<PAGE>
TCW/DW SMALL CAP GROWTH FUND TWO WORLD TRADE CENTER, NEW YORK, NEW YORK
10048
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997
DEAR SHAREHOLDER:
Over the last six months, the financial markets exceeded even the optimists'
best-case scenarios. Streams of economic statistics have been the best we have
seen in a generation. The unemployment rate is now at 4.8 percent, the lowest it
has been in twenty-five years, yet there is very little inflation. Instead of
showing signs of overheating in the seventh year of this expansion, the economy
is experiencing wholesale price deflation. Additionally, the federal budget
deficit is at a 24-year low, capacity expansion is at a 27-year high, consumer
confidence has reached a 28-year peak and corporate profits have never been so
strong for such a sustained period. Then, just as it looked like the news could
not get any better, along came a balanced budget agreement with a capital gains
tax cut, and indications from Federal Reserve Board Chairman Alan Greenspan that
the Fed may tolerate higher economic growth.
PERFORMANCE AND PORTFOLIO
During the six-month period ended August 31, 1997, TCW/DW Small Cap Growth Fund
gained 16.66 percent versus 17.65 percent for the Lipper Small Cap Growth Fund
Index and 18.53 percent for the Russell 2000. While small-cap stocks have lagged
the S&P 500 for much of the most recent stretch of the bull market, and were hit
the hardest during the correction that took place in the summer of 1996, they
have made an excellent recovery during the period under review. Since mid-April,
when small caps hit lows that made them extremely undervalued relative to large
caps, small-cap stocks have regained their leadership role. What is most
impressive about their recent movement is that in August, when the S&P 500
suffered its worst decline since August 1990, the Russell 2000 Index actually
increased 2.3 percent.
During the period under review, the Fund's investment advisor, TCW Funds
Management, Inc. (TCW), took advantage of the weakness in this market sector
that occurred early in the year. TCW added to more than 30 of the Fund's
existing holdings, some of which had experienced
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997, CONTINUED
intense selling pressure. And they added more than 20 new holdings to the
portfolio, many of which the Fund's managers had followed closely but prior to
the sharp sell-off had not met the Fund's valuation criteria. To make room for
these purchases, during the downturn TCW sold a number of holdings that had
appreciated, as well as some companies that had fallen short of earnings
targets. Over the last six months, TCW increased the Fund's exposure to some
industry sectors, including computer software and services, oil services and
leisure, while reducing the Fund's exposure to telecommunications, restaurants
and business services.
On July 28, 1997, the Fund began offering four classes of shares: A, B, C and D,
each with its own sales charge and distribution fee structure. A revised
prospectus, which includes complete details regarding the Fund's conversion to
multiple classes of shares, was mailed to shareholders in mid-summer.
LOOKING AHEAD
Despite all the controversy about whether large- or small-cap stocks will be the
best-performing sector, TCW believes the answer depends upon which sector
experiences the fastest earnings growth. Since TCW's philosophy is that stock
prices tend to follow sustainable long-term earnings growth, TCW believes that
the overriding issue is growth, not market capitalization. Share buybacks, rapid
international expansion and aggressive cost cutting and restructuring moves have
enabled large-cap stocks as a group to show faster earnings per share growth in
1996 and the first quarter of 1997. However, revenue growth was much faster for
small-cap companies, as it usually is. It is no coincidence that in the second
quarter, just as earnings growth for smaller companies began to exceed the
earnings growth of the "Nifty 50," small stocks began to outperform large
stocks. In an intensely competitive global economy it is difficult for
multinational companies to grow as rapidly as the well-positioned small-niche
companies, particularly when the dollar is strong. Even in the best of times,
large caps are hampered by their size, because rapid growth requires billions of
dollars in new revenues. Perhaps this is the main reason behind Ibbotson
Associates' findings that small-company stocks have had almost a 2 percent
annual growth advantage over large caps, on average, during the past seven
decades.
Companies with above-average growth in an environment of low inflation will
often be accorded unusually high p/e ratios, as is the case today. The danger
occurs when rapidly growing companies miss their earnings targets. This accounts
for much of the volatility we have seen in small-cap growth stocks over the past
year and provides justification for premium valuations for companies that can
deliver sustainable, above-average growth rates. In order to avoid companies
with downward
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS AUGUST 31, 1997, CONTINUED
earnings revisions, the bulk of the TCW's research efforts are directed at
ensuring that the Fund's holdings have improving fundamentals that will enable
them to report earnings that are above what Wall Street is expecting.
Even after their strong recovery, small-cap stocks are still more attractively
priced than the megacaps, particularly relative to their growth rates.
Unfortunately, valuation has never been a good market-timing tool. Economic
conditions invariably cause different sectors of the market to be overvalued or
undervalued, and the period of excess, in both directions, can last for an
extended length of time. Just as rising inflation compressed valuations in the
1970s and early 1980s, falling inflation has led to expanded valuations in the
1990s. What is important is not just that inflation is low but that it has
slowed both here and abroad. If accompanied by lower interest rates and growing
corporate profits, these conditions could support higher prices, even higher
than today's valuation levels.
We appreciate your support of TCW/DW Small Cap Growth Fund and look forward to
continuing to serve your investment needs.
Sincerely,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (97.8%)
ADVERTISING (1.7%)
204,037 Outdoor Systems, Inc.*................................................................. $ 5,394,228
------------
AEROSPACE & DEFENSE (1.1%)
100,100 BE Aerospace, Inc.*.................................................................... 3,553,550
------------
APPAREL (0.4%)
29,000 St. John Knits, Inc.................................................................... 1,221,625
------------
AUTO PARTS - ORIGINAL EQUIPMENT (0.9%)
56,500 Dura Automotive Systems, Inc.*......................................................... 1,624,375
27,300 Tower Automotive, Inc.*................................................................ 1,225,087
------------
2,849,462
------------
BIOTECHNOLOGY (2.1%)
83,100 BioReliance Corp.*..................................................................... 1,807,425
60,500 Cell Therapeutics, Inc.*............................................................... 794,062
47,100 Cytyc Corp.*........................................................................... 936,112
142,100 Neoprobe Corp.*........................................................................ 1,767,369
56,100 Sepracor, Inc.*........................................................................ 1,227,187
------------
6,532,155
------------
BROADCAST MEDIA (4.2%)
96,100 Clear Channel Communications, Inc.*.................................................... 6,528,794
83,300 Metro Networks, Inc.*.................................................................. 2,478,175
113,400 VDI Media*............................................................................. 1,530,900
97,700 Westwood One, Inc.*.................................................................... 2,735,600
------------
13,273,469
------------
BUSINESS SERVICES (0.1%)
10,300 Concord EFS, Inc....................................................................... 285,825
------------
COMMERCIAL SERVICES (9.2%)
64,274 AccuStaff, Inc.*....................................................................... 1,707,278
39,100 Cambridge Technology Partners, Inc.*................................................... 1,256,087
94,800 Caribiner International, Inc.*......................................................... 4,005,300
40,900 Cohr, Inc.*............................................................................ 628,837
72,000 Corrections Corp. of America*.......................................................... 2,664,000
69,600 International Network Services*........................................................ 1,592,100
21,900 Learning Tree International, Inc.*..................................................... 599,512
77,000 MemberWorks Inc.*...................................................................... 1,549,625
7,400 Radiant Systems, Inc.*................................................................. 151,700
68,100 Robert Half International, Inc.*....................................................... 3,975,337
137,100 Romac International, Inc.*............................................................. 5,192,662
115,300 Snyder Communications, Inc.*........................................................... 3,300,462
31,000 Superior Services, Inc.*............................................................... 829,250
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
53,400 The Vincam Group, Inc.*................................................................ $ 1,668,750
------------
29,120,900
------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE (0.5%)
37,900 Ascend Communications, Inc.*........................................................... 1,606,012
------------
COMPUTER SERVICES (1.1%)
54,900 Ciber, Inc.*........................................................................... 2,192,569
62,800 META Group, Inc........................................................................ 1,310,950
------------
3,503,519
------------
COMPUTER SOFTWARE (5.2%)
20,800 Apex PC Solutions, Inc.*............................................................... 821,600
59,300 CBT Group PLC (ADR) (Ireland)*......................................................... 3,795,200
2,400 Great Plains Software, Inc.*........................................................... 63,300
25,600 PeopleSoft, Inc.*...................................................................... 1,438,400
1,900 Peritus Software Services, Inc.*....................................................... 46,550
51,600 Remedy Corp.*.......................................................................... 1,986,600
127,400 Security Dynamics Technologies, Inc.*.................................................. 4,984,525
57,900 SELECT Software Tools (ADR) (United Kingdom)*.......................................... 448,725
77,800 Transaction Systems Architects, Inc. (Class A)*........................................ 2,693,825
------------
16,278,725
------------
COMPUTER SOFTWARE & SERVICES (15.5%)
21,800 ABR Information Services, Inc.*........................................................ 585,875
64,000 Aspect Development, Inc.*.............................................................. 2,448,000
50,200 AXENT Technologies, Inc.*.............................................................. 909,875
143,100 Citrix Systems, Inc.*.................................................................. 7,235,494
46,050 Computer Horizons Corp.*............................................................... 1,807,462
47,550 Computer Learning Centers, Inc.*....................................................... 2,234,850
94,950 Computer Management Sciences, Inc.*.................................................... 1,804,050
75,540 CSG Systems International, Inc.*....................................................... 2,086,792
107,300 Dendrite International, Inc.*.......................................................... 2,025,287
49,900 Discreet Logic, Inc. (Canada)*......................................................... 1,153,937
36,500 First USA Paymentech, Inc.*............................................................ 1,108,687
39,900 Gentia Software PLC - SP (ADR) (United Kingdom)........................................ 164,588
32,800 HNC Software, Inc.*.................................................................... 1,180,800
112,000 HPR, Inc.*............................................................................. 2,002,000
113,300 Legato Systems, Inc.*.................................................................. 3,186,563
222,800 National TechTeam, Inc.*............................................................... 2,395,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
113,200 Saville Systems Ireland PLC (ADR) (Ireland)*........................................... $ 7,570,250
97,200 Siebel Systems, Inc.*.................................................................. 3,450,600
102,000 Viasoft, Inc.*......................................................................... 5,469,750
------------
48,819,960
------------
COMPUTERS (1.3%)
134,100 Lumisys, Inc.*......................................................................... 955,463
67,200 Network Appliance, Inc.*............................................................... 3,175,200
------------
4,130,663
------------
COMPUTERS - SYSTEMS (0.4%)
49,800 Sequent Computer Systems, Inc.*........................................................ 1,394,400
------------
ELECTRICAL EQUIPMENT (1.1%)
35,450 Baldor Electric Co..................................................................... 1,081,225
100,700 Sheldahl, Inc.*........................................................................ 2,341,275
------------
3,422,500
------------
ELECTRONICS (3.0%)
65,100 Avid Technology, Inc.*................................................................. 2,140,163
127,400 Computer Products, Inc.*............................................................... 3,853,850
159,900 Gemstar International Group Ltd.*...................................................... 3,277,950
59,500 SRS Labs, Inc.*........................................................................ 342,125
------------
9,614,088
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (1.7%)
77,400 Maxim Integrated Products, Inc.*....................................................... 5,350,275
------------
ENTERTAINMENT (1.8%)
78,000 International Speedway Corp. (Class A)................................................. 1,657,500
39,600 Penske Motorsports, Inc.*.............................................................. 1,351,350
90,000 Regal Cinemas, Inc.*................................................................... 2,553,750
------------
5,562,600
------------
ENTERTAINMENT & LEISURE TIME (0.8%)
110,300 The North Face, Inc.*.................................................................. 2,426,600
------------
ENTERTAINMENT/GAMING (1.6%)
142,700 Family Golf Centers, Inc.*............................................................. 3,299,938
65,300 Mirage Resorts, Inc.*.................................................................. 1,750,856
------------
5,050,794
------------
ENVIRONMENTAL CONTROL (0.9%)
60,600 Culligan Water Technologies, Inc.*..................................................... 2,795,175
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL SERVICES (1.9%)
143,600 Envoy Corp.*........................................................................... $ 3,859,250
21,000 HealthCare Financial Partners, Inc.*................................................... 530,250
66,200 Imperial Credit Industries, Inc.*...................................................... 1,191,600
31,400 Resource Bancshares Mortgage Group, Inc................................................ 529,875
------------
6,110,975
------------
HEALTH EQUIPMENT & SERVICES (0.4%)
36,300 IDX Systems Corp.*..................................................................... 1,225,125
------------
HEALTHCARE (2.2%)
138,300 OccuSystems, Inc.*..................................................................... 4,347,806
34,700 Oxford Health Plans, Inc.*............................................................. 2,535,269
------------
6,883,075
------------
HEALTHCARE - HMOS (0.9%)
168,800 Coventry Corp.*........................................................................ 2,785,200
------------
HEALTHCARE - MISCELLANEOUS (0.7%)
34,900 Integrated Health Services, Inc........................................................ 1,151,700
43,100 Superior Consultant Holdings Corp.*.................................................... 1,196,025
------------
2,347,725
------------
HEALTHCARE PRODUCTS & SERVICES (2.5%)
31,800 AmeriSource Health Corp. (Class A)*.................................................... 1,591,988
200,100 Orthodontic Centers of America, Inc.*.................................................. 3,389,194
129,300 Pharmaceutical Product Development, Inc.*.............................................. 2,804,194
------------
7,785,376
------------
HOSPITAL MANAGEMENT & HEALTH MAINTENANCE ORGANIZATIONS (2.8%)
110,100 Medcath, Inc.*......................................................................... 2,036,850
76,425 PhyCor, Inc.*.......................................................................... 2,235,431
99,200 Total Renal Care Holdings, Inc.*....................................................... 4,538,400
------------
8,810,681
------------
HOTELS (1.1%)
120,100 Interstate Hotels Co.*................................................................. 3,437,863
------------
INSURANCE (0.1%)
13,900 ARM Financial Group, Inc. (Class A).................................................... 270,181
1,800 INSpire Insurance Solutions, Inc.*..................................................... 29,925
------------
300,106
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
INTERNET (1.4%)
73,200 E*TRADE Group, Inc.*................................................................... $ 2,342,400
34,000 Yahoo! Inc.*........................................................................... 2,029,375
------------
4,371,775
------------
INVESTMENT COMPANIES (0.2%)
17,900 Sirrom Capital Corp.................................................................... 635,450
------------
LASER EQUIPMENT (0.6%)
35,800 DBT Online, Inc.*...................................................................... 1,848,175
------------
LIFE INSURANCE (1.0%)
35,200 CRA Managed Care, Inc.*................................................................ 1,949,200
76,300 First Commonwealth, Inc.*.............................................................. 1,201,725
------------
3,150,925
------------
MEDIA GROUP (0.4%)
20,900 Heftel Broadcasting Corp. (Class A)*................................................... 1,280,125
------------
MEDICAL PRODUCTS & SUPPLIES (3.1%)
36,400 Hanger Orthopedic Group, Inc.*......................................................... 441,350
170,100 IRIDEX Corp.*.......................................................................... 1,658,475
69,500 PolyMedica Industries, Inc.*........................................................... 834,000
203,200 Safeskin Corp.*........................................................................ 6,756,400
------------
9,690,225
------------
MEDICAL SERVICES (0.8%)
62,800 Gulf South Medical Supply, Inc.*....................................................... 1,566,075
53,900 NeoPath, Inc.*......................................................................... 875,875
------------
2,441,950
------------
OIL EQUIPMENT & SERVICES (1.6%)
152,000 Newpark Resources, Inc.*............................................................... 5,149,000
------------
OIL SERVICES (1.6%)
16,500 American Oilfield Divers, Inc.*........................................................ 311,438
64,100 Cal Dive International, Inc.*.......................................................... 2,131,325
44,600 Friede Goldman International Inc.*..................................................... 1,784,000
28,400 Key Energy Group, Inc.*................................................................ 734,850
------------
4,961,613
------------
PHARMACEUTICALS (2.2%)
57,700 Curative Health Services, Inc.......................................................... 1,738,213
62,000 Dura Pharmaceuticals, Inc.*............................................................ 2,216,500
99,000 Neose Technologies, Inc.*.............................................................. 1,608,750
50,600 Vivus, Inc.*........................................................................... 1,347,225
------------
6,910,688
------------
PUBLISHING (0.8%)
59,300 Applied Graphics Technologies, Inc.*................................................... 2,446,125
------------
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
REAL ESTATE INVESTMENT TRUST (0.7%)
9,400 CCA Prison Realty Trust................................................................ $ 311,375
46,800 Redwood Trust, Inc..................................................................... 1,790,100
------------
2,101,475
------------
RECREATION (1.1%)
54,700 Signature Resorts, Inc.*............................................................... 1,955,525
48,600 Silverleaf Resorts, Inc.*.............................................................. 935,550
25,700 Trendwest Resorts, Inc.*............................................................... 462,600
------------
3,353,675
------------
RESTAURANTS (0.1%)
28,500 Einstein/Noah Bagel Corp.*............................................................. 302,813
------------
RETAIL (0.5%)
32,800 Tiffany & Co........................................................................... 1,484,200
------------
RETAIL - DEPARTMENT STORES (0.8%)
64,650 Dollar Tree Stores, Inc.*.............................................................. 2,497,106
------------
RETAIL - GENERAL MERCHANDISE (0.5%)
63,300 Cost Plus, Inc.*....................................................................... 1,606,238
------------
RETAIL - SPECIALTY (3.2%)
100,700 Bed, Bath & Beyond, Inc.*.............................................................. 3,102,819
30,645 Corporate Express, Inc.*............................................................... 519,050
450,100 Intelligent Electronics, Inc.*......................................................... 1,884,794
108,100 Marks Bros. Jewelers, Inc.*............................................................ 1,175,588
83,800 Micro Warehouse, Inc.*................................................................. 2,173,563
19,300 Timberland Co.*........................................................................ 1,275,006
------------
10,130,820
------------
RETAIL - SPECIALTY APPAREL (0.6%)
151,275 Just For Feet, Inc.*................................................................... 1,976,030
------------
SEMICONDUCTORS (0.8%)
74,800 Aspen Technology, Inc.*................................................................ 2,552,550
------------
SPECIALIZED SERVICES (1.5%)
106,400 MAXIMUS, Inc.*......................................................................... 2,433,900
13,400 Pegasus Systems, Inc.*................................................................. 237,850
254,000 Topro, Inc.*........................................................................... 1,809,750
27,200 TSI International Software Ltd.*....................................................... 333,200
------------
4,814,700
------------
STEEL (0.6%)
69,700 NS Group, Inc.......................................................................... 1,829,625
------------
TELECOMMUNICATION EQUIPMENT (1.8%)
46,500 Genesys Telecommunications Laboratories, Inc.*......................................... 1,302,000
100,800 GeoTel Communications Corp.*........................................................... 1,474,200
79,300 Natural Microsystems Corp.*............................................................ 2,894,450
------------
5,670,650
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
TELECOMMUNICATIONS (2.5%)
90,000 Omnipoint Corp.*....................................................................... $ 1,878,750
130,700 Telco Communications Group, Inc.*...................................................... 3,790,300
132,200 Winstar Communications, Inc.*.......................................................... 2,206,088
------------
7,875,138
------------
TRANSPORTATION (1.5%)
20,000 Eagle USA Airfreight, Inc.*............................................................ 550,000
278,250 Miller Industries, Inc.*............................................................... 4,121,578
------------
4,671,578
------------
WHOLESALE DISTRIBUTOR (0.7%)
58,000 Brightpoint, Inc.*..................................................................... 2,175,000
------------
WIRELESS COMMUNICATION (0.0%)
3,300 RF Micro Devices, Inc.*................................................................ 61,050
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $222,842,946)......................................................... 307,861,350
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------------------------------------------------------------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENT (2.2%)
REPURCHASE AGREEMENT
$ 6,814 The Bank of New York 5.25% due 09/02/97 (dated 08/29/97; proceeds $6,817,494) (a)
(IDENTIFIED COST $6,813,520)......................................................... $ 6,813,520
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST $229,656,466) (b)...................................................... 100.0% 314,674,870
OTHER ASSETS IN EXCESS OF LIABILITIES................................................... 0.0 50,504
------- ------------
NET ASSETS.............................................................................. 100.0% $314,725,374
------- ------------
------- ------------
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $32,560,835 U.S. Treasury Note 0.00% due 08/15/00 valued
at $6,949,790.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $96,399,850 and the
aggregate gross unrealized depreciation is $11,381,446, resulting in net
unrealized appreciation of $85,018,404.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $229,656,466)............................ $314,674,870
Receivable for:
Investments sold........................................ 1,515,122
Shares of beneficial interest sold...................... 791,230
Deferred organizational expenses............................ 33,335
Prepaid expenses and other assets........................... 138,373
------------
TOTAL ASSETS........................................... 317,152,930
------------
LIABILITIES:
Payable for:
Investments purchased................................... 1,737,168
Plan of distribution fee................................ 264,044
Management fee.......................................... 158,446
Shares of beneficial interest repurchased............... 126,983
Investment advisory fee................................. 105,630
Accrued expenses and other payables......................... 35,285
------------
TOTAL LIABILITIES...................................... 2,427,556
------------
NET ASSETS............................................. $314,725,374
------------
------------
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $244,431,555
Net unrealized appreciation................................. 85,018,404
Net investment loss......................................... (2,847,403)
Accumulated net realized loss............................... (11,877,182)
------------
NET ASSETS............................................. $314,725,374
------------
------------
CLASS A SHARES:
Net Assets.................................................. $88,163
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 4,800
NET ASSET VALUE PER SHARE.............................. $18.37
------------
------------
MAXIMUM OFFERING PRICE PER SHARE
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...... $19.39
------------
------------
CLASS B SHARES:
Net Assets.................................................. $314,305,359
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 17,129,768
NET ASSET VALUE PER SHARE.............................. $18.35
------------
------------
CLASS C SHARES:
Net Assets.................................................. $321,692
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 17,528
NET ASSET VALUE PER SHARE.............................. $18.35
------------
------------
CLASS D SHARES:
Net Assets.................................................. $10,160
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 553
NET ASSET VALUE PER SHARE.............................. $18.37
------------
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED AUGUST 31, 1997* (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 203,133
Dividends................................................... 110,523
-----------
TOTAL INCOME........................................... 313,656
-----------
EXPENSES
Plan of distribution fee (Class B shares)................... 1,390,536
Investment advisory fee..................................... 834,470
Management fee.............................................. 556,314
Transfer agent fees and expenses............................ 237,758
Professional fees........................................... 29,610
Registration fees........................................... 25,248
Shareholder reports and notices............................. 25,110
Custodian fees.............................................. 20,468
Organizational expenses..................................... 18,262
Trustees' fees and expenses................................. 16,773
Other....................................................... 6,510
-----------
TOTAL EXPENSES......................................... 3,161,059
-----------
NET INVESTMENT LOSS.................................... (2,847,403)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................................... (153,149)
Net change in unrealized appreciation....................... 47,028,427
-----------
NET GAIN............................................... 46,875,278
-----------
NET INCREASE................................................ $44,027,875
-----------
-----------
<FN>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997
</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 SIX
MONTHS ENDED FOR THE YEAR
AUGUST 31, 1997* ENDED
(UNAUDITED) FEBRUARY 28, 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss......................................... $ (2,847,403) $ (4,429,662)
Net realized loss........................................... (153,149) (8,185,871)
Net change in unrealized appreciation....................... 47,028,427 (16,577,754)
------------------- -----------------
NET INCREASE (DECREASE)................................ 44,027,875 (29,193,287)
Net increase from transactions in shares of beneficial
interest.................................................. 1,914,487 144,610,586
------------------- -----------------
NET INCREASE........................................... 45,942,362 115,417,299
NET ASSETS:
Beginning of period......................................... 268,783,012 153,365,713
------------------- -----------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF $2,847,403 AND $0,
RESPECTIVELY)........................................... $ 314,725,374 $268,783,012
------------------- -----------------
------------------- -----------------
<FN>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997 (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'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. On July 28, 1997, the Fund commenced offering three additional
classes of shares, with the then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) An equity security listed or traded on the
New York or American or other domestic or foreign stock exchange is valued at
its latest sale price on that exchange prior to the time when assets are valued;
if there were no sales that day, the security is valued at the latest bid price
(in cases where securities are traded on more than one exchange, the securities
are valued on the exchange designated as the primary market pursuant to
procedures adopted by the Trustees); (2) all other portfolio securities for
which over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by TCW Funds Management, Inc. (the "Adviser") that sale 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
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value. Distribution
fees are charged directly to the respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the 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.
F. 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.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the Investment 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, 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. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- 0.25% of the average
daily net assets of Class A; (ii) Class B -- 1.0% of the lesser of: (a) the
average daily aggregate gross sales of the Class B shares since the inception of
the Fund (not including reinvestment of dividend or capital gain distributions)
less the average daily aggregate net asset value of the Class B shares redeemed
since the Fund's inception upon which a contingent deferred sales charge has
been imposed or waived; or (b) the average daily net assets of Class B; and
(iii) Class C -- 1.0% of the average daily net assets of Class C. In the case of
Class A shares, amounts paid under the Plan are paid to the Distributor for
services provided. In the case of Class B and Class C shares, amounts paid under
the Plan are paid to the Distributor for services provided and the expenses
borne by it and others in the distribution
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
of the shares of these Classes, including the payment of commissions for sales
of these Classes and incentive compensation to, and expenses of, the account
executives of Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and
Distributor, and others who engage in or support distribution of the 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 these shares to other than current shareholders; and
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate DWR and other selected
broker-dealers for their opportunity costs in advancing such amounts, which
compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $13,881,736 at August 31, 1997.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to account executives may be reimbursed in the subsequent
calendar year. For the period ended August 31, 1997, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The distributor has informed the Fund that for the six months ended August 31,
1997, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares of $551,624, and received $2,495 in front-end sales
charges from sales of the Fund's Class A shares. The respective shareholders pay
such charges which are not an expense of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended August 31, 1997 aggregated
$88,994,375 and $87,424,574, respectively.
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1997 (UNAUDITED) CONTINUED
For the period May 31, 1997 through August 31, 1997, the Fund incurred brokerage
commissions of $728 with Morgan Stanley Inc., an affiliate of the Manager since
May 31, 1997, for portfolio transactions executed on behalf of the Fund.
Dean Witter Trust FSB, an affiliate of the Manager and Distributor, is the
Fund's transfer agent. At August 31, 1997, the Fund had transfer agent fees and
expenses payable of approximately $1,900.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
AUGUST 31, 1997 FOR THE YEAR
---------------------------- ENDED
FEBRUARY 28, 1997
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold............................................................. 4,800 $ 87,339 -- --
----------- -------------- ----------- ------------
CLASS B SHARES
Sold............................................................. 2,656,842 43,203,594 11,470,998 $212,425,149
Redeemed......................................................... (2,614,118) (41,708,576) (3,824,845) (67,814,563)
----------- -------------- ----------- ------------
Net increase -- Class B.......................................... 42,724 1,495,018 7,646,153 144,610,586
----------- -------------- ----------- ------------
CLASS C SHARES*
Sold............................................................. 17,528 322,108 -- --
----------- -------------- ----------- ------------
CLASS D SHARES*
Sold............................................................. 553 10,022 -- --
----------- -------------- ----------- ------------
Net increase in Fund............................................. 65,605 $ 1,914,487 7,646,153 $144,610,586
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
<FN>
- ---------------------
* For the period July 28, 1997 (issue date) through August 31, 1997.
</TABLE>
7. FEDERAL INCOME TAX STATUS
At February 28, 1997, the Fund had a net capital loss carryover of approximately
$8,948,000 of which $3,538,000 will be available through February 28, 2003 and
$5,410,000 will be available through February 28, 2005 to offset future capital
gains to the extent provided by regulations.
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 $2,772,000 during fiscal 1997.
As of February 28, 1997, the Fund had temporary book/tax differences primarily
attributable to post-October losses.
<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
FOR THE PERIOD
SIX MONTHS AUGUST 2,
ENDED FOR THE YEAR ENDED 1993*
AUGUST 31, FEBRUARY 28, THROUGH
1997*** --------------------------------------- FEBRUARY
(UNAUDITED) 1997 1996** 1995 28, 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period............................ $ 15.73 $ 16.24 $ 9.90 $ 10.30 $ 10.00
---------- --------- --------- --------- ---------
Net investment loss................ (0.17) (0.26) (0.19) (0.18) (0.07)
Net realized and unrealized gain
(loss)............................ 2.79 (0.25) 6.53 (0.22) 0.37
---------- --------- --------- --------- ---------
Total from investment operations... 2.62 (0.51) 6.34 (0.40) 0.30
---------- --------- --------- --------- ---------
Net asset value, end of period..... $ 18.35 $ 15.73 $ 16.24 $ 9.90 $ 10.30
---------- --------- --------- --------- ---------
---------- --------- --------- --------- ---------
TOTAL INVESTMENT RETURN+........... 16.66%(1) (3.14)% 64.04% (3.88)% 3.00%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.27%(2) 2.15% 2.32% 2.57% 2.18%(2)(3)
Net investment loss................ (2.05)%(2) (1.70)% (1.75)% (2.04)% (1.75)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $314,305 $268,783 $153,366 $69,984 $68,209
Portfolio turnover rate............ 32%(1) 42% 52% 116% 69%(1)
Average commission rate paid....... $0.0577 $0.0580 -- -- --
<FN>
- ---------------------
* Commencement of operations.
** Year ended February 29.
*** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that time have been designated Class B shares.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all its expenses that were assumed or waived by the
Manager and Adviser, the annualized expense and net investment loss ratios
would have been 2.78% and (2.35)%, respectively.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
AUGUST 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 18.12
------
Net investment loss................................................... (0.01)
Net realized and unrealized gain...................................... 0.26
------
Total from investment operations...................................... 0.25
------
Net asset value, end of period........................................ $ 18.37
------
------
TOTAL INVESTMENT RETURN+.............................................. 1.38%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.58%(2)
Net investment loss................................................... (1.46)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $88
Portfolio turnover rate............................................... 32%(1)
Average commission rate paid.......................................... $ 0.0577
</TABLE>
<TABLE>
<S> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 18.12
------
Net investment loss................................................... (0.01)
Net realized and unrealized gain...................................... 0.24
------
Total from investment operations...................................... 0.23
------
Net asset value, end of period........................................ $ 18.35
------
------
TOTAL INVESTMENT RETURN+.............................................. 1.32%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 2.39%(2)
Net investment loss................................................... (2.28)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $322
Portfolio turnover rate............................................... 32%(1)
Average commission rate paid.......................................... $ 0.0577
<FN>
- ---------------------
* The date shares were first issued.
+ Does net reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
AUGUST 31, 1997
- -----------------------------------------------------------------------------------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.................................. $ 18.12
------
Net investment loss................................................... (0.02)
Net realized and unrealized gain...................................... 0.27
------
Total from investment operations...................................... 0.25
------
Net asset value, end of period........................................ $ 18.37
------
------
TOTAL INVESTMENT RETURN+.............................................. 1.38%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.............................................................. 1.27%(2)
Net investment loss................................................... (1.16)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands............................... $10
Portfolio turnover rate............................................... 32%(1)
Average commission rate paid.......................................... $ 0.0577
<FN>
- ---------------------
* The date shares were first issued.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and General Counsel
Charles Larsen
Vice President
Douglas S. Foreman
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
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
[GRAPHIC]
SEMIANNUAL REPORT
AUGUST 31, 1997
