of transactions of less than $1 million) for the underlying foreign currencies at prices that are less
favorable than for round lots.
Forward Currency Transactions
. Each of the Funds may enter into forward currency transactions. A
foreign currency forward contract involves an obligation to purchase or sell a specific currency at an agreed future date, at a price set at the time of the contract. These contracts are traded in the interbank market conducted directly between
currency traders. A Fund may enter into foreign currency forward contracts in order to protect against the risk that the U.S. dollar value of the Fund’s dividends, interest and net realized capital gains in local currency will decline to the
extent of any devaluation of the currency during the intervals between (a) (i) the time the Fund becomes entitled to receive or receives dividends, interest and realized gains or (ii) the time an investor gives notice of a requested
redemption of a certain amount and (b) the time such amount(s) are converted into U.S. dollars for remittance out of the particular country or countries.
At the maturity of a forward contract, a Fund may either accept or make delivery of the currency specified in the contract or, prior to maturity, enter into a closing purchase transaction involving the
purchase or sale of an offsetting contract. Closing purchase transactions with respect to forward contracts are usually effected with the currency trader who is a party to the original forward contract.
The cost to a Fund of engaging in forward currency transactions may vary with factors such as the length of the contract period and the market conditions
then prevailing. Because forward currency transactions are usually conducted on a principal basis, no fees or commissions are involved, although the price charged in the transaction includes a dealer’s markup. The use of forward currency
contracts does not eliminate fluctuations in the underlying prices of the securities, but it does establish a rate of exchange that can be achieved in the future. In addition, although forward currency contracts limit the risk of loss due to a
devaluation of the foreign currency in relation to the U.S. dollar, they also limit any potential gain if that foreign currency appreciates with respect to the U.S. dollar.
A Fund will “cover” its forward positions in a manner substantially similar to that described above with respect to asset coverage for futures contracts.
Convertible Securities
. Each of the Funds may acquire convertible securities. Convertible securities include bonds, debentures, notes,
preferred stock or other securities that may be converted into or exchanged for common stock or other equity securities of the same or a different issuer. Convertible securities provide a conversion right for a particular period of time at a
specified price or formula. A convertible security entitles the holder to receive interest paid or accrued on debt or the dividend paid on preferred stock until the convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to nonconvertible debt securities in that they ordinarily provide a stable stream of income with generally higher yields than
10
those of common stocks of the same or similar issuers. Therefore, they generally entail less risk than the issuer’s common stock, although the extent to which such risk is reduced depends in
large measure upon the proximity of its price to its value as a nonconvertible fixed income security.
The value of a convertible security is
a function of its “investment value” (determined by its yield in comparison with the yields of other securities of comparable maturity and quality that do not have a conversion privilege), and its “conversion value” (the
security’s worth, at market value, if converted into the underlying common stock). The investment value of a convertible security is influenced by changes in interest rates, with investment value declining as interest rates increase and
increasing as interest rates decline. The credit standing of the issuer and other factors may also have an effect on the convertible security’s investment value. The conversion value of a convertible security is determined by the market price
of the underlying common stock. If the conversion value is low relative to the investment value, the price of the convertible security is governed principally by its investment value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the convertible security will be increasingly influenced by its conversion value. In addition, a convertible security generally will sell at a premium over its conversion value determined by
the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security.
Restricted Securities
. Each of the Funds may invest in securities which are subject to restrictions on resale because they have not been
registered under the Securities Act or they are otherwise restricted as to sale. Restricted securities may include privately placed securities and securities offered pursuant to Rule 144A under the Securities Act.
Restricted securities are subject to legal and/or contractual restrictions on resale. In some cases, certain restricted securities can be sold
without SEC registration to qualified institutional buyers and, under the Funds’ procedures; such restricted securities could be treated as liquid. However, other restricted securities, such as those that are the subject of a private
placement, may be illiquid for an extended period of time and will be reported as such.
Sovereign Debt Obligations and Emerging Market
Countries
.
Each of the Funds may invest in sovereign debt and emerging market countries. Political conditions, in terms of a country or agency’s willingness to meet the terms of its debt obligations, are considerable
significance. Investors should be aware that the sovereign debt instruments in which these Funds may invest involve great risk and are deemed to be the equivalent in terms of quality to securities rated below investment grade by Moody’s and
S&P.
Sovereign debt generally offers high yields, reflecting not only perceived credit risk, but also the need to compete with other
local investments in domestic financial markets. A foreign debtor’s willingness or ability to repay principal and interest due in a timely manner may be affected by, among other factors, its cash flow situation, the extent of its foreign
reserves, the availability of sufficient foreign exchange on the date a payment is due, the relative size of the debt service burden to the economy as a whole, the foreign debtor’s policy towards the International Monetary Fund and the
political constraints to which a sovereign debtor may be subject. Sovereign debtors may default on their sovereign debt. Sovereign debtors may also be dependent on expected disbursements from foreign governments, multilateral agencies and others
abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a sovereign debtor’s implementation of economic reforms
and/or economic performance and the timely service of such debtor’s obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of such third
parties’ commitments to lend funds to the sovereign debtor, which may further impair such debtor’s ability or willingness to service its debts.
In recent years, some of the emerging market countries in which the Funds expect to invest have encountered difficulties in servicing their sovereign debt. Some of these countries have withheld payments
of interest and/or principal of sovereign debt. These difficulties have also led to agreements to restructure external debt obligations; in particular, commercial bank loans, typically by rescheduling principal payments, reducing interest rates and
extending new credits to finance interest payments on existing debt. In the future, holders of sovereign debt may be requested to participate in similar rescheduling of such debt.
The ability or willingness of the governments of emerging market countries to make timely payments on their sovereign debt is likely to be influenced strongly by a country’s balance of trade and its
access to trade and other international credits. A country whose exports are concentrated in a few commodities could be vulnerable to a decline in the international prices of one or more of such commodities. Increased protectionism on the part of a
country’s trading partners could also adversely affect its exports. Such events could extinguish a country’s trade account surplus, if any. To the extent that a country receives payment for its exports in currencies other than hard
currencies, its ability to make hard currency payments could be affected.
The occurrence of political, social and diplomatic changes in one
or more of the countries issuing sovereign debt could adversely affect the Funds’ investments. The countries issuing such instruments are faced with social and political issues and some of them have experienced high rates of inflation in recent
years and have extensive internal debt. Among other effects, high inflation and internal debt service requirements may adversely affect the cost and availability of future domestic sovereign borrowing to finance governmental programs, and may have
other adverse social, political and economic consequences. Political changes or a deterioration of a country’s domestic economy or balance of trade may affect the willingness of countries to services their sovereign debt. There can be no
assurance that adverse political changes will not cause the Funds to suffer a loss of interest or principal on any of its holdings.
11
As a result of all of the foregoing, a government obligor may default on its obligations. If such an event
occurs, a Fund may have limited legal recourse against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain
recourse may be subject to the political climate in the relevant country. Bankruptcy, moratorium and other similar laws applicable to issuers of sovereign debt obligations may be substantially different from those applicable to issuers of private
debt obligations. In addition, no assurance can be given that the holders of commercial bank debt will not contest payments to the holders of other foreign government debt obligations in the event of default under their commercial bank loan
agreements.
Periods of economic uncertainty may result in the volatility of market prices of sovereign debt and in turn, the Funds’ net
asset value, to a greater extent than the volatility inherent in domestic securities. The value of sovereign debt will likely vary inversely with changes in prevailing interest rates, which are subject to considerable variance in the international
market.
Warrants
. A warrant confers upon its holder the right to purchase an amount of securities at a particular time and
price. Because a warrant does not carry with it the right to dividends or voting rights with respect to the securities which it entitles a holder to purchase, and because it does not represent any rights in the assets of the issuer, warrants may be
considered more speculative than certain other types of investments. Also, the value of a warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to its
expiration date.
Short Sales Against the Box
.
Each of the Funds may from time to time make short sales of securities it
owns or has the right to acquire through conversion or exchange of other securities it owns. A short sale is “against the box” to the extent that a Fund contemporaneously owns or has the right to obtain at no added cost securities
identical to those sold short. In a short sale, a Fund does not immediately deliver the securities sold and does not receive the proceeds from the sale. The Fund is said to have a short position in the securities sold until it delivers the
securities sold, at which time it receives the proceeds of the sale. When a short sale transaction is closed out by delivery of the securities, any gain or loss on the transaction is taxable as a short term capital gain or loss. A short sale of an
American Depository Receipt (“ADR”) is “against the box” if the Fund owns the underlying security represented by the ADR and reasonably believes it will be able to convert the security into the ADR prior to delivery.
To secure its obligation to deliver the securities sold short, a Fund will deposit in a separate escrow account with its custodian an equal amount of the
securities sold short or securities convertible into or exchangeable for such securities. The Fund may close out a short position by purchasing and delivering an equal amount of the securities sold short, rather than by delivering securities already
held by the Fund, because the Fund may want to continue to receive interest and dividend payments on securities in its portfolio that are convertible into the securities sold short.
A Fund may make a short sale in order to hedge against market risks when the Advisor believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund or a
security convertible into or exchangeable for such security. However, to the extent that in a generally rising market the Fund maintains short positions in securities rising with the market, the net asset value of the Fund would be expected to
increase to a lesser extent than the net asset value of an investment company that does not engage in short sales. This is because a Fund loses the opportunity to profit on such rising prices when it engages in short sales. A Fund may also make a
short sale when it does not want to sell the security it owns, because, among other reasons, it wishes to defer recognition of gain or loss for Federal income tax purposes. In such case, any future losses in the Fund’s long position should be
reduced by a gain in the short position. The extent to which such gains or losses are reduced will depend upon the amount of the security sold short relative to the amount the Fund owns, either directly or indirectly, and, in the case where the Fund
owns convertible securities, changes in the investment value or conversion premiums. Certain short sales may result in a “constructive sale” for federal income tax purposes and, thus, would prevent a Fund from deferring recognition of gain
for such purposes. A constructive sale may not occur if a Fund closes out the transaction with securities other than the appreciated securities held at the time of the short sale as long as other conditions are met. Additionally, a Fund may use
short sales when it is determined that a convertible security can be bought at a small conversion premium and has a yield advantage relative to the underlying common stock sold short. The potential risk in this strategy is the possible loss of any
premium over conversion value in the convertible security at the time of purchase. The purpose of this strategy is to produce income from the yield advantage and to provide the potential for a gain should the conversion premium increase.
Illiquid Securities.
The Funds may each invest up to 15% of their net assets in illiquid securities. The Funds may invest in
(i) securities that are sold in private placement transactions between their issuers and their purchasers and that are neither listed on an exchange nor traded over-the-counter, and (ii) securities that are sold in transactions between
qualified institutional buyers pursuant to Rule 144A under the Securities Act. Securities deemed liquid may be deemed illiquid for a time if private placement purchasers or qualified institutional buyers become uninterested or unwilling to purchase
these securities.
12
While maintaining oversight, the Board of Directors has delegated to the Advisor the day-to-day functions of
determining whether or not individual securities are liquid for purposes of the limitations on investments in illiquid assets. Rule 144A securities and Section 4(a)(2) commercial paper will be considered illiquid and therefore subject to the
Funds’ limit on the purchase of illiquid securities unless the Board of Directors or the Advisor determines that the Rule 144A securities or Section 4(a)(2) commercial paper are liquid. In determining the liquidity of a security, the
Advisor will consider, among other things, the following factors: (i) the frequency of trades and quotes for the security; (ii) the number of dealers and other potential purchasers wishing to purchase or sell the security;
(iii) dealer undertakings to make a market in the security; and (iv) the nature of the security and of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, the mechanics of transfer and
whether a security is listed on an electronic for trading the security).
Preferred Stock.
The Funds may invest in preferred
stock. Preferred stock represents an equity interest in a company that generally entitles the holder to receive, in preference to the holders of other stocks such as common stocks, dividends and a fixed share of the proceeds resulting from a
liquidation of the company. Some preferred stocks also entitle their holders to receive additional liquidation proceeds on the same basis as holders of a company’s common stock, and thus also represent an ownership interest in that company.
Preferred stocks may pay fixed or adjustable rates of return. Preferred stock is subject to issuer-specific and market risks applicable
generally to equity securities. In addition, a company’s preferred stock generally pays dividends only after the company makes required payments to holders of its bonds and other debt. For this reason, the value of preferred stock will usually
react more strongly than bonds and other debt to actual or perceived changes in the company’s financial condition or prospects. Preferred stock of smaller companies may be more vulnerable to adverse developments than preferred stock of larger
companies.
Strategies and Investments Available to the International Funds and U.S. Fixed Income Funds (as shown on the cover of this
SAI)
Swap Agreements.
The International Funds and U.S. Fixed Income Funds may engage in swap transactions, including, but
not limited to, swap agreements on interest rates, security or commodity indexes, specific securities and commodities, and credit and event-linked swaps. To the extent a Fund may invest in foreign currency-denominated securities, it also may invest
in currency exchange rate swap agreements. A Fund also may enter into options on swap agreements (“
swap options
”).
A
Fund may enter into swap transactions for any legal purpose consistent with its investment objectives and policies, such as for the purpose of attempting to obtain or preserve a particular return or spread at a lower cost than obtaining a return or
spread through purchases and/or sales of instruments in other markets, to protect against currency fluctuations, as a duration management technique, to protect against any increase in the price of securities the Fund anticipates purchasing at a
later date, or to gain exposure to certain markets in the most economical way possible.
Swap agreements are derivative instruments entered
into primarily by institutional investors for periods ranging from a few weeks to more than one year. In a standard “swap” transaction, the parties agree to exchange the returns (or differentials in rates of return) earned or realized on
particular predetermined investments or instruments, which may be adjusted for an interest factor. The gross returns to be exchanged or “swapped” between the parties are generally calculated with respect to a “notional amount,”
i.e.
, the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities or commodities representing a particular index. A
“quanto” or “differential” swap combines both an interest rate and a currency transaction. Other forms of swap agreements include interest rate caps, under which, in return for a premium, one party agrees to make payments to the
other to the extent that interest rates exceed a specified rate, or “cap”; interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified
rate, or “floor”; and interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels.
Consistent with the Enhanced Commodity Strategy Fund’s investment objectives and general investment policies, that Fund may invest in commodity swap
agreements. For example, an investment in a commodity swap agreement may involve the exchange of floating-rate interest payments for the total return on a commodity index. In a total return commodity swap, the Fund will receive the price
appreciation of a commodity index, a portion of the index, or a single commodity in exchange for paying an agreed-upon fee. If the commodity swap is for one period, the Fund may pay a fixed fee, established at the outset of the swap. However, if the
term of the commodity swap is more than one period, with interim swap payments, the Fund may pay an adjustable or floating fee. With a “floating” rate, the fee may be pegged to a base rate, such as the LIBOR, and is adjusted each period.
Therefore, if interest rates increase over the term of the swap contract, the Fund may be required to pay a higher fee at each swap reset date.
A Fund also may enter into swap options. A swap option is a contract that gives a counterparty the right (but not the obligation) in return for payment
of a premium, to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. A Fund may write (sell) and purchase put and call swap options.
13
Depending on the terms of the particular option agreement, a Fund will generally incur a greater degree of
risk when it writes a swap option than it will incur when it purchases a swap option. When a Fund purchases a swap option, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However,
when a Fund writes a swap option, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement.
Most other types of swap agreements entered into by a Fund will calculate the obligations of the parties to the agreement on a “net basis.” Consequently, a Fund’s current obligations (or
rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement (the “net amount”). A Fund’s
current obligations under a swap agreement will be accrued daily (offset against any amounts owed to the Fund) and any accrued but unpaid net amounts owed to a swap counterparty will be covered by the segregation or “earmarking” of assets
determined to be liquid by the Advisor in accordance with procedures established by the Board of Directors, to avoid any potential leveraging of a Fund’s portfolio. However, with respect to swaps that are not required to cash settle, the Fund
must segregate or “earmark” liquid assets equal to the full notional value of the swaps while the positions are open. Obligations under swap agreements so covered will not be construed to be “senior securities” for purposes of
the Fund’s investment restriction concerning senior securities.
A Fund also may enter into credit default swap agreements. The credit
default swap agreement may have as reference obligations one or more securities that are not currently held by the Fund. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an
upfront or a periodic stream of payments over the term of the contract provided that no credit event, such as a default, on a reference obligation has occurred. If a credit event occurs, the seller generally must pay the buyer the “par
value” (full notional value) of the swap in exchange for an equal face amount of deliverable obligations of the reference entity described in the swap, or the seller may be required to deliver the related net cash amount, if the swap is cash
settled. A Fund may be either the buyer or seller in the transaction. If the Fund is a buyer and no credit event occurs, the Fund may recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer
generally may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference entity whose value may have significantly decreased. As a seller, the Fund generally receives an
upfront payment or a fixed rate of income throughout the term of the swap provided that there is no credit event. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total net assets, the Fund would be
subject to investment exposure on the notional amount of the swap.
The spread of a credit default swap is the annual amount the protection
buyer must pay the protection seller over the length of the contract, expressed as a percentage of the notional amount. When spreads rise, market perceived credit risk rises and when spreads fall, market perceived credit risk falls. Wider credit
spreads and decreasing market values, when compared to the notional amount of the swap, represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined
under the terms of the agreement. For credit default swap agreements on asset-backed securities and credit indices, the quoted market prices and resulting values, as well as the annual payment rate, serve as an indication of the current status of
the payment/performance risk.
Credit default swap agreements involve greater risks than had the Fund invested in the reference obligation
directly since, in addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risk. A Fund will enter into credit default swap agreements only with counterparties that meet certain standards
of creditworthiness. A buyer generally also will lose its investment and recover nothing should no credit event occur and the swap is held to its termination date. If a credit event were to occur, the value of any deliverable obligation received by
the seller, coupled with the upfront or periodic payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the seller. A Fund’s obligations under a credit default swap agreement
will be accrued daily (offset against any amounts owing to the Fund). In connection with credit default swaps in which the Fund is the buyer, the Fund will segregate or “earmark” cash or assets determined to be liquid by the Advisor in
accordance with procedures established by the Board of Directors, or enter into certain offsetting positions, with a value at least equal to the Fund’s exposure (any accrued but unpaid net amounts owed by the Fund to any counterparty), on a
marked-to-market basis. In connection with credit default swaps in which a Fund is the seller, the Fund will segregate or “earmark” cash or assets determined to be liquid by the Advisor in accordance with procedures established by the
Board of Directors, or enter into offsetting positions, with a value at least equal to the full notional amount of the swap (minus any amounts owed to the Fund). Such segregation or “earmarking” will ensure that the Fund has assets
available to satisfy its obligations with respect to the transaction and will limit any potential leveraging of the Fund’s portfolio. Such segregation or “earmarking” will not limit a Fund’s exposure to loss.
Currently, certain standardized swap transactions are subject to mandatory exchange trading and/or central clearing. Although central clearing is
expected to decrease counterparty risk and increase liquidity compared to bilaterally negotiated swaps, central clearing does not eliminate counterparty risk or illiquidity risk entirely. In addition, depending on the size of the Fund and other
factors, the margin required under the rules of a clearinghouse and by a clearing member may be in excess of the collateral required to be posted by the Fund to support its obligations under a similar bilateral swap. However, regulators are expected
to adopt rules imposing certain margin requirements, including minimums, on uncleared swaps in the near future, which could change this comparison. Regulators are in the process of developing rules that would require trading and execution of most
liquid swaps on trading facilities. Moving trading to an exchange-type system may increase market transparency and liquidity but may require the Fund to incur increased expenses to access the same types of swaps.
14
Rules adopted in 2012 also require centralized reporting of detailed information about many types of cleared
and uncleared swaps. This information is available to regulators and, to a more limited extent and on an anonymous basis, to the public. Reporting of swap data may result in greater market transparency, which may be beneficial to funds that use
swaps to implement trading strategies. However, these rules place potential additional administrative obligations on these funds, and the safeguards established to protect anonymity may not function as expected.
Strategies and Investments Available to the U.S. Fixed Income Funds (as shown on the cover of this SAI) and Emerging Markets Funds
Distressed and Defaulted Securities.
The U.S. Fixed Income Funds and Emerging Markets Funds may each invest in distressed and defaulted
securities. Distressed and defaulted securities are debt securities on which the issuer is not currently making interest payments. In order to enforce its rights in distressed and defaulted securities, a Fund may be required to participate in legal
proceedings or take possession and manage assets securing the issuer’s obligations on the securities. This could increase a Fund’s operating expenses and adversely affect its net asset value. Risks of distressed and defaulted securities
may be considerably higher than risks of securities on which issuers are currently making interest payments as they are generally unsecured and subordinated to other creditors of the issuer. Investments by a Fund in distressed and defaulted
securities may be considered illiquid subject to the 15% limitation on illiquid securities unless the Advisor determines such securities are liquid under guidelines adopted by the Board of Directors.
Structured Notes.
The U.S. Fixed Income Funds and Emerging Markets Funds may invest in structured notes. Structured notes are derivative
debt instruments, the interest rate or principal of which is determined by an unrelated indicator (for example, a currency, security, commodity or index thereof). The terms of the instrument may be “structured” by the purchaser and the
borrower issuing the note. The terms of structured notes may provide that in certain circumstances no principal is due at maturity, which may result in a loss of invested capital. Structured notes may be positively or negatively indexed, so that
appreciation of the unrelated indicator may produce an increase or a decrease in the interest rate or the value of the structured note at maturity may be calculated as a specified multiple of the change in the value of the unrelated indicator.
Therefore, the value of such notes may be very volatile. Structured notes may entail a greater degree of market risk than other types of debt securities because the investor bears the risk of the unrelated indicator. Structured notes also may be
more volatile, less liquid, and more difficult to accurately price than less complex securities and instruments or more traditional debt securities. To the extent the Fund invests in these notes, however, the Advisor analyzes these notes in its
overall assessment of the effective duration of the Fund’s holdings in an effort to monitor the Fund’s interest rate risk.
Loan Participation and Assignments
. Investment in secured or unsecured fixed or floating rate loans (“
Loans
”)
arranged through private negotiations between a borrowing corporation, government or other entity and one or more financial institutions (“
Lenders
”) may be in the form of participations in Loans
(“
Participation
”) or assignments of all or a portion of Loans from third parties (“
Assignments
”). Participations typically result in the Fund’s having a contractual relationship only with the
Lender, not with the borrower. A Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the Lender selling the Participation and only upon receipt by the Lender of the payments from the borrower.
In connection with purchasing Participations, a Fund generally has no direct right to enforce compliance by the borrower with the terms of the loan agreement relating to the Loan, nor any rights of set-off against the borrower, and a Fund may not
directly benefit from any collateral supporting the Loan in which it has purchased the Participation. As a result, a Fund assumes the credit risk of both the borrower and the Lender that is selling the Participation. In the event of the insolvency
of the selling Lender, the Fund may be treated as a general creditor of that Lender and may not benefit from any set-off between the Lender and the borrower. A Fund will acquire Participations only if the Advisor determines that the selling Lender
is creditworthy.
When a Fund purchases Assignments from Lenders, it acquires direct rights against the borrower on the Loan. In an
Assignment, the Fund is entitled to receive payments directly from the borrower and, therefore, does not depend on the selling bank to pass these payments onto the Fund. However, because Assignments are arranged through private negotiations between
potential assignees and assignors, the rights and obligations acquired by the Fund as the purchaser of an Assignment may differ from, and be more limited than, those held by the assigning Lender.
Assignments and Participations are generally not registered under the Securities Act, and thus may be subject to a Fund’s limitation on investment
in illiquid securities. Because there may be no liquid market for such securities, such securities may be sold only to a limited number of institutional investors. The lack of a liquid secondary market could have an adverse impact on the value of
such securities and on a Fund’s ability to dispose of particular Assignments or Participations when necessary to meet the Fund’s liquidity needs or in response to a specific economic event, such as a deterioration in the creditworthiness
of the borrower.
Government Mortgage Pass-Through Securities
.
The U.S. Fixed Income Funds may invest in mortgage
pass-through securities representing participation interests in pools of residential mortgage loans purchased from individual lenders by an agency, instrumentality or sponsored corporation of the United States government (“
Federal
Agency
”) or originated by private lenders and
15
guaranteed, to the extent provided in such securities, by a Federal Agency. Such securities, which are ownership interests in the underlying mortgage loans, differ from conventional debt
securities, which provide for periodic payment of interest in fixed amounts (usually semiannually) and principal payments at payments (not necessarily in fixed amounts) that are a “pass-through” of the monthly interest and principal
payments (including any prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and the servicer of the underlying mortgage loans.
The government mortgage pass-through securities in which the Funds may invest include those issued or guaranteed by the Government National Mortgage
Association (“
GNMA
”), the Federal National Mortgage Association (“
FNMA
”) and Federal Home Loan Mortgage Corporation (“
FHLMC
”). GNMA certificates are direct obligations of the
U.S. Government and, as such, are backed by the “full faith and credit” of the United States. FNMA is a federally chartered, privately owned corporation and FHLMC is a corporate instrumentality of the United States. FNMA and FHLMC
certificates are not backed by the full faith and credit of the United States but the issuing agency or instrumentality has the right to borrow, to meet its obligations, from an existing line of credit with the U.S. Treasury. The U.S. Treasury has
no legal obligation to provide such line of credit and may choose not to do so.
Certificates for these types of mortgage-backed securities
evidence an interest in a specific pool of mortgages. These certificates are, in most cases, “modified pass-through” instruments, wherein the issuing agency guarantees the payment of principal and interest on mortgages underlying the
certificates, whether or not such amounts are collected by the issuer on the underlying mortgages.
Collateralized Mortgage Obligations
(“
CMOs
”) and Multiclass Pass-Through Securities
. CMOs are debt obligations collateralized by mortgage loans or mortgage pass-through securities. Typically, CMOs are collateralized by GNMA, FNMA or FHLMC
certificates, but also may be collateralized by whole loans or private mortgage pass-through securities (such collateral is collectively hereinafter referred to as “
Mortgage Assets
”). Multiclass pass-through securities are
equity interests in a trust composed of Mortgage Assets. Payments of principal of and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the
multiclass pass-through securities. CMOs may be issued by Federal Agencies, or by private originators of, or investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. The issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage Investment Conduit (“
REMIC
”). REMICs include governmental and/or private entities that issue a fixed pool
of mortgages secured by an interest in real property. REMICs are similar to CMOs in that they issue multiple classes of securities, but unlike CMOs, which are required to be structured as debt securities, REMICs may be structured as indirect
ownership interests in the underlying assets of the REMICs themselves. However, there are no effects on a Fund from investing in CMOs issued by entities that have elected to be treated as REMICs, and all future references to CMOs shall also be
deemed to include REMIC.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each class of CMOs, often referred to as
a “tranche,” is issued at a specific fixed or floating coupon rate and has a stated maturity or final distribution date. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated
maturities or final distribution dates. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semiannual basis. Certain CMOs may have variable or floating interest rates and others may be Stripped Mortgage Securities.
The principal of and interest on the Mortgage Assets may be allocated among the several classes of a CMO series in a number of different
ways. Generally, the purpose of the allocation of the cash flow of a CMO to the various classes is to obtain a more predictable cash flow to certain of the individual tranches than exists with the underlying collateral of the CMO. As a general rule,
the more predictable the cash flow is on a CMO tranche, the lower the anticipated yield will be on that tranche at the time of issuance relative to prevailing market yields on other mortgage-backed securities. As part of the process of creating more
predictable cash flows on most of the tranches in a series of CMOs, one or more tranches generally must be created that absorb most of the volatility in the cash flows on the underlying mortgage loans. The yields on these tranches are generally
higher than prevailing market yields on mortgage-backed securities with similar maturities. As a result of the uncertainty of the cash flows of these tranches, the market prices of and yield on these tranches generally are more volatile. The Funds
will not invest in CMO and REMIC residuals.
Private Mortgage Pass-Through Securities
. Private mortgage pass-through securities
are structured similarly to the GNMA, FNMA and FHLMC mortgage pass-through securities and are issued by United States and foreign private issuers such as originators of and investors in mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. These securities usually are backed by a pool of conventional fixed rate or adjustable rate mortgage loans. Since private mortgage pass-through
securities typically are not guaranteed by an entity having the credit status of GNMA, FNMA and FHLMC, such securities generally are structured with one or more types of credit enhancement.
Mortgage-backed securities are often backed by a pool of assets representing the obligations of a number of different parties. To lessen the effect of failures by obligors on underlying assets to make
payments, those securities may contain elements of credit support, which fall into two categories: (i) liquidity protection and (ii) protection against losses resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the entity administering the pool of assets, to ensure that the receipt of payments on the underlying pool occurs in a timely fashion. Protection against losses resulting from
default ensures ultimate payment of the obligations on at least a portion of the assets in the pool. This protection may be
16
provided through guarantees, insurance policies or letters of credit obtained by the issuer or sponsor from third parties, through various means of structuring the transaction or through a
combination of such approaches. The degree of credit support provided for each issue is generally based on historical information respecting the level of credit risk associated with the underlying assets. Delinquencies or losses in excess of those
anticipated could adversely affect the return on an investment in a security. The Funds will not pay any fees for credit support, although the existence of credit support may increase the price of a security.
Stripped Mortgage Securities
.
Stripped Mortgage Securities may be issued by Federal Agencies, or by private originators of, or
investors in, mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Stripped Mortgage Securities not issued by Federal Agencies will be treated
by the Funds as illiquid securities so long as the staff of the SEC maintains its position that such securities are illiquid.
Stripped
Mortgage Securities usually are structured with two classes that receive different proportions of the interest and principal distribution of a pool of mortgage assets. A common type of Stripped Mortgage Security will have one class receiving some of
the interest and most of the principal from the mortgage assets, while the other class will receive most of the interest and the remainder of the principal. In the most extreme case, one class will receive all of the interest (the interest-only or
“
IO
” class), while the other class will receive all of the principal (the principal-only or “
PO
” class). PO classes generate income through the accretion of the deep discount at which such securities
are purchased, and, while PO classes do not receive periodic payments of interest, they receive monthly payments associated with scheduled amortization and principal prepayment from the mortgage assets underlying the PO class. The yield to maturity
on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on such security’s yield to
maturity. If the underlying mortgage assets experience greater than anticipated prepayments or principal, the Fund may fail to fully recoup its initial investment in these securities.
A Fund may purchase Stripped Mortgage Securities for income, or for hedging purposes to protect the Fund’s portfolio against interest rate fluctuations. For example, since an IO class will tend to
increase in value as interest rates rise, it may be utilized to hedge against a decrease in value of other fixed-income securities in a rising interest rate environment.
Inflation-Indexed Bonds.
Inflation-indexed bonds are fixed income securities whose principal value is periodically adjusted according to the rate of inflation. Two structures are common. The
U.S. Treasury and some other issuers use a structure that accrues inflation into the principal value of the bond. Most other issuers pay out the Consumer Price Index (“
CPI
”) accruals as part of a semiannual coupon.
Inflation-indexed securities issued by the U.S. Treasury have maturities of five, ten or thirty years, although it is possible that
securities with other maturities will be issued in the future. The U.S. Treasury securities pay interest on a semiannual basis, equal to a fixed percentage of the inflation-adjusted principal amount. For example, if the Fund purchased an
inflation-indexed bond with a par value of $1,000 and a 3% real rate of return coupon (payable 1.5% semi-annually), and inflation over the first six months was 1%, the mid-year par value of the bond would be $1,010 and the first semi-annual interest
payment would be $15.15 ($1,010 times 1.5%). If inflation during the second half of the year resulted in the whole years’ inflation equaling 3%, the end-of-year par value of the bond would be $1,030 and the second semi-annual interest payment
would be $15.45 ($1,030 times 1.5%).
If the periodic adjustment rate measuring inflation falls, the principal value of inflation-indexed
bonds will be adjusted downward, and consequently the interest payable on these securities (calculated with respect to a smaller principal amount) will be reduced. Repayment of the original bond principal upon maturity (as adjusted for inflation) is
guaranteed in the case of U.S. Treasury inflation-indexed bonds, even during a period of deflation. However, the current market value of the bonds is not guaranteed, and will fluctuate. The Fund also may invest in other inflation related bonds which
may or may not provide a similar guarantee. If a guarantee of principal is not provided, the adjusted principal value of the bond repaid at maturity may be less than the original principal.
The value of inflation-indexed bonds is expected to change in response to changes in real interest rates. Real interest rates in turn are tied to the relationship between nominal interest rates and the
rate of inflation. Therefore, if inflation were to rise at a faster rate than nominal interest rates, real interest rates might decline, leading to an increase in value of inflation-indexed bonds. In contrast, if nominal interest rates increased at
a faster rate than inflation, real interest rates might rise, leading to a decrease in value of inflation-indexed bonds.
While these
securities are expected to be protected from long-term inflationary trends, short-term increases in inflation may lead to a decline in value. If interest rates rise due to reasons other than inflation (for example, due to changes in currency
exchange rates), investors in these securities may not be protected to the extent that the increase is not reflected in the bond’s inflation measure.
The periodic adjustment of U.S. inflation-indexed bonds is tied to the Consumer Price Index for Urban Consumers (“
CPI-U
”), which is calculated monthly by the U.S. Bureau of Labor
Statistics. The CPI-U is a measurement of changes in the cost of living, made up of components such as housing, food, transportation and energy. Inflation-indexed bonds issued by a foreign government are generally adjusted to reflect a comparable
inflation index, calculated by that government. There can be no assurance that the CPI-U or any foreign inflation index will accurately measure the real rate of inflation in the prices of goods and services. Moreover, there can be no assurance that
the rate of inflation in a foreign country will be correlated to the rate of inflation in the United States.
17
Any increase in the principal amount of an inflation-indexed bond will be considered taxable ordinary
income, even though investors do not receive their principal until maturity.
Mortgage Dollar Rolls
.
The U.S. Fixed
Income Funds may enter into mortgage dollar rolls with a bank or a broker-dealer. A mortgage dollar roll is a transaction in which a Fund sells mortgage-related securities for immediate settlement and simultaneously purchases the same type of
securities for forward settlement at a discount. While a Fund begins accruing interest on the newly purchased securities from the purchase or trade date, it is able to invest the proceeds from the sale of its previously owned securities, which will
be used to pay for the new securities, in money market investments until future settlement date. The use of mortgage dollar rolls is a speculative technique involving leverage, and is considered to be a form of borrowing by the Fund.
Asset-Backed Securities
.
Asset-backed securities have structural characteristics similar to mortgage-backed securities but have
underlying assets that are not mortgage loans or interests in mortgage loans. Various types of assets, primarily automobile and credit cards receivables, are securitized in pass-through structures similar to mortgage pass-through structures. In
general, the collateral supporting asset-backed securities is of a shorter maturity than mortgage loans and is likely to experience substantial prepayments. As with mortgage-related securities, asset-backed securities are often backed by a pool of
assets representing the obligations of a number of different parties and use similar credit enhancement techniques. The cash flow generated by the underlying assets is applied to make required payments on the securities and to pay related
administrative expenses. The amount of residual cash flow resulting from a particular issue of asset-backed or mortgage-backed securities depends on, among other things, the characteristics of the underlying assets, the coupon rates on the
securities, prevailing interest rates, the amount of administrative expenses and the actual prepayment experience on the underlying assets. The U.S. Fixed Income Funds may each invest in any such instruments or variations as may be developed, to the
extent consistent with its investment objectives and policies and applicable regulatory requirements.
Inverse Floaters
.
Inverse floaters constitute a class of CMOs with a coupon rate that moves inversely to a designated index, such as LIBOR (London Interbank Offered Rate) or 11th District Cost of Funds index (“
COFI
”). Inverse floaters have
coupon rates that typically change at a multiple of the changes of the relevant index rate. Any rise in the index rate (as a consequence of an increase in interest rates) causes a drop in the coupon rate on an inverse floater while any drop in the
index rate causes an increase in the coupon rate of an inverse floater. In some circumstances, the coupon on an inverse floater could decrease to zero. In addition, like most other fixed-income securities, the value of inverse floaters will decrease
as interest rates increase and their average lives will extend. Inverse floaters exhibit greater price volatility than the majority of mortgage-backed securities. In addition, some inverse floaters display extreme sensitivity to changes in
prepayments. As a result, the yield to maturity of an inverse floater is sensitive not only to changes in interest rates but also to changes in prepayment rates on the related underlying mortgage assets. As described above, inverse floaters may be
used alone or in tandem with interest-only stripped mortgage instruments.
The interest rate on an inverse floater resets in the opposite
direction from the designated index to which the interest rate on the inverse floater is tied. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change
in the rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market values. Accordingly, the duration of an inverse floater may exceed its stated final maturity. Certain inverse
floaters may be considered to be illiquid securities for purposes of the Fund’s 15% limitation on investment in illiquid securities.
Reverse Repurchase Agreements
. Reverse repurchase agreements involve sales by a Fund of portfolio securities concurrently with an agreement
by the Fund to repurchase the same securities at a later date at a fixed price. Generally, the effect of such a transaction is that the Fund can recover all or most of the cash invested in the portfolio securities involved during the term of the
reverse repurchase agreement, while it will be able to keep the interest income associated with those portfolio securities. Such transactions are only advantageous if the interest cost to the Fund of the reverse repurchase transaction is less than
the cost of otherwise obtaining the cash.
Debt Securities.
The U.S. Fixed Income Funds may invest in U.S. dollar or foreign
currency-denominated corporate debt securities (corporate bonds, debentures, notes and other similar corporate debt instruments, including convertible securities) of domestic or foreign issuers. The rate of interest on a corporate debt security may
be fixed, floating or variable, and may vary inversely with respect to a reference rate. The rate of return or return of principal on some debt obligations may be linked or indexed to the level of exchange rates between the U.S. dollar and a foreign
currency or currencies. Debt securities may be acquired with warrants attached.
Credit Linked Notes (“CLNs”).
The
U.S. Fixed Income Funds may each invest in CLNs. A CLN is a security structured and issued by an issuer, which may be a bank, broker or special purpose vehicle. If a CLN is issued by a special purpose vehicle, the special purpose vehicle will
typically be collateralized by AAA-rated securities. The performance and payment of principal and interest is tied to that of a reference obligation, which may be a particular security, basket of securities, a credit default swap, basket of credit
default swaps or an index. The referenced obligation may be denominated in foreign currency. Risks of CLNs include those risks associated with the underlying reference obligation including, but not limited to, market risk, interest rate risk, credit
risk, default risk and foreign
18
currency risk. In the case of a CLN created with credit default swaps, the structure will be “funded” such that the par amount of the security will represent the maximum loss that could
be incurred on the investment and no leverage will be introduced. An investor in a CLN bears counterparty risk or the risk that the CLN issuer will default or become bankrupt and not make timely payment of principal and interest of the structured
security.
Strategies and Investments Available to the Enhanced Commodity Strategy Fund
Investments in the Subsidiary.
The TCW Enhanced Commodity Strategy Fund will invest up to 25% of its total assets in the shares of the
Subsidiary. Investments in the Subsidiary are expected to provide the Fund with exposure to the commodity markets within the limitations of Subchapter M of the Internal Revenue Code of 1986, as amended, and recent IRS revenue rulings. The
Subsidiary is advised by the Advisor, and has the same investment objective as the Fund. The Subsidiary may invest in commodity-linked swap agreements and other commodity-linked derivative instruments, including futures contracts on individual
commodities or a subset of commodities and options on them, to an extent greater than the Fund may make such investments. However, the Subsidiary is otherwise subject to the same fundamental, non-fundamental and certain other investment restrictions
as the Fund, including the timing and method of the valuation of the Subsidiary’s portfolio investments and shares of the Subsidiary. The Subsidiary’s portfolio is managed pursuant to compliance policies and procedures that are the
same, in all material respects, as the policies and procedures adopted by the Fund. The Subsidiary is a company organized under the laws of the Cayman Islands, and is overseen by its own board of directors. The Fund is the sole shareholder of
the Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors.
The Subsidiary
invests primarily in commodity-linked derivative instruments, including swap agreements, commodity options, futures and options on futures. Although the Fund may enter into these commodity-linked derivative instruments directly, the Fund will likely
gain exposure to these derivative instruments indirectly by investing in the Subsidiary. The Subsidiary will also invest in fixed income instruments, some of which are intended to serve as margin or collateral for the Subsidiary’s derivatives
position.
The Subsidiary has an investment management agreement with the Advisor pursuant to which the Advisor manages the assets of the
Subsidiary and the Subsidiary is obligated to pay the Advisor a management fee at the same rate that the Fund pays the Advisor for services provided to the Fund. The Subsidiary has also entered into separate contracts for the provision of
custody, administration and transfer agency, and accounting agent services.
The Subsidiary is not registered under the 1940 Act, and, unless
otherwise noted in the Prospectus or this Statement of Additional Information, is not subject to all the investor protections of the 1940 Act. However, the Fund wholly owns and controls the Subsidiary, and the Fund and the Subsidiary are both
managed by the Advisor, making it unlikely that the Subsidiary will take action contrary to the interests of the Fund and its shareholders. The Fund’s Board has oversight responsibility for the investment activities of the Fund, including its
investment in the Subsidiary, and the Fund’s role as sole shareholder of the Subsidiary. As noted above, the Subsidiary will be subject to the same investment restrictions and limitations, and follow the same compliance policies and procedures,
as the Fund. In addition, changes in the laws of the United States and/or the Cayman Islands could result in the inability of the Fund and/or the Subsidiary to operate as described in the Prospectus and the Statement of Additional Information
and could adversely affect the Fund. For example, the Cayman Islands does not currently impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax on the Subsidiary. If Cayman Islands law
changes such that the Subsidiary must pay Cayman Islands taxes, Fund shareholders would likely suffer decreased investment returns.
RISK
CO
NSIDERATIONS
The following risk considerations relate to investment practices undertaken by some or all of
the Funds. Generally, since shares of a Fund represent an investment in securities with fluctuating market prices, shareholders should understand that the value of their Fund shares will vary as the value of each Fund’s portfolio securities
increases or decreases. Therefore, the value of an investment in a Fund could go down as well as up. You can lose money by investing in a Fund. There is no guarantee of successful performance, that a Fund’s objective can be achieved or that an
investment in a Fund will achieve a positive return. Each Fund should be considered as a means of diversifying an investment portfolio and is not in itself a balanced investment program.
Prospective investors should consider the following risks.
General
Various market risks can affect the price or liquidity of an issuer’s securities. Adverse events occurring with respect to an issuer’s
performance or financial position can depress the value of the issuer’s securities. The liquidity in a market for a particular security will affect its value and may be affected by factors relating to the issuer, as well as the depth of the
market for that security. Other market risks that can affect value include a market’s current attitudes about type of security, market reactions to political or economic events, and tax and regulatory effects (including lack of adequate
regulations for a market or particular type of instrument). Market restrictions on trading volume can also affect price and liquidity.
19
Certain risks exist because of the composition and investment horizon of a particular portfolio of
securities. Prices of many securities tend to be more volatile in the short-term and lack of diversification in a portfolio can also increase volatility.
Counterparty Credit Risk
Commodity- and financial-linked derivative instruments are
subject to the risk that the counterparty to the instrument might not pay interest when due or repay principal at maturity of the obligation. If a counterparty defaults on its interest or principal payment obligations to the Fund, this default will
cause the value of your investment in the Fund to decrease. In addition, certain Funds may invest in commodity- and financial-linked structured notes issued by a limited number of issuers, which will act as counterparties. To the extent a Fund
focuses its investments in a limited number of issuers, it will be more susceptible to the risks associated with those issuers. Certain derivative transactions may or are required to centrally clear, which may reduce counterparty and liquidity risk
but will not completely eliminate such risks.
Debt Securities Risk
Debt securities are subject to various risks. The two primary (but not exclusive) risks affecting fixed income instruments are “credit risk” and “interest rate risk.” These risks can
affect a security’s price volatility to varying degrees, depending upon the nature of the instrument. In addition, the depth and liquidity of the market for an individual or class of fixed income security can also affect its price and, hence,
the market value of a Fund.
“Credit risk” refers to the likelihood that an issuer will default in the payment of principal and/or
interest on an instrument. Financial strength and solvency of an issuer are the primary factors influencing credit risk. In addition, lack of or inadequacy of collateral or credit enhancements for a fixed income security may affect its credit risk.
Credit risk of a security may change over its life and securities which are rated by rating agencies are often reviewed and may be subject to downgrade.
“Interest rate risk” refers to the risks associated with market changes in interest rates. Interest rate changes may affect the value of a fixed income security directly (especially in the case
of fixed rate securities) and directly (especially in the case of adjustable rate securities). In general, rises in interest rates will negatively impact the price of fixed rate securities and falling interest rates will have a positive effect on
price. The degree to which a security’s price will change as a result of changes in interest rates is measured by its “duration.” For example, the price of a bond with a 5 year duration would be expected under normal market conditions
to decrease 5% for every 1% increase in interest rates. Generally, securities with longer maturities have a greater duration and thus are subject to greater price volatility from changes in interest rates. Adjustable rate instruments also react to
interest rate changes in a similar manner although generally to a lesser degree (depending, however, on the characteristics of the re-set terms, including the index chosen, frequency of reset and reset caps or floors, among other things).
Foreign Currency Risks
Because foreign securities generally are denominated and pay dividends or interest in foreign currencies, the value of the net assets of those Funds as
measured in United States dollars will be affected favorably or unfavorably by changes in exchange rates. Generally, currency exchange transactions will be conducted on a spot (
i.e.
, cash) basis at the spot rate prevailing in the currency
exchange market. The cost of currency exchange transactions will generally be the difference between the bid and offer spot rate of the currency being purchased or sold. In order to protect against uncertainty in the level of future foreign currency
exchange rates, the Funds are authorized to enter into certain foreign currency future and forward contracts. However, it is not obligated to do so and, depending on the availability and cost of these devices, the Funds may be unable to use them to
protect against currency risk. While foreign currency future and forward contracts may be available, the cost of these instruments may be prohibitively expensive so that the Funds may not to be able to effectively use them.
Foreign Securities Risk
Investment in
foreign securities involves special risks in addition to the usual risks inherent in domestic investments. These include: political or economic instability; the unpredictability of international trade patterns; the possibility of foreign
governmental actions such as expropriation, nationalization or confiscatory taxation; the imposition or modification of foreign currency or foreign investment controls; the imposition of withholding taxes on dividends, interest and gains; price
volatility; and fluctuations in currency exchange rates. As compared to companies located in the United States, foreign issuers generally disclose less financial and other information publicly and are subject to less stringent and less uniform
accounting, auditing and financial reporting standards. Foreign countries typically impose less thorough regulations on brokers, dealers, stock exchanges, insiders and listed companies than does the United States, and foreign securities markets may
be less liquid and more volatile than domestic markets. Investment in foreign securities involves higher costs than investment in U.S. securities, including higher transaction and custody costs as well as the imposition of additional taxes by
foreign governments. In addition, security trading practices abroad may offer less protection to investors such as the Funds. Settlement of transactions in some foreign markets may be delayed or may be less frequent than in the
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U.S., which could affect the liquidity of each Fund’s portfolio. Also, it may be more difficult to obtain and enforce legal judgments against foreign corporate issuers than against domestic
issuers and it may be impossible to obtain and enforce judgments against foreign governmental issues. The recent global economic crisis brought several small economies in Europe to the brink of bankruptcy and many other economies into recession and
weakened the banking and financial sectors of many European countries. These events have adversely affected the exchange rate of the euro and may continue to significantly affect every country in Europe, including countries that do not use the euro.
If a deep economic downturn in a particular country or throughout the Europe results, this could significantly affect a Fund’s investments tied economically to Europe or the euro.
Options Transactions Risks
The effective use of options depends on a Fund’s ability
to terminate option positions at times when the Advisor deems it desirable to do so. Prior to exercise or expiration, an option position can only be terminated by entering into a closing purchase or sale transaction. If a covered call option writer
is unable to effect a closing purchase transaction or to purchase an offsetting OTC Option, it cannot sell the underlying security until the option expires or the option is exercised. Accordingly, a covered call option writer may not be able to sell
an underlying security at a time when it might otherwise be advantageous to do so. A secured put option writer who is unable to effect a closing purchase transaction or to purchase an offsetting OTC Option would continue to bear the risk of decline
in the market price of the underlying security until the option expires or is exercised.
In addition, a secured put writer would be unable to
utilize the amount held in cash or U.S. government securities or other high grade short-term obligations as security for the put option for other investment purposes until the exercise or expiration of the option.
A Fund’s ability to close out its position as a writer of an option is dependent upon the existence of a liquid secondary market. There is no
assurance that such a market will exist, particularly in the case of OTC Options, as such options will generally only be closed out by entering into a closing purchase transaction with the purchasing dealer. However, the Fund may be able to purchase
an offsetting option which does not close out its position as a writer but constitutes an asset of equal value to the obligation under the option written. If the Fund is not able to either enter into a closing purchase transaction or purchase an
offsetting position, it will be required to maintain the securities subject to the call, or the collateral underlying the put, even though it might not be advantageous to do so, until a closing transaction can be entered into (or the option is
exercised or expires).
Among the possible reasons for the absence of a liquid secondary market on an exchange are: (a) insufficient
trading interest in certain options; (b) restrictions on transactions imposed by an exchange; (c) trading halts, suspensions or other restrictions imposed with respect to particular classes or series of options or underlying securities;
(d) interruption of the normal operations on an exchange; (e) inadequacy of the facilities of an exchange or the OCC or other relevant clearing corporation to handle current trading volume; or (f) a decision by one or more exchanges
to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that exchange (or in that class or series of options) would cease to exist, although outstanding options on that exchange
that had been issued by the relevant clearing corporation as a result of trades on that exchange would generally continue to be exercisable in accordance with their terms.
In the event of the bankruptcy of a broker through which a Fund engages in transactions in options, the Fund could experience delays and/or losses in liquidating open positions purchased or sold through
the broker and/or incur a loss of all or part of its margin deposits with the broker. Similarly, in the event of the bankruptcy of the writer of an OTC Option purchased by a Fund, the Fund could experience a loss of all or part of the value of the
option. Transactions are entered into by a Fund only with brokers or financial institutions deemed creditworthy by the Fund’s management.
Each of the exchanges has established limitations governing the maximum number of options on the same underlying security or futures contract (whether or
not covered) which may be written by a single investor, whether acting alone or in concert with others (regardless of whether such options are written on the same or different exchanges or are held or written on one or more accounts or through one
or more brokers). An exchange may order the liquidation of positions found to be in violation of these limits and it may impose other sanctions or restrictions. These position limits may restrict the number of listed options which a Fund may write.
The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that cannot be reflected in the option markets.
Ratings Categories Risk
A description
of the rating categories as published by Moody’s and S&P is set forth in the Appendix to this Statement of Additional Information. Ratings assigned by Moody’s and/or S&P to securities acquired by a Fund reflect only the views of
those agencies as to the quality of the securities they have undertaken to rate. It should be emphasized, however, that ratings are relative and subjective and are not absolute standards of quality. There is no assurance that a rating assigned
initially will not change. A Fund may retain a security whose rating has changed or has become unrated.
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Risks of Large Shareholder Redemptions
Certain account holders may from time to time own (beneficially or of record) or control a significant percentage of a Fund’s shares. Redemptions by these account holders of their shares in a Fund
may impact the Fund’s liquidity and net asset value. These redemptions may also force a Fund to sell securities, which may negatively impact the Fund’s brokerage and tax costs.
Repurchase Agreements Risk
In the event of a default or bankruptcy by a selling financial
institution under a repurchase agreement, a Fund will seek to sell the underlying security serving as collateral. However, this could involve certain costs or delays, and, to the extent that proceeds from any sale were less than the repurchase
price, the Fund could suffer a loss. Each Fund follows procedures designed to minimize the risks associated with repurchase agreements, including effecting repurchase transactions only with large, well-capitalized and well-established financial
institutions and specifying the required value of the collateral underlying the agreement.
Restricted Securities Risk
Certain Funds may acquire securities through private placements. These securities are typically sold directly to a small number of investors, usually
institutions or mutual funds. Unlike public offerings, such securities are not registered under the federal securities laws. Although certain of these securities may be readily sold, others may be illiquid, and their sale may involve substantial
delays and additional costs.
In addition, certain Funds may also invest in securities sold pursuant to Rule 144A under the Securities Act.
Rule 144A permits the Funds to sell restricted securities to qualified institutional buyers without limitation. However, investing in Rule 144A securities could have the effect of increasing the level of a Fund’s illiquidity to the extent the
Fund, at a particular point in time, may be unable to find qualified institutional buyers interested in purchasing such securities.
Restricted securities, including private placements, are subject to legal and contractual restrictions on resale. This may have an adverse effect on
their marketability, and may prevent a Fund from disposing of them promptly at reasonable prices. A Fund may have to bear the expense of registering such securities for resale and the risk of substantial delays in effecting such registration.
The Advisor, pursuant to procedures adopted by the Board of Directors, will make a determination as to the liquidity of each private
placement or restricted security purchased by a Fund. If such security is determined to be “liquid,” it will not be included within the category “illiquid securities,” which under each Fund’s current policies may not exceed
15% of the Fund’s net assets. To the extent the Fund owns private placements or restricted securities, these securities may involve liquidity and valuation difficulties. At times of less liquidity, it may be more difficult to value these
securities because this valuation may require more research and elements of judgment may play a greater role in the valuation since there is less reliable, objective data available. Securities that are not readily marketable will be valued by a Fund
pursuant to procedures adopted by the Board of Directors.
Reverse Repurchase Agreements and Mortgage Dollar Rolls Risk
Reverse repurchase agreements and mortgage dollar rolls involve the risk that the market value of the securities a Fund is obligated to repurchase under
the agreement may decline below the repurchase price. In the event the buyer of securities under a reverse repurchase agreement or mortgage dollar roll files for bankruptcy or becomes insolvent, the Fund’s use of proceeds of the agreement may
be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund’s obligation to repurchase the securities. Reverse repurchase agreements and mortgage dollar rolls are speculative techniques
involving leverage, and are considered borrowings by the Fund. Under the requirements of the 1940 Act, the Fund is required to maintain an asset coverage (including the proceeds of the borrowings) of a least 300% of all borrowings. None of the Funds
authorized to utilize these instruments expects to engage in reverse repurchase agreements or mortgage dollar rolls (together with other borrowings of the Fund) with respect to greater than 30% of the Fund’s total assets.
Small and Mid-Capitalization Companies Risk
Investing in the equity securities of small and mid-capitalization companies involves additional risks compared to investing in large capitalization companies. Compared to large companies, these companies
may have more limited product lines and capital resources; have less established markets for their products; have earnings that are more sensitive to changes in the economy, competition and technology and be more dependent upon key members of
management.
The market value of the common stock of small and medium capitalization companies may be more volatile, particularly in response
to company announcements or industry events; have less active trading markets and be harder to sell at the time and prices that the Advisor considers appropriate.
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Stock Market Risk
Funds that invest in equity securities are subject to stock market risks and significant fluctuations in value. If the stock market declines in value, a Fund’s share price is likely to decline in
value. A Fund’s focus on certain types of stocks (such as small or large cap) and style of investing (such as value or growth) subjects it to the risk that is performance may be lower than that of other types of equity funds that focus on other
types of stocks or that have a broader investment style (such as general market).
Structured Notes Risk
Certain Funds may invest in structured notes, which are debt obligations that also contain an embedded derivative component with characteristics that
adjust the obligation’s risk/return profile. Generally, the performance of a structured note will track that of the underlying debt obligation and the derivative embedded within it. The Fund has the right to receive periodic interest payments
from the issuer of the structured notes at an agreed-upon interest rate and a return of the principal at the maturity date.
Structured notes
are typically privately negotiated transactions between two or more parties. The Fund bears the risk that the issuer of the structured note will default or become bankrupt. The Fund bears the risk of the loss of its principal investment and periodic
interest payments expected to be received for the duration of its investment in the structured notes.
In the case of structured notes on
credit default swaps, the Fund is also subject to the credit risk of the corporate credits underlying the credit default swaps. If one of the underlying corporate credits defaults, the Fund may receive the security that has defaulted, or
alternatively a cash settlement may occur, and the Fund’s principal investment in the structured note would be reduced by the corresponding face value of the defaulted security.
A Fund may invest in equity-linked structured notes (which would be linked to an equity index) to a significant extent. A highly liquid secondary market may not exist for the structured notes the Fund
invests in, and there can be no assurance that a highly liquid secondary market will develop. The lack of a highly liquid secondary market may make it difficult for the Fund to sell the structured notes it holds at an acceptable price or accurately
value such notes.
The market for structured notes may be, or suddenly can become, illiquid. The other parties to the transaction may be the
only investors with sufficient understanding of the derivative to be interested in bidding for it. Changes in liquidity may result in significant, rapid, and unpredictable changes in the prices for structured notes. In certain cases, a market price
for a credit-linked security may not be available. The collateral for a structured note may be one or more credit default swaps, which are subject to additional risks.
Swap Agreements Risks
Whether a Fund’s use of swap agreements will be successful in
furthering its investment objective will depend on the ability of the Advisor to correctly predict whether certain types of investments are likely to produce greater returns than other investments. Because bilateral swaps are two-party contracts and
because they may have terms of greater than seven days, these agreements may be considered to be illiquid investments. Illiquidity may make it more difficult for a Fund to enter or close swap transactions at opportune times, which could cause the
Fund to lose value or forgo advantageous investment positions. Similarly, swap agreements can be complex and difficult to price objectively. Moreover, the Fund bears the risk of loss of the amount expected to be received under a bilateral swap
agreement in the event of the default or bankruptcy of the swap agreement counterparty. As a result of new rules adopted in 2012, certain standardized swaps are currently subject to mandatory central clearing. Central clearing is designed to
decrease counterparty risk and increase liquidity, as compared to bilateral swaps. However, central clearing does not eliminate such risks. Further, central clearing may require a Fund to post margin that may be greater than the collateral that
would have be required under a bilateral agreement. A Fund will enter into uncleared swap agreements only with counterparties that meet certain standards for creditworthiness (generally, such counterparties would have to be eligible counterparties
under the terms of the Fund’s repurchase agreement guidelines). Certain restrictions imposed on the Fund by the Internal Revenue Code may limit a Fund’s ability to use swap agreements. It is possible that future developments in the swap
market, including potential government regulation, could adversely affect a Fund’s ability to terminate existing swap agreements, realize amounts to be received under such agreements, make full use of swaps transactions, or otherwise profit
from such agreements. In addition, swaps may also subject a Fund to leveraging risk by exposing the Fund to potential profits and losses based on the full notional amount underlying the swap with through just a small initial investment. A
Fund’s use of leverage may reduce the Fund’s returns and increase its volatility.
Risks Associated With Asset-Backed Securities
Certain asset-backed securities do not have the benefit of the same security interest in the related collateral as do mortgage-backed
securities. Credit card receivables are generally unsecured, and the debtors are entitled to the protection of a number of state and federal consumer credit laws, many of which give such debtors the right to set off certain amounts owned on the
credit cards, thereby reducing the balance due. In addition, some issuers of automobile receivables permit the servicers to retain possession of the underlying obligations. If the servicer were to sell these obligations to another party, there is a
risk that the purchaser would acquire an interest superior to that of the holders of the related automobile receivables.
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Risks Associated With Commodity-Linked Instruments
The TCW Enhanced Commodity Strategy Fund may seek to provide exposure to the investment returns of real assets that trade in the commodity markets through
investments in commodity-linked derivative instruments, such as structured notes, which are designed to provide this exposure without direct investment in physical commodities or commodities futures contracts. The Fund may also seek to provide
exposure to the investment returns of real assets that trade in the commodity markets through investments in the Subsidiary. Real assets are assets such as oil, gas, industrial and precious metals, livestock, and agricultural or meat products, or
other items that have tangible properties, as compared to stocks or bonds, which are financial instruments. In choosing investments, the Advisor seeks to provide exposure to various commodities and commodity sectors. The value of commodity-linked
derivative instruments held by the Fund and/or the Subsidiary may be affected by a variety of factors, including, but not limited to, overall market movements and other factors affecting the value of particular industries or commodities, such as
weather, disease, embargoes, acts of war or terrorism, or political and regulatory developments.
The prices of commodity-linked derivative
instruments may move in different directions than investments in traditional equity and debt securities when the value of those traditional securities is declining due to adverse economic conditions. As an example, during periods of rising
inflation, debt securities have historically tended to decline in value due to the general increase in prevailing interest rates. Conversely, during those same periods of rising inflation, the prices of certain commodities, such as oil and metals,
have historically tended to increase. Of course, there cannot be any guarantee that these investments will perform in that manner in the future, and at certain times the price movements of commodity-linked instruments have been parallel to those of
debt and equity securities. Commodities have historically tended to increase and decrease in value during different parts of the business cycle than financial assets. Nevertheless, at various times, commodities prices may move in tandem with the
prices of financial assets and thus may not provide overall portfolio diversification benefits. Under favorable economic conditions, the Fund’s investments may be expected to underperform an investment in traditional securities. Over the long
term, the returns on the Fund’s investments are expected to exhibit low or negative correlation with stocks and bonds.
The ability of
the Fund to gain commodity exposure as contemplated may be adversely affected by future legislation, regulatory developments, interpretive guidance or other actions by the Internal Revenue Service or the Treasury Department as discussed under
“Distributions and Taxes.”
Risks Associated With Derivatives
Certain Funds may, but are not required to, use various derivatives and related investment strategies as described in this Statement of Additional
Information. Derivatives may be used for a variety of purposes including hedging, risk management, portfolio management or to earn income. Any or all of the investment techniques previously described herein may be used at any time and there is no
particular strategy that dictates the use of one technique rather than another, as the use of any derivative by the Fund is a function of numerous variables including market conditions. Although the Advisor seeks to use derivatives to further the
Fund’s investment objective, no assurance can be given that the use of derivatives will achieve this result.
Derivatives utilized by a
Fund may involve the purchase and sale of derivative instruments. A derivative is a financial instrument, the value of which depends upon (or derives from) the value of another asset, security, interest rate or index. Derivatives may relate to a
wide variety of underlying instruments, including equity and debt securities, indexes, interest rates, currencies and other assets. Certain derivative instruments which a Fund may use and the risks of those instruments are described in further
detail below. A Fund may in the future also utilize derivatives techniques, instruments and strategies that may be newly developed or permitted as a result of regulatory changes, consistent with the Fund’s investment objective and policies.
Such newly developed techniques, instruments and strategies may involve risks different than or in addition to those described herein. No assurance can be given that any derivatives strategy employed by the Fund will be successful.
The risks associated with the use of derivatives are different from, and possibly greater than, the risks associated with investing directly in the
instruments underlying such derivatives. Derivatives are highly specialized instruments that require investment techniques and risk analyses different from other portfolio investments. The use of derivative instruments requires an understanding not
only of the underlying instrument but also of the derivative itself. Certain risk factors generally applicable to derivative transactions are described below.
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Derivatives are subject to the risk that the market value of the derivative itself or the market value of underlying instruments will change in a way
adverse to the Fund’s interests. The Fund bears the risk that the Advisor may incorrectly forecast future market trends and other financial or economic factors or the value of the underlying security, index, interest rate or currency when
establishing a derivatives position for the Fund.
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Derivatives may be subject to pricing or “basis” risk, which exists when a derivative becomes extraordinarily expensive (or inexpensive)
relative to historical prices or corresponding instruments. Under such market conditions, it may not be economically feasible to initiate a transaction or liquidate a position at an advantageous time or price.
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Many derivatives are complex and often valued subjectively. Improper valuations can result in increased payment requirements to counterparties or a
loss of value to the Fund.
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Using derivatives as a hedge against a portfolio investment subjects the Fund to the risk that the derivative will have imperfect correlation with the
portfolio investment, which could result in the Fund incurring substantial losses. This correlation risk may be greater in the case of derivatives based on an index or other basket of securities, as the portfolio securities being hedged may not
duplicate the components of the underlying index or the basket may not be of exactly the same type of obligation as those underlying the derivative. The use of derivatives for “cross hedging” purposes (using a derivative based on one
instrument as a hedge on a different instrument) may also involve greater correlation risks.
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While using derivatives for hedging purposes can reduce a Fund’s risk of loss, it may also limit the Fund’s opportunity for gains or result
in losses by offsetting or limiting the Fund’s ability to participate in favorable price movements in portfolio investments.
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Derivatives transactions for non-hedging purposes involve greater risks and may result in losses which would not be offset by increases in the value of
portfolio securities or declines in the cost of securities to be acquired. In the event that a Fund enters into a derivatives transaction as an alternative to purchasing or selling the underlying instrument or in order to obtain desired exposure to
an index or market, the Fund will be exposed to the same risks as are incurred in purchasing or selling the underlying instruments directly.
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The use of certain derivatives transaction involves the risk of loss resulting from the insolvency or bankruptcy of the other party to the contract
(the “counterparty”) or the failure by the counterparty to make required payments or otherwise comply with the terms of the contract. In the event of default by a counterparty, the Fund may have contractual remedies pursuant to the
agreement related to the transaction.
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Liquidity risk exists when a particular derivative is difficult to purchase or sell. If a derivative transaction is particularly large or if the
relevant market is illiquid, the Fund may be unable to initiate a transaction or liquidate a position at an advantageous time or price.
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Certain derivatives transactions are not entered into or traded on exchanges or in markets regulated by the CFTC or the SEC. Instead, such
over-the-counter (“
OTC
”) derivatives are entered into directly by the counterparties and may be traded only through financial institutions acting as market makers. OTC derivatives transactions can only be entered into with a
willing counterparty that is approved by the Advisor in accordance with guidelines established by the Board. Where no such counterparty is available, the Fund will be unable to into a desired transaction. There also may be greater risk that no
liquid secondary market in the trading of OTC derivatives will exist, in which case the Fund may be afforded to exchange participants will not be available to participants in OTC derivatives transactions. OTC derivatives transactions are not subject
to the guarantee of an exchange or clearinghouse and as a result the Fund would bear greater risk of default by the counterparties to such transactions.
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The Fund may be required to make physical delivery of portfolio securities underlying a derivative in order to close out a derivatives position or to
sell portfolio securities at a time or price at which it may be disadvantageous to do so in order to obtain cash to close out or to maintain a derivatives position.
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As a result of the structure of certain derivatives, adverse changes in the value of the underlying instrument can result in losses substantially
greater than the amount invested in the derivative itself. Certain derivatives have the potential for unlimited loss, regardless of the size of the initial investment.
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Certain derivatives may be considered illiquid and therefore subject to a Fund’s limitation on investments in illiquid securities.
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Derivatives transactions conducted outside the United States may not be conducted in the same manner as those entered into on U.S. exchanges, and may
be subject to different margin, exercise, settlement or expiration procedures. Brokerage commissions, clearing costs and other transaction costs may be higher on foreign exchanges. Many of the risks of OTC derivatives transactions are also
applicable to derivatives transactions conducted outside the United States. Derivatives transactions conducted outside the United States are subject to the risk of governmental action affecting the trading in, or the prices of, foreign securities,
currencies and other instruments. The value of such positions could be adversely affected by foreign political and economic factors; lesser availability of data on which to make trading decisions; delays on the Fund’s ability to act upon
economic events occurring in foreign markets; and less liquidity than U.S. markets.
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Currency derivatives are subject to additional risks. Currency derivatives transactions may be negatively affected by government exchange controls,
blockages, and manipulations. Currency exchange rates may be influenced by factors extrinsic to a country’s economy. There is not systematic reporting of last sale information with respect to foreign
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currencies. As a result, the available information on which trading in currency derivatives will be based may not be as complete as comparable data for other transactions. Events could occur in
the foreign currency market which will not be reflected in currency derivatives until the following day, making it more difficult for the Fund to respond to such events in a timely manner.
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Risks Associated With Emerging Market Countries
Investors should recognize that investing in securities of emerging market countries through investment in the International Funds and U.S. Fixed Income Funds involves certain risks, and considerations,
including those set forth below, which are not typically associated with investing in the United States or other developed countries.
Political and economic structures in many emerging markets countries may be undergoing significant evolution and rapid development, and such countries
may lack the social, political and economic stability characteristics of more developed countries. Some of these countries may have in the past failed to recognize private property rights and have at times nationalized or expropriated the assets of
private companies.
The securities markets of emerging market countries are substantially smaller, less developed, less liquid and more
volatile than the major securities markets in the United States and other developed nations. The limited size of many emerging securities markets and limited trading volume in issuers compared to volume of trading in U.S. securities or securities of
issuers in other developed countries could cause prices to be erratic for reasons apart from factors that affect the quality of the securities. For example, limited market size may cause prices to be unduly influenced by traders who control large
positions. Adverse publicity and investors’ perceptions, whether or not based on fundamental analysis, may decrease the value and liquidity of portfolio securities, especially in these markets.
In addition, emerging market countries’ exchanges’ and broker-dealers are generally subject to less government and exchange regulation than
their counterparts in developed countries. Brokerage commissions, dealer concessions, custodial expenses and other transaction costs may be higher in emerging markets than in developed countries. As a result, Funds investing in emerging market
countries have operating expenses that are expected to be higher than other funds investing in more established market regions.
Many of the
emerging market countries may be subject to greater degree of economic, political and social instability than is the case in the United States, Canada, Australia, New Zealand, Japan and Western European and certain Asian countries. Such instability
may result from, among other things, (i) popular unrest associated with demands for improved political, economic and social conditions, and (ii) internal insurgencies. Such social, political and economic instability could disrupt the
financial markets in which the Funds invest and adversely affect the value of the Funds’ assets.
In certain emerging market countries
governments participate to a significant degree, through ownership or regulation, in their respective economies. Action by these governments could have a significant adverse effect on market prices of securities and payment of dividends. In
addition, most emerging market countries have experienced substantial, and in some periods extremely high, rates of inflation. Inflation and rapid fluctuation in inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain emerging market countries.
Many of the currencies of emerging market countries have experienced
devaluations relative to the U.S. dollar, and major devaluations have historically occurred in certain countries. Any devaluations in the currencies in which portfolio securities are denominated will have a detrimental impact on Funds investing in
emerging market countries. Many emerging market countries are experiencing currency exchange problems. Countries have and may in the future impose foreign currency controls and repatriation control.
Risks Associated with Exchange-Traded Notes
(“
ETNs
”)
The value of an ETN will change as the value of the market benchmark or strategy fluctuates. If, for example, a commodity-linked ETN is purchased, its value will fluctuate because the value of the
underlying commodity to which it is linked fluctuates with market conditions. The prices of the market benchmark are determined based on a variety of market and economic factors and may change unpredictably, affecting the value of the underlying
benchmark and, consequently, the value of the ETN.
ETNs are fully exposed to any decline in the level of the underlying market benchmark. If
the value of the underlying market benchmark decreases, or does not increase by an amount greater than the aggregate investor fee applicable to the ETN, a Fund will receive less than its original investment in the ETN upon maturity or early
redemption and could lose up to 100% of the original principal amount. Investors in ETNs do not receive any periodic interest payments.
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ETNs are subject to illiquity risk. The issuer of an ETN may restrict the ETN’s redemption amount or
its redemption date. In addition, although an ETN may be listed on an exchange, the issuer may not be required to maintain the listing and there can be no assurance that a secondary market will exist for an ETN.
Because ETNs are unsecured debt securities, they are subject to risk of default by the issuing bank or other financial institution. This is called
counter party risk. In addition, the value of an ETN may decline due to downgrade in the issuer’s credit rating despite no change in the underlying market benchmark.
ETNs are also subject to tax risk. No assurance can be given that the Internal Revenue Service (“
IRS
”) will accept, or a court will uphold, how the Funds characterize and treat
ETNs’ for tax purposes. Further, the IRS and Congress are considering proposals that would change the timing and character of income and gains from ETNs.
Risks Associated With Fund of Funds
The TCW Conservative Allocation Fund is a “fund
of funds.” Achieving the TCW Conservative Allocation Fund’s investment objectives will depend entirely on the performance of the Underlying Funds to which the TCW Conservative Allocation Fund’s investments are allocated, which depends
on the particular securities in which the Underlying Funds invest. Therefore, the TCW Conservative Allocation Fund is subject to all risks associated with the Underlying Funds. Because the TCW Conservative Allocation Fund’s performance depends
on that of each Underlying Fund, performance may be subject to increased volatility. Additionally, operating expenses incurred annually by each Underlying Fund are borne indirectly by shareholders of the TCW Conservative Allocation Fund. The TCW
Conservative Allocation Fund directly bears its annual operating expenses and, indirectly, bears the annual operating expenses of the Underlying Funds in proportion to their allocations.
The Advisor allocates the assets of the TCW Conservative Allocation Fund among the Underlying Funds based upon a number of factors, including the Advisor’s asset allocation strategies and the
investment performance of each Underlying Fund. In making investment decisions for the TCW Conservative Allocation Fund, the Advisor will consider, among other factors, internally generated research. Because certain Underlying Funds are more
profitable to the Advisor than others, the Advisor may have an incentive to allocate more of the TCW Conservative Allocation Fund’s assets to more profitable Underlying Funds, and fewer assets to less profitable Underlying Funds. The Advisor
does not, however, consider the profitability of the Underlying Funds in making investment decisions for the TCW Conservative Allocation Fund.
The TCW Conservative Allocation Fund may invest in the Underlying Funds as disclosed in the Prospectus. The Advisor may modify the asset allocation
strategy for the TCW Conservative Allocation Fund and modify the selection of Underlying Funds for the TCW Conservative Allocation Fund or may invest in other TCW Funds from time to time without shareholder approval if it believes that doing so
would better enable the TCW Conservative Allocation Fund to pursue its investment goals.
Risks Associated With Futures Contracts and
Options on Futures
There are certain risks inherent in the use of futures contracts and options on futures contracts. Successful use of
futures contracts by a Fund is subject to the ability of the Advisor to correctly predict movements in the direction of interest rates or changes in market conditions. In addition, there can be no assurance that there will be a correlation between
price movements in the underlying securities, currencies or index and the price movements in the securities which are the subject of the hedge.
Positions in futures contracts and options on futures contracts may be closed out only on the exchange or board of trade on which they were entered into,
and there can be no assurance that an active market will exist for a particular contract or option at any particular time. If a Fund has hedged against the possibility of an increase in interest rates or a decrease in the value of portfolio
securities and interest rates fall or the value of portfolio securities increase instead, a Fund will lose part or all of the benefit of the increased value of securities that it has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if a Fund has insufficient cash, it may have to sell securities to meet daily variation margin requirements at a time when it may be disadvantageous to do so. These sales of securities may, but will not
necessarily be at increased prices that reflect the decline in interest rates. While utilization of futures contracts and options on futures contracts may be advantageous to the Fund, if the Fund is not successful in employing such instruments in
managing the Fund’s investments, the Fund’s performance will be worse than if the Fund did not make such investments.
Exchanges
limit the amount by which the price of a futures contract may move on any day. If the price moves equal the daily limit on successive days, then it may prove impossible to liquidate a futures position until the daily limit moves have ceased. In the
event of adverse price movements, a Fund would continue to be required to make daily cash payments of variation margin on open futures positions. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet
daily variation margin requirements at a time when it may be disadvantageous to do so. In addition, a Fund may be required to take or make delivery of the instruments underlying interest rate futures contracts it holds at a time when it is
disadvantageous to do so. The inability to close out options and futures positions could also have an adverse impact on a Fund’s ability to effectively hedge its portfolio.
27
Futures contracts and options thereon which are purchased or sold on foreign commodities exchanges may have
greater price volatility than their U.S. counterparts. Furthermore, foreign commodities exchanges may be less regulated and under less governmental scrutiny than U.S. exchanges. Brokerage commissions, clearing costs and other transaction costs may
be higher on foreign exchanges. Greater margin requirements may limit a Fund’s ability to enter into certain commodity transactions on foreign exchanges. Moreover, differences in clearance and delivery requirements on foreign exchanges may
occasion delays in the settlement of a Fund’s transactions effected on foreign exchanges.
In the event of the bankruptcy of a broker
through which a Fund engages in transactions in futures or options thereon, the Fund could experience delays and/or losses in liquidating open positions purchased or sold through the broker and/or incur a loss of all or part of its margin deposits
with the broker. Similarly, in the event of the bankruptcy, of the writer of an OTC option purchased by a Fund, the Fund could experience a loss of all or part of the value of the option. Transactions are entered into by a Fund only with brokers or
financial institutions deemed creditworthy by the Advisor.
There is no assurance that a liquid secondary market will exist for futures
contracts and related options in which a Fund may invest. In the event a liquid market does not exist, it may not be possible to close out a futures position, and in the event of adverse price movements, a Fund would continue to be required to make
daily cash payments of variation margin. In addition, limitations imposed by an exchange or board of trade on which futures contracts are traded may compel or prevent a Fund from closing out a contract which may result in reduced gain or increased
loss to the Fund. The absence of a liquid market in futures contracts might cause a Fund to make or take delivery of the underlying securities (currencies) at a time when it may be disadvantageous to do so.
Compared to the purchase or sale of futures contracts, the purchase of call or put options on futures contracts involves less potential risk to a Fund
because the maximum amount at risk is the premium paid for the options (plus transaction costs). However, there may be circumstances when the purchase of a call or put option on a futures contract would result in a loss to a Fund notwithstanding
that the purchase or sale of a futures contract would not result in a loss, as in the instance where there is no movement in the prices of the futures contract or underlying securities (currencies).
Options on foreign currency futures contracts may involve certain additional risks. Trading options on foreign currency futures contracts is relatively
new. The ability to establish and close out positions on such options is subject to the maintenance of a liquid secondary market. To reduce this risk, a Fund will not purchase or write options on foreign currency futures contracts unless and until,
in the Advisor’s opinion, the market for such options has developed sufficiently that the risks in connection with such options are not greater than the risks in connection with transactions in the underlying foreign currency futures contracts.
Risks Associated With Lower Rated Securities
All Funds (except the TCW Conservative Allocation Fund) may invest in convertible securities. A portion of the convertible securities acquired by the Funds may be rated below investment grade. The Core
Fixed Income, Emerging Markets Income, Emerging Markets Local Currency Income, Emerging Markets Multi-Asset Opportunities, Enhanced Commodity Strategy, High Yield Bond, Short Term Bond, Total Return Bond and Global Bond Funds will invest in below
investment grade securities. Securities rated below investment grade are commonly known as “junk bonds” and have speculative characteristics.
High yield securities or “junk bonds” can be classified into two categories: (a) securities issued without an investment grade rating and (b) securities whose credit ratings have been
downgraded below investment grade because of declining investment fundamentals. The first category includes securities issued by “emerging credit” companies and companies which have experienced a leveraged buyout or recapitalization.
Although the small and medium size companies that constitute emerging credit issuers typically have significant operating histories, these companies generally do not have strong enough operating results to secure investment grade ratings from the
rating agencies. In addition, in recent years there has been a substantial volume of high yield securities issued by companies that have converted from public to private ownership through leveraged buyout transactions and by companies that have
restructured their balance sheets through leveraged recapitalizations. High yield securities issued in these situations are used primarily to pay existing stockholders for their shares or to finance special dividend distributions to shareholders.
The indebtedness incurred in connection with these transactions is often substantial and, as a result, often produces highly leveraged capital structures which present special risks for the holders of such securities. Also, the market price of such
securities may be more volatile to the extent that expected benefits from the restructuring do not materialize. The second category of high yield securities consists of securities of former investment grade companies that have experienced poor
operating performance due to such factors as cyclical downtrends in their industry, poor management or increased foreign competition.
Generally, lower-rated debt securities provide a higher yield than higher-rated debt securities of similar maturity but are subject to greater risk of
loss of principal and interest than higher-rated securities of similar maturity. They are generally considered to be subject to greater risk than securities with higher ratings particularly in the event of a deterioration of general economic
conditions. The lower ratings of the high yield securities which the Funds will purchase reflect a greater possibility that the financial condition of the issuers, or adverse changes in general economic conditions, or both, may impair the ability of
the issuers to make payments of principal and interest. The market value of a single lower-rated debt security may fluctuate more than the market value of higher-rated securities,
28
since changes in the creditworthiness of lower-rated issuers and in market perceptions of the issuers’ creditworthiness tend to occur more frequently and in a more pronounced manner than in
the case of higher-rated issuers. High yield debt securities also tend to reflect individual corporate developments to a greater extent than higher-rated securities. The securities in which the Funds invest are frequently subordinated to senior
indebtedness.
The economy and interest rates affect high yield securities differently from other securities. The prices of high yield bonds
have been found to be less sensitive to interest rate changes than higher-rated investments, but 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 projected business goals, and to obtain additional financing. If the
issuer of a bond owned by a Fund defaults, the Fund may incur additional expenses to seek recovery. In addition, periods of economic uncertainty and changes can be expected to result in increased volatility of market prices of high yield bonds and a
Fund’s asset value. Furthermore, the market prices of high yield bonds structured as zero coupon or pay-in-kind securities are affected to a greater extent by interest rate changes and thereby tend to be more volatile than securities which pay
interest periodically and in cash.
To the extent there is a limited retail secondary market for particular high yield bonds, these bonds may
be thinly-traded and the Advisor’s ability to accurately value high yield bonds and a Fund’s assets may be more difficult because there is less reliable, objective data available. In addition, a Fund’s ability to acquire or dispose of
the bonds may be negatively-impacted. Adverse publicity and investor perceptions, whether or not based on fundamental analysis, may decrease the values and liquidity of high yield bonds, especially in a thinly-traded market. To the extent a Fund
owns or may acquire illiquid or restricted high yield bonds, these securities may involve special registration responsibilities, liabilities and costs, and liquidity and valuation difficulties.
Special tax considerations are associated with investing in lower rated debt securities structured as zero coupon or pay-in-kind securities. The Funds
accrue income on these securities prior to the receipt of cash payments. The Funds must distribute substantially all of its income to its shareholders to qualify for pass-through treatment under the tax laws and may, therefore, have to dispose of
its portfolio securities to satisfy distribution requirements.
Additionally, investments in debt obligations that are at risk of or in
default present tax issues for a Fund. Tax rules are not entirely clear about issues such as whether and to what extent a Fund should recognize market discount on a debt obligation, when a Fund may cease to accrue interest, original issue discount
or market discount, when and to what extent a Fund may take deductions for bad debts or worthless securities and how a Fund should allocate payments received on obligations in default between principal and income. These and other related issues will
be addressed by a Fund to ensure that it distributes sufficient income to preserve its status as a regulated investment company.
Underwriting
and dealer spreads associated with the purchase of lower rated bonds are typically higher than those associated with the purchase of high grade bonds.
Risks Associated With Mortgage-Backed Securities
Credit and Market Risks of
Mortgage-Backed Securities
. Investments in fixed rate and floating rate mortgage-backed securities will entail normal credit risks (
i.e.
, the risk of non-payment of interest and principal) and market risks (
i.e.
, the risk that
interest rates and other factors will cause the value of the instrument to decline). Many issuers or servicers of mortgage-backed securities guarantee timely payment of interest and principal on the securities, whether or not payments are made when
due on the underlying mortgages. This kind of guarantee generally increases the quality of a security, but does not mean that the security’s market value and yield will not change. Like other bond investments, the value of fixed rate
mortgage-backed securities will tend to rise when interest rates fall, and fall when rates rise. Floating rate mortgage-backed securities will generally tend to have minimal changes in price when interest rates rise or fall. The value of all
mortgage-backed securities may also change because of changes in the market’s perception of the creditworthiness of the organization that issued or guarantees them. In addition, the mortgage-backed securities market in general may be adversely
affected by changes in governmental legislation or regulation. Fluctuations in the market value of mortgage-backed securities after their acquisition usually do not affect cash income from such securities but are reflected in each Fund’s net
asset value. The liquidity of mortgage-backed securities varies by type of security; at certain times a Fund may encounter difficulty in disposing of investments. Other factors that could affect the value of a mortgage-backed security include, among
other things, the types and amounts of insurance which a mortgagor carries, the amount of time the mortgage loan has been outstanding, the loan-to-value ratio of each mortgage and the amount of overcollateralization of a mortgage pool.
Prepayment and Redemption Risk of Mortgage-Backed Securities
. Mortgage-backed securities reflect an interest in monthly payments made by
the borrowers who receive the underlying mortgage loans. Although the underlying mortgage loans are for specified periods of time, such as 20 or 30 years, the borrowers can, and typically do, pay them off sooner. In such an event, the
mortgage-backed security which represents an interest in such underlying mortgage loan will be prepaid. A borrower is more likely to prepay a mortgage which bears a relatively high rate of interest. This means that in times of declining interest
rates, a portion of a Fund’s higher yielding securities are likely to be redeemed and the Fund will probably be unable to replace them with securities
29
having as great a yield. Prepayments can result in lower yields to shareholders. The increased likelihood of prepayments when interest rates decline also limits market price appreciation of
mortgage-backed securities. In addition, a mortgage-backed security may be subject to redemption at the option of the issuer. If a mortgage-backed security held by a Fund is called for redemption, the Fund will be required to permit the issuer to
redeem the security, which could have an adverse effect on the Fund’s ability to achieve its investment objective.
Collateralized
Mortgage Obligations (“
CMOs
”)
. There are certain risks associated specifically with CMOs. CMOs issued by private entities are not obligations issued or guaranteed by the United States Government, its agencies
or instrumentalities and are not guaranteed by any government agency, although the securities underlying a CMO may be subject to a guarantee. Therefore, if the collateral securing the CMO, as well as any third party credit support or guarantees, is
insufficient to make payment, the holder could sustain a loss. In addition, the average life of CMOs is determined using mathematical models that incorporate prepayment assumptions and other factors that involve estimates of future economic and
market conditions. These estimates may vary from actual future results, particularly during periods of extreme market volatility. Further, under certain market conditions, such as those that occurred in 1994 and 2008, the average weighted life of
certain CMOs may not accurately reflect the price volatility of such securities. For example, in periods of supply and demands imbalances in the market for such securities and/or in periods of sharp interest rate movements, the prices of CMOs may
fluctuate to a greater extent than would be expected from interest rate movements alone.
Stripped Mortgage Securities
. These
investments are highly sensitive to changes in interest and prepayment rates and tend to be less liquid than other CMOs.
Inverse
Floaters
. Inverse floaters are a class of CMOs with a coupon rate that resets in the opposite direction from the market rate of interest to which it is indexed such as LIBOR or COFI. Any rise in the index rate (as a consequence of an
increase in interest rates) causes a drop in the coupon rate of an inverse floater. An inverse floater may be considered to be leveraged to the extent that its interest rate varies by a magnitude that exceeds the magnitude of the change in the index
rate of interest. The higher degree of leverage inherent in inverse floaters is associated with greater volatility in their market prices.
Adjustable Rate Mortgages (“ARMs”)
. ARMs contain maximum and minimum rates beyond which the mortgage interest rate may not vary
over the lifetime of the security. In addition, certain ARMs provide for additional limitations on the minimum amount by which the mortgage interest rate may adjust for any single adjustment period. Alternatively, certain ARMs contain limitations on
changes in the required monthly payment. In the event that a monthly payment is not sufficient to pay the interest accruing on an ARM, any such excess interest is added to the principal balance of the mortgage loan, which is repaid through future
monthly payments. If the monthly payment for such an instrument exceeds the sum of the interest accrued at the applicable mortgage interest rate and the principal payment required at such point to amortize the outstanding principal balance over the
remaining term of the loan, the excess is utilized to reduce the then outstanding principal balance of the ARM.
Temporary Defensive
Positions
The Advisor may temporarily invest up to 100% of a Fund’s assets in high quality short-term money market instruments if it
believes adverse economic or market conditions, such as excessive volatility or sharp market declines, justify taking a defensive investment posture. If a Fund attempts to limit investment risk by temporarily taking a defensive investment position,
it may be unable to pursue its investment objective during that time, and it may miss out on some or all of an upswing in the securities markets.
PORTFOLIO TURNOVER
A Fund’s portfolio turnover rate is, in
summary, the percentage computed by dividing the lesser of the Fund’s purchases or sales of securities (excluding short-term securities) by the average market value of that Fund. The Advisor intends to manage each Fund’s assets by buying
and selling securities to help attain its investment objective. This may result in increases or decreases in a Fund’s current income available for distribution to its shareholders. While none of the Funds is managed with the intent of
generating short-term capital gains, each of the Funds may dispose of investments (including money market instruments) regardless of the holding period if, in the opinion of the Advisor, an issuer’s creditworthiness or perceived changes in a
company’s growth prospects or asset value make selling them advisable. Such an investment decision may result in capital gains or losses and could result in a high portfolio turnover rate during a given period, resulting in increased
transaction costs related to equity securities. Disposing of debt securities in these circumstances should not increase direct transaction costs since debt securities are normally traded on a principal basis without brokerage commissions. However,
such transactions do involve a mark-up or markdown of the price.
The portfolio turnover rates of the Funds cannot be accurately predicted.
Nevertheless, the annual portfolio turnover rates of certain of the Funds are generally not expected to exceed 100%. A 100% portfolio turnover rate would occur, for example, if all the securities in a Fund’s investment portfolio were replaced
once in a period of one year. In addition, many of the Funds are Underlying Funds of the TCW Conservative Allocation Fund, and changes to the target allocations of the TCW Conservative Allocation Fund may result in the transfer of assets from one
Underlying Fund to another. These changes, as well as changes in managers and investment personnel and reorganizations of Underlying Funds, may result in the sale of portfolio securities, which may increase trading costs and the portfolio
30
turnover and trigger negative tax consequences for the affected Underlying Funds. Each Fund’s portfolio turnover rate (rounded to a whole number) for the fiscal years ended October 31,
2013 and 2012 is shown in the table below. Variations in turnover rate may be due to market conditions, fluctuating volume of shareholder purchases and redemptions or changes in the Advisor’s investment outlook.
|
|
|
|
|
|
|
|
|
|
|
|
|
Turnover Rate
|
|
|
|
|
2013
|
|
|
2012
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
|
40
|
%
|
|
|
25
|
%
|
|
TCW Growth Fund
|
|
|
38
|
%
|
|
|
45
|
%
|
|
TCW Growth Equities Fund
|
|
|
79
|
%
|
|
|
49
|
%
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
18
|
%
|
|
|
23
|
%
|
|
TCW Relative Value Large Cap Fund
|
|
|
37
|
%
|
|
|
20
|
%
|
|
TCW Select Equities Fund
|
|
|
25
|
%
|
|
|
20
|
%
|
|
TCW Small Cap Growth Fund
|
|
|
84
|
%
|
|
|
79
|
%
|
|
TCW SMID Cap Growth Fund
|
|
|
73
|
%
|
|
|
79
|
%
|
|
TCW Value Opportunities Fund
|
|
|
29
|
%
|
|
|
33
|
%
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
197
|
%
|
|
|
214
|
%
|
|
TCW Enhanced Commodity Strategy Fund
|
|
|
54
|
%
|
|
|
9
|
%
|
|
TCW High Yield Bond Fund
|
|
|
115
|
%
|
|
|
111
|
%
|
|
TCW Short Term Bond Fund
|
|
|
71
|
%
|
|
|
82
|
%
|
|
TCW Total Return Bond Fund
|
|
|
191
|
%
|
|
|
123
|
%
|
|
|
|
|
|
International Funds
|
|
|
|
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
|
150
|
%
|
|
|
175
|
%
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
290
|
%
|
|
|
253
|
%
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund
|
|
|
53
|
%
1
|
|
|
N/A
|
|
|
TCW Global Bond Fund
|
|
|
136
|
%
|
|
|
165
|
%
2
|
|
TCW International Growth Fund
|
|
|
310
|
%
|
|
|
N/A
|
|
|
TCW International Small Cap Fund
|
|
|
302
|
%
|
|
|
140
|
%
|
|
|
|
|
|
Asset Allocation Fund
|
|
|
|
|
|
|
|
|
|
TCW Conservative Allocation Fund
|
|
|
58
|
%
|
|
|
59
|
%
|
|
1
|
For the period July 1, 2013 (Commencement of Operations) through October 31, 2013 and is not indicative of a full year’s operating
results.
|
|
2
|
For the period December 1, 2011 (Commencement of Operations) through October 31, 2012 and is not indicative of a full year’s operating
results.
|
The following Funds experienced significant variations in their portfolio turnover rates over the most recent two
fiscal years.
For the fiscal year ended October 31, 2013, the portfolio turnover rate for the TCW Enhanced Commodity Strategy Fund was
54%. This was due principally to increased reinvestment of cash flow into longer term instruments as compared to the prior year and a decrease in the market value of the portfolio.
For the fiscal year ended October 31, 2013, the portfolio turnover rate for the TCW International Growth Fund was 310%. This was due principally to increased volatility in the non-U.S. markets that
required a sizable repositioning of the Fund’s portfolios away from emerging markets and into Japanese and European Markets.
For the
fiscal year ended October 31, 2013, the portfolio turnover rate for the TCW International Small Cap Fund was 302%. This was due principally to increased inflows and outflows for the Fund and increased volatility in the non-U.S. markets that
required a sizable repositioning of the Fund’s portfolios away from emerging markets and into Japanese and European Markets.
BROKERAGE PRACTICES
The Advisor is responsible for the placement of the Funds’ portfolio transactions and the negotiation of
prices and commissions, if any, with respect to such transactions. Debt, convertible and unlisted equity securities are generally purchased from a primary market maker acting as principal on a net basis without a stated commission but at prices
generally reflecting a dealer spread. Listed equity
31
securities are normally purchased through brokers in transactions executed on securities exchanges involving negotiated commissions. Debt, convertible and equity securities are also purchased in
underwritten offerings at fixed prices which include discounts to underwriters and/or concessions to dealers. In placing a portfolio transaction, the Advisor seeks to obtain the best execution for the Funds, taking into account such factors as price
(including the applicable dealer spread or commission, if any), size of order, difficulty of execution and operational facilities of the firm involved and the firm’s risk in positioning a block of securities.
Consistent with its policy of securing best execution, in selecting broker-dealers and negotiating any commissions or prices involved in Fund
transactions, the Advisor considers the range and quality of the professional services provided by such firms. Brokerage services include the ability to most effectively execute large orders without adversely impacting markets and positioning
securities in order to enable the Advisor to effect orderly purchases or sales for a Fund. Accordingly, transactions will not always be executed at the lowest available commission. In addition, the Advisor may effect transactions which cause a Fund
to pay a commission in excess of a commission which another broker-dealer would have charged if the Advisor first determines that such commission is reasonable in relation to the value of the brokerage and research services provided by the
broker-dealer. In some cases, research is provided directly by an executing broker-dealer and in other cases, research may be provided by third party research providers such as a non-executing third party broker-dealer or other third party research
service. Research services furnished by an executing broker-dealer or third party research provider may be used in providing services for any or all of the clients of the Advisor, as well as clients of affiliated companies, and may be used in
connection with accounts other than those which pay commissions to the broker-dealers providing the research services.
The Advisor maintains
an internal allocation procedure to identify those direct research providers who provide it with research services and endeavors to place sufficient transactions with them to ensure the continued receipt of research services the Advisor believes are
useful. The Advisor’s procedures also seek to compensate third party research providers that provide it with research by directing executing broker-dealers to cause payments to be made to third party research providers, either through cash
payments from the executing broker or through the use of step out transactions. A “step out transaction” is a securities trade executed by the executing broker-dealer, but settled by the non-executing research broker-dealer permitting the
non-executing research broker-dealer to share in the commission. The determination of the broker-dealers to whom commissions are directed generally is made using a system involving the Advisor’s Director of U.S. Equity Research, the Funds’
portfolio managers, the Advisor’s analysts and is periodically reviewed by the Advisor’s trading committee. The Advisor’s Director of U.S. Equity Research coordinates the evaluation of broker-dealer research services in most
instances, taking into account the views of the Advisor’s portfolio managers and analysts.
Research services include such items as
reports on industries and companies, economic analyses, review of business conditions and portfolio strategy, analytic computer software, account performance services and various trading and/or quotation equipment. They also include advice from
broker-dealers as to the value of securities and 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 transactions.
Sometimes the Advisor receives products or services from broker-dealers that are used for both research services and other purposes, such as corporate administration or marketing (“
mixed-use products or services
”). The
Advisor makes a good faith effort to determine the relative proportions of mixed-use products or services that may be attributable to research services. The portion attributable to research services may be paid through the allocation of brokerage
commissions and the Advisor pays the non-research services in cash.
Debt and convertible securities are generally purchased from the issuer
or a primary market maker acting as principal on a net basis with no brokerage commission paid by the client. Such securities, as well as equity securities, may also be purchased from underwriters at prices which include underwriting fees.
In an effort to achieve efficiencies in execution and reduce trading costs, the Advisor and its affiliates frequently (though not always)
execute securities transactions on behalf of a number of accounts at the same time, generally referred to as “block trades.” When executing block trades, securities are allocated using procedures that the Advisor considers fair and
equitable. Allocation guidelines are established to provide to the Advisor’s Trading Department. In some cases, various forms of pro-rata allocation are used and, in other cases, random allocation processes are used. Participation of an account
in the allocation is based on considerations such as lot size, account size, diversification requirements and investment objectives, restrictions, time horizon, availability of cash, existing or targeted account weightings in particular securities,
the amount of existing holdings (or substitutes) of the security in the account, and, when relevant, directed brokerage. In connection with certain purchase or sale programs, and in other circumstances if practicable, if multiple trades for a
specific security are made with the same broker in a single day, those securities are allocated to accounts based on a weighted average purchase or sale price.
In determining whether accounts are eligible to participate in any type of initial public offering, the Advisor considers such factors as lot size, account size, diversification requirements and
investment objectives, restrictions, time horizon, availability of cash, existing or targeted account weightings in particular securities, and the amount of existing holdings (or substitutes) of the security in the account. For initial public
offerings of equities, the Advisor generally shares allocations in a pro rata fashion based upon assets under management for those accounts eligible to participate in the initial public offering. For equity offerings, an exception may be made
32
when the allocation is so small that it may create transaction costs that diminish the benefit of the trade or it would be unreasonably minimal relative to the size of the account. For their
exceptions, the Advisor will use its best judgment to make a fair and equitable allocation, which may include, among other things, consideration of allocating to underperforming accounts or accounts where smaller lot sizes would be reasonable.
To the extent permitted by law and in accordance with procedures established by the Board of Directors, the Fund may engage in brokerage
transactions with brokers that are affiliates of the Advisor. The Fund has adopted procedures which are reasonably designed to provide that commissions or other remuneration paid to affiliated brokers of the Advisor do not exceed the usual and
customary broker’s commission. The TCW Conservative Allocation Fund will not incur any commissions or sales charges when it invests in the Underlying Funds.
The following table sets forth the aggregate brokerage commissions paid on transactions in the Funds’ securities and the amounts of brokerage commission paid to broker-dealers for research services
by each Fund for the fiscal years ended October 31, 2013, October 31, 2012 and October 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
Aggregate Brokerage
Commissions Paid
on Transactions
in
the Funds’ Securities
|
|
|
Aggregate Brokerage
Commissions Paid
for Research
Services Provided
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
$
|
5,602
|
|
|
$
|
5,076
|
|
|
TCW Growth Fund
|
|
|
1,435
|
|
|
|
1,261
|
|
|
TCW Growth Equities Fund
|
|
|
108,082
|
|
|
|
100,654
|
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
521,062
|
|
|
|
498,480
|
|
|
TCW Relative Value Large Cap Fund
|
|
|
698,825
|
|
|
|
658,403
|
|
|
TCW Select Equities Fund
|
|
|
444,976
|
|
|
|
397,764
|
|
|
TCW Small Cap Growth Fund
|
|
|
2,065,103
|
|
|
|
1,795,550
|
|
|
TCW SMID Cap Growth Fund
|
|
|
70,758
|
|
|
|
64,651
|
|
|
TCW Value Opportunities Fund
|
|
|
166,348
|
|
|
|
156,904
|
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
1,110
|
|
|
|
—
|
|
|
TCW Enhanced Commodity Strategy Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW High Yield Bond Fund
|
|
|
97
|
|
|
|
—
|
|
|
TCW Short Term Bond Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Total Return Bond Fund
|
|
|
20,385
|
|
|
|
—
|
|
|
|
|
|
|
Asset Allocation Fund
|
|
|
|
|
|
|
|
|
|
TCW Conservative Allocation Fund
|
|
|
787
|
|
|
|
418
|
|
|
|
|
|
|
International Funds
|
|
|
|
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund
1
|
|
|
81,387
|
|
|
|
81,387
|
|
|
TCW Global Bond Fund
|
|
|
204
|
|
|
|
48
|
|
|
TCW International Growth Fund
|
|
|
28,295
|
|
|
|
28,295
|
|
|
TCW International Small Cap Fund
|
|
|
338,468
|
|
|
|
338,468
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
|
|
|
Aggregate Brokerage
Commissions Paid
on Transactions
in
the Funds’ Securities
|
|
|
Aggregate Brokerage
Commissions Paid
for Research
Services Provided
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
$
|
18,787
|
|
|
$
|
18,493
|
|
|
TCW Growth Fund
|
|
|
23,018
|
|
|
|
21,890
|
|
|
TCW Growth Equities Fund
|
|
|
119,509
|
|
|
|
110,801
|
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
600,830
|
|
|
|
600,339
|
|
|
TCW Relative Value Large Cap Fund
|
|
|
795,600
|
|
|
|
794,849
|
|
|
TCW Select Equities Fund
|
|
|
425,457
|
|
|
|
421,361
|
|
|
TCW Small Cap Growth Fund
|
|
|
3,633,288
|
|
|
|
3,559,560
|
|
|
TCW SMID Cap Growth Fund
|
|
|
101,690
|
|
|
|
100,074
|
|
|
TCW Value Opportunities Fund
|
|
|
264,040
|
|
|
|
262,189
|
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
5,578
|
|
|
|
—
|
|
|
TCW Enhanced Commodity Strategy Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW High Yield Bond Fund
|
|
|
496
|
|
|
|
—
|
|
|
TCW Short Term Bond Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Total Return Bond Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Asset Allocation Fund
|
|
|
|
|
|
|
|
|
|
TCW Conservative Allocation Fund
|
|
|
1,152
|
|
|
|
604
|
|
|
|
|
|
|
International Funds
|
|
|
|
|
|
|
|
|
|
TCW Emerging Market Income Fund
|
|
|
22,920
|
|
|
|
—
|
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Global Bond Fund
2
|
|
|
158
|
|
|
|
—
|
|
|
TCW International Growth Fund
*
|
|
|
—
|
|
|
|
—
|
|
|
TCW International Small Cap Fund
|
|
|
151,336
|
|
|
|
83,731
|
|
|
|
|
|
|
|
2011
|
|
|
|
|
Aggregate Brokerage
Commissions Paid
on Transactions
in
the Funds’ Securities
|
|
|
Aggregate Brokerage
Commissions Paid
for Research
Services Provided
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
$
|
81,677
|
|
|
$
|
77,365
|
|
|
TCW Growth Fund
|
|
|
61,628
|
|
|
|
55,456
|
|
|
TCW Growth Equities Fund
|
|
|
176,020
|
|
|
|
170,563
|
|
|
TCW Relative Value Dividend Appreciation Fund†
|
|
|
870,828
|
|
|
|
865,332
|
|
|
TCW Relative Value Large Cap Fund
|
|
|
497,833
|
|
|
|
494,215
|
|
|
TCW Select Equities Fund
|
|
|
232,548
|
|
|
|
226,714
|
|
|
TCW Small Cap Growth Fund
|
|
|
3,919,560
|
|
|
|
3,754,582
|
|
|
TCW SMID Cap Growth Fund
3
|
|
|
94,572
|
|
|
|
90,892
|
|
|
TCW Value Opportunities Fund
|
|
|
555,894
|
|
|
|
502,921
|
|
34
|
|
|
|
|
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
24
|
|
|
|
—
|
|
|
TCW Enhanced Commodity Strategy Fund**
|
|
|
—
|
|
|
|
—
|
|
|
TCW High Yield Bond Fund
|
|
|
2,582
|
|
|
|
—
|
|
|
TCW Short Term Bond Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Total Return Bond Fund
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Asset Allocation Fund
|
|
|
|
|
|
|
|
|
|
TCW Conservative Allocation Fund
|
|
|
148
|
|
|
|
146
|
|
|
|
|
|
|
International Funds
|
|
|
|
|
|
|
|
|
|
TCW Emerging Market Income Fund
|
|
|
—
|
|
|
|
—
|
|
|
TCW Emerging Markets Local Currency Income Fund***
|
|
|
—
|
|
|
|
—
|
|
|
TCW International Small Cap Fund
4
|
|
|
154,431
|
|
|
|
—
|
|
|
*
|
The TCW International Growth Fund commenced operations on November 1, 2012
|
|
**
|
The TCW Enhanced Commodity Strategy Fund commenced operations on April 1, 2011
|
|
***
|
The TCW Emerging Markets Local Currency Income Fund commenced operations on December 15, 2010
|
|
1
|
For the period July 1, 2013 (Commencement of Operations) through October 31, 2013
|
|
2
|
For the period
December 1, 2011 (Commencement of Operations) through October 31, 2012
|
|
3
|
For the period
November 1, 2010 (Commencement of Operations) through October 31, 2011
|
|
4
|
For the period
February 28, 2011 (Commencement of Operations) through October 31, 2011
|
For the fiscal years ended
October 31, 2013 and October 31, 2012, the Funds paid $0 and $606, respectively, in aggregate commissions to Newedge USA, LLC, which was an affiliated broker of the Funds during that period.
The following table shows the value of the aggregate holdings of securities by issuers’ of the Funds’ “regular” brokers or dealers
(as defined in Rule 10b-1 under the 1940 Act) as of October 31, 2013:
|
|
|
|
|
|
|
|
|
Fund Name
|
|
Broker/Dealer
|
|
Dollar Amount
of
Securities Held as of
October 31, 2013
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
JPMorgan Chase & Co.
|
|
$
|
375,984
|
|
|
|
|
Wells Fargo Securities, LLC
|
|
|
357,059
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
315,929
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
154,535
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
51,384
|
|
|
TCW Growth Fund
|
|
State Street Bank and Trust Company
|
|
$
|
191,295
|
|
|
TCW Growth Equities Fund
|
|
State Street Bank and Trust Company
|
|
$
|
640,595
|
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
State Street Bank and Trust Company
|
|
$
|
72,103,732
|
|
|
|
|
JPMorgan Chase & Co.
|
|
|
32,536,893
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
26,926,560
|
|
|
TCW Relative Value Large Cap Fund
|
|
State Street Bank and Trust Company
|
|
$
|
49,199,417
|
|
|
|
|
JPMorgan Chase & Co.
|
|
|
19,392,853
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
17,741,286
|
|
|
TCW Select Equities Fund
|
|
State Street Bank and Trust Company
|
|
$
|
55,305,691
|
|
|
TCW Small Cap Growth Fund
|
|
State Street Bank and Trust Company
|
|
$
|
10,381,903
|
|
|
TCW SMID Cap Growth Fund
|
|
State Street Bank and Trust Company
|
|
$
|
2,686,393
|
|
|
TCW Value Opportunities Fund
|
|
State Street Bank and Trust Company
|
|
$
|
424,446
|
|
35
|
|
|
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
JPMorgan Chase & Co.
|
|
$
|
35,689,411
|
|
|
|
|
Bank of America Corp.
|
|
|
21,732,829
|
|
|
|
|
Deutsche Bank Securities, Inc.
|
|
|
20,215,905
|
|
|
|
|
Wells Fargo Securities, LLC
|
|
|
18,355,662
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
13,329,133
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
12,080,164
|
|
|
|
|
UBS Securities
|
|
|
3,207,693
|
|
|
|
|
Bank of New York Mellon
|
|
|
2,534,925
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
909,331
|
|
|
|
|
Credit Suisse Group
|
|
|
521,234
|
|
|
|
|
Barclays Capital, Inc.
|
|
|
277,038
|
|
|
TCW Enhanced Commodity Strategy Fund
|
|
JPMorgan Chase & Co.
|
|
$
|
337,739
|
|
|
|
|
Bank of America Corp.
|
|
|
149,822
|
|
|
|
|
Wells Fargo Securities, LLC
|
|
|
99,352
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
96,032
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
83,814
|
|
|
|
|
UBS Securities
|
|
|
25,511
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
20,997
|
|
|
|
|
Credit Suisse Group
|
|
|
18,766
|
|
|
TCW High Yield Bond Fund
|
|
State Street Bank and Trust Company
|
|
$
|
1,312,581
|
|
|
|
|
JPMorgan Chase & Co.
|
|
|
785,278
|
|
|
TCW Short Term Bond Fund
|
|
JPMorgan Chase & Co.
|
|
$
|
728,203
|
|
|
|
|
UBS Securities
|
|
|
354,378
|
|
|
|
|
Bank of America Corp.
|
|
|
341,278
|
|
|
|
|
Credit Suisse Group
|
|
|
334,228
|
|
|
|
|
Wells Fargo Securities, LLC
|
|
|
326,349
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
313,588
|
|
|
|
|
Deutsche Bank Securities, Inc.
|
|
|
154,026
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
120,944
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
107,137
|
|
|
|
|
Bank of New York Mellon
|
|
|
50,698
|
|
|
TCW Total Return Bond Fund
|
|
JPMorgan Chase & Co.
|
|
$
|
327,400,951
|
|
|
|
|
Barclays Capital, Inc.
|
|
|
288,850,312
|
|
|
|
|
Bank of America Corp.
|
|
|
218,300,746
|
|
|
|
|
Wells Fargo Securities, LLC
|
|
|
153,816,356
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
134,740,658
|
|
|
|
|
Credit Suisse Group
|
|
|
132,215,115
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
123,736,336
|
|
|
|
|
Deutsche Bank Securities, Inc.
|
|
|
14,062,815
|
|
|
|
|
Nomura Securities International, Inc.
|
|
|
11,418,960
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
6,462,665
|
|
|
|
|
Jefferies & Co., Inc.
|
|
|
5,079,092
|
|
|
|
|
|
|
International Funds
|
|
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
State Street Bank and Trust Company
|
|
$
|
417,483,378
|
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
State Street Bank and Trust Company
|
|
$
|
1,634,140
|
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund
1
|
|
State Street Bank and Trust Company
|
|
$
|
2,313,309
|
|
|
TCW Global Bond Fund
|
|
Bank of America Corp.
|
|
$
|
686,186
|
|
|
|
|
JPMorgan Chase & Co.
|
|
|
246,000
|
|
|
|
|
Barclays Capital, Inc.
|
|
|
226,602
|
|
36
|
|
|
|
|
|
|
|
|
|
|
Citigroup Global Markets, Inc.
|
|
|
208,179
|
|
|
|
|
State Street Bank and Trust Company
|
|
|
149,932
|
|
|
|
|
Goldman Sachs & Co.
|
|
|
126,392
|
|
|
|
|
UBS Securities
|
|
|
121,442
|
|
|
|
|
Deutsche Bank Securities, Inc.
|
|
|
72,531
|
|
|
TCW International Small Cap Fund
|
|
State Street Bank and Trust Company
|
|
$
|
898,411
|
|
|
1
|
For the period July 1, 2013 (Commencement of Operations) through October 31, 2013
|
INVESTMENT RESTRICTIONS (All Funds except the TCW Enha
nced Commodity Strategy Fund, TCW Global Bond Fund, TCW International
Growth Fund and TCW Emerging Markets Multi-Asset Opportunities Fund)
The investment restrictions numbered 1 through 9 below have been
adopted as fundamental policies (except as otherwise provided in 1). A fundamental policy affecting a particular Fund may not be changed without the vote of a majority of the outstanding shares of the affected Fund. Investment restrictions 10, 11,
12 and 13 with respect to a Fund may be changed by vote of a majority of the Board of Directors at any time.
1. No Fund will
borrow money, except that (a) a Fund may borrow from banks for temporary or emergency (not leveraging) purposes including the meeting of redemption requests that might otherwise require the untimely disposition of securities; (b) the TCW
Core Fixed Income, TCW Short Term Bond, TCW Total Return Bond Funds may each enter into reverse repurchase agreements; (c) the TCW Core Fixed Income, TCW Short Term Bond and TCW Total Return Bond Funds may utilize mortgage-dollar rolls; and
(d) each Fund may enter into futures contracts for hedging purposes subject to the conditions set forth in paragraph 8 below. The total amount borrowed by a Fund (including, for this purpose, reverse repurchase agreements and mortgage dollar
rolls) at any time will not exceed 30% of the value of the Fund’s total assets (including the amount borrowed) valued at market less liabilities (not including the amount borrowed) at the time the borrowing is made. As an operating policy,
whenever borrowings pursuant to (a) exceed 5% of the value of a Fund’s total assets, the Fund will not purchase any securities.
2. No Fund will issue senior securities as defined in the 1940 Act, provided that the Funds may (a) enter into repurchase agreements; (b) purchase securities on a when-issued or delayed delivery
basis; (c) purchase or sell financial futures contracts or options thereon; and (d) borrow money in accordance with the restrictions described in paragraph 1 above.
3. No Fund will underwrite securities of other companies, except insofar as the Fund might be deemed to be an underwriter for purposes of the Securities Act by virtue of disposing of portfolio securities.
4. No Fund will purchase any securities that would cause 25% or more of the value of the Fund’s total assets at the time
of purchase to be invested in the securities of any one particular industry or group of industries, provided that this limitation shall not apply to any Fund’s purchase of U.S. Government Securities. The TCW Emerging Markets Income Fund and TCW
Emerging Markets Local Currency Income Fund may invest more than 25% of the value of their total assets in debt securities issued or guaranteed by the governments of emerging markets countries. In determining industry classifications for foreign
issuers, each Fund will use reasonable classifications that are not so broad that the primary economic characteristics of the companies in a single class are materially different. Each Fund will determine such classifications of foreign issuers
based on the issuer’s principal or major business activities. The TCW Conservative Allocation Fund may invest, in accordance with its investment program as set forth in the prospectus, more than 25% of its assets in any one or a combination of
Underlying Funds and other investment companies. The TCW Conservative Allocation Fund treats the assets of the Underlying Funds in which it invests as its own for purposes of this restriction.
5. No Fund will invest in real estate, real estate mortgage loans, residual interests in REMICs, oil, gas and other mineral leases
(including other universal exploration or development programs), or real estate limited partnerships, except that a Fund may purchase securities backed by real estate or interests therein, or issued by companies, including real estate investment
trusts, which invest in real estate or interests therein and except that the TCW Core Fixed Income, TCW Short Term Bond and TCW Total Return Bond Funds are not prohibited investing in real estate mortgage loans.
6. No Fund may make loans of cash except by purchasing qualified debt obligations or entering into repurchase agreements.
7. Each Fund may effect short sales of securities or maintain a short position only if the Fund at the time of sale either owns or has
the right to acquire at no additional cost securities equivalent in kind and amount to those sold.
8. No Fund will invest in
commodities or commodities contracts, except that the Funds may enter into futures contracts or purchase related options thereon if, immediately thereafter, the amount committed to margin plus the amount paid for premiums for unexpired options on
futures contracts does not exceed 5% of the value of the Fund’s total assets, after taking into account unrealized gains and unrealized losses on such contracts it has entered into, provided, however, that in the case of an option that is
in-the-money (the exercise price of the call (put) option is less (more) than the market price of the underlying security) at the time of purchase, the in-the-money amount may be excluded in calculating the 5%. The 5% limit does not apply to the TCW
Emerging Markets Local Currency Income and TCW International Small Cap Funds. The entry into foreign currency forward contracts shall not be deemed to involve investing in commodities.
37
9. For each of the TCW Concentrated Value, TCW Growth, TCW Growth Equities, TCW Relative
Value Dividend Appreciation, TCW Relative Value Large Cap, TCW Select Equities, TCW Small Cap Growth, TCW SMID Cap Growth, TCW Value Opportunities, TCW Emerging Markets Income, TCW Core Fixed Income, TCW High Yield Bond, TCW Short Term Bond and TCW
Total Return Bond Funds, no Fund will, with respect to 75 percent of its assets, (a) purchase the securities of any issuer, other than U.S. Government securities and securities of other investment companies if as a result more than five percent
of the value of the Funds’ total assets would be invested in the securities of the issuer; or, (b) purchase more than 10 percent of the voting securities of any one issuer other than U.S. Government securities and securities of other
investment companies.
10. No Fund will purchase securities on margin, except that a Fund may obtain any short-term credits
necessary for clearance of purchases and sales of securities. For purposes of this restriction, the deposit or payment of initial or variation margin in connection with futures contracts and related options will not be deemed to be a purchase of
securities on margin.
11. No Fund will purchase the securities of an issuer for the purpose of acquiring control or
management thereof.
12. The TCW Conservative Allocation Fund may invest in short-term instruments, U.S. Government
Securities, money market instruments, unaffiliated investment companies, and other securities in addition to securities of other affiliated investment companies, for temporary defensive purposes or otherwise as deemed advisable by the Advisor to the
extent permissible under existing or future rules of the SEC.
13. Underlying Funds may not invest in securities of other
investment companies in reliance on Section 12(d)(1)(F) or (G) of the 1940 Act, or any successor provisions.
The
percentage limitations contained in the restrictions listed above apply, with the exception of (1), at the time of purchase or initial investment and 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 Fund.
For purposes of applying the terms
of investment restriction number 4, the Advisor will, on behalf of each Fund, make reasonable determinations as to the appropriate industry classification to assign to each issuer of securities in which the Fund invests. As a general matter, an
“industry” is considered to be a group of companies whose principal activities, products or services offered give them a similar economic risk profile vis à vis issuers active in other sectors of the economy. The definition of what
constitutes a particular “industry” is therefore an evolving one, particularly for issuers in industries or sectors within industries that are new or are undergoing rapid development. Some issuers could reasonably fall within more than one
industry category. For example, some companies that sell goods over the internet (including issuers of securities in which the Fund invest) were initially classified as internet companies, but over time have evolved into the economic risk profiles
of retail companies. The Advisor will use its best efforts to assign each issuer to the category which it believes is most appropriate. For the purposes of this investment restriction, the Funds interpret their policy with respect to concentration
in a particular industry to apply to direct investments in the securities of issuers in a particular industry, as defined by the Corporation. The Funds take the position that mortgage-backed securities and asset-backed securities, whether
government-issued or privately issued do not represent interests in any particular “industry” or group of industries, and therefore the 25% concentration restriction noted above does not apply to such securities. Further, the TCW Emerging
Markets Income Fund and TCW Emerging Markets Local Currency Income Fund consider a government of an emerging market country to be an industry.
Notwithstanding the foregoing investment restrictions, the Underlying Funds in which the TCW Conservative Allocation Fund may invest have adopted certain
investment restrictions that may be more or less restrictive than those listed above, thereby permitting the TCW Conservative Allocation Fund to engage indirectly in investment strategies that may be prohibited under the investment restrictions
listed above.
INVESTMENT RESTRICTIONS (TCW Enhanced Commodity Strategy Fund)
The investment restrictions numbered 1 through 6 below have been adopted as fundamental policies (except as otherwise provided in 1). A fundamental policy affecting the Fund may not be changed without the
vote of a majority of the outstanding shares of the affected Fund. Investment restriction 7 with respect to the Fund may be changed by vote of a majority of the Board of Directors at any time.
1. The Fund may not issue senior securities or borrow money, except to the extent permitted by the 1940 Act. For purposes of this
restriction, the entering into of options, short sales, futures, forwards and other investment techniques or derivatives contracts, and collateral and margin arrangements with respect to such transactions, are not deemed to include the borrowing or
the issuance of senior securities provided such transactions are “covered” in accordance with procedures established by the Board of Directors and applicable regulatory guidance.
2. The Fund will not underwrite securities of other companies, except insofar as the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933 by virtue of disposing of portfolio securities.
38
3. The Fund will not purchase any securities that would cause 25% or more of the value of
the Fund’s total assets at the time of purchase to be invested in the securities of any one particular industry or group of industries, provided that (a) there shall be no limit on the Fund’s purchase of U.S. Government securities;
and (b) the Fund may invest more than 25% of its total assets in instruments (such as structured notes) issued by companies in the financial services sectors (which includes the banking, brokerage and insurance industries). In determining
industry classifications for foreign issuers, the Fund will use reasonable classifications that are not so broad that the primary economic characteristics of the companies in a single class are materially different. The Fund will determine such
classifications of foreign issuers based on the issuer’s principal or major business activities.
4. The Fund will not
purchase or sell real estate, real estate mortgage loans, residual interests in REMICs, oil, gas and other mineral leases (including other universal exploration or development programs), or real estate limited partnerships, except that the Fund may
purchase securities backed by real estate or interests therein, or issued by companies, including real estate investment trusts, which invest in real estate or interests therein.
5. The Fund may not make loans of cash except by purchasing qualified debt obligations or entering into repurchase agreements.
6. The Fund will not purchase the securities of an issuer for the purpose of acquiring control or management thereof.
7. The Fund may not purchase or sell physical commodities unless acquired as a result of ownership of securities or other
instruments. This restriction shall not prohibit the Fund, subject to restrictions described in the prospectuses and elsewhere in this SAI, from purchasing or selling commodity-linked derivative instruments, including but not limited to swap
agreements and commodity-linked structured noted, options, futures contracts and options on futures contracts with respect to indices or individual commodities, or from investing in securities or other instruments linked to or backed by physical
commodities or by indices, subject to compliance with any applicable provisions of the federal securities or commodities laws.
The percentage
limitations contained in the restrictions listed above apply at the time of purchase or initial investment and 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 Fund, except that the percentage limitations with respect to the borrowing of money will be continuously complied with.
For purposes of applying the terms of investment restriction number 3, the Advisor will, on behalf of the Fund, make reasonable determinations as to the appropriate industry classification to assign to
each issuer of securities in which the Fund invests. As a general matter, an “industry” is considered to be a group of companies whose principal activities, products or services offered give them a similar economic risk profile vis
à vis issuers active in other sectors of the economy. The definition of what constitutes a particular “industry” is therefore an evolving one, particularly for issuers in industries or categories within industries that are new or
are undergoing rapid development. Some issuers could reasonably fall within more than one industry category. For example, some companies that sell goods over the internet (including issuers of securities in which the Fund invests) were initially
classified as internet companies, but over time have evolved into the economic risk profiles of retail companies. The Advisor will use its best efforts to assign each issuer to the category which it believes is most appropriate.
For purposes of investment restriction number 3, the Fund will look through each swap agreement (other than credit default swap agreements) to the
reference issuers that constitute the swap agreement’s reference investment, as if the Fund had invested directly in those issuers in the same proportion to which each issue contributes to the reference investment.
INVESTMENT RESTRICTIONS (TCW Global Bond Fund)
The investment restrictions numbered 1 through 6 below have been adopted as fundamental policies (except as otherwise provided in 1). A fundamental policy affecting the Fund may not be changed without the
vote of a majority of the outstanding shares of the affected Fund. Investment restriction 7 with respect to the Fund may be changed by vote of a majority of the Board of Directors at any time.
1. The Fund may not issue senior securities or borrow money, except to the extent permitted by the 1940 Act. For purposes of this
restriction, the entering into of options, short sales, futures, forwards and other investment techniques or derivatives contracts, and collateral and margin arrangements with respect to such transactions, are not deemed to include the borrowing or
the issuance of senior securities provided such transactions are “covered” in accordance with procedures established by the Board of Directors and applicable regulatory guidance.
2. The Fund will not underwrite securities of other companies, except insofar as the Fund might be deemed to be an underwriter for
purposes of the Securities Act of 1933 by virtue of disposing of portfolio securities.
3. The Fund will not purchase any
securities that would cause 25% or more of the value of the Fund’s total assets at the time of purchase to be invested in the securities of any one particular industry or group of industries, provided that (a) there shall be no limit on
the Fund’s purchase of U.S. Government securities or securities issued or guaranteed by foreign governments; and (b) the Fund
39
may invest more than 25% of its total assets in instruments (such as structured notes) issued by companies in the financial services sectors (which includes the banking, brokerage and insurance
industries). In determining industry classifications for foreign issuers, the Fund will use reasonable classifications that are not so broad that the primary economic characteristics of the companies in a single class are materially different. The
Fund will determine such classifications of foreign issuers based on the issuer’s principal or major business activities.
4. The Fund will not purchase or sell real estate, real estate mortgage loans, residual interests in REMICs, oil, gas and other mineral
leases (including other universal exploration or development programs), or real estate limited partnerships, except that the Fund may purchase securities backed by real estate or interests therein, or issued by companies, including real estate
investment trusts, which invest in real estate or interests therein.
5. The Fund may not make loans of cash except by
purchasing qualified debt obligations or entering into repurchase agreements.
6. The Fund will not purchase the securities of
an issuer for the purpose of acquiring control or management thereof.
7. The Fund may not invest in securities of other
investment companies in reliance on Sections 12(d)(1)(F) or (G) of the 1940 Act, or any successor provisions.
The
percentage limitations contained in the restrictions listed above apply at the time of purchase or initial investment and 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 Fund, except that the percentage limitations with respect to the borrowing of money will be continuously complied with.
For purposes of applying the terms of investment restriction number 3, the Advisor will, on behalf of the Fund, make reasonable determinations as to the appropriate industry classification to assign to
each issuer of securities in which the Fund invests. As a general matter, an “industry” is considered to be a group of companies whose principal activities, products or services offered give them a similar economic risk profile vis
à vis issuers active in other sectors of the economy. The definition of what constitutes a particular “industry” is therefore an evolving one, particularly for issuers in industries or categories within industries that are new or
are undergoing rapid development. Some issuers could reasonably fall within more than one industry category. For example, some companies that sell goods over the internet (including issuers of securities in which the Fund invests) were initially
classified as internet companies, but over time have evolved into the economic risk profiles of retail companies. The Advisor will use its best efforts to assign each issuer to the category which it believes is most appropriate. For the purposes of
this investment restriction, the Fund interprets its policy with respect to concentration in a particular industry to apply to direct investments in the securities of issuers in a particular industry, as defined by the Corporation. The Fund takes
the position that mortgage-backed securities and asset-backed securities, whether government-issued or privately issued do not represent interests in any particular “industry” or group of industries, and therefore the 25% concentration
restriction noted above does not apply to such securities. Further, the Fund considers a foreign government to be an industry.
For purposes
of investment restriction number 3, the Fund will look through each swap agreement (other than credit default swap agreements) to the reference issuers that constitute the swap agreement’s reference investment, as if the Fund had invested
directly in those issuers in the same proportion to which each issue contributes to the reference investment.
INVESTMENT RESTRICTIONS (TCW
International Growth Fund and TCW Emerging Markets Multi-Asset Opportunities Fund)
The investment restrictions numbered 1 through 6 below
have been adopted as fundamental policies. A fundamental policy affecting the Fund may not be changed without the vote of a majority of the outstanding shares of the Fund. Investment restrictions 7 and 8 with respect to the Fund may be changed by
vote of a majority of the Board of Directors at any time.
1. No Fund may borrow money or issue any senior security except as
permitted under, or to the extent not prohibited by, the 1940 Act, and rules thereunder, and as interpreted, modified, or otherwise permitted by regulatory authority having jurisdiction, from time to time.
2. No Fund may underwrite securities of other companies, except insofar as the Fund might be deemed to be an underwriter for purposes of
the Securities Act by virtue of disposing of portfolio securities.
3 No Fund may purchase any securities that would cause 25%
or more of the value of the Fund’s total assets at the time of purchase to be invested in the securities of any one particular industry or group of industries, provided that this limitation shall not apply to the Fund’s purchase of U.S.
Government Securities, or to the TCW Emerging Markets Multi-Asset Opportunities Fund’s purchase of securities issued or guaranteed by the governments of emerging markets countries.
40
4. No Fund may purchase or sell real estate unless acquired as a result of ownership of
securities or other instruments, although it may purchase or sell securities or instruments secured by real estate or interests therein or representing interests in real estate, and may make, purchase or sell real estate mortgage loans, or purchase
or sell securities or instruments issued by issuers which invest, deal or otherwise engage in real estate or interests therein.
5. No Fund may make loans except as permitted under, or to the extent not prohibited by, the 1940 Act, and rules thereunder, and as
interpreted, modified, or otherwise permitted by regulatory authority having jurisdiction, from time to time.
6. Each Fund
may invest in commodities only as permitted by the 1940 Act or other governing statute, by the rules thereunder, or by the SEC or other regulatory agency with authority over the Fund. This restriction shall not prohibit a Fund from purchasing or
selling securities or other instruments backed by commodities or purchasing, selling or entering into futures contracts, options on futures contracts, foreign currency forward contracts, foreign currency options, interest rate or securities-related
or foreign currency-related hedging instruments, swap agreements or other derivative instruments, subject to compliance with any applicable provisions of the federal securities or commodities laws.
7. Each Fund may effect short sales of securities or maintain a short position only if a Fund at the time of sale either owns or has the
right to acquire at no additional cost securities equivalent in kind and amount to those sold.
8. No Fund may purchase
securities on margin, except for use of short-term credit necessary for clearance of purchases and sales of portfolio securities, but it may make margin deposits in connection with covered transactions in options, futures and options on futures. For
purposes of this restriction, the posting of margin deposits or other forms of collateral in connection with swap agreements is not considered purchasing securities on margin.
9. No Fund may invest in securities of other investment companies in reliance on Section 12(d)(1)(F) or (G) of the 1940 Act, or any successor provisions.
Unless otherwise indicated all percentage limitations listed above apply to each Fund only at the time at which a transaction is entered into.
Accordingly, except with respect to borrowing or hypothecating assets of each Fund, if a percentage restriction is adhered to at the time of investment, a later increase or decrease in the percentage which results from a relative change in values or
from a change in the Fund’s net assets will not be considered a violation.
For purposes of applying the terms of investment restriction
number 3, the Advisor will, on behalf of each Fund, make reasonable determinations as to the appropriate industry classification to assign to each issuer of securities in which the Fund invests. As a general matter, an “industry” is
considered to be a group of companies whose principal activities, products or services offered give them a similar economic risk profile vis à vis issuers active in other sectors of the economy. The definition of what constitutes a particular
“industry” is therefore an evolving one, particularly for issuers in industries or sectors within industries that are new or are undergoing rapid development. Some issuers could reasonably fall within more than one industry category. For
example, some companies that sell goods over the internet (including issuers of securities in which the Fund invest) were initially classified as internet companies, but over time have evolved into the economic risk profiles of retail companies. The
Advisor will use its best efforts to assign each issuer to the category which it believes is most appropriate. For the purposes of this investment restriction, each Fund interprets its policy with respect to concentration in a particular industry to
apply to direct investments in the securities of issuers in a particular industry, as defined by the Corporation. Each Fund takes the position that mortgage-backed securities and asset-backed securities, whether government-issued or privately issued
do not represent interests in any particular “industry,” and therefore the 25% concentration restriction noted above does not apply to such securities. Further, the TCW Emerging Markets Multi-Asset Opportunities Fund considers a government
of an emerging market country to be an industry.
DIRECTORS AND O
FFICERS
A board of ten directors is responsible for overseeing the Funds’ affairs. The directors of the Funds, and their business addresses and their
principal occupations for the last five years are set forth below. Each director oversees each of the twenty-one Funds in the Corporation, as of the date of this Statement of Additional Information.
41
The directors in the table below are not “interested persons” of the Advisor, including its
affiliates, or the Corporation (the “
Independent Directors
”).
Independent Directors
|
|
|
|
|
|
|
|
|
|
|
Name, Address, Age and
Position with Funds
(1)
|
|
Term of Office and
Length of Time Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Other Directorships
Held by Director
|
|
Number of Portfolios in
Fund Complex
Overseen
(2)
|
|
Samuel P. Bell (77)
|
|
Mr. Bell has served as a director of TCW Funds, Inc. since October 2002.
|
|
Private Investor.
|
|
Point 360 (post production services)
|
|
22
|
|
|
|
|
|
|
|
John A. Gavin (82)
|
|
Mr. Gavin has served as a director of TCW Funds, Inc., since May 2001.
|
|
Founder and Chairman of Gamma Holdings (international capital consulting firm).
|
|
Hotchkis and Wiley Funds (mutual fund with 5 series).
|
|
22
|
|
|
|
|
|
|
|
Patrick C. Haden (61)
Chairman of the Board
|
|
Mr. Haden has served as a director of TCW Funds, Inc. since May 2001.
|
|
Athletic Director, University of Southern California. Prior to August 2010, General Partner, Riordan, Lewis & Haden (private equity firm).
|
|
Tetra Tech, Inc. (environmental consulting)
|
|
32
|
|
|
|
|
|
|
|
Janet E. Kerr (59)
|
|
Ms. Kerr has served as a director of TCW Funds, Inc. since August 2010.
|
|
Professor Emeritus and Founder, Geoffrey H. Palmer Center for Entrepreneurship and the Law, Pepperdine University School of Law, and Chief Strategy Officer, Exemplify (technology
management company).
|
|
La-Z-Boy Furniture Incorporated (residential furniture producer), Tilly’s Inc. (a retailer of apparel and accessories)
|
|
22
|
|
|
|
|
|
|
|
Peter McMillan (56)
|
|
Mr. McMillan has served as a director of TCW Funds, Inc. since August 2010.
|
|
Co-founder, Managing Partner and Chief Investment Officer, Temescal Canyon Partners (investment advisory firm) since May 2013; Co-founder and Managing Partner, Willowbrook
Capital Group, LLC (investment advisory firm) and Co-founder and Executive Vice President, KBS Capital Advisors (a manager of real estate investment trusts).
|
|
KBS Real Estate Investment Trusts (real estate investments)
|
|
32
|
|
|
|
|
|
|
|
Charles A. Parker (79)
|
|
Mr. Parker has served as a director of the TCW Funds, Inc. since April 2003.
|
|
Private Investor.
|
|
Burridge Center for Research in Securities Prices (University of Colorado)
|
|
22
|
|
|
|
|
|
|
|
Victoria B. Rogers (52)
|
|
Ms. Rogers has served as a director of the TCW Funds, Inc. since October 2011.
|
|
President, the Rose Hills Foundation (Los Angeles, CA)
|
|
Causeway Capital Management Trust (mutual fund with 5 series)
|
|
22
|
|
|
|
|
|
|
|
Andrew Tarica (54)
|
|
Mr. Tarica has served as a director of the TCW Funds, Inc. since March 2012.
|
|
Chief Executive Officer, Meadowbrook Capital Management (asset management company) and Employee, Concept Capital.
|
|
None
|
|
32
|
|
(1)
|
The address of each Independent Director is c/o Bingham McCutchen LLP, Counsel to the Independent Directors, 355 South Grand Avenue, Los Angeles, CA
90071.
|
|
(2)
|
Includes Metropolitan West Funds and TCW Strategic Income Fund, Inc.
|
42
Interested Directors
The Directors in the table below are “interested persons” of the Corporation as defined in the 1940 Act (each, an “
Interested Director
”) because they are directors and
officers of the Advisor, and shareholders and directors of The TCW Group, Inc. the parent company of the Advisor.
|
|
|
|
|
|
|
|
|
|
|
Name, Address, Age and
Position with Funds
(1)
|
|
Term of Office and
Length of Time Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Other Directorships
Held by Director
|
|
Number of Portfolios
in Fund Complex
Overseen
(2)
|
|
David S. DeVito (51)
President and
Chief Executive Officer
|
|
Mr. DeVito has served as a director of TCW Funds, Inc. since February 2014.
|
|
Executive Vice President and Chief Operating Officer, the Advisor, The TCW Group, Inc., Trust Company of the West, Metropolitan West Asset Management and TCW Asset Management
Company; President and Chief Executive Officer, TCW Strategic Income Fund, Inc.; Executive Vice President and Chief Financial Officer, Metropolitan West Funds.
|
|
None
|
|
22
|
|
|
|
|
|
|
|
Marc I. Stern (69)
|
|
Mr. Stern has served as a director since inception of TCW Funds, Inc. in September 1992.
|
|
Chairman, The TCW Group, Inc, TCW Investment Management Company, TCW Asset Management Company and Metropolitan West Asset Management. Prior to February 2013, Chief Executive
Officer and Chairman, the Advisor; Vice Chairman and Chief Executive Officer, The TCW Group, Inc., and TCW Asset Management Company; and Vice Chairman, Trust Company of the West.
|
|
Qualcomm Incorporated (wireless communications)
|
|
21
|
|
(1)
|
The address of each Interested Director is c/o Trust Company of the West, 865 South Figueroa Street, Los Angeles, CA 90017.
|
|
(2)
|
Includes Metropolitan West Funds and TCW Strategic Income Fund, Inc.
|
Thomas E. Larkin, Jr. retired from the Board effective February 6, 2013 and was subsequently appointed Director Emeritus by the Board of Directors. Charles W. Baldiswieler retired from the Board
effective December 31, 2013.
Leadership Structure
The Board of Directors is responsible for the overall management of the Corporation, including general supervision of the duties performed by the Advisor and other service providers in accordance with the
provisions of the 1940 Act, other applicable laws and the Corporation’s Articles of Incorporation and By-Laws. The Board of Directors meets in regularly scheduled meetings throughout the year. It is currently composed of ten Directors,
including eight Independent Directors. As discussed below, the Board of Directors has established three committees to assist the Board of Directors in performing its oversight responsibilities.
The Board of Directors has appointed an Independent Director to serve as its Chairman. The Chairman’s primary role is to set the agenda of the Board
of Directors and determine what information is provided to the Board of Directors with respect to matters to be acted upon by the Board of Directors. The Chairman presides at all meetings of the Board of Directors and leads the Board of Directors
through its various tasks. The Chairman also acts as a liaison with management in carrying out the Board of Directors’ functions. The Chairman also performs such other functions as may be requested by the Board of Directors from time to time.
The designation of Chairman does not impose any duties, obligations or liabilities that are greater than the duties, obligations or liabilities imposed on such person as a member of the Board of Directors, generally.
43
Risk Oversight
Through its direct oversight role, and indirectly through its Committees, the Board of Directors performs a risk oversight function for the Corporation consisting, among other things, of the following
activities:
General Oversight.
The Board of Directors regularly meets with, or receives reports from, the officers of the Corporation
and representatives of key service providers to the Corporation, including the Advisor, administrator, transfer agent, custodian and independent registered public accounting firm to review and discuss the operational activities of the Corporation
and to provide direction with respect thereto.
Compliance Oversight
. The Board of Directors reviews and approves the procedures of the
Corporation established to ensure compliance with applicable federal securities laws. The Board of Directors keeps informed about how the Corporation’s operations conform to its compliance procedures through regular meetings with, and reports
received from the Corporation’s Chief Compliance Officer, and other officers.
Investment Oversight.
The Board of Directors
monitors investment performance during the year through regular performance reports from management with references to appropriate performance measurement indices. The Board of Directors also receives focused performance presentations on a regular
basis, including special written reports and oral presentations by portfolio managers. In addition, the Board of Directors monitors the Corporation’s investment practices and reviews its investment strategies with management and receives
focused presentations.
Valuation Oversight.
The Board of Directors has approved the valuation methodologies used in establishing the
daily values of the Corporation’s assets and monitors the accuracy with which the valuations are carried out. The Board of Directors receives regular reports on the use of fair value prices and monitors the effectiveness of the
Corporation’s valuation procedures.
Financial Reporting
. Through its Audit Committee, the Board of Directors meets regularly with
the Corporation’s independent registered public accounting firm to discuss financial reporting matters, the adequacy of the Corporation’s internal controls over financial reporting, and risks to accounting and financial reporting matters.
Committees
Audit
Committee.
The Audit Committee makes recommendations to the Board of Directors concerning the selection of the independent auditors and reviews with the auditors the results of the annual audit, including the scope of auditing procedures, the
adequacy of internal controls and compliance by the Corporation with the accounting, recording and financial reporting requirements of the 1940 Act. The Audit Committee also reviews compliance with the Code of Ethics by the executive officers,
directors and investment personnel of the Advisor. The Audit Committee’s members consist of Mses. Kerr and Rogers and Messrs. Bell, Gavin, Haden, McMillan, Parker and Tarica. Each Audit Committee member is an Independent Director. During the
fiscal year ended October 31, 2013, the Audit Committee held four meetings.
Executive Committee
. The Executive Committee has the
same powers of the Board of Directors except the power to declare dividends or other stock distributions, elect directors, authorize the issuance of stock except as permitted by statute, to recommend to the shareholders any action requiring their
approval, to amend the By-Laws or to approve any merger or share exchange not requiring shareholder approval. The Executive Committee’s members consist of Messrs. Bell, Haden and Stern. Messrs. Bell and Haden are Independent Directors and
Mr. Stern is an Interested Director. During the fiscal year ended October 31, 2013, the Executive Committee held no meetings.
Nominating Committee
. The Nominating Committee makes recommendations to the Board of Directors regarding nominations for membership on the Board
of Directors. It evaluates candidates’ qualifications for Board membership and, with respect to nominees for positions as independent directors, their independence from the Corporation’s investment advisor and other principal service
providers. The Nominating Committee periodically reviews director compensation and recommends any appropriate changes to the Board as a group. This Committee also reviews and may make recommendations to the Board of Directors relating to those
issues that pertain to the effectiveness of the Board in carrying out its responsibilities in governing the Corporation and overseeing the management of the Corporation. The members of the Corporation’s Nominating Committee are Mses. Kerr and
Rogers and Messrs. Bell, Gavin, Haden, McMillan, Parker and Tarica. Each Nominating Committee member is an Independent Director. During the fiscal year ended October 31, 2013, the Nominating Committee held four meetings.
The Nominating Committee will consider potential director candidates recommended by shareholders provided that the proposed candidates satisfy the
director qualification requirements provided in the Corporation’s Directors Nominating and Qualification Charter and are not “interested persons” of the Corporation within the meaning of the 1940 Act. In determining procedures for the
submission of potential candidates by shareholders and any eligibility requirements for such nominees and the shareholders submitting the nominations, the Nominating Committee has looked to recent SEC promulgations regarding director nominations for
guidance.
44
The Corporation seeks as Directors individuals of distinction and experience in business or finance,
government service or academia. In determining that a particular person was and continues to be qualified to serve as a Director, the Board of Directors has considered a variety of criteria, none of which, in isolation, was controlling. Based on a
review of the experience, qualifications, attributes or skills of each Director, the Board has determined that each of the Directors is qualified to serve as a Director of the Corporation. In addition, the Board of Directors believes that,
collectively, the Directors have balanced and diverse experience, qualifications, attributes and skills that allow the Board of Directors to operate effectively in governing the Corporation and protecting the interests of shareholders.
Additional Information About the Directors
Samuel P. Bell. Mr. Bell, Chairman of the Audit Committee, is a private investor and serves on the boards of Post 360, a post production services company and TCW Strategic Income Fund, Inc.
(“TSI”), a publicly-traded closed-end fund. He previously was President of Los Angeles Business Advisors, a not-for-profit business organization. Prior to 1996, Mr. Bell served as the Area Managing Partner of Ernst & Young, a
public accounting firm, for the Pacific Southwest Area.
David S. DeVito. Mr. DeVito is Executive Vice President and Chief Operating
Officer of the Advisor, TCW Asset Management Company, Metropolitan West Asset Management and Trust Company of the West, is Executive Vice President and Chief Financial Officer of Metropolitan West Funds, and is President and Executive Officer of
TSI, a publicly traded closed-end fund. He also serves on the boards of several philanthropic organizations including the YMCA of Metropolitan Los Angeles and Loyola High School of Los Angeles. Prior to joining TCW in 1993, Mr. DeVito was a
Certified Public Accountant and Senior Manager with Deloitte & Touche LLP. He is also a member of the American Institute of Certified Public Accountants and the California Society of CPAs.
John A. Gavin. Mr. Gavin, Chairman of the Nominating Committee, is founder and Chairman of Gamma Holdings, an international capital consulting firm
and serves on the boards of the Hotchkis and Wiley Funds, a mutual fund complex, and TSI, a publicly-traded closed-end fund. From 1981 to 1986, Mr. Gavin served as the United States Ambassador to Mexico.
Patrick C. Haden. Mr. Haden, the Independent Chairman of TCW Funds, Inc., is the Athletic Director of the University of Southern California.
Previously he was a General Partner in Riordan, Lewis & Haden, a private equity fund and serves on the boards of Tetra Tech, Inc., an environmental consulting company, the Metropolitan West Funds, a mutual fund complex managed by an
affiliate of the Advisor, and TSI, a publicly-traded closed-end fund, of which he is also the Independent Chairman. Mr. Haden is a Rhodes Scholar and prior to August 2010, a member of the Board of Trustees of the University of Southern
California.
Janet E. Kerr. Ms. Kerr serves on the board of La-Z-Boy Incorporated, a residential furniture producer, TSI, a
publicly-traded closed-end fund and Tilly’s Inc., a retailer of apparel and accessories. Ms. Kerr is also Professor Emeritus and Founder of the Geoffrey H. Palmer Center for Entrepreneurship and the Law at the Pepperdine University School
of Law and Chief Strategy Officer of Exemplify, a technology management company. Ms. Kerr has founded several technology companies and is a well known author in the areas of securities, corporate law and corporate governance, having published
several articles and a book on the subjects. She is also a member of the National Association of Corporate Directors and Women Corporate Directors.
Peter McMillan. Mr. McMillan is the Co-founder and Managing Partner of Willowbrook Capital Group, LLC, an investment advisory firm, co-founder, Managing Partner and Chief Investment Officer of
Temescal Canyon Partners, an investment advisory firm, since May 2013, and co-founder and Executive Vice President of KBS Capital Advisors, a manager of real estate investment trusts. He serves on the boards of four KBS Real Estate Investment
Trusts, TSI, a publicly-traded closed-end fund and the Metropolitan West Funds, a mutual fund complex managed by an affiliate of the Advisor. Prior to forming Willowbrook Capital Group in 2000, Mr. McMillan served as the executive vice
president and chief investment officer of Sun America Investments, Inc. Prior to 1989, he served as assistant vice president for Aetna Life Insurance for Aetna Life Insurance and Annuity Company with responsibility for the company’s fixed
income portfolios.
Charles A. Parker. Mr. Parker is a private investor and serves on the boards of the Burridge Center for Research in
Security Prices (Leeds School of Business, University of Colorado) and TSI, a publicly-traded closed-end fund. Previously Mr. Parker was an executive vice president and director of the Continental Corporation and chairman and chief executive
officer of Continental Asset Management Corporation.
Victoria B. Rogers. Ms. Rogers is President of The Rose Hills Foundation, a $475
million foundation based in Los Angeles, California. She also serves on the Boards of Trustees of Polytechnic School (Pasadena, California), Norton Simon Museum, USA Water Polo, Stanford University, TSI, a publicly-traded closed-end fund, and
Causeway Capital Management Trust, a mutual fund company. Previously, Ms. Rogers served on the Boards of Trustees of The Chandler School (Pasadena, California), The Hotchkiss School (Lakeville, Connecticut) and the YMCA of Metropolitan Los
Angeles. Ms. Rogers has substantial experience in the area of taxes, accounting, non-profit organizations and foundation management having been previously employed by Deloitte & Touche LLP, Security Pacific Bank and The Whittier Trust
Company.
45
Marc I. Stern. Mr. Stern is Chairman of The TCW Group, Inc., TCW Investment Management Company, TCW
Asset Management Company, Metropolitan West Asset Management, Vide Chairman of Trust Company of the West, and serves on the board of Qualcomm Inc. Prior to joining TCW in 1990, Mr. Stern was President of Sun America, Inc. He also serves on the
boards of several philanthropic and civic organizations and universities including the Los Angeles Opera, the Performing Arts Center of Los Angeles County, the John F. Kennedy Center for the Performing Arts, the Southern California Committee for the
Olympic Games, the Marc and Eva Stern Foundation, Dickenson College and the California Institute of Technology. Mr. Stern was appointed as a “Commandeur de l’Ordre National du Mérite” by the President of France
Andrew Tarica. Since 2001, Mr. Tarica has been Chief Executive Officer of Meadowbrook Capital Management, a fixed-income asset management company
that also manages a fixed income hedge fund. From 2005 through 2010, Mr. Tarica served as an employee of the broker-dealer business of Sanders Morris Harris, a Houston, Texas-based asset manager and broker-dealer, where he managed a
fixed-income portfolio. Sanders Morris Harris’ broker-dealer business became Concept Capital in 2010, where Mr. Tarica is currently employed. He also serves on the board of the Metropolitan West Funds, a mutual fund complex managed by an
affiliate of the Advisor.
Equity Ownership of Directors
Independent Directors
As of February 1, 2014, the Directors and officers of the
Corporation, as a group, owned less than 1% of the outstanding shares of each of the Funds, other than the TCW Emerging Markets Multi-Asset Opportunities Fund, Class I, TCW Enhanced Commodity Strategy Fund, Class I, and TCW SMID Cap Growth Fund,
Class I, of which they own 5.1%, 4.0% and 5.1%, respectively.
The following tables set forth the equity ownership of the Directors in each
Fund as of December 31, 2013. The code for the dollar range of equity securities owned by the directors is: (a) $1-$10,000, (b) $10,001-$50,000, (c) $50,001-$100,000; and (d) over $100,000.
|
|
|
|
|
|
|
Name of Director
|
|
Dollar Range of Equity
Securities in the Corporation
|
|
Aggregate Dollar Range of
Equity Securities in All
Registered Investment Companies Overseen by
Director in Family of
Investment Companies
|
|
Samuel P. Bell
|
|
TCW Select Equities Fund (c)
|
|
(d)
|
|
|
|
TCW Value Opportunities Fund (c)
|
|
|
|
|
|
|
|
John A. Gavin
|
|
TCW Select Equities Fund (d)
|
|
(d)
|
|
|
|
|
|
Patrick C. Haden
|
|
TCW Emerging Markets Income Fund (c)
TCW Emerging Markets Multi-Asset Opportunities Fund (b)
|
|
(d)
|
|
|
|
TCW Total Return Bond Fund (d)
|
|
|
|
|
|
|
|
Janet E. Kerr
|
|
TCW Short Term Bond Fund (b)
|
|
(b)
|
|
|
|
TCW Total Return Bond Fund (a)
|
|
|
|
|
|
TCW Conservative Allocation Fund (a)
|
|
|
|
|
|
|
|
Peter McMillan
|
|
TCW Select Equities Fund (b)
|
|
(b)
|
|
|
|
|
|
Charles A. Parker
|
|
TCW Emerging Markets Income Fund (d)
|
|
(d)
|
|
|
|
TCW Total Return Bond Fund (a)
|
|
|
|
|
|
|
|
Victoria B. Rogers
|
|
TCW Emerging Markets Income Fund (d)
|
|
(d)
|
|
|
|
|
|
Andrew Tarica
|
|
None
|
|
|
46
Interested Directors
|
|
|
|
|
|
|
Name of Director
|
|
Dollar Range of Equity
Securities in the Corporation
|
|
Aggregate
Dollar Range of
Equity Securities in All
Registered Investment
Companies Overseen by
Director in Family
of
Investment Companies
|
|
David S. DeVito
|
|
TCW Concentrated Value Fund (b)
|
|
(d)
|
|
|
|
TCW Growth Equities Fund (b)
|
|
|
|
|
|
TCW Relative Value Large Cap Fund (b)
|
|
|
|
|
|
TCW Select Equities Fund (c)
|
|
|
|
|
|
TCW Small Cap Growth Fund (b)
|
|
|
|
|
|
TCW Emerging Markets Income Fund (b)
|
|
|
|
|
|
TCW Total Return Bond Fund (b)
|
|
|
|
|
|
|
|
Marc I. Stern
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund (d)
|
|
(d)
|
|
|
|
TCW Emerging Markets Local Currency Income Fund (d)
|
|
|
|
|
|
TCW Enhanced Commodity Strategy Fund(c)
|
|
|
|
|
|
TCW High Yield Bond Fund (c)
|
|
|
|
|
|
TCW Relative Value Large Cap Fund (d)
|
|
|
|
|
|
TCW Select Equities Fund (d)
|
|
|
|
|
|
TCW Small Cap Growth Fund (d)
|
|
|
|
|
|
TCW SMID Cap Growth Fund (d)
|
|
|
|
|
|
TCW Total Return Bond Fund (c)
|
|
|
|
|
|
TCW International Growth Fund (b)
|
|
|
Compensation of Independent Directors
The Corporation pays each Independent Director an annual fee of $45,000 plus a per joint meeting fee of $1,750 for meetings of the Board of Directors or Committees of the Board of Directors attended by
the director prorated among the Funds. The Chairman of the Audit Committee also receives a $15,000 annual retainer, the Chairman of the Nominating Committee an additional $1,500 annual retainer and the Independent Chairman of the Corporation
receives an additional $22,500 annual retainer. Directors are also reimbursed for travel and other out-of-pocket expenses incurred by them in connection with attending such meetings. Directors and officers who are employed by the Advisor or an
affiliated company thereof receive no compensation nor expense reimbursement from the Corporation. Directors do not receive any pension or retirement benefits as a result of their service as a director of the Corporation.
The following table illustrates the compensation paid to the Independent Directors by the Corporation for the fiscal year ended October 31, 2013.
|
|
|
|
|
|
|
Name of Independent Director
|
|
Aggregate Compensation
From TCW Funds, Inc.
|
|
|
Samuel P. Bell
|
|
$
|
70,750
|
|
|
John A. Gavin
|
|
$
|
57,250
|
|
|
Patrick C. Haden
|
|
$
|
78,250
|
|
|
Janet E. Kerr
|
|
$
|
55,750
|
|
|
Peter McMillan
|
|
$
|
40,500
|
|
|
Charles A. Parker
|
|
$
|
55,750
|
|
|
Victoria B. Rogers
|
|
$
|
55,750
|
|
|
Andrew Tarica
|
|
$
|
40,500
|
|
At a meeting held on March 14, 2011, the Board of Directors approved a Deferred Compensation Plan for the
Independent Directors. The table below lists the total amount of deferred compensation (including interest) payable to the respective Independent Directors as of October 31, 2013.
|
|
|
|
|
|
|
Name of Independent Director
|
|
Aggregate Compensation
From TCW Funds, Inc.
|
|
|
Samuel P. Bell
|
|
|
—
|
|
|
John A. Gavin
|
|
|
—
|
|
|
Patrick C. Haden
|
|
|
—
|
|
47
|
|
|
|
|
|
|
Janet E. Kerr
|
|
|
—
|
|
|
Peter McMillan
|
|
|
$15,250
|
|
|
Charles A. Parker
|
|
|
—
|
|
|
Victoria B. Rogers
|
|
|
—
|
|
|
Andrew Tarica
|
|
|
$15,250
|
|
The following table illustrates the total compensation paid to Corporation’s Independent Directors for the fiscal
year ended October 31, 2013 by TCW Strategic Income Fund, Inc., Metropolitan West Funds and the Corporation. TCW Strategic Income Fund, Inc. is included solely because the Corporation’s Advisor, TCW Investment Management Company, also
serves as its investment advisor and Metropolitan West Funds is included solely because the Corporation’s Advisor is under common control with its advisor, Metropolitan West Asset Management, LLC.
|
|
|
|
|
|
|
|
|
Name of Independent Directors
|
|
|
|
Total Cash Compensation from
TCW Funds, Inc.
TCW Strategic Income Fund,
Inc.
and Metropolitan West Funds
|
|
|
Samuel P. Bell
|
|
|
|
$
|
85,000
|
|
|
John A. Gavin
|
|
|
|
$
|
71,500
|
|
|
Patrick C. Haden
|
|
|
|
$
|
137,500
|
|
|
Janet E. Kerr
|
|
|
|
$
|
70,000
|
|
|
Peter McMillan
|
|
|
|
$
|
115,000
|
|
|
Charles A. Parker
|
|
|
|
$
|
70,000
|
|
|
Victoria B. Rogers
|
|
|
|
$
|
70,000
|
|
|
Andrew Tarica
|
|
|
|
$
|
130,000
|
|
Retirement Policy
The Corporation has not adopted a retirement policy for directors.
Officers
The officers of the Corporation who are not also directors of the Corporation are:
|
|
|
|
|
|
|
Name, Address and Age
|
|
Position(s) Held
with Corporation
|
|
Principal Occupation(s)
During Past 5 Years
(1)
|
|
Peter A. Brown (58)*
|
|
Senior Vice President
|
|
Managing Director, the Advisor, The TCW Group Inc., Trust Company of the West, TCW Asset Management Company and Metropolitan West Asset Management; Senior Vice President, TCW
Strategic Income Fund, Inc.
|
|
|
|
|
|
Meredith S. Jackson (54)*
|
|
Senior Vice President,
General Counsel and Secretary.
Interim Chief
Compliance Officer
|
|
Executive Vice President, General Counsel, Interim Chief Compliance Officer and Secretary, the Advisor, The TCW Group Inc., Trust Company of the West, TCW Asset Management
Company and Metropolitan West Asset Management; Senior Vice President, General Counsel, Secretary and Interim Chief Compliance Officer, TCW Strategic Income Fund, Inc.; Executive Vice President, General Counsel and Secretary, Metropolitan West
Funds. Previously, Partner and Chair of the Debt Finance Practice Group, Irell & Manella (law firm) (1999 – January 2013).
|
|
|
|
|
|
Richard M. Villa (49)
(2)
*
|
|
Treasurer and Chief Financial Officer
|
|
Managing Director and Chief Financial Officer, Trust Company of the West, TCW Asset Management Company, TCW Investment Management Company, Metropolitan West Asset Management.
Treasurer and Chief Financial Officer, TCW Strategic Income Fund, Inc.
|
|
(1)
|
Positions with The TCW Group, Inc. and its affiliates may have changed over time.
|
48
|
(2)
|
Richard M. Villa was elected an Officer of the Corporation on February 5, 2014.
|
|
*
|
Address is 865 South Figueroa Street, 18th Floor, Los Angeles, California 90017
|
In addition, George N. Winn, Senior Vice President of Trust Company of the West, TCW Asset Management Company, Metropolitan West Asset Management and the Advisor, is Assistant Treasurer of the
Corporation, Patrick W. Dennis, Senior Vice President & Associate General Counsel of Trust Company of the West, TCW Asset Management Company, Metropolitan West Asset Management and the Advisor, is Assistant Secretary of the Corporation, and
Jon-Luc Dupuy, Vice President and Senior Counsel for State Street Corporation’s Legal Administration Group, is Assistant Secretary of the Corporation.
INVESTMENT ADVISORY AGREEMEN
T
The Corporation and the Advisor
are parties to an Investment Management and Advisory Agreement (“
Advisory Agreement
”). The Advisor was organized in 1987 as a wholly-owned subsidiary of The TCW Group, Inc. (“
TCW
”). On February 6,
2013, global alternative asset manager The Carlyle Group (NASDAQ:CG), and the management of TCW announced the completion of their acquisition of TCW from Société Générale, creating an independent firm. As a result of the
transaction, TCW management and employees owns approximately 40% of the firm on a fully diluted basis.
The Advisory Agreement was approved by
a majority of the Board of Directors, including the Independent Directors, on September 24, 2012, and was subsequently approved by the shareholders of each of the Funds, except TCW Emerging Markets Multi-Asset Opportunities Fund, at a special
meeting of shareholders called for that purpose.
An amendment to the Advisory Agreement, adding the TCW Emerging Markets Multi-Asset
Opportunities Fund, was approved by the Board of Directors on May 20, 2013.
Under the Advisory Agreement, the Corporation retains the
Advisor to manage the investment of its assets, to place orders for the purchase and sale of its portfolio securities, to administer its day-to-day operations, and to be responsible for overall management of the Corporation’s business affairs
subject to control by the Board of Directors of the Corporation. The Advisor is responsible for obtaining and evaluating economic, statistical, and financial data and for formulating and implementing investment programs in furtherance of each
Fund’s investment objectives.
The Advisor furnishes to the Corporation office space at such places as are agreed upon from time to time
and all office facilities, business equipment, supplies, utilities and telephone service necessary for managing the affairs and investments and arranges for officers or employees of the Advisor to serve, without compensation from the Corporation, as
officers, directors or employees of the Company if desired and reasonably required by the Corporation.
The fee allocable to each Fund,
payable monthly, is calculated daily by applying the annual investment advisory fee percent for the Fund to the Fund’s net asset value, except for the TCW Conservative Allocation Fund, which is not charged an investment advisory fee. Under the
Advisory Agreement, the TCW Conservative Allocation Fund does not pay any amount to the Advisor as compensation for the services rendered, facilities furnished, and expenses paid by it. However, the Advisor serves as investment advisor to the
Underlying Funds and is paid a fee by the Underlying Funds for providing such service. Accordingly, shareholders of the TCW Conservative Allocation Fund indirectly bear a portion of the fees paid by the Underlying Funds to the Advisor and other
service providers, and the other expenses borne by the Underlying Funds. The annual management fee (as a percentage of average net asset value) for each Fund is as follows:
|
|
|
|
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
|
0.65
|
%
|
|
TCW Growth Fund
|
|
|
0.75
|
%
|
|
TCW Growth Equities Fund
|
|
|
1.00
|
%
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
0.75
|
%
|
|
TCW Relative Value Large Cap Fund
|
|
|
0.75
|
%
|
|
TCW Select Equities Fund
|
|
|
0.75
|
%
|
|
TCW Small Cap Growth Fund
|
|
|
1.00
|
%
|
|
TCW SMID Cap Fund
|
|
|
1.00
|
%
|
|
TCW Value Opportunities Fund
|
|
|
0.80
|
%
|
49
|
|
|
|
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
0.40
|
%
|
|
TCW Enhanced Commodity Strategy Fund
|
|
|
0.50
|
%
|
|
TCW High Yield Bond Fund
|
|
|
0.45
|
%
|
|
TCW Short Term Bond Fund
|
|
|
0.35
|
%
|
|
TCW Total Return Bond Fund
|
|
|
0.50
|
%
|
|
|
|
|
International Funds
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
|
0.75
|
%
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
0.75
|
%
|
|
TCW Emerging Markets Multi Asset Opportunities Fund
|
|
|
0.95
|
%
|
|
TCW Global Bond Fund
|
|
|
0.55
|
%
|
|
TCW International Growth Fund
|
|
|
0.85
|
%
|
|
TCW International Small Cap Fund
|
|
|
0.75
|
%
|
The Advisor has agreed to reduce its investment advisory fee or to pay the operating expenses of a Fund to the extent
necessary to limit the Fund’s operating expenses to an amount not to exceed the trailing monthly expense ratio average for comparable funds as calculated by Lipper Inc. This expense limitation is voluntary and terminable on six months notice.
In addition, certain Funds have contractual fee or expense caps. This contractual fee waiver and/or expense reimbursement excludes interest and acquired fund fees and expenses, if any.
The table below sets forth the investment advisory fee, exclusive of any expense reimbursement, paid by each Fund (except for the TCW Conservative Allocation Fund which has no investment advisory fee) for
the period or fiscal year ended October 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fund
|
|
Fiscal Year
Ended 2013
|
|
|
Fiscal Year
Ended 2012
|
|
|
Fiscal Year
Ended 2011
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
$
|
50,723
|
|
|
$
|
133,737
|
|
|
$
|
335,102
|
|
|
TCW Growth Fund
|
|
|
17,220
|
|
|
|
193,228
|
|
|
|
187,751
|
|
|
TCW Growth Equities Fund
|
|
|
488,785
|
|
|
|
943,558
|
|
|
|
1,195,245
|
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
6,488,810
|
|
|
|
4,703,226
|
|
|
|
4,833,202
|
|
|
TCW Relative Value Large Cap Fund
|
|
|
6,055,748
|
|
|
|
4,660,385
|
|
|
|
3,519,721
|
|
|
TCW Select Equities Fund
|
|
|
10,283,151
|
|
|
|
6,684,794
|
|
|
|
4,092,204
|
|
|
TCW Small Cap Growth Fund
|
|
|
4,435,539
|
|
|
|
11,600,700
|
|
|
|
10,693,497
|
|
|
TCW SMID Cap Growth Fund
|
|
|
454,161
|
|
|
|
417,067
|
|
|
|
205,400
|
|
|
TCW Value Opportunities Fund
|
|
|
1,148,410
|
|
|
|
1,058,674
|
|
|
|
1,680,848
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
4,680,221
|
|
|
|
3,199,176
|
|
|
|
1,386,523
|
|
|
TCW Enhanced Commodity Strategy Fund
4
|
|
|
21,385
|
|
|
|
24,058
|
|
|
|
16,702
|
3
|
|
TCW High Yield Bond Fund
|
|
|
229,115
|
|
|
|
420,465
|
|
|
|
684,713
|
|
|
TCW Short Term Bond Fund
|
|
|
53,060
|
|
|
|
34,418
|
|
|
|
88,016
|
|
|
TCW Total Return Bond Fund
|
|
|
43,179,697
|
|
|
|
30,390,146
|
|
|
|
26,262,619
|
|
|
International Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
|
49,823,340
|
|
|
|
29,055,761
|
|
|
|
15,731,516
|
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
2,830,093
|
|
|
|
1,324,189
|
|
|
|
473,689
|
2
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund
|
|
|
102,442
|
6
|
|
|
—
|
|
|
|
—
|
|
|
TCW Global Bond Fund
|
|
|
124,668
|
|
|
|
110,954
|
5
|
|
|
—
|
|
|
TCW International Growth Fund
|
|
|
18,933
|
|
|
|
—
|
|
|
|
—
|
|
|
TCW International Small Cap Fund
|
|
|
236,171
|
|
|
|
215,481
|
|
|
|
108,885
|
1
|
|
1
|
For the period
February 28, 2011 (Commencement of Operations) through October 31, 2011
|
50
|
2
|
For the period December 14, 2010 (Commencement of Operations) through October 31, 2011
|
|
3
|
For the period April 1, 2011 (Commencement of Operations) through October 31, 2011
|
|
4
|
The reported amounts represent the consolidated payments from the Fund and its subsidiary made to the Advisor
|
|
5
|
For the period December 1, 2011 (Commencement of Operations) through October 31, 2012
|
|
6
|
For the period July 1, 2013 (Commencement of Operations) through October 31, 2013
|
In addition to the management fees discussed above, the Corporation and TCW Strategic Income Fund, Inc. reimburse the Advisor for certain regulatory
compliance services pursuant to a written agreement. Under the terms of the agreement, the Corporation and TCW Strategic Income Fund, Inc. reimbursed the Advisor in the amount of $291,607 for the 2013 calendar year. The Corporation’s share was
$285,753. This amount is allocated pro rata to each Fund based on management fees paid by each Fund to the Advisor.
Except for expenses
specifically assumed by the Advisor under the Advisory Agreement, each Fund bears all expenses incurred in its operations. Fund expenses include the fee of the Advisor; expenses of the Plan of Distribution pursuant to Rule 12b-1; compensation and
expenses of directors who are not officers or employees of the Advisor; registration, filing and other fees in connection with filings with states and other regulatory authorities; fees and expenses of independent accountants; the expenses of
printing and mailing proxy statements and shareholder reports; custodian and transfer and dividend disbursing agent charges; brokerage fees and commissions and securities transaction costs; taxes and corporate fees; legal fees; the fees of any trade
association; the costs of the administrator and fund accountant; compliance support services; the cost of stock certificates, if any, representing shares of the Fund; organizational expenses; expenses of shareholder and director meetings; the cost
and expense of printing, including typesetting, and distributing prospectuses and supplements thereto to the Fund’s shareholders; premiums for the fidelity bond and any errors and omissions insurance; interest and taxes; and any other ordinary
or extraordinary expenses incurred in the course of the Fund’s business. The 12b-1 fees relating to the Class N shares will be directly allocated to that class.
The TCW Conservative Allocation Fund, as a shareholder of the Underlying Funds, also indirectly bears its pro rata share of the advisory fees charged to, and expenses of operating, the Underlying Funds in
which it invests. The TCW Conservative Allocation Fund’s expense ratios, as disclosed in the Funds’ prospectus, may be higher or lower depending on the allocation of the TCW Conservative Allocation Fund’s assets among the Underlying
Funds and the actual expenses of the Underlying Funds.
The Advisory Agreement was approved by each Fund’s shareholders and will continue
in effect as to each Fund initially for two years and thereafter from year to year if such continuance is specifically approved at least annually by (a) the Board of Directors of the Corporation or by the vote of a majority of the outstanding
voting securities of the Fund, and (b) vote of a majority of the directors who are not “interested persons” of the Corporation or the Advisor (the Independent Directors), cast in person at a meeting called for the purpose of voting on
such approval. The Advisory Agreement may be terminated without penalty at any time on 60 days’ written notice, by vote of a majority of the Board of Directors of the Corporation or by vote of a majority of the outstanding voting securities of
the Fund. The Advisory Agreement terminates automatically in the event of its assignment.
At a meeting held on September 24, 2012, the
Board, including the Independent Directors, re-approved the Advisory Agreement with respect to each Fund for an additional one year term. In addition, the Board, including the Independent Directors, approved the New Agreement with respect to each
Fund for a term of two years, after which it would continue from year to year subject to the same approval process as described above for the Advisory Agreement. Pursuant to a Proxy Statement, shareholders of the Corporation also approved the
Advisory Agreement.
At a meeting held on May 20, 2013, the Board, including the Independent Directors, approved an amendment to the
Advisory Agreement adding the TCW Emerging Markets Multi-Asset Opportunities Fund.
The Corporation has acknowledged that the name
“TCW” is owned by TCW, the parent of the Advisor. The Corporation has agreed to change its name and the name of the Funds at the request of TCW if any advisory agreement into which TCW or any of its affiliates and the Corporation may enter
is terminated.
The Advisory Agreement also provides that the Advisor shall not be liable to the Corporation for any actions or omissions if
it acted in good faith without gross negligence, willful misfeasance, bad faith, or from reckless disregard of its duties.
51
The TCW Enhanced Commodity Strategy Fund, through the Subsidiary, seeks exposure to certain commodity-linked
instruments. The Subsidiary has entered into a separate advisory agreement with the Advisor for the management of the Subsidiary’s portfolio (the “
Subsidiary Advisory Agreement
”) pursuant to which the Subsidiary will pay
the Advisor a management fee at the same rate that the Fund pays the Advisor for services provided to the Fund. The Advisor has agreed to waive the management fee it receives from the Fund in an amount equal to the management fee paid to the Advisor
by the Subsidiary. The Subsidiary Advisory Agreement is terminable by either party thereto, without penalty, on 60 days’ prior written notice.
PORTFOLIO MANAGEMENT
Portfolio Manager Compensation
The overall objective of the Advisor’s compensation program for portfolio managers is to attract competent and expert investment
professionals and to retain them over the long-term. Compensation is comprised of several components which, in the aggregate, are designed to achieve these objectives and to reward the portfolio managers for their contributions to the successful
performance of the accounts they manage. Portfolio managers are compensated through a combination of base salary, profit sharing based compensation (“
profit sharing
”), bonus and equity incentive participation in the
Advisor’s parent company (“
equity incentives
”). Profit sharing and equity incentives generally represent most of the portfolio managers’ compensation. In some cases, portfolio managers are eligible for discretionary
bonuses.
Salary
. Salary is agreed to with managers at time of employment and is reviewed from time to time. It does not change
significantly and often does not constitute a significant part of the portfolio manager’s compensation.
Profit Sharing
. Profit
sharing is linked quantitatively to a fixed percentage of net income relating to accounts in the investment strategy area for which the portfolio managers are responsible and is typically paid quarterly. In most cases, revenues are allocated to a
pool and profit sharing compensation is paid out after the deduction of certain expenses (including base salaries) related to the strategy group. The profit sharing percentage used to compensate a portfolio manager for management of the Funds is
generally the same as that used to compensate portfolio managers for all other client accounts in the same strategy managed by the Advisor or one of the other TCW Advisors (together, “
the TCW Group
”). Income included in a
profit sharing pool will relate to the products managed by the portfolio manager. In some cases, the pool includes revenues related to more than one equity or fixed income product where the portfolio managers work together as a team, in which case
each participant in the pool is entitled to profit sharing derived from all the included products. In certain cases, a portfolio manager may also participate in a profit sharing pool that includes revenues from products besides the strategies
offered in the Funds, including alternative investment products; the portfolio manager would be entitled to participate in such pool where he or she supervises, is involved in the management of, or is associated with a group, other members of which
manage, such products. Profit sharing arrangements are generally the result of agreement between the portfolio manager and the TCW Group, although in some cases they may be discretionary based on supervisor allocation.
In some cases, the profit sharing percentage is subject to increase based on the relative pre-tax performance of the investment strategy composite
returns, net of fees and expenses, to that of the benchmark. The measurement of performance relative to the benchmark can be based on single year or multiple year metrics, or a combination thereof. The benchmark used is the one associated with the
Fund managed by the portfolio manager as disclosed in the prospectus. Benchmarks vary from strategy to strategy but, within a given strategy, the same benchmark applies to all accounts, including the Funds. In the case of the Concentrated Value
Fund, the Russell 1000 Value rather than the S&P 500 is used to measure performance for purposes of the profit sharing percentage.
Discretionary Bonus/Guaranteed Minimums
. In general, portfolio managers do not receive discretionary bonuses. However, in some cases bonuses may
be paid on a discretionary basis out of a department profit sharing pool, as determined by the supervisor(s) in the department. In other cases where portfolio managers do not receive profit sharing or where the company has determined the combination
of salary and profit sharing does not adequately compensate the portfolio manager, discretionary bonuses may be paid by the TCW Group. Also, pursuant to contractual arrangements, some portfolio managers may be entitled to a mandatory bonus if the
sum of their salary and profit sharing does not meet certain minimum thresholds.
Equity Incentives
. Many portfolio managers
participate in equity incentives based on overall firm performance of the TCW Group and its affiliates, through ownership or participation in restricted unit plans that vest over time or unit appreciation plans of the Advisor’s parent company.
The plans include the Fixed Income Retention Plan, Restricted Unit Plan and 2013 Equity Unit Incentive Plan.
Under the Fixed Income Retention
Plan, certain portfolio managers in the fixed income area were awarded cash and/or partnership units in the Advisor’s parent company, either on a contractually-determined basis or on a discretionary basis. Awards under this plan were made in
2010 that vest over a period of time and other awards are granted annually.
Under the Restricted Unit Plan, certain portfolio managers in the
fixed income and equity areas were awarded partnership units in the Advisor’s parent company. Awards under this plan vest over time. Vesting is in part dependent on satisfaction of performance criteria.
52
Under the 2013 Equity Unit Incentive Plan, certain portfolio managers in the fixed income and equity areas
are awarded options to acquire partnership units in the Advisor’s parent company with a strike price equal to the fair market value of the option at the date of grant. The options granted under the plan are subject to vesting and other
conditions.
Other Plans and Compensation Vehicles
. Portfolio managers may also elect to participate in the TCW Group’s 401(k)
plan, to which they may contribute a portion of their pre- and post-tax compensation to the plan for investment on a tax-deferred basis.
Ownership of Securities and Other Managed Accounts
The first table sets forth the dollar of securities of the Fund owned by each portfolio manager as of October 31, 2013. The second table sets forth certain information, as of October 31, 2013,
regarding other accounts managed by the portfolio managers, including the managed Fund. Total assets in the second table are in millions. Certain portfolio managers invest in their investment strategy through investment vehicles other than the
Funds.
53
TCW Concentrated Value Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Thomas K. McKissick
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
N. John Snider
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other
Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Thomas K. McKissick
|
|
|
1
|
|
|
$
|
8.6
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
13
|
|
|
$
|
34.5
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
N. John Snider
|
|
|
1
|
|
|
$
|
8.6
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
13
|
|
|
$
|
34.5
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
0
|
|
|
$
|
0
|
|
54
TCW Growth Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Craig C. Blum
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chang Lee
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mike Olson
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Reilly
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Jason Maxwell
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
Registered
Investment
Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other
Accounts
|
|
|
Registered Investment
Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other
Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Craig C. Blum
|
|
|
4
|
|
|
$
|
1,976.9
|
|
|
|
6
|
|
|
$
|
546.2
|
|
|
|
62
|
|
|
$
|
5,849.4
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
138.2
|
|
|
|
3
|
|
|
$
|
430.8
|
|
|
Chang Lee
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
|
Mike Olson
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
|
Michael P. Reilly
|
|
|
2
|
|
|
$
|
20.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
Jason Maxwell
|
|
|
1
|
|
|
$
|
2,522.2
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
2
|
|
|
$
|
1,145.5
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
55
TCW Growth Equities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Chang Lee
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Mike Olson
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered Investment
Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment
Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Chang Lee
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
|
Mike Olson
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Diane E. Jaffee
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Diane E. Jaffee
|
|
|
5
|
|
|
$
|
2,401.4
|
|
|
|
14
|
|
|
$
|
1,748.3
|
|
|
|
57
|
|
|
$
|
3,135.0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
707.2
|
|
|
|
1
|
|
|
$
|
145.4
|
|
56
TCW Relative Value Large Cap Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Diane E. Jaffee
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Matthew J. Spahn
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Diane E. Jaffee
|
|
|
5
|
|
|
$
|
2,401.4
|
|
|
|
14
|
|
|
$
|
1,748.3
|
|
|
|
57
|
|
|
$
|
3,135.0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
707.2
|
|
|
|
1
|
|
|
$
|
145.4
|
|
|
Matthew J. Spahn
|
|
|
3
|
|
|
$
|
1,184.2
|
|
|
|
12
|
|
|
$
|
1,649.4
|
|
|
|
43
|
|
|
$
|
2,991.7
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
707.2
|
|
|
|
1
|
|
|
$
|
145.4
|
|
TCW Select Equities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
|
Over
$1 Mill
|
|
Craig C. Blum
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Craig C. Blum
|
|
|
4
|
|
|
$
|
1,976.9
|
|
|
|
6
|
|
|
$
|
546.2
|
|
|
|
62
|
|
|
$
|
5,849.4
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
138.2
|
|
|
|
3
|
|
|
$
|
430.8
|
|
57
TCW Small Cap Growth Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Chang Lee
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mike Olson
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Chang Lee
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
|
Mike Olson
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
TCW SMID Cap Growth Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Chang Lee
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Mike Olson
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Chang Lee
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
|
Mike Olson
|
|
|
5
|
|
|
$
|
416.1
|
|
|
|
6
|
|
|
$
|
70.7
|
|
|
|
16
|
|
|
$
|
1,017.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
386.7
|
|
58
TCW Value Opportunities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Diane E. Jaffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Diane E. Jaffee
|
|
|
5
|
|
|
$
|
2,401.4
|
|
|
|
14
|
|
|
$
|
1,748.3
|
|
|
|
57
|
|
|
$
|
3,135.0
|
|
|
|
0
|
|
|
$
|
0
|
|
|
|
2
|
|
|
$
|
707.2
|
|
|
|
1
|
|
|
$
|
145.4
|
|
TCW Core Fixed Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Stephen M. Kane
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Laird R. Landmann
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tad Rivelle
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan Whalen
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Stephen M. Kane
|
|
|
31
|
|
|
$
|
42,744.3
|
|
|
|
42
|
|
|
$
|
7,172.5
|
|
|
|
196
|
|
|
$
|
20,016.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
30
|
|
|
$
|
4,397.7
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Laird R. Landmann
|
|
|
30
|
|
|
$
|
42,762.1
|
|
|
|
38
|
|
|
$
|
6,825.0
|
|
|
|
189
|
|
|
$
|
19,880.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Bryan Whalen
|
|
|
3
|
|
|
$
|
8,281.8
|
|
|
|
34
|
|
|
$
|
4,870.4
|
|
|
|
35
|
|
|
$
|
10,793.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
28
|
|
|
$
|
3,717.0
|
|
|
|
2
|
|
|
$
|
373.2
|
|
59
TCW Enhanced Commodity Strategy Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Tad Rivelle
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Stephen M. Kane
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Bret R. Barker
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Stephen M. Kane
|
|
|
31
|
|
|
$
|
42,744.3
|
|
|
|
42
|
|
|
$
|
7,172.5
|
|
|
|
196
|
|
|
$
|
20,016.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
30
|
|
|
$
|
4,397.7
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Bret R. Barker
|
|
|
1
|
|
|
$
|
3.6
|
|
|
|
1
|
|
|
$
|
1.0
|
|
|
|
8
|
|
|
$
|
395.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
TCW High Yield Bond Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
James S. Farnham
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
Laird R. Landmann
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Giovanni A. Nucci
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
James S. Farnham
|
|
|
5
|
|
|
$
|
2,959.9
|
|
|
|
2
|
|
|
$
|
2,154.0
|
|
|
|
6
|
|
|
$
|
803.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
Laird R. Landmann
|
|
|
30
|
|
|
$
|
42,762.1
|
|
|
|
38
|
|
|
$
|
6,825.0
|
|
|
|
189
|
|
|
$
|
19,880.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Giovanni A. Nucci
|
|
|
3
|
|
|
$
|
2,515.2
|
|
|
|
4
|
|
|
$
|
2,490.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
397.6
|
|
|
|
0
|
|
|
$
|
0.0
|
|
60
TCW Short Term Bond Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Stephen M. Kane
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laird R. Landmann
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tad Rivelle
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan Whalen
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Stephen M. Kane
|
|
|
31
|
|
|
$
|
42,744.3
|
|
|
|
42
|
|
|
$
|
7,172.5
|
|
|
|
196
|
|
|
$
|
20,016.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
30
|
|
|
$
|
4,397.7
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Laird R. Landmann
|
|
|
30
|
|
|
$
|
42,762.1
|
|
|
|
38
|
|
|
$
|
6,825.0
|
|
|
|
189
|
|
|
$
|
19,880.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Bryan Whalen
|
|
|
3
|
|
|
$
|
8,281.8
|
|
|
|
34
|
|
|
$
|
4,870.4
|
|
|
|
35
|
|
|
$
|
10,793.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
28
|
|
|
$
|
3,717.0
|
|
|
|
2
|
|
|
$
|
373.2
|
|
61
TCW Total Return Bond Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Mitch Flack
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
Tad Rivelle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Bryan Whalen
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Mitch Flack
|
|
|
4
|
|
|
$
|
8,048.8
|
|
|
|
28
|
|
|
$
|
3,799.9
|
|
|
|
32
|
|
|
$
|
9,561.4
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
26
|
|
|
$
|
3,651.2
|
|
|
|
1
|
|
|
$
|
296.7
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Bryan Whalen
|
|
|
3
|
|
|
$
|
8,281.8
|
|
|
|
34
|
|
|
$
|
4,870.4
|
|
|
|
35
|
|
|
$
|
10,793.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
28
|
|
|
$
|
3,717.0
|
|
|
|
2
|
|
|
$
|
373.2
|
|
62
TCW Emerging Markets Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Penelope D. Foley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
David I. Robbins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Javier Segovia
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Penelope D. Foley
|
|
|
5
|
|
|
$
|
6,494.5
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
2
|
|
|
$
|
992.4
|
|
|
David I. Robbins
|
|
|
6
|
|
|
$
|
6,517.4
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
4
|
|
|
$
|
2,102.0
|
|
|
Javier Segovia
|
|
|
1
|
|
|
$
|
5,671.7
|
|
|
|
2
|
|
|
$
|
525.9
|
|
|
|
1
|
|
|
$
|
35.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
63
TCW Emerging Markets Local Currency Income Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Penelope D. Foley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
David I. Robbins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Penelope D. Foley
|
|
|
5
|
|
|
$
|
6,494.5
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
2
|
|
|
$
|
992.4
|
|
|
David I. Robbins
|
|
|
6
|
|
|
$
|
6,517.4
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
4
|
|
|
$
|
2,102.0
|
|
64
TCW Emerging Markets Multi-Asset Opportunities Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Penelope D. Foley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
David I. Robbins
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Penelope D. Foley
|
|
|
5
|
|
|
$
|
6,494.5
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
2
|
|
|
$
|
992.4
|
|
|
David I. Robbins
|
|
|
6
|
|
|
$
|
6,517.4
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
4
|
|
|
$
|
2,102.0
|
|
TCW Global Bond Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Stephen M. Kane
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
Tad Rivelle
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David I. Robbins
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Stephen M. Kane
|
|
|
31
|
|
|
$
|
42,744.3
|
|
|
|
42
|
|
|
$
|
7,172.5
|
|
|
|
196
|
|
|
$
|
20,016.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
30
|
|
|
$
|
4,397.7
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
David I. Robbins
|
|
|
6
|
|
|
$
|
6,517.4
|
|
|
|
5
|
|
|
$
|
1,564.6
|
|
|
|
8
|
|
|
$
|
2,554.7
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
255.6
|
|
|
|
4
|
|
|
$
|
2,102.0
|
|
65
TCW International Growth Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1
to
$10K
|
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
Rohit Sah
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other
Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Rohit Sah
|
|
|
2
|
|
|
$
|
37.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
67.5
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
TCW International Small Cap Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Manager
|
|
None
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over
$1 Mill
|
|
|
Rohit Sah
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other
Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Rohit Sah
|
|
|
2
|
|
|
$
|
37.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
1
|
|
|
$
|
67.5
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
66
TCW Conservative Allocation Fund
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Portfolio Managers
|
|
None
|
|
|
$1
to
$10K
|
|
$10K
to
$50K
|
|
$50K
to
$100K
|
|
$100K
to
$500K
|
|
$500K
to
$1 Mill
|
|
Over $1 Mill
|
|
Komal S. Sri-Kumar
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adam T. Coppersmith
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laird R. Landmann
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven M. Kane
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan Whalen
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Reilly
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tad Rivelle
|
|
|
X
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Performance Fee Accounts
|
|
|
|
|
|
|
|
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
Registered
Investment Companies
|
|
|
Other Pooled
Investment Vehicles
|
|
|
Other Accounts
|
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Number
of
Accounts
|
|
|
Total
Assets
|
|
|
Komal S. Sri-Kumar
|
|
|
1
|
|
|
$
|
17.5
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
Adam T. Coppersmith
|
|
|
1
|
|
|
$
|
17.5
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
Laird R. Landmann
|
|
|
30
|
|
|
$
|
42,762.1
|
|
|
|
38
|
|
|
$
|
6,825.0
|
|
|
|
189
|
|
|
$
|
19,880.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Steven M. Kane
|
|
|
31
|
|
|
$
|
42,744.3
|
|
|
|
42
|
|
|
$
|
7,172.5
|
|
|
|
196
|
|
|
$
|
20,016.9
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
30
|
|
|
$
|
4,397.7
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
|
Bryan Whalen
|
|
|
3
|
|
|
$
|
8, 281.8
|
|
|
|
34
|
|
|
$
|
4,870.4
|
|
|
|
35
|
|
|
$
|
10,793.3
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
28
|
|
|
$
|
3,717.0
|
|
|
|
2
|
|
|
$
|
373.2
|
|
|
Michael P. Reilly
|
|
|
2
|
|
|
$
|
20.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
Tad Rivelle
|
|
|
30
|
|
|
$
|
47,750.7
|
|
|
|
36
|
|
|
$
|
4,631.7
|
|
|
|
191
|
|
|
$
|
19,971.8
|
|
|
|
0
|
|
|
$
|
0.0
|
|
|
|
29
|
|
|
$
|
4,000.1
|
|
|
|
5
|
|
|
$
|
2,249.3
|
|
67
Conflicts
Actual or potential conflicts of interest may arise when a portfolio manager has management responsibilities to more than one account (including a Fund), such as devotion of unequal time and attention to
the management of the accounts, inability to allocate limited investment opportunities across a broad band of accounts and incentive to allocate opportunities to an account where the portfolio manager or TCW has a greater financial incentive, such
as a performance fee account or where an account or fund managed by a portfolio manager has a higher fee sharing percentage than the portfolio manager’s fee sharing percentage with respect to a Fund. When accounts managed by the Advisor
(including a Fund) invest in different parts of an issuer’s capital structure (e.g., one account owns equity securities of an issuer while another account owns debt obligations of the same issuer), actual or potential conflicts of interest may
also arise with respect to decisions concerning the issuer’s financing, investments or risks, among other issues, as related to the interests of the accounts. TCW has adopted policies and procedures reasonably designed to address these types of
conflicts and TCW believes its policies and procedures serve to operate in a manner that is fair and equitable among its clients, including the Funds.
DISTRIBUTION OF COMPANY SHARES
TCW Funds Distributors
(“
Distributor
”) 865 South Figueroa Street, Los Angeles, CA 90017 serves as the non-exclusive distributor of each class of the Corporation’s shares pursuant to an Amended and Restated Distribution Agreement
(“
Distribution Agreement
”) with the Corporation, which is subject to approval by the Board. The Distribution Agreement is terminable without penalty, on not less than 60 days’ notice, by the Corporation’s Board of
Directors, by vote of holders of a majority of the Corporation’s shares, or by the Distributor. The Distributor receives no compensation from the Funds for distribution of the Funds’ shares except payments pursuant to the
Corporation’s distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act (“
Distribution Plan
”). The Distributor is affiliated with the Advisor.
The Corporation offers two classes of shares: Institutional Class or Class I shares and Class N or Investor Class shares. Class I shares are offered primarily for direct investment by investors and the
TCW Conservative Allocation Fund. Class N shares are offered through firms which are members of the Financial Industry Regulatory Authority (“
FINRA
”), and which have dealer agreements with the Distributor and other financial
intermediaries.
The Corporation has adopted a Plan Pursuant to Rule 18f-3 under the 1940 Act (“
Rule 18f-3 Plan
”).
Under the Rule 18f-3 Plan, shares of each class of each Fund represent an equal pro rata interest in such Fund and, generally, have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations,
qualifications and terms and conditions, except that: (a) each class has a different designation; (b) each class of shares bears any class-specific expenses allocated to it; and (c) each class has exclusive voting rights on any matter
submitted to shareholders that relates solely to its distribution or service arrangements, and each class has separate voting rights on any matter submitted to shareholders in which the interests of one class differ from the interests of any other
class. In addition, each class may have a differing sales charge structure, and differing exchange and conversion features.
Rule 12b-1
Plan
The Corporation also has adopted a Distribution Plan with respect to the Class N shares of each Fund. Under the terms of the
Distribution Plan, each Fund compensates the Distributor at a rate equal to 0.25% of the average daily net assets of the Fund attributable to its Class N shares for distribution and related services. Payments are made to firms that are members of
FINRA and other financial intermediaries for distribution and related services. Under the terms of the Distribution Plan, services which a firm will provide may include, but are not limited to, the following functions: providing facilities to answer
questions from prospective investors about a Fund; receiving and answering correspondence, including requests for prospectuses and statements of additional information; preparing, printing and delivering prospectuses and shareholder reports to
prospective shareholders; complying with federal and state securities laws pertaining to the sale of Class N shares; and assisting investors in completing application forms and selecting dividend and other account options. Because these fees are
paid out of the Funds’ assets on an ongoing basis, over time these fees will increase the cost of your investment and may cost you more than paying other sales charges.
The following table sets forth the amounts of distribution payments made to broker-dealers and other financial intermediaries by each Fund’s N Class for the fiscal year ended October 31, 2013:
|
|
|
|
|
|
|
|
|
Amount
|
|
|
U.S. Equity Funds
|
|
|
|
|
|
TCW Concentrated Value Fund
|
|
$
|
2,214
|
|
|
TCW Growth Fund
|
|
|
299
|
|
|
TCW Growth Equities Fund
|
|
|
17,986
|
|
|
TCW Relative Value Dividend Appreciation Fund
|
|
|
1,831,490
|
|
|
TCW Relative Value Large Cap Fund
|
|
|
152,431
|
|
|
TCW Select Equities Fund
|
|
|
815,331
|
|
68
|
|
|
|
|
|
|
TCW Small Cap Growth Fund
|
|
|
332,024
|
|
|
TCW SMID Cap Growth Fund
|
|
|
48,812
|
|
|
TCW Value Opportunities Fund
|
|
|
88,105
|
|
|
U.S. Fixed Income Funds
|
|
|
|
|
|
TCW Core Fixed Income Fund
|
|
|
1,647,545
|
|
|
TCW Enhanced Commodity Strategy Fund
|
|
|
4,237
|
|
|
TCW High Yield Bond Fund
|
|
|
40,839
|
|
|
TCW Total Return Bond Fund
|
|
|
6,502,381
|
|
|
Asset Allocation Fund
|
|
|
|
|
|
TCW Conservative Allocation Fund
|
|
|
2,243
|
|
|
International Funds
|
|
|
|
|
|
TCW Emerging Markets Income Fund
|
|
|
3,934,178
|
|
|
TCW Emerging Markets Local Currency Income Fund
|
|
|
356,086
|
|
|
TCW Emerging Markets Multi-Asset Opportunities Fund
1
|
|
|
7
|
|
|
TCW Global Bond Fund
|
|
|
28,835
|
|
|
TCW International Growth Fund
|
|
|
2,662
|
|
|
TCW International Small Cap Fund
|
|
|
30,392
|
|
|
1
|
For the period July 1, 2013 (Commencement of Operations) through October 31, 2013
|
The Distribution Plan compensates the Distributor regardless of its expenses.
No interested person of the Funds nor any Independent Director has any direct or indirect financial interest in the operation of the Distribution Plan except to the extent that the Distributor, the
Advisor 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 Distribution Plan.
The Distribution Plan provides that it may not be amended to materially increase the costs which Class N shareholders may bear under the Plan without the approval of a majority of the outstanding voting
securities of the Class N and by vote of a majority of both (i) the Board of Directors of the Corporation, and (ii) those Directors of the Corporation who are not “interested persons” of the Corporation (as defined in the 1940
Act) and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it cast in person at a meeting called for the purpose of voting on the Plan and any related amendments.
The Distribution Plan was initially approved by the Corporation’s Board of Directors on December 17, 1998 and provides that it shall continue
in effect so long as such continuance is specifically approved at least annually by the vote of a majority of both (i) the Board of Directors of the Corporation, and (ii) those Directors of the Corporation who are not “interested
persons” of the Corporation (as defined in the 1940 Act) and who have no direct or indirect financial interest in the operation of the Plan or any agreements related to it cast in person at a meeting called for the purpose of voting on the Plan
and any related amendments.
Payments by the Advisor
Set forth below is a list of the member firms of the Financial Industry Regulatory Authority (“
FINRA
”) to which the Advisor, or its affiliates made payments out of their revenues in
connection with the sale and distribution of the Funds’ shares or for services to the Funds and their shareholders for the year ended December 31, 2013. Such payments are in addition to any Distribution Plan amounts paid to such FINRA
member firms. The payments are discussed in detail in the Prospectus under the title “Payments by the Advisor.” Any additions, modifications, or deletions to the FINRA member firms identified in this list since December 31, 2013, are
not reflected:
FINRA member firm
Fidelity Investments
Charles Schwab
UBS Financial Services Incorporated
Merrill Lynch (Financial Data Svcs)
Wells Fargo
Pershing
Morgan Stanley Smith Barney
69
TD Ameritrade
SEI Private Trust
LPL Financial Corporation
E*Trade
Nationwide Investment Services
Corp
Vanguard Marketing Corporation
MSCS Financial Services LLC
Raymond James
M & I Trust (Non-Cambridge)
GWFS
RBC Capital Markets Corporation
Prudential
ING
Edward D Jones & Company
T Rowe Price
Retirement Plan Svcs
Mid Atlantic
AIG Retirement Services Co
New York Life
Benefit Services
Goldman
CPI
Qualified Plan Consultants
Mercer HR Svcs
Ascensus
Wilmington Trust
Mellon Global Securities Services
Reliance Trust Company
Princor Financial Services Corp
Mass Mutual Fin
Group
The Retirement Plan Company
The Newport Group
TIAA-CREF
Benefit Trust Company
In addition to member
firms of FINRA, payments are also made to their selling and shareholder servicing agents that sell shares of or provide services to the funds and their shareholders, such as banks, insurance companies and plan administrators. These firms are not
included on the list above, although they may be affiliated with companies on the above list.
CONTROL PERSONS
AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 2014, the following shareholders held more than 25% of the outstanding shares
of a Fund. Persons holding more than 25% of the outstanding shares of a Fund may be deemed to “control” (as that term is defined in the 1940 Act) that Fund and may be able to affect or determine the outcome of matters presented for a
vote of the shareholders of that Fund.
TCW Concentrated Value Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105-1905
31.07% owned of record
70
TCW Core Fixed Income Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
55.27% owned of record
TCW Emerging Markets Local Currency Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
26.89% owned of record
TCW Enhanced Commodity Strategy Fund
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
88.84% owned of record
TCW Global Bond Fund
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
96.50% owned of record
TCW Growth Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
77.37% owned of record
TCW High Yield Bond Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
25.84% owned of record
71
TCW International Growth Fund
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
94.63%
owned of record
TCW Relative Value Dividend Appreciation Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
65.86% owned of record
TCW Relative Value Large Cap Fund
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of
customers
2801 Market Street
St. Louis, MO 63103
40.58% owned of record
TCW Select Equities Fund
Merrill Lynch Pierce Fenner & Smith for the sole benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
33.92% owned of record
TCW Small Cap Growth Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
26.09% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, NJ 07311
32.35% owned of record
TCW SMID Cap Growth Fund
Société Générale Holding DE
189 Rue Daubervilliers
75886 Paris Cedex 18
France
53.73% owned of record
72
As of January 31, 2014, the following shareholders held more than 5% of the outstanding shares of a
Fund.
Class I
TCW
Concentrated Value Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
29.78% owned of record
Brian Howard Murrish Irrevocable Trust
U/A 04/16/91
2457 Bedford Drive
New Orleans, LA 70131
9.76% owned beneficially
McKernan Family Trust
Thomas V. McKernan & Judith H. McKernan Tr
1070 Fallen Leaf Rd
Arcadia, CA 91006
8.47% owned beneficially
Patrick Stewart Trustee
For the Danso Trust U/A 3/18/93
9 Tempus Wharf
29 Bermondsey Wall Street
London SE164W
England
6.81%
owned beneficially
Norred 1987 Trust
Charlene L. Norred
10288 Century Woods Dr.
Los Angeles, CA 90067
6.19% owned beneficially
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
5.43% owned of record
Class N
TCW Concentrated Value Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
42.46% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
23.84% owned of record
73
TD Ameritrade Inc. for the exclusive benefit of our clients
P.O. Box 2226
Omaha, NE 68103
7.51% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
6.32% owned of record
Class I
TCW
Conservative Allocation Fund
The Robert Kravis & Kimberly Kravis FDN
C/O KKR Financial Services Co. LLC
730 5
th
Avenue, Fl. 8
New York, NY 10019
16.10% owned beneficially
George R. Kravis II Trust R
Henry P. Kravis Trustee
U/A 9/1/1995
Attn KKR Financial Services
730 5
th
Avenue, Fl. 8
New York, NY 10019
15.77% owned beneficially
Growers Ranch Inc.
Profit Sharing Plan
2016 Newport Blvd.
Costa Mesa, CA 92627
12.90% owned beneficially
Earl B. Gilmore Foundation
U/A 6/4/1958
6301 West 3
rd
St.
Los Angeles, CA 90036
8.62% owned beneficially
LPL Financial
FBO: Customer Accounts
Attn: Mutual Fund Operations
PO Box 509046
San Diego, CA 92150
6.04% owned of record
Irell & Manella Foundation
U/A 06/16/1997
1800 Avenue of the Start Suite 900
Los Angeles, CA 90067
5.54% owned beneficially
Class N
TCW
Conservative Allocation Fund
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
24.28% owned of record
74
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
23.91% owned of record
LPL Financial
9785 Towne Centre Dr.
San Diego, CA 92121
17.64% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl..
499 Washington Blvd.
Jersey City, New Jersey 07310
15.20% owned of record
RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Attn. Mutual Funds Ops Manger
510 Marquette Ave S.
Minneapolis, Minnesota 55402
6.47% owned of record
Class I
TCW Core Fixed Income
Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
35.66% owned of record
Pershing LLC
1
Pershing Plaza
Jersey City, NJ 07399
10.90% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
10.22% owned of record
Class N
TCW Core Fixed Income Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
69.57% owned of record
Merrill Lynch Pierce Fenner & Smith for the sole benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
14.04% owned of record
75
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
5.68% owned of record
Class I
TCW Emerging Markets Income Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
17.63% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
15.00% owned of record
Merrill Lynch Pierce Fenner & Smith for the sole
benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
10.11% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
7.14% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, NJ 07311
6.40% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
6.39% owned of record
Class N
TCW Emerging Markets Income Fund
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
39.97% owned of record
76
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
20.49% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Russ Lennon
200 Liberty Street
New York, NY 10281
19.95% owned of record
Class I
TCW Emerging Markets Local Currency Income Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
36.91% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
17.43% owned of record
C/O M&I Trust Co. NA – Attn.MF
Mitra & Co. FBO 98
11270 W. Park Pl., Suite 400
Milwaukee, WI 53224
9.48% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, NJ 07311
5.51% owned of record
Class N
TCW Emerging Markets Local Currency Income Fund
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
51.34% owned of record
Goldman Sachs & Co.
c/o Mutual Fund Ops.
222 S. Main St.
Salt Lake City UT 84101
23.12% owned of record
77
National Financial Services LLC
for the exclusive benefit of our customers
Russ Lennon
200 Liberty Street
New York, NY 10281
11.56% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
8.02% owned of record
Class I
TCW Emerging Markets Multi-Asset Opportunity Fund
PM Operating LTD
5810 E Skelly Dr. Suite 1650
Tulsa, OK 74135
20.97% owned of record
Hook Investments LLC
C/O HM International Inc.
5810 E Skelly Dr. Suite 1650
Tulsa, OK 74135
18.75% owned of record
Northern Trust Cust.
FBO Foundation Partners Fund GP
A/C# 26-42100
P.O. Box 92956
Chicago, IL 60675
10.20% owned of record
David I Robbins & Joyce Chang JTWROS
52 E. End Ave. Apt. 31
New York, NY 10028
5.72% owned of record
Penelope D. Foley Living
Trust Agreement
Penelope Dyson Foley Tr.
U/A 10/15/2008
175 N Canyon View Dr.
Los Angeles, CA 90049-2721
5.41% owned of record
78
Class N
TCW Emerging Markets Multi-Asset Opportunity Fund
National Financial
Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
59.81% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
39.96% owned of record
Class I
TCW Enhanced
Commodity Strategy Fund
Société Générale Asset Management S.A.
189 Rue Daubervilliers
75886 Paris Cedex 18
France
79.92% owned of record
Class N
TCW Enhanced
Commodity Strategy Fund
Société Générale Asset Management S.A.
189 Rue Daubervilliers
75886 Paris Cedex 18
France
100% owned of record
Class I
TCW Global Bond Fund
Société Générale Asset Management S.A.
189 Rue Daubervilliers
75886 Paris Cedex 18
France
99.59% owned of record
Class N
TCW Global Bond Fund
TCW Asset Management Company
International LTD
865 South Figueroa St. Ste. 1800
Los Angeles, CA 90017
93.19% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
5.58% owned of record
79
Class I
TCW Growth Equities Fund
The Olivia Mann Family 2011
Sirene Trust FBO Olivia A Mann
Richard Zimmerman & Dawn Wright
& Comerica Bank TR U/A 06/06/2011
1013 Centre Rd. STE 229
Wilmington, DE 19805
18.14% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
9.88% owned of record
Holyhead Holdings Limited
Cititrust Jersey Limited
38 Esplanade
St. Helier, Jersey JE4 8ZT
Channel Islands
8.37% owned of record
Henry Kravis TR Raymond and Bessie
Kravis Foundation U/A 11-25-91
c/o Kohlberg Kravis Roberts & Co.
Mr. James Goldrick
9 W 57th St
New York, NY 10019
8.10% owned of record
Class N
TCW Growth Equities Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
28.76% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
27.76% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
13.34% owned of record
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
7.67% owned of record
80
Class I
TCW Growth Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
80.01% owned of record
Michael P. Reilly & Jo Marie Reilly JTWROS
1217 Milan Ave.
S. Pasadena, CA 91030
12.58% owned beneficially
Class N
TCW Growth Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
38.70% owned of record
Oppenheimer & Co. Inc. Custodian
FBO Leressa Renna Crockett IRA PAS
244 Glen Ave.
Millburn, NJ 07041
29.97% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
17.72% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
8.15% owned of record
Oppenheimer & Co. Inc.
FBO Lisa Boshnack
Preference Advisory
213 Old Stamford Rd.
New Canaan, CT 06840
5.46% owned of record
Class I
TCW High Yield Bond
Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
18.17% owned of record
81
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
15.99% owned of record
Gazelle Holdings Limited
P.O. Box 560
11-15 Seaton Pl.
St. Helier JE4 XP
Channel Islands Jersey
15.06% owned of record
Merrill Lynch Pierce Fenner & Smith for the sole
benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
12.95% owned of record
Class N
TCW High Yield Bond Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
45.69% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
16.86% owned of record
TD Ameritrade Inc. for the exclusive benefit of our
clients
P.O. Box 2226
Omaha, NE 68103
7.23% owned of record
Class I
TCW International
Growth Fund
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
89.81% owned of record
Class N
TCW International
Growth Fund
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
100% owned of record
82
Class I
TCW International Small Cap Fund
LPL Financial
9785 Towne Centre Dr.
San Diego, CA 92121
26.26% owned of record
Mac & Co. A/C TWBF
Attn. Mutual Fund Operations
P.O. Box 3198
525 William Penn Place
Pittsburgh, PA 15230
19.48% owned of record
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
15.22%
owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
14.20% owned of record
Class N
TCW International Small Cap Fund
TD Ameritrade Trust Co.
P.O. Box 17748
Denver, CO 80217
44.17% owned of record
Société Générale
189 Rue Daubervilliers
75886 Paris Cedex 18
France
30.57% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
10.07% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
5.71% owned of record
Class I
TCW Relative Value Dividend Appreciation Fund
NECA IBEW Pension Benefit Trust Fund
5735 Elizabeth Ave.
St. Louis, MO 63110
19.89% owned of record
83
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
13.45% owned of record
LPL Financial
9785 Towne Centre Dr.
San Diego, CA 92121
10.96% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
9.42% owned of record
RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Attn. Mutual Funds Ops Manger
60 S 6th St Suite 700
Minneapolis, Minnesota 55402
9.08% owned of record
C/O M&T Bank ID 337
SEI Private Trust Company
One Freedom Valley Drive
Oaks, PA 19456
5.89% owned of record
Class N
TCW Relative Value
Dividend Appreciation Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
76.42% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
7.75% owned of record
Class I
TCW Relative Value Large Cap Fund
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of
customers
2801 Market Street
St. Louis, MO 63103
45.95% owned of record
84
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
26.60% owned of record
Wells Fargo Bank NA.
Omnibus Acct. for Various Ret. Plans
1525 West WT Harris Blvd
Charlotte, NC 28288
6.85% owned of record
Class N
TCW Relative Value
Large Cap Fund
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, NJ 07311
52.73% owned of record
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
12.29% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
9.89% owned of record
VRSCO
FBO AIGFSB Cust. TTEE
FBO Kelsey-Seybold Health System 401K
2929 Allen Pkwy., Suite A6-20
Houston, TX 77109
9.68% owned of record
Class I
TCW Select Equities
Fund
Merrill Lynch Pierce Fenner & Smith for the sole benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
44.09% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
12.27% owned of record
85
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
10.30% owned of record
MB Financial Trustee
MB Financial Bank NA. Trust Operations
6111 N. River Rd., Suite 800, Fl. 8
Rosemont, IL 60018
5.00% owned of record
Class N
TCW Select Equities
Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
38.84% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
23.49% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
16.37% owned of record
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
10.05% owned of record
Class I
TCW Short Term Bond
Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
19.08% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
13.50% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
10.02% owned of record
86
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
8.49% owned of record
U.S. Bank NA Cust.
Gary Franklin Hoffman IRA
235 Spur Lane #202
PO Box 1529
Ketchum, ID 83340
7.19% owned of record
RBC Capital Markets LLC
Mutual Fund Omnibus Processing
Attn. Mutual Funds Ops Manger
60 S 6
th
St
Ste 700
Minneapolis, Minnesota 55402
5.12% owned of record
Class I
TCW Small Cap Growth Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl..
499 Washington Blvd.
Jersey City, New Jersey 07310
31.55% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
26.65% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
12.19% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of our customers
2801 Market St
St Louis, MO 63103
7.85% owned of record
Class N
TCW Small Cap Growth Fund
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
41.32% owned of record
87
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
17.49% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
16.83% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
7.48% owned of record
Class I
TCW SMID Cap Growth Fund
Northern Trust as Custodian
FBO The Cullen Foundation
A/C 26-05887
PO Box 92956
Chicago, IL 60675
61.11% owned beneficially
Société Générale Holding DE
189 Rue Daubervilliers
75886 Paris Cedex 18
France
22.42% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
5.21% owned of record
Class N
TCW SMID Cap Growth Fund
Société Générale Holding DE
189 Rue Daubervilliers
75886 Paris Cedex 18
France
98.43%
owned of record
Class I
TCW Total Return Bond Fund
Merrill Lynch Pierce Fenner & Smith
for the sole benefit of its clients
4800 Deer Lake Drive East, 2
nd
Fl.
Jacksonville, FL 32246
25.39% owned of record
88
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
12.82% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
11.54% owned of record
Pershing LLC
1 Pershing Plaza
Jersey City, NJ 07399
9.32% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
9.07% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
5.37% owned of record
Class N
TCW Total Return Bond
Fund
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
30.16% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
19.15% owned of record
UBS WM USA
Omni Account M/F
1000 Harbor Blvd., 5
th
Fl.
Weehawken, NJ 07086
17.85% owned of record
89
Class I
TCW Value Opportunities Fund
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
12.73% owned of record
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
12.47% owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
11.89% owned of record
Diane E. Jaffee
50 E. 89
th
St. #12D
New York, NY 10128
11.67% owned beneficially
Pershing LLC
1
Pershing Plaza
Jersey City, NJ 07399
7.01% owned of record
Wells Fargo Advisors
Special Custody Account for the exclusive benefit of customers
2801 Market Street
St. Louis, MO 63103
5.21% owned of record
Class N
TCW Value
Opportunities Fund
Morgan Stanley Smith Barney
Harborside Financial Center
Plaza 2, 3
rd
Fl.
Jersey City, New Jersey 07311
29.57% owned of record
Charles Schwab & Co., Inc.
Reinvestment Account
Attn. Mutual Funds Dept.
211 Main St.
San Francisco, CA 94105
23.98%owned of record
National Financial Services LLC
for the exclusive benefit of our customers
Attn. Mutual Fund Dept. 4th Fl.
499 Washington Blvd.
Jersey City, New Jersey 07310
9.09% owned of record
90
ADMINISTRATION AGREEMENT
State Street Bank and Trust Company (“Administrator”) serves as the administrator of the Corporation pursuant to an Administration Agreement.
Under the Administration Agreement, the Administrator provides certain accounting and administrative services to the Corporation, including: fund accounting; calculation of the daily net asset value of each Fund; monitoring the Corporation’s
expense accruals; calculating monthly total return and yield figures; prospectus and statement of additional information compliance monitoring; preparing certain financial statements of the Corporation; and preparing the Corporation’s Form
N-SAR. The Administrator receives a combined accounting, administration and custody (as custodian of the Corporation) fee based on the combined assets of the Corporation and TCW Strategic Income Fund, Inc. as follows: 0.0210% of the first $10
billion in assets; 0.0100% of the next $10 billion in assets; 0.0075% of the next $5 billion in assets and 0.0050% thereafter. For the fiscal years ended October 31, 2013, 2012, and 2011, the Administrator received accounting and administration
fees of $3,554,145; $2,651,159; and $2,333,173 from the Corporation.
CODE OF ETHICS
The Advisor and Distributor are subject to a Code of Ethics with respect to investment transactions in which the Advisor’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 permits personnel subject to the Code of Ethics to invest in securities, including securities that
may be held by the Corporation. The Code of Ethics contains several restrictions and procedures designed to eliminate conflicts of interest including: (1) pre-clearance of non-exempt personal securities transactions; (2) quarterly
reporting of personal securities transactions; (3) a prohibition against acquiring a security in an initial public offering, entering into uncovered short sales and writing uncovered options; (4) a ten day “black out period”
prior or subsequent to a client transaction during which portfolio managers are prohibited from making certain transactions in securities which are being purchased or sold by a client of such manager; (5) 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; (6) a prohibition against acquiring any security which is subject to firm wide or, if applicable, a department restriction; (7) a prohibition of the purchase of securities offered in a hedge fund, other private placement or
limited offering (other than certain TCW-sponsored offerings) except with prior approval of designated officers; (8) a prohibition of a purchase, without prior disclosure to a designated officer, on behalf of a client through a private
placement of a security of an issuer or its affiliate, if a member of the department purchasing the security has a beneficial interest in the issuer or affiliate; (9) a prohibition of acquiring any third party mutual fund advised or sub-advised
by TCW; and (10) limitations on specified trading, redemption, and reallocation practices involving the TCW Funds and the TCW Profit Sharing and Savings Plan. The Code of Ethics also contains the following policies:
1. A policy statement on insider trading that provides generally that no officer, director or employee of TCW (1) may buy or sell a
security either for themselves or others while in possession of material non-public information about the company, or (2) communicate material, non-public information to others who have no official need to know. The policy statement provides
guidance about what is material non-public information, lists common examples of situations in which TCW personnel could obtain that information, and describes TCW’s procedures regarding securities maintained on its “Restricted Securities
List” and for establishing Ethical Walls. It also identifies parties to contact for questions in connection with the requirements of the policy statement.
2. A policy governing gifts, payments and preferential treatment, that includes an approval process for specific categories of gifts and entertainment provided to TCW employees.
91
3. A policy governing an employee’s activities outside of their employment with TCW,
including outside employment, service as a director or in a similar capacity, fiduciary appointments, participation in public affairs and service as treasurer of clubs, houses of worship and lodges.
4. A policy on political activities and contributions, containing general rules governing contributions and solicitation, responsibility
of individuals for personal contribution limits, pre-clearance of certain contributions to state and local candidates, and rules for political activities on TCW premises and for using TCW resources.
5. A policy containing confidentiality requirements.
6. A policy encouraging employees to report illegal activity or activities not in compliance with TCW’s formal written policies and procedures, including the Code of Ethics.
Certain of the procedures listed above contain exceptions under specific circumstances. In addition, the Advisor’s Code of Ethics provides both for
different compliance procedures in certain circumstances and that exemptive relief may be given from certain of its requirements, upon application.
DISCLOSURE OF PORTFOLIO INFORMATION
It is the policy of the
Corporation to provide certain unaudited information regarding the portfolio composition of the Funds as of month-end (the “
Portfolio Holdings
”) to shareholders and others upon request to the Funds, beginning on the 15th
calendar day after the end of the month (or, if not a business day, the next business day thereafter). These complete holdings lists are not contained on the Corporation’s website. The top ten holdings and other portfolio characteristics at
month-end for each Fund may be found in the respective Fund page and/or Fund Profile posted on the Corporation’s website at
www.tcw.com
.
Shareholders and others who wish to obtain Portfolio Holdings for a particular month may make a request by contacting the Funds between the hours of 7:00 a.m. and 5:00 p.m. Pacific time, Monday through
Friday, toll free at (877) 829-4768 beginning on the 15th day following the end of that month (or, if not a business day, the next business day thereafter). Requests for Portfolio holdings may be made on a monthly basis pursuant to this
procedure, or standing requests for Portfolio Holdings may be accepted.
Persons making requests will be asked to provide their name and a
mailing address, e-mail address or fax number. The Funds reserve the right to refuse to fulfill a request if they believe that providing Portfolio Holdings would be contrary to the best interests of the Funds. Such decisions are made by personnel of
the Advisor of the Title of Senior Vice President or higher.
In addition to the policy stated above, the Funds may disclose Portfolio
Holdings at other times to analysts or ratings agencies. Personnel of the Advisor of a title of Senior Vice President or higher are permitted to authorize the release of the Funds’ Portfolio Holdings, as necessary, in conformity with the
procedures. The disclosure of Portfolio Holdings in this context is conditioned on the recipient agreeing to treat such Portfolio Holdings as confidential (provided that analysts and rating agencies may publish portfolio positions upon the consent
of personnel of the Advisor of the title of Senior Vice President or higher, under circumstances where such personnel determine that such information is publicly available through the Corporation’s website or by other means, or will become
publicly available through such publication), and to not allow the Portfolio Holdings to be used by it or its employees in connection with the purchase or sale of shares of the Funds. In addition, Portfolio Holdings are provided or otherwise
available to third-party service providers of the Funds, including the Funds’ custodian, pricing services, broker-dealers to facilitate trading and administrators, as necessary for the provision of services to the Funds. No compensation is
received by the Funds or the Advisor in connection with the disclosure of portfolio holdings information.
The Advisor and/or the Corporation
currently have entered into ongoing arrangements to provide portfolio holdings information with the following parties:
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Name
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Information Disclosed
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Frequency
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Lag Time
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Service Providers
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State Street Bank and Trust Company
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Complete portfolio holdings
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Daily
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(1)
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Fund Rating Agencies
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Lipper
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Complete portfolio holdings
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Monthly
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15 days after month end
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Morningstar
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Complete portfolio holdings
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Monthly
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15 days after month end
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Standard & Poor’s
|
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Complete portfolio holdings
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Monthly
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15 days after month end
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Weisenberger
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Complete portfolio holdings
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Monthly
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15 days after month end
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Consultants and Analysts
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Alpha Portfolio Advisors (Alphaport)
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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Americh Massena & Associates Inc.
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Complete portfolio holdings
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Monthly
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15 days after month end
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Name
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Information Disclosed
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Frequency
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Lag Time
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Bloomberg
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Complete portfolio holdings
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Monthly
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15 days after month end
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Callan Associates
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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Cambridge Associates
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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Canterbuy Consulting
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Complete portfolio holdings
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Monthly/Quarterly
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15 days after month end
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EPFR
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Complete portfolio holdings
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Monthly
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15 days after month end
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eVestment Alliance
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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FactSet Research Systems
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Complete portfolio holdings
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Monthly
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15 days after month end
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Fidelity
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Complete portfolio holdings
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Monthly
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15 days after month end
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Fund Evaluation Group
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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Informa Investment Solutions (PSN)
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Complete portfolio holdings
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Quarterly
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15 days after month/quarter end
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LCG Associates
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Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Mercer Investment Consulting
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Money Managers Review
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Morningstar
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Nelson (Lipper MarketPlace)
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
No-Load Fund Analyst
|
|
Complete portfolio holdings
|
|
Monthly
|
|
15 days after month end
|
|
Pavilion Advisory Group (Brockhouse Cooper)
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Rocaton Investment Advisors
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
RogersCasey (EQuest database)
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Vestek
|
|
Complete portfolio holdings
|
|
Monthly
|
|
15 days after month end
|
|
Wilshire Associates (Compass)
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month/quarter end
|
|
Yanni Partners
|
|
Complete portfolio holdings
|
|
Quarterly
|
|
15 days after month end
|
|
(1)
|
Information will typically be provided on a real time basis or as soon thereafter as possible.
|
Separate account and unregistered product clients (“
Clients
”) of the Advisor or its affiliates have access to their portfolio
holdings, and prospective clients have access to representative portfolio holdings. These Clients and prospective clients are not subject to the Corporation’s Portfolio Holdings Policy. Some of these Clients have substantially similar or
identical investment objectives and strategies to certain Funds. They, therefore, have similar, and in certain cases, nearly identical portfolio holdings as those Funds.
PROXY VOTING GUIDELINES
The following information is a summary
of the proxy voting guidelines of the Advisor. The Board of Directors of the Corporation has delegated the Corporation’s proxy voting authority to the Advisor except for with respect to the TCW Conservative Allocation Fund. The TCW Conservative
Allocation Fund, in its capacity as a shareholder of the Underlying Funds, may be requested to vote on matters pertaining to the Underlying Funds. If an Underlying Fund calls a shareholder meeting and solicits proxies, the TCW Conservative
Allocation Fund will vote its shares in the Underlying Fund in the same proportion as the vote of all other shareholders in the Underlying Fund, unless the Board authorizes the Advisor, on behalf of the TCW Conservative Allocation Fund, to vote in
some other manner.
Disclosure of Proxy Voting Guidelines
The proxy voting guidelines of the Advisor are available:
|
|
1.
|
By calling 800-FUND-TCW (877-829-4768) to obtain a hard copy; or
|
|
|
2.
|
By going to the SEC website at http://www.sec.gov.
|
When the Corporation receives a request for a description of the Advisor’s proxy voting guidelines, it will deliver the description that is disclosed in the Corporation’s Statement of Additional
Information. This information will be sent out via first class mail (or other means designed to ensure equally prompt delivery) within three business days of receiving the request.
The Advisor, on behalf of the Corporation, shall prepare and file Form N-PX with the SEC not later than August 31 of each year, which shall include the Corporation’s proxy voting record for the
most recent twelve-month period ended June 30 of that year. The Corporation’s proxy voting record for the most recent twelve-month period ended June 30 is available:
|
|
1.
|
By calling 800-FUND-TCW (800-386-3829) to obtain a hard copy; or
|
|
|
2.
|
By going to the SEC website at http://www.sec.gov.
|
When the Corporation receives a request for the Corporation’s proxy voting record, it will send the information disclosed in the Corporation’s most recently filed report on Form N-PX via first
class mail (or other means designed to ensure equally prompt delivery) within three business days of receiving the request. The Corporation also posts Form N-PX on its website as soon as is reasonably practicable after it is filed with the SEC.
93
TCW INVESTMENT MANAGEMENT COMPANY
SUMMARY OF PROXY VOTING GUIDELINES
Introduction
Certain affiliates of The TCW Group, Inc. (these affiliates are collectively
referred to as “
TCW
”) act as investment advisors for a variety of clients, including mutual funds. If TCW has responsibility for voting proxies in connection with these investment advisory duties, or has the responsibility to
specify to an agent of the client how to vote the proxies, TCW exercises such voting responsibilities for its clients through the corporate proxy voting process. TCW believes that the right to vote proxies is a significant asset of its clients’
holdings. In order to carry out its fiduciary responsibilities in the voting of proxies for its clients, TCW has established a proxy voting committee (the “
Proxy Committee
”) and adopted these proxy voting guidelines and procedures
(the “
Guidelines
”).
The Proxy Committee generally meets quarterly (or at such other frequency as determined by the Proxy
Committee), and its duties include establishing proxy voting guidelines and procedures, overseeing the internal proxy voting process, and reviewing proxy voting issues. The members of the Proxy Committee include TCW personnel from the investment,
compliance, legal and marketing departments. TCW also uses outside proxy voting services (each an “
Outside Service
”) to help manage the proxy voting process. An Outside Service facilitates TCW’s voting according to the
Guidelines (or, if applicable, according to guidelines submitted by TCW’s clients) and helps maintain TCW’s proxy voting records. All proxy voting and record keeping by TCW is, of course, dependent on the timely provision of proxy ballots
by custodians, clients and other third parties. Under specified circumstances described below involving potential conflicts of interest, an Outside Service may also be requested to help decide certain proxy votes. The Proxy Committee shall
periodically review and evaluate the voting recommendations of such Outside Service to ensure that recommendations are consistent with TCW’s clients’ best interests. In certain limited circumstances, particularly in the area of structured
financing, TCW may enter into voting agreements or other contractual obligations that govern the voting of shares. In the event of a conflict between any such contractual requirements and the Guidelines, TCW will vote in accordance with its
contractual obligations. In the event that TCW inadvertently receives any proxy materials on behalf of a client that has retained proxy voting responsibility, and where it is reasonably feasible for TCW to determine the identity of the client, TCW
will promptly forward such materials to the client.
As a matter of firm policy, TCW does not disclose to unaffiliated third parties how it
expects to vote on upcoming proxies and does not disclose the way it voted proxies without a legitimate need to know such information.
Philosophy
When voting proxies,
TCW’s utmost concern is that all decisions be made solely in the interests of the client and with the goal of maximizing the value of the client’s investments. Generally, proposals will be voted in accordance with the Guidelines and any
applicable guidelines provided by TCW’s clients. TCW’s underlying philosophy, however, is that its portfolio managers, who are primarily responsible for evaluating the individual holdings of TCW’s clients, are best able to determine
how to further client interests and goals. The portfolio managers may, in their discretion, take into account the recommendations of TCW management, the Proxy Committee, and an Outside Service.
Proxy Voting Overrides
Individual
portfolio managers, in the exercise of their best judgment and discretion, may from time to time override the Guidelines and vote proxies in a manner that they believe will enhance the economic value of clients’ assets, keeping in mind the best
interests of the beneficial owners. A portfolio manager choosing to abstain on a vote will provide a written rationale for doing so and that rationale will be in the vote notes of the proxy when it is voted. A portfolio manager choosing to override
the Guidelines must deliver a written rationale for each such decision to TCW’s Proxy Specialist (the “
Proxy Specialist
”), who will maintain such documentation in TCW’s proxy voting records and deliver a quarterly report
to the Proxy Committee of all votes cast other than in accordance with the Guidelines. If the Proxy Specialist believes there is a question regarding a portfolio manager’s vote, he/she will obtain the approval of TCW’s Director of Research
(the “
Director of Research
”) for the vote before submitting it. The Director of Research will review the portfolio manager’s vote and make a determination. If the Director of Research believes it appropriate, he/she may elect
to convene the Proxy Committee for its independent consideration as to how the vote should be cast.
Conflicts of Interest
In the event a potential conflict of interest arises in the context of voting proxies for TCW’s clients, the primary means by which TCW will avoid a
conflict is by casting such votes solely according to the Guidelines and any applicable guidelines provided by TCW’s clients, as outlined below. If a potential conflict of interest arises and there is no predetermined vote, or the Guidelines
(or any applicable TCW client guidelines) themselves refer such vote to the portfolio manager for decision, or the portfolio manager would like to override a predetermined vote, then TCW will undertake the following analysis:
94
Where the issuer soliciting proxy votes is itself a client of TCW’s (or because an
affiliate of such issuer, such as a pension or profit sharing plan sponsored by such issuer, is a client of TCW’s), then the Proxy Specialist will determine whether such relationship may be deemed not to be material to TCW based on the level of
assets under management and other relevant facts and circumstances. Where the relationship is deemed material, TCW will refrain completely from exercising its discretion with respect to voting the proxy with respect to such vote and will, instead,
refer that vote to an Outside Service for its independent consideration as to how the vote should be cast.
Where an employee
of TCW sits on the Board of a public company, the Proxy Specialist will determine whether such Board member is the portfolio manager for the account holding the security, or whether the Board member has spoken with the portfolio managers for the
account holding the security. If either the particular Board member is the portfolio manager or there has been communication concerning such proxy vote between the portfolio manager and the particular Board member, then the Proxy Specialist will
provide the Proxy Committee with the facts and vote rationale so that it can determine and vote the securities.
Where the
issuer is an affiliate of TCW, TCW will refrain completely from exercising its discretion with respect to voting the proxy with respect to such a vote and will, instead, refer that vote to an Outside Service for its independent consideration as to
how the vote should be cast.
Where any other portfolio manager conflict is identified with respect to a given proxy vote, the Proxy Committee
will remove such vote from the conflicted portfolio manager and will itself consider and cast the vote.
Proxy Voting Information and
Recordkeeping
Upon request to the Proxy Specialist, TCW provides proxy voting records to its clients. These records state how votes were
cast on behalf of client accounts, whether a particular matter was proposed by the company or a shareholder, and whether or not TCW voted in line with management recommendations.
TCW or an Outside Service will keep records of the following items: (i) these Proxy Voting Guidelines and any other proxy voting procedures; (ii) proxy statements received regarding client
securities (unless such statements are available on the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system); (iii) records of votes cast on behalf of clients (if maintained by an Outside Service, that Outside Service
will provide copies of those records promptly upon request); (iv) records of written requests for proxy voting information and TCW’s response (whether a client’s request was oral or in writing); and (v) any documents prepared by
TCW that were material to making a decision how to vote, or that memorialized the basis for the decision, including proxy overrides delivered to the Proxy Specialist and decisions of the Proxy Committee. Additionally, TCW or an Outside Service will
maintain any documentation related to an identified material conflict of interest.
TCW or an Outside Service will maintain these records in
an easily accessible place for at least five years from the end of the fiscal year during which the last entry was made on such record. For the first two years, TCW or an Outside Service will store such records at its principal office.
International Proxy Voting
While TCW
utilizes these Proxy Voting Guidelines for both international and domestic portfolios and clients, there are some significant differences between voting U.S. company proxies and voting non-U.S. company proxies. For U.S. companies, it is relatively
easy to vote proxies, as the proxies are automatically received and may be voted by mail or electronically. In most cases, the officers of a U.S. company soliciting a proxy act as proxies for the company’s shareholders.
For proxies of non-U.S. companies, however, it is typically both difficult and costly to vote proxies. The major difficulties and costs may include:
(i) appointing a proxy; (ii) knowing when a meeting is taking place; (iii) obtaining relevant information about proxies, voting procedures for foreign shareholders, and restrictions on trading securities that are subject to proxy
votes; (iv) arranging for a proxy to vote; and (v) evaluating the cost of voting.
Furthermore, the operational hurdles to voting
proxies vary by country. As a result, TCW considers whether or not to vote an international proxy based on the particular facts and circumstances. However, when TCW believes that an issue to be voted is likely to affect the economic value of the
portfolio securities, that its vote may influence the ultimate outcome of the contest, and that the benefits of voting the proxy exceed the expected costs, TCW will make every reasonable effort to vote such proxies.
Guidelines
The proxy voting decisions
set forth below refer to proposals by company management except for the categories of “Shareholder Proposals” and “Social Issue Proposals.” The voting decisions in these latter two categories refer to proposals by outside
shareholders.
95
Governance
|
|
•
|
|
For
director and management nominees in uncontested elections
|
|
|
•
|
|
For
management nominees in contested elections
|
|
|
•
|
|
For
ratifying auditors, except
against
if the previous auditor was dismissed because of a disagreement with the company or if the
non-audit services exceed 51% of fees
|
|
|
•
|
|
Generally
for routine management proposals
|
|
|
•
|
|
For
amendments to the company’s certificate of incorporation or bylaws, except against if an amendment would have the effect of reducing
shareholders’ rights
|
Capital Structure
|
|
•
|
|
Generally
for reasonable changes in authorized common stock
|
|
|
•
|
|
For
the issuance of common stock or preferred stock, except
against
if the shares have voting rights superior to those of other common or
preferred shareholders, as applicable
|
|
|
•
|
|
For
approving the issuance or exercise of stock warrants
|
|
|
•
|
|
For
authorizing preferred stock and making reasonable changes to authorized preferred stock, except
against
if the board has unlimited
rights to set the terms and conditions of the shares
|
|
|
•
|
|
For
amending or canceling a class or series of preferred stock
|
|
|
•
|
|
Against
authorizing and for eliminating or amending dual or multiple classes of common stock
|
|
|
•
|
|
For
a stock repurchase program
|
|
|
•
|
|
For
a reverse stock split, except
against
if the company does not intend to proportionally reduce the number of authorized shares
|
Mergers and Restructuring
|
|
•
|
|
Generally
for mergers and restructurings, including recapitalization, bankruptcy restructurings, liquidations, reincorporating in a different
state, leveraged buyout of the company, spinning off certain company operations or divisions, the sale of assets
|
|
|
•
|
|
Against
adopting or preserving cumulative voting
|
Board of Directors
|
|
•
|
|
For
limiting the liability of directors
|
|
|
•
|
|
For
setting the board size
|
|
|
•
|
|
For
allowing the directors to fill vacancies on the board without shareholder approval
|
|
|
•
|
|
Against
giving the board the authority to set the size of the board as needed without shareholder approval
|
|
|
•
|
|
For
a proposal regarding the removal of directors, except against if the proposal limits the removal of directors to cases where there is legal
cause
|
Anti-Takeover Provisions
|
|
•
|
|
Generally
against the concept of a classified board
|
|
|
•
|
|
Generally
against the concept of a shareholder rights plan (poison pill)
|
|
|
•
|
|
Against
eliminating or limiting shareholders’ right to call a special meeting
|
|
|
•
|
|
For
restoring shareholders’ right to call a special meeting
|
|
|
•
|
|
Against
eliminating or limiting shareholders’ right to act by written consent
|
|
|
•
|
|
For
restoring shareholders’ right to act by written consent
|
|
|
•
|
|
Against
establishing or maintaining a supermajority vote provision to (i) approve a merger or other business combination, (ii) change
certain bylaw or charter provisions
|
|
|
•
|
|
Against
expanding or clarifying the authority of the board of directors to consider factors other than the interests of shareholders in
assessing a takeover bid
|
|
|
•
|
|
Against
fair price provisions
|
|
|
•
|
|
For
limiting the payment of greenmail
|
|
|
•
|
|
Against
adopting advance notice requirements
|
|
|
•
|
|
Against
opting into a state takeover statutory provision
|
Compensation
|
|
•
|
|
Generally
in favor of reasonable compensation and bonus plans proposed by management, including one-time stock options and deferred compensation
plans
|
|
|
•
|
|
For
adopting, amending or adding shares to a stock incentive, purchase or award plan for employees and non-employee directors, provided that
outstanding common stock is not overly diluted
|
|
|
•
|
|
For
limiting per-employee option awards
|
|
|
•
|
|
For
extending the term of a stock incentive plan for employees
|
|
|
•
|
|
Refer
on assuming stock incentive plans
|
|
|
•
|
|
With
management on “say on pay” proposals
|
96
Shareholder Proposals
|
|
•
|
|
For
requiring shareholder ratification of auditors
|
|
|
•
|
|
Against
requiring the auditors to attend the annual meeting
|
|
|
•
|
|
Against
limiting consulting by auditors
|
|
|
•
|
|
Against
requiring the rotation of auditors
|
|
|
•
|
|
Against
restoring preemptive rights
|
|
|
•
|
|
For
asking the company to study sales, spin-offs, or other strategic alternatives
|
|
|
•
|
|
For
asking the board to adopt confidential voting and independent tabulation of the proxy ballots
|
|
|
•
|
|
Against
asking the company to refrain from counting abstentions and broker non-votes in vote tabulations
|
|
|
•
|
|
Against
eliminating the company’s discretion to vote unmarked proxy ballots.
|
|
|
•
|
|
For
providing equal access to the proxy materials for shareholders
|
|
|
•
|
|
Generally
against making changes to board or chairman election, composition or eligibility requirements
|
|
|
•
|
|
Against
changing the annual meeting location or date
|
|
|
•
|
|
For
increasing disclosure regarding the board’s role in the development and monitoring of the company’s long-term strategic plan
|
|
|
•
|
|
Against
urging the creation of a shareholder committee
|
|
|
•
|
|
For
adopting cumulative voting
|
|
|
•
|
|
Against
making directors liable for acts or omissions that constitute a breach of fiduciary care resulting from a director’s gross
negligence and/or reckless or willful neglect
|
|
|
•
|
|
For
repealing a classified board
|
|
|
•
|
|
Against
asking the board to redeem or to allow shareholders to vote on a poison pill shareholder rights plan
|
|
|
•
|
|
Generally
against supermajority provisions
|
|
|
•
|
|
Against
repealing fair price provisions
|
|
|
•
|
|
For
restoring shareholders’ right to call a special meeting or act by written consent
|
|
|
•
|
|
For
limiting the board’s discretion to issue targeted share placements or requiring shareholder approval before such block placements can
be made
|
|
|
•
|
|
For
seeking to force the company to opt out of a state takeover statutory provision
|
|
|
•
|
|
Against
reincorporating the company in another state
|
|
|
•
|
|
For
limiting greenmail payments
|
|
|
•
|
|
Generally
against restricting executive or director compensation, but for reasonable enhanced disclosure of executive compensation
|
|
|
•
|
|
For
banning or calling for a shareholder vote on future golden parachutes
|
|
|
•
|
|
Against
seeking to award performance-based stock options
|
|
|
•
|
|
Against
establishing a policy of expensing the costs of all future stock options issued by the company in the company’s annual income
statement
|
|
|
•
|
|
Against
requesting that future executive compensation be determined without regard to any pension fund income
|
|
|
•
|
|
Against
approving extra benefits under Supplemental Executive Retirement Plans (SERPs)
|
|
|
•
|
|
Against
requiring option shares to be held
|
|
|
•
|
|
Generally
for the creation of a compensation and a nominating committee
|
|
|
•
|
|
For
increasing the independence of key committees
|
Social Issue Proposals
|
|
•
|
|
Generally
for proposals that ask a company to review operations or impacts or disclosure activities or impacts, except against if the proposal
calls for action beyond reporting
|
|
|
•
|
|
Generally
against proposals that ask the company to implement changes in procedure, including the development of social, economic, environmental
or ethical criteria to govern contracts and production
|
Additional Information
A description of TCW’s policies and procedures relating to proxy voting and class actions can also be found in the firm’s Part 2A of Form ADV. A
copy of TCW’s Form ADV is available to clients upon request to the Proxy Specialist.
DETERMINATION OF NET
ASSET VALUE
As discussed in the Prospectus, the Corporation will not calculate the net asset value of each class of a Fund on certain
holidays, weekends and when there is no activity in the Fund’s shares. On those days, securities held by a Fund may nevertheless be actively traded, and the value of the Fund’s shares could be significantly affected.
97
A Fund determines its net asset value per share of each class by subtracting the liabilities attributable to
the class (including accrued expenses and dividends payable) from the total assets attributable to the class (the market value of the securities the Fund holds plus cash and other assets attributable to the class, including income accrued but not
yet received) and dividing the result by the total number of shares of the class outstanding. The assets of the TCW Conservative Allocation Fund consist primarily of shares of the Underlying Funds, which are valued at their respective net asset
values.
HOW TO BUY AND REDEEM SHARES
Shares in a Fund may be purchased and redeemed in the manner described in the Prospectus and in this Statement of Additional Information.
Use of Sub-Transfer Agency Accounting or Administrative Services
Certain financial
intermediaries have contracted with the Distributor to perform certain sub-transfer agent accounting or administrative services for certain clients or retirement plan investors who have invested in the Funds. In consideration of the provision of
these sub-transfer agency accounting or administrative services, the financial intermediaries will receive sub-transfer agency accounting or administrative fees, a portion of which may be paid by the Funds.
Purchases Through Broker-Dealers and Financial Organizations
Shares of the Funds may be purchased and redeemed through certain broker-dealers and financial organizations and their authorized intermediaries. If purchases and redemptions of a Fund’s shares are
arranged and settlement is made at an investor’s election through a registered broker-dealer, other than the Distributor, the broker-dealer may in its discretion, charge a fee for that service.
Computation of Public Offering Prices
The Funds offer their shares to the public on a continuous basis. The public offering price per share of each Fund is equal to its net asset value per
share next computed after receipt of a purchase order. See “Determination of Net Asset Value” above.
Distributions in Kind
If the Board of Directors determines that it would be detrimental to the best interests of the remaining shareholders of a Fund to make a
redemption payment wholly in cash, the Fund may pay, in accordance with SEC rules, any portion of a redemption in excess of the lesser of $250,000 or 1% of the Fund’s net assets by distribution in kind of portfolio securities in lieu of cash.
Shareholders receiving distributions in kind may incur brokerage commissions or other costs when subsequently disposing of shares of those securities.
HOW TO EXCHANGE SHARES
A shareholder may exchange all or part
of its shares of one Fund for shares of another Fund (subject to receipt of any required state securities law clearances with respect to certain Funds in the shareholder’s state of residence). An exchange of shares between Funds is treated for
federal income tax purposes as a redemption (sale) of shares given in exchange by the shareholder, and an exchanging shareholder may, therefore, realize a taxable gain or loss in connection with the exchange. Conversion between classes is intended
for shares held through a financial intermediary offering a fee-based or wrap-fee program that has an agreement with the Advisor or the Fund’s distributor specific for this purpose. Such a conversion in these particular circumstances does not
cause a shareholder to realize taxable gain or loss. Please contact your tax advisor for additional information. See “Distributions and Taxes” below.
A shareholder may also exchange the shares of any Fund for shares of the Fidelity Prime Money Market Portfolio, which is an unaffiliated, separately managed, money market mutual fund or exchange shares of
Fidelity Prime Money Market Portfolio for shares of any Fund. A shareholder should read the Fidelity Prime Money Market Portfolio prospectus prior to investing in that money market mutual fund. Shareholders can obtain a prospectus for the Fidelity
Prime Money Market Portfolio by calling (800) 386-3829 or by visiting www.tcw.com.
The exchange privilege enables a shareholder to
acquire shares in a Fund with different investment objectives or policies when the shareholder believes that a shift between Funds is an appropriate investment decision. Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value and the proceeds are immediately invested, at a price as described above, in shares of the Fund being acquired. A Fund reserves the right to reject any exchange request.
As described in each Prospectus, the exchange privilege may be terminated or revised by the Funds.
98
PURCHASES-IN-KIND
The Funds may, at the sole discretion of the Advisor, accept securities in exchange for shares of a Fund. Securities which may be accepted in exchange for shares of any Fund must: (1) meet the
investment objectives and policies of the Fund; (2) be acquired for investment and not for resale; (3) be liquid securities which are not restricted as to transfer either by law or liquidity of market (determined by reference to liquidity
policies established by the Board of Directors); and (4) have a value which is readily ascertainable as evidenced by, for example, a listing on a recognized stock exchange. In-kind purchases are not accepted for the Fidelity Prime Money Market
Portfolio, which is an unaffiliated separately managed money market mutual fund.
DISTRIBUTIONS AND TAXES
Each of the Funds intends to qualify as a “regulated investment company” under Subchapter M of the Internal Revenue Code of
1986, as amended (the “
Internal Revenue Code
”). A Fund that is a regulated investment company and distributes to its shareholders at least 90% of its investment company taxable income (including, for this purpose, its net
realized short-term capital gains) and 90% of its tax-exempt interest income (reduced by certain expenses), will not be liable for federal income taxes to the extent its investment company taxable income and its net realized long-term capital gains,
if any, are distributed to its shareholders. However, a Fund will be taxed on that portion of taxable net investment income and long-term and short-term capital gains that it retains. Furthermore, a Fund will be subject to United States corporate
income tax (and possibly state or local income or franchise tax) with respect to such distributed amounts in any year that it fails to qualify as a regulated investment company or fails to meet the 90% distribution requirement (unless certain cure
provisions apply).
To qualify as a regulated investment company, in addition to the 90% distribution requirement described above, a Fund
must: (a) derive at least 90% of its gross income from dividends, interest, certain payments with respect to securities loans, net income from certain publicly traded partnerships, and gains from the sale or other disposition of stock or
securities or foreign currencies or other income (including but not limited to gains from options, futures or forward contracts) derived with respect to its business in investing in such stock, securities or currencies, and (b) diversify its
holdings so that at the end of each fiscal quarter, (i) at least 50% of the value of the Fund’s assets is represented by cash items, U.S. Government securities, securities of other regulated investment companies and other securities,
limited in respect of any one issuer, to an amount not greater than 5% of the Fund’s total assets and 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its total assets is invested in the
securities of any one issuer (other than U.S. Government securities or securities of other regulated investment companies) or in the securities of two or more issuers (other than U.S. Government securities or securities of other regulated investment
companies) which the Fund controls (
i.e.
, holds at least 20% of the combined voting power) and which are engaged in the same or similar trades or businesses or related trades or businesses or in the securities of certain publicly traded
partnerships.
If a Fund invests in foreign currency or forward foreign exchange contracts, gains from such foreign currency and forward
foreign exchange contracts relating to investments in stocks, securities or foreign currencies are considered to be qualifying income for purposes of the 90% gross income test described in clause (a) above, although regulations may require that
such gains are directly related to the Fund’s principal business of investing in stock or securities. It is currently unclear, however, who will be treated as the issuer of certain foreign currency instruments or how foreign currency contracts
will be valued for purposes of the asset diversification requirements applicable to the Fund described in clause (c) above. Until such time as these uncertainties are resolved, each Fund will utilize the more conservative, or limited,
definition or approach with respect to determining permissible investments in its portfolio.
Investments in foreign currencies, forward
contracts, options, futures contracts and options thereon may subject a Fund to special provisions of the Internal Revenue Code that may affect the character of gains and losses realized by the Fund (
i.e.
, may affect whether gains or losses
are ordinary or capital), may accelerate recognition of income to a Fund, and may defer Fund losses. These rules also (a) could require a Fund to mark-to-market certain types of the positions in its portfolio (
i.e.
, treat them as if they
had been closed out in a fully taxable transaction) and (b) may cause the Fund to recognize income without receiving cash with which to pay dividends or make distributions in amounts necessary to satisfy the distribution requirements for
avoiding income and excise taxes. Under the Internal Revenue Code certain hedging activities may cause a dividend that would otherwise be subject to the lower tax rate applicable to a “qualifying dividend” to instead be taxed at the tax
rate applicable to ordinary income.
Under the Internal Revenue Code, gains or losses attributable to fluctuations in foreign currency
exchange rates which occur between the time a Fund accrues interest income or other receivables or accrues expenses or other liabilities denominated in a foreign currency and the time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary loss. Similarly, on disposition of some investments, including debt securities and certain forward contracts denominated in a foreign currency, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of the security or contract and the date of disposition also are treated as ordinary gain or loss. These gains and losses, referred to under the Internal Revenue Code as
“section 988” gains and losses, may increase or decrease the amount of the Fund’s investment company taxable income to be distributed to its shareholders as ordinary income. For example, fluctuations in exchange rates may increase the
amount of income that the Fund must distribute in order to qualify for treatment as a regulated investment company and to prevent application of an excise tax on undistributed income. Alternatively, fluctuations in exchange rates may decrease or
eliminate income available for distribution. If section 988 losses exceed other investment company taxable income during a taxable year, the Fund would not be able
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to make ordinary dividend distributions, or distributions made before the losses were realized would be recharacterized as a return of capital to shareholders for federal income tax purposes,
rather than as an ordinary dividend, reducing each shareholder’s basis in its shares of the Fund.
As a general rule, a Fund’s gain
or loss on a sale or exchange of an investment will be a long-term capital gain or loss if the Fund has held the investment for more than one year and will be a short-term capital gain or loss if it has held the investment for one year or less.
Furthermore, as a general rule, a shareholder’s gain or loss on a sale or redemption of Fund shares will be a long-term capital gain or loss if the shareholder has held his or her Fund shares for more than one year and will be a short-term
capital gain or loss if he or she has held his or her Fund shares for one year or less. For federal, state and local income tax purposes, an exchange by a shareholder of shares in one Fund for shares in another Fund will be treated as a taxable sale
for a purchase price equal to the fair market value of the shares received.
Any loss realized on the disposition by a shareholder of its
shares in a Fund will be disallowed to the extent the shares disposed of are replaced with other Fund shares, including replacement through the reinvesting of dividends and capital gains distributions in the Fund, within a period (of 61 days)
beginning 30 days before and ending 30 days after the disposition of the shares. In such a case, the basis of the shares acquired will be increased to reflect the disallowed loss. Any loss realized by a shareholder on the sale of a Fund share held
by the shareholder for six months or less will be treated as a long-term capital loss to the extent of any distributions of capital gain dividends (as defined below) received by the shareholder with respect to such share.
Due to recent legislation, each Fund (or its administrative agents) is required to report to the Internal Revenue Service and furnish to shareholders the
cost basis information for sale transactions of shares purchased on or after January 1, 2012. Shareholders may elect to have one of several cost basis methods applied to their account when calculating the cost basis of shares sold, including
average cost, FIFO (“first in, first out”) or some other specific identification method. Unless you instruct otherwise, each Fund will use average cost as its default cost basis method, and will treat sales as first coming from shares
purchased prior to January 1, 2012. If average cost is used for the first sale of shares covered by these new rules, the shareholder may only use an alternative cost basis method for shares purchased prospectively. Shareholders should consult
with their tax advisors to determine the best cost basis method for their tax situation. Shareholders that hold their shares through a financial intermediary should contact such financial intermediary with respect to reporting of cost basis and
available elections for their accounts.
Any realized gains will be distributed as described in the Prospectus. See “Distributions and
Taxes” in the Prospectus. Distributions of long-term capital gains (“
capital gain dividends
”), if any, will be taxable to shareholders as long-term capital gains, regardless of how long a shareholder has held Fund shares, and
will be designated as capital gain dividends in a written notice mailed to shareholders after the close of the Fund’s prior taxable year. Current tax law generally provides for a maximum tax rate for individual taxpayers of 15% or 20%
(depending on whether the individual’s income exceeds certain threshold amounts) on long-term capital gains and from certain qualifying dividends on corporate stock. These rate reductions do not apply to corporate taxpayers.
Note that distributions of earnings from dividends paid by certain “qualified foreign corporations” can also qualify for the lower tax rates on
qualifying dividends. A shareholder will also have to satisfy a more than 60-day holding period with respect to any distributions of qualifying dividends in order to obtain the benefit of the lower tax rate. Distributions of earnings from
non-qualifying dividend interest income, other types of ordinary income and short-term capital gains will be taxed at the ordinary income tax rate applicable to the taxpayer.
The TCW Conservative Allocation Fund will not be able to offset gains distributed by one Underlying Fund in which it invests against losses in another Underlying Fund in which the TCW Conservative
Allocation Fund invests. Redemptions of shares in an Underlying Fund, including those resulting from changes in the allocation among Underlying Funds, could also cause additional distributable gains to shareholders of the TCW Conservative Allocation
Fund. A portion of any such gains may be short-term capital gains that would be distributable as ordinary income to shareholders of the TCW Conservative Allocation Fund. Further, a portion of losses on redemptions of shares in the Underlying Funds
may be deferred under the wash sale rules. As a result of these factors, the use of the fund of funds structure by the TCW Conservative Allocation Fund could therefore affect the amount, timing and character of distributions to shareholders. For tax
years beginning after December 22, 2010, the TCW Conservative Allocation Fund will be able to pass through from the Underlying Funds any potential benefit from the foreign tax credit or income from certain federal obligations (that may be
exempt from state tax) provided that at least 50% of such Underlying Fund’s total assets are invested in other regulated investment companies at the end of each quarter of the tax year.
An additional 3.8% Medicare tax will be imposed on certain net investment income (including ordinary dividends and capital gain distributions received from a Fund and net gains from redemption or other
taxable dispositions of Fund shares) of U.S. individuals, estates and trusts to the extent that such person’s “modified adjusted gross income” (in the case of an individual) or “adjusted gross income” (in the case of a trust
or estate) exceeds certain threshold amounts.
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A Fund (and in the case of the TCW Conservative Allocation Fund, the Underlying Funds) may be subject to
taxes in foreign countries in which each invests. Tax conventions between certain countries and the U.S. may reduce or eliminate such taxes. If more than 50% of the value of a Fund’s total assets at the close of its taxable year consists of
stock or securities of foreign corporations, or if at least 50% of the value of a Fund’s total assets at the close of each quarter of its taxable year is represented by interests in other regulated investment companies, that fund may elect to
“pass through” to its shareholders the amount of foreign taxes paid or deemed paid by that fund. If that fund so elects, each of its shareholders would be required to include in gross income, even though not actually received, its pro rata
share of the foreign taxes paid or deemed paid by that fund, but would be treated as having paid its pro rata share of such foreign taxes and would therefore be allowed to either deduct such amount in computing taxable income or use such amount
(subject to various limitations) as a foreign tax credit against federal income tax (but not both).
If a Fund invests in an entity which is
classified as a “passive foreign investment company” (“
PFIC
”) for U.S. tax purposes, the application of certain technical tax provisions applying to such companies could result in the imposition of federal income
tax with respect to such investments at the Fund level which could not be eliminated by distributions to the shareholders of the Fund. It is not anticipated that any taxes at the Fund level with respect to investments in PFICs will be significant.
Note that distributions from a PFIC are not eligible for the reduced rate of tax on “qualifying dividends.”
In computing its net
taxable (and distributable) income and/or gains, a Fund may choose to take a dividend paid deduction for a portion of the proceeds paid to redeeming shareholders. This method (sometimes referred to as “equalization”) would permit the Fund
to avoid distributing to continuing shareholders taxable dividends representing earnings included in the net asset value of shares redeemed. Using this method will not affect the Fund’s total return. Since there are some unresolved technical
tax issues relating to use of equalization by a Fund, there can be no assurance that the Internal Revenue Service will agree with the Fund’s methodology and/or calculations which could possibly result in the imposition of tax, interest or
penalties on the Fund.
Under the Internal Revenue Code, a nondeductible excise tax of 4% is imposed on a Fund to the extent the Fund does not
distribute by the end of any calendar year an amount at least equal to the sum of 98% of its ordinary income (taking into account certain deferrals and elections) for that calendar year and at least 98.2% of the amount of its net capital gains (both
long-term and short-term) for the one-year period ending on October 31 of such calendar year (or December 31 if the Fund so elects), plus any undistributed amounts of taxable income for prior years. For this purpose, however, any income or
gain retained by the Fund that is subject to corporate income tax will be considered to have been distributed by year-end. Each Fund intends to meet these distribution requirements to avoid the excise tax liability.
Dividends generally are taxable to shareholders at the time they are paid. However, dividends declared in October, November and December and made to
shareholders of record in such a month are treated as paid and are taxable as of December 31, provided that the Fund pays the dividend during January of the following year.
If a shareholder fails to furnish a correct taxpayer identification number, fails to report fully dividend or interest income, or fails to certify that it has provided a correct taxpayer identification
number and that it is not subject to “backup withholding,” then the shareholder may be subject to a 28% “backup withholding” tax with respect to: (a) taxable dividends and distributions, and, (b) the proceeds of any
redemptions of Fund shares. An individual’s taxpayer identification number is his social security number. The 28% “backup withholding” tax is not an additional tax and may be credited against a taxpayer’s regular federal income
tax liability.
Dividends to shareholders who are non-resident aliens or foreign entities will generally be subject to a 30% United States
withholding tax under provisions of the Internal Revenue Code applicable to foreign individuals and entities unless a reduced rate of withholding or a withholding exemption is provided under applicable treaty law. Non-resident shareholders should
consult their own tax advisors. Note that the preferential rate of tax applicable to certain dividends (discussed above) does not apply to dividends paid to foreign shareholders.
For taxable years beginning before January 1, 2014 (unless further extended by Congress), properly designated dividends received by a nonresident alien or foreign entity are generally exempt from
U.S. federal withholding tax when they (a) are paid in respect of a Fund’s “qualified net interest income” (generally, the Fund’s U.S. source interest income, reduced by expenses that are allocable to such income), or
(b) are paid in connection with the Fund’s “qualified short-term capital gains” (generally, the excess of the Fund’s net short-term capital gain over the Fund’s long-term capital loss for such taxable year). However,
depending on the circumstances, the Fund may designate all, some or none of the Fund’s potentially eligible dividends as such qualified net interest income or as qualified short-term capital gains, and a portion of the Fund’s distributions
(e.g. interest from non-U.S. sources or any foreign currency gains) would be ineligible for this potential exemption from withholding. There can be no assurance as to whether or not legislation will be enacted to extend this exemption.
Effective July 1, 2014, a Fund will be required to withhold U.S. tax (at a 30% rate) on payments of taxable dividends and (effective January 1,
2017) redemption proceeds and certain capital gain dividends made to certain non-U.S. entities that fail to comply (or be deemed compliant) with extensive new reporting and withholding requirements designed to inform the U.S. Department of Treasury
of U.S.-owned foreign investment accounts. Shareholders may be requested to provide additional information to a Fund to enable the Fund to determine whether withholdings are required.
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Foreign shareholders may also be subject to U.S. estate tax with respect to their Fund shares.
With respect to the Enhanced Commodity Strategy Fund, the Fund may gain exposure to the commodities markets through investments in commodity-linked
derivative instruments. The IRS issued Revenue Ruling 2006-1 which concluded that income and gains from certain commodity-linked derivatives is not qualifying income under Subchapter M of the Internal Revenue Code. As a result, the Fund’s
ability to invest directly in commodity-linked swaps as part of its investment strategy is limited by the requirement that it receive no more than 10% of its gross income from such investments.
However, in Revenue Ruling 2006-31, the IRS indicated that income from alternative investment instruments (such as certain structured notes) that create
commodity exposure may be considered qualifying income under the Internal Revenue Code. The IRS subsequently issued private letter rulings to other taxpayers in which the IRS specifically concluded that income from certain commodity index-linked
notes is qualifying income and that income derived from a fund’s investment in a controlled foreign corporation (“
CFC
”) also will constitute qualifying income to the fund, even if the CFC itself owns commodity-linked swaps. The
Fund seeks to gain exposure to the commodity markets primarily through investments in commodity index-linked notes and through investments in the Subsidiary. The Fund has received a private letter ruling from the IRS confirming that income from the
Fund’s investment in the Subsidiary and income derived from certain commodity index-linked notes will constitute “qualifying income” for purposes of Subchapter M.
It should be noted, however, that the IRS currently has suspended the issuance of such rulings pending further review. There can be no assurance that the IRS will not change its position that income
derived from commodity-linked notes and wholly-owned subsidiaries is qualifying income. Furthermore, the tax treatment of commodity-linked notes, other commodity-linked derivatives, and the Fund’s investments in the Subsidiary may otherwise be
adversely affected by future legislation, Treasury Regulations and/or guidance issued by the IRS. Such developments could affect the character, timing and/or amount of the Fund’s taxable income or any distributions made by the Fund or result in
the inability of the Fund to operate as described in the Prospectus and this Statement of Additional Information.
A foreign corporation, such
as the Subsidiary, generally is not subject to U.S. federal income taxation on its business income unless it is engaged in, or deemed to be engaged in, a U.S. trade or business. It is expected that the Subsidiary will conduct its activities so as to
satisfy the requirements of a safe-harbor set forth in the Internal Revenue Code, under which the Subsidiary may engage in certain commodity-related investments without being treated as engaged in a U.S. trade or business. However, if the
Subsidiary’s activities were determined not to be of the type described in the safe harbor, its activities may be subject to U.S. federal income taxation.
A foreign corporation, such as the Subsidiary, that does not conduct a U.S. trade or business is nonetheless subject to a U.S. withholding tax at a flat 30% rate (or lower treaty rate) on certain U.S.
source gross income. No tax treaty is in force between the United States and the Cayman Islands that would reduce the 30% rate of withholding tax. However, it is not expected that the Subsidiary will derive income subject to U.S. withholding taxes.
The Subsidiary will be treated as a CFC for U.S. federal income tax purposes. As a result, the Fund must include in gross income for such
purposes all of the Subsidiary’s “subpart F” income when the Subsidiary recognizes that income, whether or not the Subsidiary distributes such income to the Fund. It is expected that all of the Subsidiary’s income will be subpart
F income. The Fund’s tax basis in the Subsidiary will be increased as a result of the Fund’s recognition of the Subsidiary’s subpart F income. The Fund will not be taxed on distributions received from the Subsidiary to the extent of
the Subsidiary’s previously-undistributed subpart F income although its tax basis in the Subsidiary will be decreased by such amount. All subpart F income will be taxed as ordinary income, regardless of the nature of the transactions that
generate it. Subpart F income does not qualify for treatment as qualified dividend income. If the Subsidiary recognizes a net loss, the net loss will not be available to offset income recognized by the Fund.
The foregoing is a general and abbreviated summary of the applicable provisions of the Internal Revenue Code and Treasury Regulations presently in
effect. For the complete provisions, reference should be made to the pertinent Internal Revenue Code sections and the Treasury Regulations promulgated thereunder. The Internal Revenue Code and these Regulations are subject to change by legislative
or administrative action.
Each shareholder will receive annual information from its Fund regarding the tax status of Fund distributions.
Shareholders are urged to consult their attorneys or tax advisors with respect to the applicability of federal, state, local, estate and gift taxes and non-U.S. taxes to their investment in a Fund.
For information concerning distributions and taxes of the Fidelity Prime Money Market Portfolio, please refer to the Prospectus for the Fidelity Prime
Money Market Portfolio, which is an unaffiliated separately managed money market mutual fund.
SHARES AND VOTING
RIGHTS
The Funds offer two classes of shares: Class I shares and Class N shares. The Class I shares are offered at the current net asset
value. The Class N shares are also offered at the current net asset value, but will be subject to distribution or service fees imposed under the Distribution Plan. Shares of each class of a Fund represents an equal proportionate share in the assets,
liabilities, income and expenses
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of that Fund and, generally, have identical voting, dividend, liquidation, and other rights, other than the payment of distribution fees imposed under the Distribution Plan. All shares issued
will be fully paid and nonassessable and will have no preemptive or conversion rights. Each share has one vote and fractional shares have fractional votes. As a Maryland corporation, the Corporation is not required to hold an annual shareholder
meeting in any year in which the selection of directors is not required to be acted on under the 1940 Act. Shareholder approval will be sought only for certain changes in the operation of the Funds and for the election of directors under certain
circumstances. Directors may be removed by a majority of all votes entitled to be cast by shareholders at a meeting. A special meeting of the shareholders will be called to elect or remove directors if requested by the holders of ten percent of the
Corporation’s outstanding shares. All shareholders of the Funds will vote together with all other shareholders of the Funds and with all shareholders of all other funds that the Corporation may form in the future on all matters affecting the
Corporation, including the election or removal of directors. For matters where the interests of separate Funds or classes of a Fund are not identical, the matter will be voted on separately by each affected Fund or class.
For matters affecting only one Fund or class of a Fund, only the shareholders of that Fund or class will be entitled to vote thereon. Voting is not
cumulative. Upon request in writing by ten or more shareholders who have been shareholders of record for at least six months and hold at least the lesser of shares having a net asset value of $25,000 or one percent of all outstanding shares, the
Corporation will provide the requesting shareholders either access to the names and addresses of all shareholders of record or information as to the approximate number of shareholders of record and the approximate cost of mailing any proposed
communication to them. If the Corporation elects the latter procedure, and the requesting shareholders tender material for mailing together with the reasonable expenses of the mailing, the Corporation will either mail the material as requested or
submit the material to the SEC for a determination that the mailing of the material would be inappropriate.
TRANSFER AGENT AND CUSTODIANS
U.S. Bancorp Fund Services, LLC, P.O. Box 701, Milwaukee, WI 53201, serves as transfer agent for the Corporation. State Street Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02117, serves as custodian for the Corporation. Chase Bank, 4 New York Plaza, New York, New York 10004; and Morgan Guaranty Trust Company, 60 Wall Street, New York, New York 10260 act as limited custodians under the terms of certain repurchase and
futures agreements.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP, Two California Plaza, 350 South Grand Avenue, Los Angeles, California 90071-3462.
LEGAL COUNSEL
Dechert LLP, 1900 K Street, N.W., Washington, D.C. 20006-2401.
FINANCIAL STATEMENTS
The audited financial statements and
financial highlights for the period ended October 31, 2013, including the reports of the independent registered public accounting firm on those financial statements and highlights, appearing in the Corporation’s Annual Report to
Shareholders are incorporated by reference and made a part of this document.
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