<PAGE>
Registration File No.: 33-48765
TCW/DW SMALL CAP GROWTH FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- - - -----------------------------------------------------------------------------
TCW/DW Small Cap Growth Fund enjoyed exceptional performance during the
fiscal year ended February 29, 1996, posting a total return of 64.04 percent.
Over the same period, the Russell 2000 Small Stock Index registered a total
return of 26.64 percent. Despite experiencing weakness in the last half of
the fiscal year, technology stocks were one of the Fund's best-performing
industry groups. The accompanying chart illustrates the growth of a $10,000
investment in the Fund since inception (August 2, 1993) through the fiscal
year ended February 29, 1996, versus the performance of similar hypothetical
investment in the issues that comprise the unmanaged Russell 2000 Small Stock
Index.
THE MARKETPLACE
TCW/DW SMALL CAP GROWTH FUND
GROWTH OF $10,000
DATE TOTAL RUSSELL 2000
---- ----- ------------
August 2, 1993 $10,000 $10,000
February 28, 1994 $10,300 $11,196
February 28, 1995 $ 9,900 $10,818
February 29, 1996 $15,940(3) $13,701
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR LIFE OF FUND
------ -------------
64.04 (1) 20.71 (1)
59.04 (2) 19.84 (2)
____ Fund ____ Russell 2000 (4)
Past performance is not predictive of future returns.
________________________________________
(1) Figure shown does not reflect the deduction of any sales charges.
(2) Figure shown assumes the deduction of the maximum applicable contingent
deferred sales charge (CDSC) (1 year-5%, since inception 3%). See the
Fund's current prospectus for complete details on fees and sales charges.
(3) Closing value after the deduction of a 3% CDSC, assuming a complete
redemption on February 29, 1996.
(4) The Russell 2000 Small Stock Index is a capitalization-weighted price-only
index of the 2000 smallest stocks represented in the Russell 3000 Index.
The performance of the index does not include any expenses, fees or
charges. The Index is unmanaged and should not be considered an
investment.
One of the biggest risks facing equity investors today is rising interest
rates. Despite the increase in rates since the beginning of the year, TCW
believes that continued benign inflation and slow economic growth together
point to lower interest rates in the months ahead. TCW expects the federal
budget scenario to be resolved over the next several months, which should
give the bond market a much needed boost. In addition, further easing by the
Federal Reserve Board is likely before the November presidential election.
Many forecasters believe that the stock market's upside is limited by
slower profit growth in the year ahead. While the Fund's investment adviser
would not necessarily argue for another year of strong profit growth, TCW
does believe that the case for an upward valuation of earnings multiples can
be made on the basis of an unusual confluence of events that all point to
higher stock prices. These would include
o falling inflation after five years of economic expansion
o continued productivity gains at this late juncture in the current
economic cycle, even as revenue growth moderates
o an explosion in corporate cash flows, leading to buy backs and
strategic acquisitions
o a falling trade deficit
o a budget deficit of only 1.4 percent of gross domestic product
(GDP) -- even before a budget deal
o the slowest growth in total debt in the United States in 35 years
o relentless cost cutting by corporate America in an effort to remain
competitive
o share buybacks exceeding new equity offerings
<PAGE>
o an increase in the personal savings rate
o a significant rise in technology spending and business investment
as a percentage of GDP
o the growing importance of 401(k) funds as a percentage of stock
market inflows
o a rising U.S. dollar
o the dominant competitive position of the United States versus other
major industrialized countries, as well as the fact that the United
States is the only country with an investment-led economic recovery
o the fact that the United States remains the most stable country in
which to invest.
Each of these trends is very positive for financial assets in its own right.
Since they have never before occurred at the same time, TCW would suggest
that relying on history to predict precise valuation parameters for the
market is not the most appropriate course.
Another important factor affecting the valuation of equities is the effect
of demographic changes. The baby-boom generation that produced an explosion
of consumer spending in the 1970s and 1980s, now must save for retirement. As
savings and investment expand, TCW believes that we may witness the same
impact on the prices of financial assets that baby boomers had on the prices
of consumer products -- everything from automobiles and houses to hamburgers
and tennis shoes. This demographic shift also makes it difficult to support
the theory that the market is fully valued. What will probably result is a
dichotomy between the valuations of average companies having unimaginative
managements and product lines, and the valuations investors place on
well-managed companies with exciting product stories and prospects for rapid
growth. The investment adviser believes that the Fund is well positioned in
the latter group of companies, and hopes to take advantage of these exciting
opportunities in the year ahead.
THE PORTFOLIO
At the end of the fiscal year, the Fund had net assets in excess of $153
million. Although a number of portfolio changes were made over the last 12
months, there was little change in the weightings of broad industry sectors.
Industries that were increased included business services, healthcare,
telecommunications and retail. Groups where weightings were reduced included
semiconductors and leisure. The portfolio's largest industry groups at fiscal
year end were computer software and services (20.8 percent of total net
assets), healthcare related (20 percent), retail (11.1 percent) and business
services (8.8 percent), which includes the commercial services, office
equipment and supplies, and publishing sectors.
The Fund is invested in rapidly growing companies where earnings power and
growth rates are considered underestimated by Wall Street consensus. In order
to minimize the impact of a slowing economy on the Fund, TCW is emphasizing
companies that focus on a specific market niche that is insulated from
macroeconomic trends. Some of the market niches that the Fund emphasizes
include health care companies (Medaphis Corp. and Access Health), which
benefit from the intense pressure to lower costs; technology companies
(Cambridge Technology Partners, Inc. and Remedy Corp.), which are exploiting
the trend to client/server computing; service companies (Corporate Express
and Alternative Resources), which are taking advantage of the move to
outsourcing; and numerous companies that are well positioned demographically,
such as those whose growth is tied to our aging population (Rotech Medical
and Lincare Holdings).
<PAGE>
The Fund also holds a number of companies that are benefiting from strong
new-product cycles, which TCW believes can lead to accelerating earnings.
New-product cycles that drive the growth of many small companies include the
explosion of opportunities that are tied to the development of the Internet,
the creation of new drugs or medical devices and new retail concepts that
capture the attention of consumers with rising discretionary income.
OPPORTUNITIES IN SMALL CAP STOCKS
Given the equity market's outstanding performance in 1995, TCW would
caution investors not to expect such spectacular returns in 1996. It is
important to point out, however, that the small-cap sector significantly
underperformed the Standard & Poor's 500 Composite Stock Price Index. This is
the second successive year that large cap stocks outperformed small caps. TCW
believes that larger companies benefited from a weak dollar in 1995, which
led to incremental earnings gains from both currency translation and
increased exports. Since smaller companies have little or no international
exposure, they did not benefit from this currency element and, consequently,
will not suffer if the dollar strengthens.
Small stocks offer generally higher earnings growth at lower
price/earnings multiples than larger issues. In addition, it is possible to
construct a portfolio of small companies that can benefit from a competitive
advantage or focus on a market niche that insulates them from the wide swings
of the overall market. For example, if the dollar strengthens, it is possible
that a portfolio of well-positioned small stocks may outperform in the
slow-growth economic environment expected in 1996. Slower profit growth
should make the Fund's rapidly growing companies look increasingly attractive
relative to their larger counterparts.
LOOKING AHEAD
TCW believes that small-cap growth stocks will continue to provide
above-average long-term returns. This outlook is enhanced by the fact that
valuations today are unusually attractive in relation to expected rates of
earnings growth. Because of their unique characteristics, small stocks can be
an integral component of a diversified equity portfolio.
We appreciate your support of 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 February 29, 1996
- - - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - - ----------- ------------------------------------- --------------
<C> <S> <C>
COMMON STOCKS (95.7%)
AUTO PARTS - ORIGINAL EQUIPMENT
(0.1%)
7,700 Titan Wheel International, Inc. ..... $ 117,425
--------------
BEVERAGES (0.5%)
48,300 Odwalla, Inc.* ....................... 760,725
--------------
BEVERAGES - ALCOHOLIC (0.6%)
22,900 Canandaigua Wine Company, Inc.* ..... 870,200
--------------
BIOTECHNOLOGY (0.4%)
35,400 Neoprobe Corp.* ...................... 685,875
--------------
BREWERY (0.5%)
34,100 Boston Beer Company, Inc.
(Class A)* .......................... 745,937
--------------
BROADCAST MEDIA (3.2%)
1,100 American Radio Systems Corp.* ....... 33,550
40,400 Clear Channel Communications, Inc.* . 2,045,250
27,600 Lin Television Corp.* ................ 945,300
11,200 Premiere Radio Networks, Inc.* ...... 187,600
70,000 Westwood One, Inc.* .................. 1,172,500
16,900 Young Broadcasting, Inc.* ............ 473,200
--------------
4,857,400
--------------
COMMERCIAL SERVICES (5.4%)
14,400 AccuStaff, Inc.* ..................... 763,200
32,500 Alternative Resources Corp.* ......... 918,125
43,900 America Online, Inc.* ................ 2,156,587
22,000 Cambridge Technology Partners, Inc.* 1,122,000
18,100 Corrections Corp. of America* ....... 859,750
7,800 Pharmaceutical Product Development,
Inc.* ............................... 208,650
21,300 Robert Half International, Inc.* .... 891,937
30,100 Romac International, Inc.* ........... 752,500
21,300 Sylvan Learning Systems, Inc.* ...... 649,650
--------------
8,322,399
--------------
COMMUNICATIONS -
EQUIPMENT & SOFTWARE (4.5%)
52,800 Ascend Communications, Inc.* ......... 2,382,600
44,100 Cascade Communications Corp.* ....... 2,993,287
27,000 Microcom, Inc.* ...................... 813,375
23,900 Premisys Communications, Inc.* ...... 776,750
--------------
6,966,012
--------------
COMPUTER SOFTWARE (11.3%)
36,400 Atria Software, Inc.* ................ 1,706,250
6,200 Business Objects S.A. (ADR)* (France) 463,450
15,000 CBT Group PLC (ADR)* (Ireland) ...... 832,500
56,100 Datastream Systems, Inc.* ............ 1,136,025
81,900 Epic Design Technology, Inc.* ....... 2,733,412
80,000 Macromedia, Inc.* .................... 3,200,000
22,100 Medic Computer Systems, Inc.* ....... $ 1,491,750
9,200 Peoplesoft, Inc.* .................... 496,800
23,900 Remedy Corp.* ........................ 1,810,425
58,200 Security Dynamics Technologies, Inc.* 3,375,600
--------------
17,246,212
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - - ----------- ------------------------------------- --------------
<C> <S> <C>
COMPUTER SOFTWARE & SERVICES (9.5%)
600 Arbor Software Corp.* ................ 25,800
72,200 Astea International, Inc.* ........... 1,768,900
17,600 Citrix Systems, Inc.* ................ 756,800
400 Clarify, Inc.* ....................... 11,700
42,200 Computer Management Sciences, Inc.* . 664,650
8,900 CSG Systems International, Inc.* .... 195,800
41,100 Discreet Logic, Inc.* ................ 657,600
900 Documentum, Inc.* .................... 34,425
3,800 Engineering Animation, Inc.* ......... 96,900
20,200 HNC Software, Inc.* .................. 1,414,000
31,700 HPR Inc.* ............................ 1,172,900
14,200 INSO Corp.* .......................... 692,250
78,200 Logic Works, Inc.* ................... 1,397,825
39,600 Maxis, Inc.* ......................... 1,128,600
53,900 Mercury Interactive Corp.* ........... 862,400
14,500 MetaTools, Inc.* ..................... 380,625
6,900 Objective Systems Integrators, Inc.* 282,900
12,400 Open Environment Corp.* .............. 96,100
22,500 Raptor Systems, Inc.* ................ 714,375
66,400 Saville Systems Ireland PLC (ADR)* .. 1,145,400
27,200 Summit Medical Systems Inc.* ......... 550,800
19,800 Sync Research, Inc.* ................. 524,700
1,200 Verity, Inc.* ........................ 56,400
--------------
14,631,850
--------------
COMPUTERS (2.1%)
27,100 Filenet Corp.* ....................... 1,720,850
79,500 Lumisys, Inc.* ....................... 1,411,125
1,800 Network Appliance, Inc.* ............. 56,250
--------------
3,188,225
--------------
ELECTRICAL EQUIPMENT (3.2%)
35,450 Baldor Electric Co. .................. 771,037
55,400 Cidco, Inc.* ......................... 1,966,700
76,500 C.P. Clare Corp.* .................... 1,348,312
45,000 Methode Electronics, Inc. (Class A) . 630,000
10,500 Sheldahl, Inc.* ...................... 231,000
--------------
4,947,049
--------------
ELECTRONICS - SEMICONDUCTORS (1.4%)
30,900 ASM Lithography Holding NV
(Netherlands)* ...................... 1,483,200
14,000 Oak Technology, Inc.* ................ 703,500
--------------
2,186,700
--------------
</TABLE>
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments February 29, 1996 (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - - ----------- ------------------------------------- --------------
<C> <S> <C>
ELECTRONICS - SEMICONDUCTORS/
COMPONENTS (1.6%)
67,800 Maxim Integrated Products Inc.* ..... $2,457,750
--------------
ENTERTAINMENT (1.3%)
60,000 Regal Cinemas, Inc.* ................. 2,025,000
--------------
ENTERTAINMENT/GAMING (0.8%)
22,200 Anchor Gaming* ....................... 577,200
29,500 Family Golf Centers, Inc.* ........... 623,187
--------------
1,200,387
--------------
ENVIRONMENTAL CONTROL (0.7%)
36,600 Culligan Water Technologies, Inc.* .. 1,125,450
--------------
HEALTH EQUIPMENT & SERVICES (4.3%)
1,200 IDX Systems Corp.* ................... 38,100
72,500 Medaphis Corp.* ...................... 2,818,438
62,400 Rotech Medical Corp.* ................ 2,262,000
56,000 Thermolase Corp.* .................... 1,463,000
--------------
6,581,538
--------------
HEALTHCARE (1.2%)
35,700 HealthPlan Services Corp.* ........... 937,125
12,600 Integrated Health Services, Inc. .... 278,775
6,900 Oxford Health Plans, Inc.* ........... 567,525
--------------
1,783,425
--------------
HEALTHCARE PRODUCTS & SERVICES (4.0%)
38,300 Access Health, Inc.* ................. 2,077,775
31,800 AmeriSource Health Corp.* ............ 890,400
43,400 Orthodontic Centers of America, Inc.* 1,009,050
20,800 Pediatrix Medical Group, Inc.* ...... 774,800
73,500 Veterinary Centers of America, Inc.* 1,433,250
--------------
6,185,275
--------------
HOSPITAL MANAGEMENT (0.1%)
5,300 NCS HealthCare, Inc. (Class A)* ..... 133,825
--------------
HOSPITAL MANAGEMENT & HEALTH
MAINTENANCE ORGANIZATIONS (3.7%)
45,600 American Oncology Resources, Inc.* .. 1,835,400
14,300 HealthWise America, Inc.* ............ 589,875
51,000 MedPartners/Mullikin, Inc.* .......... 1,530,000
37,950 PhyCor, Inc.* ........................ 1,707,750
--------------
5,663,025
--------------
HOUSEHOLD PRODUCTS (1.6%)
50,000 Blyth Industries, Inc.* .............. 1,600,000
41,100 Department 56, Inc.* ................. 827,138
--------------
2,427,138
--------------
INSURANCE (1.0%)
6,700 Compdent Corp.* ...................... $ 249,575
30,300 Gallagher (Arthur J.) & Co. .......... 1,185,488
4,700 United Dental Care, Inc.* ............ 166,850
--------------
1,601,913
--------------
LIFE INSURANCE (1.3%)
32,000 CRA Managed Care, Inc.* .............. 1,016,000
37,100 First Commonwealth, Inc.* ............ 964,600
--------------
1,980,600
--------------
MANUFACTURING (0.4%)
26,700 Memtec Ltd. (ADR) (Australia) ....... 620,775
--------------
MEDICAL EQUIPMENT (1.1%)
22,200 Thermo Cardiosystems, Inc.* .......... 1,648,350
--------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - - ----------- ------------------------------------- --------------
<C> <S> <C>
MEDICAL PRODUCTS & SUPPLIES (3.1%)
12,500 IRIDEX Corp.* ........................ 128,125
25,000 Lincare Holdings, Inc.* .............. 781,250
30,000 Omnicare, Inc. ....................... 1,447,500
84,000 Safeskin Corp.* ...................... 1,554,000
30,700 Sola International, Inc.* ............ 851,925
--------------
4,762,800
--------------
MEDICAL SERVICES (1.0%)
44,100 Gulf South Medical Supply Inc.* ..... 1,488,375
--------------
OFFICE EQUIPMENT & SUPPLIES (0.7%)
20,000 Viking Office Products, Inc.* ....... 1,137,500
--------------
OIL DRILLING & SERVICES (1.0%)
82,400 Global Industries Ltd.* .............. 1,462,600
--------------
OIL WELL - MACHINERY (0.7%)
35,350 Weatherford Enterra, Inc.* ........... 1,082,594
--------------
PHARMACEUTICALS (1.5%)
55,200 Dura-Pharmaceuticals, Inc.* .......... 2,304,600
--------------
PUBLISHING (2.7%)
60,000 Gartner Group, Inc. (Class A)* ...... 3,240,000
32,000 Scientific Games Holding Corp.* ..... 960,000
--------------
4,200,000
--------------
RESTAURANTS (2.3%)
30,700 Apple South, Inc. .................... 671,563
43,600 Boston Chicken, Inc.* ................ 1,564,150
25,000 Papa John's International, Inc.* .... 1,281,250
--------------
3,516,963
--------------
RETAIL (1.5%)
47,400 Stein Mart, Inc.* .................... 592,500
32,900 Tiffany & Co. ........................ 1,768,375
--------------
2,360,875
--------------
</TABLE>
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Portfolio of Investments February 29, 1996 (continued)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- - - ----------- --------------------------------- ------------
<C> <S> <C>
RETAIL - DEPARTMENT STORES (0.5%)
27,300 Proffitt's Inc.* ................. $ 716,625
------------
RETAIL - SPECIALTY (5.8%)
37,600 Bed, Bath & Beyond, Inc.* ........ 1,677,900
76,800 Corporate Express, Inc.* ......... 2,284,800
54,400 Mossimo, Inc.* ................... 1,332,800
20,500 Oakley, Inc.* .................... 704,688
39,200 Petsmart, Inc.* .................. 1,362,200
56,400 Sunglass Hut International, Inc.* 1,551,000
------------
8,913,388
------------
RETAIL - SPECIALTY APPAREL (3.3%)
77,550 Just for Feet, Inc.* ............. 2,762,719
51,800 K & G Men's Center, Inc.* ........ 738,150
109,600 Kenneth Cole Productions, Inc.* . 1,616,600
------------
5,117,469
------------
SEMICONDUCTORS (0.9%)
36,000 Aspen Technology, Inc.* .......... 1,377,000
------------
TELECOMMUNICATIONS (1.7%)
25,700 Centennial Cellular Corp.* ...... 452,963
93,400 LCI International, Inc.* ......... 2,124,850
------------
2,577,813
------------
TRANSPORTATION (0.6%)
29,800 Miller Industries, Inc.* ......... 845,575
------------
TRANSPORTATION - MISCELLANEOUS
(1.4%)
19,600 Fritz Companies, Inc.* ........... 759,500
32,900 Pittston Brink's Group ........... 769,038
28,400 United Transnet, Inc.* ........... 571,550
------------
2,100,088
------------
TRANSPORTATION - SHIPPING (1.2%)
63,700 Atlas Air, Inc.* ................. 1,855,263
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $92,212,257) ... 146,779,988
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN
THOUSANDS) VALUE
- - - ----------- -------------------------------------- --------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.9%)
COMMERCIAL PAPER (a) (3.8%)
FINANCE - EQUIPMENT (2.0%)
$3,000 Deere (John) Capital Corp. 5.21% due
03/18/96 .............................. $2,992,619
--------------
INSURANCE (1.3%)
2,000 Prudential Funding Corp. 5.17% due
03/04/96 .............................. 1,999,138
--------------
UTILITIES - ELECTRIC (0.5%)
760 Florida Power & Light Co. 5.29% due
03/13/96 .............................. 758,660
--------------
TOTAL COMMERCIAL PAPER
(Amortized Cost $5,750,417) ........... 5,750,417
--------------
REPURCHASE AGREEMENT (2.1%)
321 The Bank of New York 5.75% due
03/01/96 (dated 02/29/96; proceeds
$3,212,878; collateralized by
$3,444,569 Federal National Mortgage
Assoc. 6.36% due 11/01/22 valued at
$3,276,612) (Identified Cost
$3,212,365) ........................... 3,212,365
--------------
TOTAL SHORT-TERM INVESTMENTS
(IDENTIFIED COST $8,962,782) .......... 8,962,782
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $101,175,039) (B) . 101.6% 155,742,770
LIABILITIES IN EXCESS
OF OTHER ASSETS ................... (1.6) (2,377,057)
-------- -------------
NET ASSETS ........................ 100.0% $153,365,713
======== =============
</TABLE>
- - - ------------
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 approximates
identified cost. The aggregate gross unrealized appreciation
was $57,744,581 and the aggregate gross unrealized depreciation was
$3,176,850 resulting in net unrealized appreciation of $54,567,731.
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Financial Statements
- - - -----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES February 29, 1996
- - - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $101,175,039) $155,742,770
Receivable for:
Investments sold ................................................. 1,236,823
Shares of beneficial interest sold ............................... 1,142,446
Deferred organizational expenses .................................. 87,885
Prepaid expenses and other assets ................................. 29,694
--------------
TOTAL ASSETS .................................................... 158,239,618
--------------
LIABILITIES:
Payable for:
Investments purchased ............................................ 4,463,553
Shares of beneficial interest repurchased ........................ 130,641
Plan of distribution fee ......................................... 94,464
Management fee ................................................... 70,306
Investment advisory fee .......................................... 46,871
Accrued expenses and other payables ............................... 68,070
--------------
TOTAL LIABILITIES ............................................... 4,873,905
--------------
NET ASSETS:
Paid-in-capital ................................................... 102,336,144
Net unrealized appreciation ....................................... 54,567,731
Accumulated net realized loss ..................................... (3,538,162)
--------------
NET ASSETS ...................................................... $153,365,713
==============
NET ASSET VALUE PER SHARE, 9,440,891 shares outstanding
(unlimited shares authorized of $.01 par value) .................. $ 16.24
==============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Financial Statements (continued)
STATEMENT OF OPERATIONS For the year ended February 29, 1996
- - - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest ........................... $ 530,013
Dividends .......................... 58,397
-------------
TOTAL INCOME ...................... 588,410
-------------
EXPENSES
Plan of distribution fee ........... 930,066
Management fee ..................... 617,772
Investment advisory fee ............ 411,848
Transfer agent fees and expenses .. 134,353
Professional fees .................. 80,869
Shareholder reports and notices ... 55,216
Registration fees .................. 46,754
Trustees' fees and expenses ....... 45,697
Organizational expenses ............ 36,983
Custodian fees ..................... 22,477
Other .............................. 8,821
-------------
TOTAL EXPENSES .................... 2,390,856
-------------
NET INVESTMENT LOSS ............... (1,802,446)
-------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain .................. 7,848,331
Net change in unrealized
appreciation ...................... 43,257,394
-------------
NET GAIN .......................... 51,105,725
-------------
NET INCREASE ...................... $49,303,279
=============
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Financial Statements (continued)
STATEMENT OF CHANGES IN NET ASSETS
- - - -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
ENDED FEBRUARY FOR THE YEAR ENDED
29, 1996 FEBRUARY 28, 1995
----------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment loss ................................ $ (1,802,446) $(1,259,460)
Net realized gain (loss) ........................... 7,848,331 (6,623,756)
Net change in unrealized appreciation .............. 43,257,394 5,269,121
----------------- ------------------
Net increase (decrease) ........................... 49,303,279 (2,614,095)
Net increase from transactions in shares of
beneficial interest ................................ 34,078,291 4,389,693
----------------- ------------------
Total increase .................................... 83,381,570 1,775,598
NET ASSETS:
Beginning of period ................................. 69,984,143 68,208,545
----------------- ------------------
END OF PERIOD ....................................... $153,365,713 $69,984,143
================= ==================
</TABLE>
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements February 29, 1996
- - - -----------------------------------------------------------------------------
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's investment objective is capital appreciation. The Fund seeks to
achieve its objective by investing primarily in common stocks and other
equity securities of lesser known, smaller capitalization domestic and
foreign companies. The Fund was organized as a Massachusetts business trust
on March 11, 1992 and commenced operations on August 2, 1993.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures. Actual results
could differ from those estimates. The following is a summary of significant
accounting policies:
A. Valuation of Investments -- (1) an equity security listed or traded on
the New York 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 and other distributions are
recorded on the ex-dividend date. Discounts are accreted over the life of
the respective securities. Interest income is accrued daily.
C. Federal Income Tax Status -- It is the Fund's policy to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income to its
shareholders. Accordingly, no federal income tax provision is required.
D. Dividends and Distributions to Shareholders -- The Fund records
dividends and distributions to its shareholders on the 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.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements February 29, 1996 (continued)
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 on the straight-line method over a period not to exceed
five years from the commencement of operations.
2. MANAGEMENT AGREEMENT -- Pursuant to a Management Agreement, the Fund pays
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 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 broker-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.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Notes to Financial Statements February 29, 1996 (continued)
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 year ended February 29,
1996, it received approximately $366,000 in contingent deferred sales charges
from certain redemptions of the Fund's shares.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES -- The cost of
purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 29, 1996 aggregated
$82,030,573 and $50,052,339, respectively.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At February 29, 1996, the Fund had transfer agent
fees and expenses payable of approximately $5,800.
6. SHARES OF BENEFICIAL INTEREST -- Transactions in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
FEBRUARY 29, 1996 FEBRUARY 28, 1995
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Sold ........... 4,601,760 $ 63,324,377 2,644,412 $ 24,821,505
Repurchased ... (2,231,274) (29,246,086) (2,196,969) (20,431,812)
------------- -------------- ------------- --------------
Net increase .. 2,370,486 $ 34,078,291 447,443 $ 4,389,693
============= ============== ============= ==============
</TABLE>
7. FEDERAL INCOME TAX STATUS -- At February 29, 1996, the Fund had a net
capital loss carryover of approximately $3,538,000 which will be available
through February 28, 2003 to offset future capital gains to the extent
provided by regulations.
As of February 29, 1996, the Fund had permanent book/tax differences
attributable to a net operating loss. To reflect reclassifications arising
from permanent book/tax differences for the year ended February 29, 1996,
paid-in-capital was charged and net investment loss was credited $1,802,446.
<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 PERIOD
FOR THE YEAR ENDED AUGUST 2, 1993*
------------------------------------ THROUGH
FEBRUARY 29, 1996 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 ..................... (0.19) (0.18) (0.07)
Net realized and unrealized gain (loss) 6.53 (0.22) 0.37
----------------- ----------------- -----------------
Total from investment operations ....... 6.34 (0.40) 0.30
----------------- ----------------- -----------------
Net asset value, end of period .......... $ 16.24 $ 9.90 $ 10.30
================= ================= =================
TOTAL INVESTMENT RETURN+ ................ 64.04 % (3.88)% 3.00 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ................................ 2.32 % 2.57 % 2.18 %(2)(3)
Net investment loss ..................... (1.75)% (2.04)% (1.75)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands $153,366 $69,984 $68,209
Portfolio turnover rate ................. 52 % 116 % 69 %(1)
</TABLE>
- - - ------------
* 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.
See Notes to Financial Statements
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
Report of Independent Accountants
- - - -----------------------------------------------------------------------------
To the Shareholders and Trustees of TCW/DW Small Cap Growth Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of TCW/DW Small Cap
Growth Fund (the "Fund") at February 29, 1996, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
two years in the period then ended and for the period August 2, 1993
(commencement of operations) through February 28, 1994, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
February 29, 1996 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from
brokers were not received, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
April 12, 1996
<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 F. 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.
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
ANNUAL REPORT
FEBRUARY 29, 1996
