<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- -----------------------------------------------------------------------------
During the six-month period ended August 31, 1995, the U.S. stock market,
led by technology stocks, scaled new heights, increasing an impressive 16.41
percent, as measured by the Dow Jones Industrial Average (the Standard &
Poor's 500 Composite Stock Price Index and the NASDAQ Composite Index
increased 16.79 percent and 28.52 percent, respectively). The financial
markets' dramatic moves largely reflected a slowing of the U.S. economy and a
shift to the belief that the Federal Reserve would ease monetary policy.
THE MARKETPLACE
According to the Fund's investment adviser, TCW Funds Management, Inc.
(TCW), the outlook for financial assets improved markedly this summer as the
dollar broke out of a five-year downtrend. In addition to attracting foreign
investors into the U.S. market, a stronger dollar gives the Federal Reserve
Board additional flexibility to reduce interest rates. The positive impact of
a rising dollar on inflation also leads to lower rates. An added benefit of
the stronger dollar will be the J-curve impact causing the trade deficit with
Japan to decline substantially. Ironically, the other "twin" deficit is also
falling as the budget deficit is being positively affected by better than
anticipated economic growth and remarkably stable inflation.
A more favorable mix of moderate economic growth and low inflation
provides an excellent backdrop for the financial markets. Based on recent
statistics, TCW believes that the economy should continue to expand, but at a
rate that will not create inflationary pressures. While TCW recognizes that
the stock market is already discounting to a certain degree the positive
outlook for equities, the combination of falling interest rates, a rising
dollar, declining trade and budget deficits, strong corporate cash flow and
positive supply/demand factors, leaves the market with further upside
potential.
TCW/DW Small Cap Growth Fund is well positioned to benefit from an
environment in which TCW believes small stocks will outperform large stocks.
With the help of the weak dollar in 1994, earnings for large companies on
balance grew faster than in smaller companies and as a result, small cap
stocks underperformed. In 1995, earnings for small companies should grow
considerably faster than for their larger counterparts. Also contributing to
their outperformance is the fact that small stocks are more attractively
valued in terms of earnings, sales and book value.
PERFORMANCE AND PORTFOLIO
During the six month period ended August 31, 1995, TCW/DW Small Cap Growth
Fund posted a total return of 34.34 percent, this compares with a return of
16.79 percent for the broad-based capitalization- weighted Standard & Poor's
500 Composite Stock Price Index and a return of 20.09 percent for the Russell
2000 Small Stock Index ( a capitalization-weighted price-only index of the
2,000 smallest stocks represented in the Russell 3000 Index). The Fund's
above-average results were obviously helped by its technology holding, but
the Fund also enjoyed strong performance in business services, leisure,
financial services, restaurants, and health care.
Although a number of changes were made in the Fund over the last six
months, there was very little change in the weightings of broad industry
sectors. Industries where weightings were increased included publishing (now
representing 3.3 percent of the portfolio), computer software and services
(15.5 percent) and retail (12.0 percent). Groups that were reduced include
entertainment and gaming (1.0 percent), semiconductors (5.0 percent),
autoparts (0.8 percent) and energy (1.8 percent). In view of the strength in
technology it is noteworthy that the Fund's weighting in technology remained
at approximately 30 percent of the portfolio. Although the Fund's portfolio
manager remained positive on the outlook for technology stocks, profit taking
offset appreciation and kept the group from becoming a larger proportion of
the Fund.
<PAGE>
The convergence of two powerful new product cycles, Intel's Pentium
microprocessor and Microsoft's Windows 95 operating system, will create
demand for a number of new software applications and hardware products. What
gives the current cycle unusual sustainability is that software development
is helping to push hardware demand. Past cycles have been driven by new
computer products that were held back by the lack of compelling software
applications. Today software development is on the leading edge causing users
to upgrade existing computer systems to take advantage of exciting new
applications. Another feature that enhances the durability of the current
cycle is that demand is much more broadly based. This is because personal
computers have shifted from being helpful tools to where they have become
critical pieces of communications equipment. As a result, consumers are the
driving force today, just as commercial and industrial users led the buying
in past cycles. It is consumer buying that has made Windows 95 such an
explosive product. Corporations will soon follow, as will international
markets that are rapidly adopting the latest standards. Order backlogs for
most companies should insure that 1996 will be another year of strong growth.
OPPORTUNITIES IN SMALL CAP STOCKS
While TCW believes the overall market has further upside, it is even more
optimistic about the outlook for small cap stocks. Small caps have generally
underperformed their larger counterparts over the last eighteen months, but
the apparent bottoming of the dollar and the slowing of the domestic economy
may soon reverse this trend. The weak dollar in 1994, together with the
rebound in foreign economies, caused companies with international operations
and export-oriented businesses to report significantly higher earnings gains
than companies whose fortunes were tied solely to the U.S. Since small
companies do not tend to have meaningful foreign exposure, large companies
making up the Dow Jones Industrial Average and the S&P 500 Index outperformed
small cap equities. The bottoming of the dollar that we seem to be
experiencing may mark a major shift in leadership away from large
multinationals. Domestically, slowing economic growth will also make it more
difficult for large companies to show upside earnings surprises. One of the
advantages of investing in small cap stocks is that in a slowing economy,
such as what we expect for 1995, it is possible to construct a portfolio of
companies that benefit from market niches which insulate them from swings in
the overall economy. Small companies can offer a direct participation in
exciting and rapidly growing areas that would not be "pure plays" for large
companies with many diverse operations.
LOOKING AHEAD
The Fund's investment adviser has a positive outlook for small cap growth
stocks over the long term. This outlook is enhanced by the fact that
valuations of small cap growth stocks today are unusually attractive in
relation to expected rates of earnings growth. Because of their unique
characteristics, small cap growth stocks should be at least a part of all
diversified equity portfolios.
We appreciate your support of the TCW/DW Small Cap Growth Fund and look
forward to continuing to serve your financial needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
-------------------------------
Charles A. Fiumefreddo
Chairman of the Board
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments August 31, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
COMMON STOCKS (91.4%)
AUTO PARTS - ORIGINAL EQUIPMENT
(0.8%)
30,800 Titan Wheel International, Inc. . $ 823,900
--------------
BANKS - COMMERCIAL (0.6%)
60,000 Hibernia Corp. (Class A) ......... 600,000
--------------
BEVERAGES (0.2%)
12,100 Odwalla, Inc. .................... 211,750
--------------
BEVERAGES - ALCOHOLIC (1.1%)
22,900 Canandaigua Wine Company, Inc.* . 1,082,025
--------------
BREWERY (0.0%)
1,600 Redhook Ale Brewery, Inc. ........ 50,800
--------------
BROADCAST MEDIA (2.6%)
2,100 American Radio Systems Corp. .... 59,850
18,500 Lin Television Corporation* ..... 666,000
70,000 Westwood One, Inc.* .............. 1,295,000
16,900 Young Broadcasting, Inc.* ........ 583,050
--------------
2,603,900
--------------
BUSINESS SERVICES (0.4%)
31,700 Information Resources, Inc. ..... 404,175
--------------
COMMERCIAL SERVICES (4.2%)
21,600 Alternative Resources Corp.* .... 642,600
19,200 America Online, Inc.* ............ 1,262,400
19,400 Cambridge Technology Partners,
Inc.* .......................... 761,450
7,500 Corrections Corp. of America .... 337,500
11,100 Education Alternative, Inc. ..... 152,625
18,300 Interim Services, Inc. ........... 475,800
14,400 Robert Half International, Inc.* 408,600
17,800 Romac International, Inc. ........ 280,350
--------------
4,321,325
--------------
COMMUNICATIONS -
EQUIPMENT & SOFTWARE (0.8%)
13,200 Ascend Communications, Inc.* .... 848,100
--------------
COMPUTER SOFTWARE (11.4%)
18,200 Atria Software, Inc.* ............ 928,200
6,900 Broderbund Software, Inc.* ...... 505,425
6,200 Business Objects S.A. (ADR)
(France) ....................... 221,650
15,000 CBT Group PLC (ADR) (Ireland)* .. 592,500
26,600 Computron Software, Inc. ......... 498,750
16,100 Datastream Systems, Inc. ......... 507,150
46,500 Frame Technology Corp.* .......... 1,209,000
18,200 General Magic, Inc.* ............. 295,750
38,200 Learning Company (The)* .......... 2,234,700
22,100 Medic Computer Systems, Inc.* ... 972,400
38,000 Netmanage, Inc.* ................. 731,500
4,600 Peoplesoft, Inc.* ................ 317,400
44,600 Platinum Software Corp.* ......... 518,475
23,900 Remedy Corp. ..................... 800,650
32,800 Security Dynamics Technologies,
Inc.* .......................... 1,312,000
--------------
11,645,550
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES
(4.1%)
11,700 ArcSys, Inc. ..................... $ 468,000
23,700 Astea International, Inc. ........ 402,900
8,800 Discreet Logic, Inc. ............. 354,200
1,400 Firefox Communications, Inc. .... 26,250
20,200 HNC Software, Inc. ............... 494,900
2,200 Imnet Systems, Inc. .............. 40,700
6,400 Inference Corp. (Class A) ........ 113,600
7,100 INSO Corp. ....................... 441,975
12,700 Maxis, Inc. ...................... 457,200
16,100 Netcom On Line Communications
Services, Inc. ................. 601,738
6,900 Open Environment Corp.. .......... 131,100
11,000 Performance Systems
International, Inc. ............ 203,500
3,100 Pure Software, Inc. .............. 86,025
7,800 Summit Medical Systems Inc. ..... 120,900
16,900 Unison Software, Inc. ............ 194,350
2,500 Vantive Corp.. ................... 31,875
--------------
4,169,213
--------------
COMPUTERS (2.8%)
37,700 Digital Link Corp.* .............. 867,100
27,100 Filenet Corp.* ................... 1,233,050
21,100 Xylogics, Inc.* .................. 733,225
--------------
2,833,375
--------------
COMPUTERS - SYSTEMS (0.4%)
15,100 Peak Technologies Group (The) ... 419,025
--------------
ELECTRICAL EQUIPMENT (1.1%)
11,700 Baldor Electric Co. .............. 408,038
30,000 Methode Electronics, Inc. (Class
A) ............................. 697,500
--------------
1,105,538
--------------
ELECTRONICS (2.7%)
40,000 Macromedia, Inc.* ................ 1,980,000
24,600 Trimble Navigation Ltd.* ......... 790,275
--------------
2,770,275
--------------
ELECTRONICS - SEMICONDUCTORS
(1.8%)
25,400 ASM Lithography Holding NV
(Netherlands) .................. 1,193,800
14,000 Oak Technology, Inc.* ............ 612,500
4,400 TelCom Semiconductor, Inc. ...... 56,650
--------------
1,862,950
--------------
ELECTRONICS - SEMICONDUCTORS/
COMPONENTS (3.0%)
21,000 C.P. Clare Corp.. ................ 493,500
20,000 Maxim Integrated Products Inc.* . 1,520,000
28,750 Microchip Technology, Inc.* ..... 1,085,312
--------------
3,098,812
--------------
</TABLE>
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments August 31, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
ENTERTAINMENT (1.7%)
34,000 Boomtown, Inc.* .................. $ 382,500
40,000 Regal Cinemas, Inc.* ............. 1,350,000
--------------
1,732,500
--------------
ENTERTAINMENT/GAMING (1.0%)
22,200 Anchor Gaming* ................... 577,200
22,600 Primadonna Resorts, Inc.* ........ 446,350
--------------
1,023,550
--------------
FINANCIAL SERVICES (0.2%)
1,000 Jayhawk Acceptance Corp. ......... 14,500
14,200 MS Financial, Inc. ............... 179,275
--------------
193,775
--------------
HEALTH EQUIPMENT & SERVICES
(4.0%)
6,700 APPS Dental, Inc. ................ 180,900
64,600 Medaphis Corp.* .................. 1,453,500
30,000 Rotech Medical Corp.* ............ 765,000
86,400 Thermolase Corp.* ................ 1,717,200
--------------
4,116,600
--------------
HEALTHCARE (2.6%)
35,700 HealthPlan Services Corp.. ...... 664,912
12,600 Integrated Health Services, Inc. 376,425
46,600 MedPartners, Inc.* ............... 1,293,150
6,900 Oxford Health Plans, Inc.* ...... 338,100
--------------
2,672,587
--------------
HEALTHCARE PRODUCTS & SERVICES
(0.5%)
21,800 AmeriSource Health Corp.* ........ 485,050
--------------
HOSPITAL MANAGEMENT & HEALTH
MAINTENANCE ORGANIZATIONS (3.0%)
38,000 American Oncology Resources, Inc. 1,434,500
21,700 Orthodontic Centers of America,
Inc. ........................... 618,450
25,300 PhyCor, Inc.* .................... 1,056,275
--------------
3,109,225
--------------
HOSPITAL SUPPLY (0.5%)
21,800 Haemonetics Corp.. ............... 468,700
--------------
HOUSEHOLD PRODUCTS (2.3%)
25,000 Blyth Industries, Inc.* .......... 1,212,500
24,600 Department 56, Inc.* ............. 1,088,550
--------------
2,301,050
--------------
INSURANCE (0.8%)
22,000 Gallagher (Arthur J.) & Co. ..... 808,500
--------------
LIFE INSURANCE (0.7%)
16,000 CRA Managed Care, Inc. ........... 328,000
14,300 HealthWise America, Inc. ......... 386,100
--------------
714,100
--------------
MACHINERY - DIVERSIFIED (0.2%)
7,700 AG Associates, Inc. .............. $ 231,000
--------------
MEDIA GROUP (1.4%)
18,750 Clear Channel Communications,
Inc.* .......................... 1,399,219
--------------
MEDICAL EQUIPMENT (0.9%)
22,200 Thermo Cardiosystems, Inc.* ..... 874,125
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
MEDICAL PRODUCTS & SUPPLIES
(2.5%)
25,000 Lincare Holdings, Inc.* .......... 743,750
30,000 Omnicare, Inc. ................... 997,500
28,700 Safeskin Corp.. .................. 473,550
15,700 Sola International, Inc.* ........ 359,137
--------------
2,573,937
--------------
MEDICAL SERVICES (1.2%)
16,600 Gulf South Medical Supply Inc.* . 456,500
20,900 Summit Care Corp.* ............... 480,700
11,300 Vencor, Inc.* .................... 334,763
--------------
1,271,963
--------------
OFFICE EQUIPMENT & SUPPLIES
(0.7%)
20,000 Viking Office Products, Inc.* ... 710,000
--------------
OIL DRILLING & SERVICES (0.9%)
41,200 Global Industries Ltd..* ......... 885,800
--------------
OIL WELL - MACHINERY (0.9%)
70,700 Weatherford International, Inc.* 927,938
--------------
PHARMACEUTICALS (1.3%)
55,200 Dura-Pharmaceuticals, Inc.* ..... 1,352,400
--------------
PROPERTY - CASUALTY INSURANCE
(0.5%)
40,300 Crop Growers Corp.* .............. 554,125
--------------
PUBLISHING (3.3%)
60,000 Gartner Group Inc.* .............. 1,710,000
18,300 Nelson (Thomas), Inc. ............ 466,650
32,000 Scientific Games Holding Corp.* . 1,200,000
--------------
3,376,650
--------------
RESTAURANTS (2.3%)
16,700 Apple South, Inc. ................ 407,063
30,000 Boston Chicken, Inc.* ............ 720,000
1,600 Logan's Roadhouse, Inc. .......... 25,200
20,000 Papa John's International, Inc.* 790,000
17,000 Rock Bottom Restaurants, Inc.* .. 429,250
--------------
2,371,513
--------------
RETAIL (3.1%)
37,950 Renters Choice, Inc.* ............ 1,072,087
47,400 Stein Mart, Inc.* ................ 645,825
32,900 Tiffany & Co. .................... 1,406,475
--------------
3,124,387
--------------
</TABLE>
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments August 31, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- --------------
<C> <S> <C>
RETAIL - SPECIALTY (5.6%)
30,400 Bed, Bath & Beyond, Inc.* ........ $ 828,400
55,800 Corporate Express, Inc.* ......... 1,297,350
53,200 Hollywood Entertainment Corp.* .. 1,489,600
28,500 Officemax, Inc.* ................. 669,750
30,000 Petsmart, Inc.* .................. 900,000
13,200 Sunglass Hut International, Inc.* 559,350
--------------
5,744,450
--------------
RETAIL - SPECIALTY
APPAREL (3.3%)
27,200 Gymboree Corp. (The)* ............ 812,600
49,050 Just for Feet, Inc.* ............. 1,410,187
29,800 Kenneth Cole Productions, Inc. .. 1,098,875
--------------
3,321,662
--------------
SEMICONDUCTOR EQUIPMENT (0.1%)
3,300 Paradigm Technology, Inc. ........ 107,250
--------------
SEMICONDUCTORS (0.5%)
18,000 Aspen Technology, Inc.* .......... 472,500
--------------
TELECOMMUNICATIONS (4.1%)
25,700 Centennial Cellular Corp.* ...... 462,600
30,600 Epic Design Technology, Inc.* ... 1,315,800
30,000 LCI International, Inc.* ......... 1,196,250
14,800 Premisys Communications, Inc. ... 1,198,800
--------------
4,173,450
--------------
TELECOMMUNICATIONS EQUIPMENT
(1.6%)
45,400 CIDCO Group, Inc.* ............... 1,577,650
--------------
TRANSPORTATION - MISCELLANEOUS
(0.7%)
9,800 Fritz Companies, Inc.* ........... 698,250
--------------
TRANSPORTATION -
SHIPPING (1.0%)
48,600 Atlas Air, Inc. .................. 1,044,900
--------------
TOTAL COMMON STOCKS (IDENTIFIED
COST $59,588,423) .............. 93,269,519
--------------
</TABLE>
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments August 31, 1995 (unaudited) (continued)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- ----------- ------
<C> <S> <C>
SHORT-TERM INVESTMENTS (8.1%)
COMMERCIAL PAPER (a) (3.7%)
INSURANCE
$1,800 Pacific Mutual Life Insurance
5.70% due 09/15/95 ............. $1,796,010
2,000 Prudential Funding Corp.
5.78% due 09/11/95 ............. 1,996,789
--------------
TOTAL COMMERCIAL PAPER (AMORTIZED
COST $3,792,799) ............... 3,792,799
--------------
REPURCHASE AGREEMENT (4.4%)
4,512 The Bank of New York 5.8125% due
09/01/95 (dated 08/31/95;
proceeds $4,512,235;
collateralized by $5,027,177
Federal National Mortgage
Association 5.76% due 04/25/19
valued at $4,738,433)
(Identified Cost $4,511,504) ... 4,511,504
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,304,303) ... 8,304,303
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST
$67,892,726) (B) ............ 99.5% 101,573,822
OTHER ASSETS IN EXCESS OF
LIABILITIES ...................... 0.5 524,822
-------- --------------
NET ASSETS ....................... 100.0% $102,098,644
==============
<FN>
- ---------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Securities were purchased on a discount basis. The interest rates shown
have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes is $67,892,726; the
aggregate gross unrealized appreciation is $34,467,284 and the gross
unrealized depreciation is $786,188, resulting in net unrealized
appreciation of $33,681,096.
</TABLE>
See Notes to Financial Statements
3
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Financial Statements
- -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995 (unaudited)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified
cost $67,892,726) ............................. $101,573,822
Receivable for:
Shares of beneficial interest sold ............ 408,242
Investments sold .............................. 299,850
Dividends ..................................... 1,443
Deferred organizational expenses ............... 105,980
Prepaid expenses ............................... 69,686
--------------
TOTAL ASSETS ................................. 102,459,023
--------------
LIABILITIES:
Payable for:
Investments purchased ......................... 88,991
Plan of distribution fee ...................... 80,777
Shares of beneficial interest repurchased .... 68,139
Management fee ................................ 50,168
Investment advisory fee ....................... 33,445
Accrued expenses ............................... 38,859
--------------
TOTAL LIABILITIES ............................ 360,379
--------------
NET ASSETS:
Paid-in-capital ................................ 77,614,519
Net unrealized appreciation .................... 33,681,096
Accumulated net investment loss ................ (774,897)
Accumulated net realized loss .................. (8,422,074)
--------------
NET ASSETS ................................... $102,098,644
==============
NET ASSET VALUE PER SHARE, 7,674,322 shares
outstanding (unlimited shares authorized of
$.01 par value) ............................... $ 13.30
==============
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended August 31, 1995 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest ............................. $ 223,783
Dividends ............................ 31,375
-------------
TOTAL INCOME ........................ 255,158
-------------
EXPENSES ..............................
Plan of distribution fee ............. 413,058
Management fee ....................... 249,537
Investment advisory fee .............. 166,358
Transfer agent fees and expenses .... 58,531
Shareholder reports and notices ..... 36,042
Professional fees .................... 35,267
Trustees' fees and expenses .......... 28,661
Organizational expenses .............. 18,889
Registration fees .................... 11,429
Custodian fees ....................... 9,148
Other ................................ 3,135
-------------
TOTAL EXPENSES ...................... 1,030,055
-------------
NET INVESTMENT LOSS ................. (774,897)
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain .................... 2,964,419
Net change in unrealized appreciation 22,370,759
-------------
NET GAIN ............................ 25,335,178
-------------
NET INCREASE ........................ $24,560,281
=============
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEAR
AUGUST 31, 1995 ENDED FEBRUARY
(UNAUDITED) 28, 1995
------------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss .......................................... $ (774,897) $(1,259,460)
Net realized gain (loss) ..................................... 2,964,419 (6,623,756)
Net change in unrealized appreciation ........................ 22,370,759 5,269,121
------------------------ -----------------
Net increase (decrease) ..................................... 24,560,281 (2,614,095)
------------------------ -----------------
Net increase from transactions in shares of beneficial
interest ...................................................... 7,554,220 4,389,693
------------------------ -----------------
Total increase .............................................. 32,114,501 1,775,598
NET ASSETS:
Beginning of period ........................................... 69,984,143 68,208,545
------------------------ -----------------
END OF PERIOD (including accumulated net investment loss of
$774,897 and $0, respectively) ............................... $102,098,644 $69,984,143
======================== =================
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements August 31, 1995 (unaudited)
- -----------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES -- TCW/DW Small Cap Growth Fund (the
"Fund") is registered under the Investment Company Act of 1940, as amended
(the "Act"), as a non-diversified, open-end management investment company.
The Fund was organized as a Massachusetts business trust on March 11, 1992
and commenced operations on August 2, 1993.
The following is a summary of significant accounting policies:
A. Valuation of Investments -- (1) an equity security listed or traded on
the New York or American Stock Exchange is valued at its latest sale price on
that exchange prior to the time when assets are valued; if there were no
sales that day, the security is valued at the latest bid price; (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest available bid price prior to the time of
valuation; (3) when market quotations are not readily available, including
circumstances under which it is determined by the Adviser that sale or bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation
of debt securities for which market quotations are not readily available may
be based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); and (4) short-term debt securities having a maturity date of more
than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity
date of sixty days or less at the time of purchase are valued at amortized
cost.
B. Accounting for Investments -- Security transactions are accounted for
on the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Dividend income is recorded on the ex-dividend date. Interest income
is accrued daily and includes the accretion of discount on certain short-term
securities.
C. Federal Income Tax Status -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the ex-dividend date. The
amount of dividends and distributions from net investment income and net
realized capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. Organizational Expenses -- Dean Witter InterCapital Inc., an affiliate
of Dean Witter Services Co. Inc. (the "Manager"), paid the organizational
expenses of the Fund in the amount of $170,413 which have been reimbursed for
the full amount thereof. Such expenses have been deferred and are being
amortized by the Fund on the straight line method over a period not to exceed
five years from the commencement of operations.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements August 31, 1995 (unaudited) (continued)
- -----------------------------------------------------------------------------
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement with the
Manager, the Fund pays its Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.60% to the net assets of
the Fund determined as of the close of each business day.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office
space, facilities, equipment, clerical, bookkeeping and certain legal
services and pays the salaries of all personnel, including officers of the
Fund who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the
Fund.
3. INVESTMENT ADVISORY AGREEMENT -- Pursuant to an Investment Advisory
Agreement with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the
Adviser an advisory fee, accrued daily and payable monthly, by applying the
annual rate of 0.40% to the net assets of the Fund determined as of the close
of each business day.
Under the terms of the Investment Advisory Agreement, the Fund has
retained the Adviser to invest the Fund's assets, including placing orders
for the purchase and sale of portfolio securities. The Adviser obtains and
evaluates such information and advice relating to the economy, securities
markets, and specific securities as it considers necessary or useful to
continuously manage the assets of the Fund in a manner consistent with its
investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION -- Shares of the Fund are distributed by Dean Witter
Distributors Inc. (the "Distributor"), an affiliate of the Manager. The Fund
has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act pursuant to which the Fund pays the Distributor compensation accrued
daily and payable monthly at an annual rate of 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Fund's shares since the inception
of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Fund's
shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or upon which such charge has been waived; or
(b) the Fund's average daily net assets. Amounts paid under the Plan are paid
to the Distributor to compensate it for the services provided and the
expenses borne by it and others in the distribution of the Fund's shares,
including the payment of commissions for sales of the Fund's shares and
incentive compensation to, and expenses of, the account executives of Dean
Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and Distributor,
and other employees or selected dealers who engage in or support distribution
of the Fund's shares or who service shareholder accounts, including overhead
and telephone expenses, printing and distribution of prospectuses and reports
used in connection with the offering of the Fund's shares to other than
current shareholders and preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may be
compensated under the Plan for its opportunity costs in advancing such
amounts, which compensation would be in the form of a carrying charge on any
unreimbursed expenses incurred by the Distributor.
Provided that the Plan continues in effect, any cumulative expenses
incurred but not yet recovered, may be recovered through future distribution
fees from the Fund and contingent deferred sales charges from the Fund's
shareholders.
The Distributor has informed the Fund that for the six months ended August
31, 1995, it received approximately $195,000 in contingent deferred sales
charges from certain redemptions of the Fund's shares. The Fund's
shareholders pay such charges which are not an expense of the Fund.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements August 31, 1995 (unaudited) (continued)
- -----------------------------------------------------------------------------
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended August 31, 1995 aggregated
$28,784,885 and $24,546,572, respectively.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At August 31, 1995, the Fund had transfer agent
fees and expenses payable of approximately $10,000.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR
ENDED ENDED
AUGUST 31, 1995 FEBRUARY 28, 1995
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sold ........... 1,678,042 $ 19,870,602 2,644,412 $ 24,821,505
Repurchased ... (1,074,125) (12,316,382) (2,196,969) (20,431,812)
------------- -------------- ------------- --------------
Net increase .. 603,917 $ 7,554,220 447,443 $ 4,389,693
============= ============== ============= ==============
</TABLE>
7. FEDERAL INCOME TAX STATUS -- At February 28, 1995, the Fund had an
approximate net capital loss carryover which may be used to offset future
capital gains to the extent provided by regulations as follows:
<TABLE>
<CAPTION>
AVAILABLE THROUGH FEBRUARY 28,
- ---------------------------------------
2002 2003 TOTAL
- ---------- ------------- ------------
<S> <C> <C>
$491,000 $10,597,000 $11,088,000
========== ============= ============
</TABLE>
Capital losses incurred after October 31 ("post-October losses") within
the taxable year are deemed to arise on the first business day of the Fund's
next taxable year. The Fund incurred and will elect to defer net capital
losses of approximately $299,000 during fiscal 1995. At February 28, 1995,
the Fund had temporary book/tax differences primarily attributable to
post-October losses and permanent book/tax differences attributable to a net
operating loss.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Financial Highlights
- -----------------------------------------------------------------------------
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED FOR THE YEAR AUGUST 2, 1993*
AUGUST 31, 1995 ENDED THROUGH
(UNAUDITED) FEBRUARY 28, 1995 FEBRUARY 28, 1994
------------------ ----------------- -----------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $ 9.90 $10.30 $10.00
----------------- -----------------
Net investment loss ..................... (0.10) (0.18) (0.07)
Net realized and unrealized gain (loss) 3.50 (0.22) 0.37
------------------ ----------------- -----------------
Total from investment operations ....... 3.40 (0.40) 0.30
------------------ ----------------- -----------------
Net asset value, end of period .......... $13.30 $ 9.90 $10.30
================== ================= =================
TOTAL INVESTMENT RETURN+ ................ 34.34 %(1) (3.88)% 3.00 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 2.48 %(2) 2.57 % 2.18 %(2)(3)
Net investment loss ..................... (1.86)%(2) (2.04)% (1.75)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $102,099 $69,984 $68,209
Portfolio turnover rate ................. 33 %(1) 116 % 69 %(1)
<FN>
- ---------------
* Commencement of operations.
+ Does not reflect the deduction of sales charge.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all its expenses that were assumed or waived by
the Manager and Adviser, the above annualized expense and net
investment loss ratios would have been 2.78% and 2.35%, respectively.
</TABLE>
See Notes to Financial Statements
(This page has been left blank intentiionally.)
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
Charles Larsen
Vice President
Douglas S. Foreman
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
TCW/DW
SMALL CAP
GROWTH FUND
SEMIANNUAL REPORT
AUGUST 31, 1995
