<PAGE>
TCW/DW INCOME AND GROWTH FUND
Two World Trade Center
New York, New York 10048
DEAR SHAREHOLDER:
- --------------------------------------------------------------------------------
The domestic equity market experienced its broadest decline of 1996 in July,
with every major index recording a decline in price. Despite this
mini-correction, stock-market performance was positive for the first seven
months of the year. This is primarily attributable to a combination of strong
corporate earnings and significant cash inflows into equity mutual funds, which
propelled stock prices significantly higher relative to levels seen at the
beginning of the year.
However, as interest rates moved significantly higher, the bond market
delivered negative returns. Given that convertibles are hybrid in nature, their
returns were surprisingly good as they captured approximately 75 percent to 80
percent of the upside of the Standard & Poor's 500 Composite Stock Price Index
(S&P 500). High-yield bonds benefited in this environment of rising rates as
yield spreads tightened and also delivered positive returns.
For the six-month period ended July 31, 1996, TCW/DW Income and Growth Fund
registered a total return of 0.85 percent. During the same period, the S&P 500
produced a total return of 1.77 percent, while the Lehman Brothers
Government/Corporate Bond Index posted a total return of -2.26. Since its
inception on March 31, 1993, the Fund has provided an average annual total
return of 8.69 percent, versus 13.98 percent and 5.64 for the S&P 500 and the
Lehman Brothers Government/Corporate Bond Index, respectively. The Fund paid
shareholders regular quarterly dividends totaling $0.30 per share during the
period under review. On July 31, 1996, the Fund had net assets totaling
approximately $55.8 million. The portfolio currently includes more than 140
holdings representing 30 industries.
CONVERTIBLE SECURITIES
Convertibles, which comprised approximately 56 percent of the portfolio as
of July 31, 1996, performed well during the first seven months of 1996. Although
rising interest rates impeded performance somewhat, this was offset by the
strong returns generated by the underlying equities. On average these equities
outperformed the S&P 500 by approximately 200 basis points (2.00 percent).
The convertible portion of the Fund has benefited from its holdings in the
business services, pharmaceuticals, pollution control, airline and insurance
sectors. The convertible issues of such companies as Omnicom, Danka, First
Financial Management, Alco Standard, U.S. Filter, Aegon and Elan were liquidated
as their prices rose significantly. Profits ranging between 20 percent and 50
percent were taken in General Instruments, American Airlines, Delta, Altera,
Quantum Health and GME as those positions were also liquidated. In contrast to
1995, the portfolio's technology holdings detracted from the Fund's overall
performance as companies such as National Semiconductor, Analog Devices,
Motorola, Silicon Graphics and Quantum Corp. saw their stock prices decline
substantially. In addition, the Fund's holdings in health care services
(Integrated Health and Healthsource) and cable stocks (Comcast,
Telecommunications, Inc. and Cox) also hurt performance.
The Fund's investment adviser, TCW Funds Management, Inc., believes the
convertible portion of the Fund is structured relatively conservatively. Most
convertible holdings that are considered to be equity equivalents with little
downside protection have been sold with the proceeds reinvested in shorter-term
convertibles selling near par, or face value. As of July 31, 1996, the
convertible portfolio was approximately 80 percent bonds and 20 percent
preferred stocks, with most holdings concentrated in non-cyclical industries
<PAGE>
such as health care, leisure and business services. Despite its relative
underperformance, the investment adviser is still investing in technology
companies which are believed to have attractive future prospects.
HIGH-YIELD SECURITIES
High-yield bonds, which comprised approximately 41 percent of the Fund as of
July 31, 1996, performed well over the first seven months of 1996. The
high-yield market was buoyed by several factors including a strong equity market
and the continuation of positive cash inflows into high-yield mutual funds.
Additionally, mergers and acquisitions continued to be important drivers of
high-yield market performance, as a number of high-yield companies were acquired
by investment-grade companies. This activity not only positively impacted
bondholders of the target companies, but other companies within the target's
industry, as expectations for further consolidation within these sectors
heightened.
The renewed strength of the U.S. economy, coupled with strong investor
demand encouraged high-yield issuers to enter the market at a record pace
through July. New issuance totaled more than $40 billion for the first seven
months of the year, twice the amount issued during the comparable period last
year. Currently, technical market factors are quite favorable, suggesting that
the pace of new-issue activity may remain robust in the months ahead.
According to the investment adviser, despite signs of a healthy economy and
the recent receptivity of the capital markets, high-yield investors are best
served in the long term by a defensively positioned high-yield portfolio. In the
investment adviser's opinion, the increase in the issuance of lower-rated and
deferred-interest securities, which is being driven by the market's substantial
liquidity, resulted in a slippage in credit selection standards on the part of
certain high-yield investors. The investment adviser continues to believe in the
importance of emphasizing fundamental credit analysis and seeks to obtain
capital appreciation from positive credit events rather than from market
euphoria.
OUTLOOK
In the investment adviser's view, the financial markets appear to have
entered a more difficult and volatile period, marked by uncertainty about the
direction of the economy, inflation and interest rates. In addition, some market
sectors are seeing their valuations contract. According to the investment
adviser, given the state of the market, a correction between 10 percent and 15
percent could occur in the coming months. The "wild card" in this scenario is
the rate of mutual fund redemptions. With over $1 trillion in U.S. stock mutual
funds, the liquidation of just five percent of these assets could cause
meaningful dislocations in a difficult market. In this environment, the Fund
will assume a more defensive posture. The investment adviser believes that the
combined attributes of convertible and high-yield securities make TCW/DW Income
and Growth Fund a particularly timely investment in today's more volatile
environment.
We appreciate your support of TCW/DW Income and Growth Fund and look forward
to continuing to serve your investment needs and objectives.
Very truly yours,
[LOGO]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- --------- ------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (44.0%)
AEROSPACE (0.7%)
$ 345 Hexcel Corp................................................................ 7.00% 08/01/03 $ 395,549
------------
AUTO PARTS (0.9%)
505 Magna International, Inc. (Canada)......................................... 5.00 10/15/02 510,050
------------
BANKS - INTERNATIONAL (0.9%)
460 MBL International Finance (Bermuda)........................................ 3.00 11/30/02 505,186
------------
BIOTECHNOLOGY (0.5%)
305 Sepracor Inc. - 144A*...................................................... 7.00 12/01/02 284,666
------------
BUSINESS SERVICES (0.6%)
300 Danka Business Systems - 144A*............................................. 6.75 04/01/02 337,449
------------
CABLE & TELECOMMUNICATIONS (0.6%)
390 Tele-Communications International, Inc..................................... 4.50 02/15/06 319,312
------------
COMPUTER EQUIPMENT (2.0%)
405 Apple Computer, Inc........................................................ 6.00 06/01/01 385,762
940 Silicon Graphics, Inc. - 144A*............................................. 0.00 11/02/13 467,124
250 Storage Technology Corp.................................................... 8.00 05/31/15 282,500
------------
1,135,386
------------
COMPUTER SOFTWARE & SERVICES (0.6%)
330 UBS Finance Inc............................................................ 2.00 05/22/02 313,500
------------
DISTRIBUTION (0.6%)
425 U.S. Office Products Co.................................................... 5.50 05/15/03 353,655
------------
ELECTRONICS (1.2%)
340 Richey Electronics Inc. - 144A*............................................ 7.00 03/01/06 328,525
375 SCI Systems, Inc........................................................... 5.00 05/01/06 359,295
------------
687,820
------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (3.0%)
285 Altera Corp. - 144A*....................................................... 5.75 06/15/02 290,788
565 Analog Devices............................................................. 3.50 12/01/00 567,283
885 Xilinx Inc. - 144A*........................................................ 5.25 11/01/02 817,156
------------
1,675,227
------------
ENGINEERING & CONSTRUCTION (0.7%)
380 New World Infrastructure Ltd. - 144A* (Hong Kong).......................... 5.00 07/15/01 368,600
------------
ENTERTAINMENT/GAMING (1.4%)
250 California Hotel Finance Corp.............................................. 11.00 12/01/02 260,625
340 Imax Corp. - 144A* (Canada)................................................ 5.75 04/01/03 298,350
275 International Cabletel, Inc................................................ 7.00 06/15/08 245,003
------------
803,978
------------
ENVIRONMENTAL CONTROL (1.2%)
355 Molten Metal Technology, Inc............................................... 5.50 05/01/06 344,009
300 United Waste Systems, Inc.................................................. 4.50 06/01/01 301,527
------------
645,536
------------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- FINANCIAL SERVICES (0.8%) --------- --------- ----------
<C> <S> <C> <C> <C>
$ 495 Morgan Stanley Group, Inc......................................... 2.00% 03/29/02 $ 470,250
----------
FOREIGN GOVERNMENT (1.1%)
630 Republic of Italy................................................. 5.00 06/28/01 628,425
----------
HEALTHCARE (3.2%)
230 American Medical Response, Inc. - 144A*........................... 5.25 02/01/01 238,625
90 Assisted Living Concepts, Inc. - 144A*............................ 7.00 07/31/05 116,662
180 PhyCor, Inc....................................................... 4.50 02/15/03 175,345
420 Phymatrix Corp.................................................... 6.75 06/15/03 375,358
260 Renal Treatment Centers, Inc...................................... 5.625 07/15/06 265,398
300 Tenet Healthcare Corp............................................. 6.00 12/01/05 291,600
350 Vivra, Inc. - 144A*............................................... 5.00 07/01/01 341,512
----------
1,804,500
----------
HEALTHCARE SERVICES (0.6%)
335 Quintiles Transportational Corp. - 144A*.......................... 4.25 05/31/00 350,685
----------
HOTELS (0.6%)
640 Marriott International Inc........................................ 0.00 03/25/11 340,666
----------
LEISURE (0.6%)
1,115 Coleman Worldwide Corp............................................ 0.00 05/27/13 320,596
----------
MACHINERY (0.3%)
165 Thermo Optek Inc. - 144A*......................................... 5.00 10/15/00 167,828
----------
MEDIA GROUP (1.3%)
255 Comcast Corp...................................................... 3.375 09/09/05 208,462
125 Nelson (Thomas), Inc. - 144A*..................................... 5.75 11/30/99 114,884
885 News America Holdings, Inc........................................ 0.00 03/11/13 385,497
----------
708,843
----------
MEDICAL SERVICES (1.7%)
170 ARV Assisted Living - 144A*....................................... 6.75 04/01/06 159,659
155 Emeritus Corp. - 144A*............................................ 6.25 01/01/06 139,500
55 Integrated Health Services, Inc................................... 5.75 01/01/01 50,875
310 Integrated Health Services, Inc. - 144A*.......................... 5.75 01/01/01 289,075
350 Sterling House Corp............................................... 6.75 06/30/06 325,500
----------
964,609
----------
OIL & GAS PRODUCTS (1.4%)
345 Apache Corp. - 144A*.............................................. 6.00 01/15/02 379,069
215 Nabors Industries, Inc............................................ 5.00 05/15/06 223,895
180 Pennzoil Co....................................................... 4.75 10/01/03 189,675
----------
792,639
----------
PAPER (0.6%)
340 Advance Agro Public Co. - 144A* (Thailand)........................ 3.50 06/14/01 323,000
----------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- PHARMACEUTICALS (1.9%) --------- --------- ----------
<C> <S> <C> <C> <C>
$ 340 Alza Corp......................................................... 5.00% 05/01/06 $ 313,545
720 Sandoz Capital BVI, Ltd. - 144A* (Switzerland).................... 2.00 10/06/02 766,800
----------
1,080,345
----------
POLLUTION CONTROL (4.6%)
1,170 Thermo Electron Corp. - 144A*..................................... 4.25 01/01/03 1,338,187
655 U.S. Filter Corp. - 144A*......................................... 6.00 09/15/05 816,516
450 WMX Technologies, Inc............................................. 2.00 01/24/05 383,400
----------
2,538,103
----------
PUBLISHING (0.7%)
350 Scholastic Corp. - 144A*.......................................... 5.00 08/15/05 372,750
----------
REAL ESTATE INVESTMENT TRUST (2.1%)
300 Camden Property Trust............................................. 7.33 04/01/01 298,500
335 Liberty Property Trust............................................ 8.00 07/01/01 335,000
395 LTC Properties, Inc............................................... 8.50 01/01/01 409,398
125 LTC Properties, Inc............................................... 7.75 01/01/02 124,990
----------
1,167,888
----------
RETAIL (4.8%)
565 Baby Superstore, Inc.............................................. 4.875 10/01/00 418,100
335 Charming Shoppes, Inc............................................. 7.50 07/15/06 357,612
300 Federated Department Stores, Inc.................................. 5.00 10/01/03 317,241
255 Nine West Group, Inc.............................................. 5.50 07/15/03 254,408
940 Staples, Inc. - 144A*............................................. 4.50 10/01/00 924,321
430 Sunglass Hut International, Inc................................... 5.25 06/15/03 326,800
----------
2,598,482
----------
SEMICONDUCTORS (0.5%)
285 C-Cube Microsystems, Inc.......................................... 5.875 11/01/05 294,334
----------
TELECOMMUNICATIONS (1.7%)
1,320 Motorola, Inc..................................................... 0.00 09/27/13 954,294
----------
UTILITIES - ELECTRIC (0.6%)
350 Korea Electric Power Corp. (South Korea).......................... 5.00 08/01/01 345,188
----------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST $24,860,270)................................... 24,559,339
----------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
CORPORATE BONDS (41.1%)
BUSINESS SERVICES (2.0%)
320 Big Flower Press, Inc...................................................... 10.75 08/01/03 312,000
310 Jorgensen (Earle M.) Co.................................................... 10.75 03/01/00 306,900
450 Williamhouse-Regency - 144A*............................................... 13.00 11/15/05 507,375
------------
1,126,275
------------
CHEMICALS (0.7%)
375 NL Industries Inc.......................................................... 11.75 10/15/03 382,031
------------
COMPUTERS (0.6%)
430 Quantum Corp............................................................... 5.00 03/01/03 357,738
------------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ENERGY (1.8%) --------- --------- ----------
<C> <S> <C> <C> <C>
$ 250 Chesapeake Energy Corp............................................ 12.00% 03/01/01 $ 270,625
640 Flores & Rucks, Inc............................................... 13.50 12/01/04 736,000
----------
1,006,625
----------
ENTERTAINMENT/GAMING (3.2%)
80 Alliance Gaming Corp.............................................. 12.875 06/30/03 78,400
360 Bally's Grand, Inc. (Series B).................................... 10.375 12/15/03 392,850
590 Bally's Park Place Funding, Inc................................... 9.25 03/15/04 623,925
695 Fitzgeralds Gaming Corp. (Units)++................................ 13.00 12/31/02 524,725
165 Grand Casinos, Inc................................................ 10.125 12/01/03 160,875
----------
1,780,775
----------
FINANCIAL SERVICES (1.4%)
400 American Annuity Group, Inc....................................... 11.125 02/01/03 428,000
330 Morgan Stanley Group, Inc......................................... 1.25 07/31/03 325,462
----------
753,462
----------
FOODS (1.7%)
290 American Rice, Inc................................................ 13.00 07/31/02 266,800
500 Penn Traffic Co................................................... 10.25 02/15/02 458,750
250 Penn Traffic Co................................................... 11.50 04/15/06 235,625
----------
961,175
----------
HOME BUILDING (0.6%)
350 U.S. Home Corp.................................................... 9.75 06/15/03 341,250
----------
HOSPITAL MANAGEMENT (1.3%)
665 OrNda HealthCorp.................................................. 12.25 05/15/02 718,200
----------
INDUSTRIALS (7.0%)
250 American Media Operations, Inc.................................... 11.625 11/15/04 257,500
415 Corporate Express, Inc............................................ 4.50 07/01/00 397,757
215 Cott Corp. (Canada)............................................... 9.375 07/01/05 210,162
200 Four M Corp. - 144A*.............................................. 12.00 06/01/06 204,000
250 Grand Union Co.................................................... 12.00 09/01/04 245,313
250 Hayes Wheels International, Inc................................... 11.00 07/15/06 253,750
500 Mobilemedia Communications, Inc................................... 9.375 11/01/07 441,250
320 National Fiberstock Corp. - 144A*................................. 11.625 06/15/02 323,200
300 Oregon Steel Mills, Inc........................................... 11.00 06/15/03 313,125
250 Pierce Leahy Corp. - 144A*........................................ 11.125 07/15/06 256,250
500 Rogers Communications, Inc. (Canada).............................. 10.875 04/15/04 508,125
500 Showboat, Inc..................................................... 9.25 05/01/08 497,500
----------
3,907,932
----------
MANUFACTURING (5.7%)
335 Communications & Power Industries, Inc. (Series B)................ 12.00 08/01/05 352,588
250 Foamex L.P........................................................ 11.25 10/01/02 258,750
575 Newflo Corp....................................................... 13.25 11/15/02 632,500
500 Sweetheart Cup, Inc............................................... 10.50 09/01/03 505,000
750 Talley Manufacturing & Technology Inc............................. 10.75 10/15/03 772,500
600 Telex Communications Inc.......................................... 12.00 07/15/04 642,000
----------
3,163,338
----------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- MEDIA GROUP (4.7%) --------- --------- ----------
<C> <S> <C> <C> <C>
$ 375 Ackerly Communications, Inc. (Series B)........................... 10.75% 10/01/03 $ 390,000
500 Adams Outdoor Advertising - 144A*................................. 10.75 03/15/06 515,000
545 Garden State Newspapers, Inc...................................... 12.00 07/01/04 577,700
575 Heritage Media Services Inc....................................... 11.00 06/15/02 609,500
500 K-III Communications Corp......................................... 10.625 05/01/02 508,750
----------
2,600,950
----------
MULTI-INDUSTRY (0.8%)
500 Valcor, Inc....................................................... 9.625 11/01/03 458,750
----------
PACKAGING & BOTTLING (0.7%)
375 Plastic Containers, Inc........................................... 10.75 04/01/01 376,875
----------
PAPER & FOREST PRODUCTS (3.7%)
935 Malette, Inc. (Canada)............................................ 12.25 07/15/04 981,750
500 Rainy River Forest Product (Canada)............................... 10.75 10/15/01 525,000
550 Stone Container Corp.............................................. 10.75 10/01/02 558,250
----------
2,065,000
----------
REAL ESTATE INVESTMENT TRUST (0.8%)
415 Trizec Finance Ltd. (Canada)...................................... 10.875 10/15/05 425,375
----------
RETAIL (1.2%)
420 Cole National Group, Inc.......................................... 11.25 10/01/01 441,000
250 Farm Fresh, Inc................................................... 12.25 10/01/00 212,500
----------
653,500
----------
TELECOMMUNICATIONS (0.9%)
500 Mobile Telecommunication Technologies Corp........................ 13.50 12/15/02 520,000
----------
TRANSPORTATION (1.4%)
550 Moran Transportation Co........................................... 11.75 07/15/04 547,250
200 SFP Pipeline Holdings, Inc........................................ 11.16 08/15/10 238,000
----------
785,250
----------
UTILITIES (0.9%)
490 Texas-New Mexico Power Co......................................... 10.75 09/15/03 513,275
----------
TOTAL CORPORATE BONDS (IDENTIFIED COST $22,918,513)..................................... 22,897,776
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (11.5%)
AUTO PARTS (0.5%)
5,550 Federal Mogul Corp. (Series D) - 144A* $3.875................................................ 296,231
------------
BUILDING MATERIALS (0.5%)
5,700 Owens-Corning Capital L.L.C. - 144A* $3.25................................................... 298,537
------------
CABLE & TELECOMMUNICATIONS (0.5%)
7,500 TCI Communications, Inc. (Series A) $2.125................................................... 283,125
------------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- FINANCIAL (1.3%) ----------
<C> <S> <C>
8,600 Allstate Corp. $2.30 (1).......................................................... $ 366,575
6,200 St. Paul Capital L.L.C. $3.00..................................................... 321,625
----------
688,200
----------
FINANCIAL SERVICES (0.5%)
13,400 Merril Lynch & Co., Inc. $3.12 (2)................................................ 268,000
----------
FUNERAL SERVICES (0.6%)
4,000 SCI Finance L.L.C. (Series A) $3.125.............................................. 360,000
----------
HEALTHCARE HMOS (0.4%)
4,000 Aetna Inc. $4.758................................................................. 250,500
----------
INDUSTRIALS (0.6%)
8,200 Crown Cork & Seal Co., Inc. $1.885................................................ 359,775
----------
INSURANCE (0.9%)
3,800 American Bankers Insurance Group, Inc. (Series B) $3.125.......................... 194,750
12,200 Salomon, Inc. $2.031.............................................................. 317,200
----------
511,950
----------
MACHINERY (0.3%)
3,400 Greenfield Capital Trust - 144A* $3.00............................................ 161,500
----------
MEDIA GROUP (0.5%)
4,900 SFX Broadcasting, Inc. (Series D) $3.25........................................... 256,025
----------
OIL & GAS PRODUCTS (2.2%)
8,500 Enron Corp. $0.725................................................................ 199,750
10,500 Occidental Petroleum Corp. (Series A) $3.00 (3)................................... 620,813
5,900 Occidental Petroleum Corp. - 144A* $3.875......................................... 327,450
----------
1,148,013
----------
OIL REFINERIES (0.5%)
10,700 Sun Company, Inc. (Series A) $1.80................................................ 282,213
----------
REAL ESTATE INVESTMENT TRUST (0.1%)
2,800 Security Capital Industrial Trust $1.75........................................... 65,100
----------
RETAIL (0.8%)
8,800 Kmart Financing I $3.875.......................................................... 427,900
----------
TELECOMMUNICATION EQUIPMENT (0.8%)
8,700 Corning Delaware, L.P. $3.00...................................................... 471,975
----------
TELECOMMUNICATIONS (0.5%)
5,500 MFS Communications Company, Inc. $2.68............................................ 305,250
----------
TOTAL CONVERTIBLE PREFERRED STOCKS (IDENTIFIED COST $6,231,599)................... 6,434,294
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ----------- ---------
<C> <S> <C> <C>
WARRANTS (0.1%)
ENTERTAINMENT/GAMING
6,654 Fitzgeralds Gaming Corp. - 144A* (Identified Cost $29,943).......................... 03/15/99 29,943
------------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- --------- --------- ------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (1.4%)
REPURCHASE AGREEMENT
$ 809 The Bank of New York (dated 07/31/96; proceeds $808,735; collateralized by
$958,822 Federal Home Loan Mortgage Corp. 7.00% due 04/01/24 valued at
$824,778) (Identified Cost $808,606)..................................... 5.75% 08/01/96 $ 808,606
------------
TOTAL INVESTMENTS (IDENTIFIED COST $54,848,931) (A)........................ 98.1% 54,729,958
OTHER ASSETS IN EXCESS OF LIABILITIES...................................... 1.9 1,045,516
----- ----------
NET ASSETS................................................................. 100.0% $55,775,474
----- ----------
----- ----------
<FN>
- ------------------
* RESALE IS RESTRICTED TO QUALIFIED INSTITUTIONAL INVESTORS.
++ CONSISTS OF MORE THAN ONE CLASS OF SECURITIES TRADED TOGETHER AS A UNIT;
GENERALLY BONDS WITH ATTACHED WARRANTS.
(1) EXCHANGEABLE INTO PMI GROUP INC. COMMON STOCK.
(2) EXCHANGEABLE INTO MGIC INVESTMENTS CORP. COMMON STOCK.
(3) EXCHANGEABLE INTO CANADIAN OCCIDENTAL PETROLEUM COMMON STOCK.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES APPROXIMATES IDENTIFIED
COST. THE AGGREGATE GROSS UNREALIZED APPRECIATION WAS $1,681,011 AND THE
AGGREGATE GROSS UNREALIZED DEPRECIATION WAS $1,799,984, RESULTING IN NET
UNREALIZED DEPRECIATION OF $118,973.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $54,848,931)............. $54,729,958
Receivable for:
Investments sold.......................... 1,012,095
Interest.................................. 834,005
Shares of beneficial interest sold........ 160,820
Deferred organizational expenses............ 66,302
Prepaid expenses............................ 23,373
----------
TOTAL ASSETS........................ 56,826,553
----------
LIABILITIES:
Payable for:
Investments purchased..................... 880,627
Shares of beneficial interest
repurchased............................. 40,412
Plan of distribution fee.................. 38,386
Management fee............................ 23,032
Investment advisory fee................... 15,355
Accrued expenses and other payables......... 53,267
----------
TOTAL LIABILITIES................... 1,051,079
----------
NET ASSETS:
Paid-in-capital............................. 53,559,378
Net unrealized depreciation................. (118,973)
Accumulated undistributed net investment
income.................................... 357,553
Accumulated undistributed net realized
gain...................................... 1,977,516
----------
NET ASSETS.......................... $55,775,474
----------
----------
NET ASSET VALUE PER SHARE, 5,104,063 shares
outstanding (unlimited shares authorized
of $.01 par value)........................
$10.93
----------
----------
</TABLE>
Statement of Operations
FOR THE SIX MONTHS ENDED JULY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest................................ $1,870,144
Dividends............................... 138,036
----------
TOTAL INCOME........................ 2,008,180
----------
EXPENSES
Plan of distribution fee................ 210,757
Management fee.......................... 128,648
Investment advisory fee................. 85,765
Professional fees....................... 34,344
Transfer agent fees and expenses........ 28,443
Shareholder reports and notices......... 22,394
Organizational expenses................. 19,849
Trustees' fees and expenses............. 19,535
Registration fees....................... 12,365
Custodian fees.......................... 11,339
Other................................... 9,190
----------
TOTAL EXPENSES...................... 582,629
----------
NET INVESTMENT INCOME............... 1,425,551
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain....................... 2,199,899
Net change in unrealized appreciation... (3,170,631)
----------
NET LOSS............................ (970,732)
----------
NET INCREASE........................ $ 454,819
----------
----------
</TABLE>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR
FOR THE SIX MONTHS ENDED
ENDED JANUARY 31,
JULY 31, 1996 1996
------------------- ---------------
<S> <C> <C>
(UNAUDITED)
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income................................................... $ 1,425,551 $ 2,973,403
Net realized gain....................................................... 2,199,899 1,186,265
Net change in unrealized appreciation/depreciation...................... (3,170,631) 6,051,315
------------------- ---------------
Net increase........................................................ 454,819 10,210,983
Dividends from net investment income...................................... (1,518,137) (3,087,769)
Net decrease from transactions in shares of beneficial interest........... (791,803) (4,827,749)
------------------- ---------------
Total increase (decrease)........................................... (1,855,121) 2,295,465
NET ASSETS:
Beginning of period....................................................... 57,630,595 55,335,130
------------------- ---------------
END OF PERIOD (Including undistributed net investment income of $357,553
and $450,139, respectively).............................................. $55,775,474 $57,630,595
------------------- ---------------
------------------- ---------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--TCW/DW Income and 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 to generate high total return by providing a high level
of current income and the potential for capital appreciation. The Fund seeks to
achieve its objective by investing in bonds or preferred stock convertible into
common stock, other fixed income securities, common stocks and U.S. Government
securities. The Fund was organized as a Massachusetts business trust on November
23, 1992 and commenced operations on March 31, 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 (in cases
where securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market by the Adviser); (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); (4) portfolio securities may be valued by an
outside pricing service approved by the Trustees. The pricing service
utilizes a matrix system incorporating security quality, maturity and coupon
as the evaluation model parameters, and/or research and evaluation by its
staff, including review of broker-dealer market price quotations, if
available, in determining what it believes is the fair valuation of the
portfolio securities valued by such pricing service; and (5) 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. Discounts are accreted over the life of the respective securities.
Dividend income and other distributions are recorded on the ex-dividend
date. Interest income is accrued daily.
C. 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.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the capital accounts based on their federal
tax-basis treatment; temporary differences do not require reclassification.
Dividends and distributions which exceed net investment income and net
realized capital gains for financial reporting purposes but not for tax
purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized capital gains. To the extent they
exceed net investment income and net realized capital gains for tax
purposes, they are reported as distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES--Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc. (the "Manager") paid the organizational
expenses of the Fund in the amount of approximately $206,000 of which
$200,000 have been reimbursed. Such expenses have been deferred and are
being amortized on the straight-line method over a period not to exceed five
years from the commencement of operations.
2. MANAGEMENT AGREEMENT--Pursuant to a Management Agreement, the Fund pays the
Investment Manager a management fee, accrued daily and payable monthly, by
applying the following annual rates to the net assets of the Fund determined as
of the close of each business day: 0.45% to the portion of daily net assets not
exceeding $500 million and 0.42% to the portion of the daily net assets
exceeding $500 million.
Under the terms of the Management Agreement, the Manager maintains certain
of the Fund's books and records and furnishes, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and pays
the salaries of all personnel, including officers of the Fund who are employees
of the Manager. The Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT--Pursuant to an Investment Advisory Agreement
with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the Adviser an
advisory fee, accrued daily and payable monthly, by applying the following
annual rates to the net assets of the Fund determined as of the close of each
business day: 0.30% to the portion of daily net assets not exceeding $500
million and 0.28% to the portion of the daily net assets exceeding $500 million.
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.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
4. PLAN OF DISTRIBUTION--Dean Witter Distributors Inc. (the "Distributor"), an
affiliate of the Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act, finances certain expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by the Distributor, Dean Witter Reynolds
Inc. ("DWR"), an affiliate of the Distributor and Manager, its affiliates and
any other selected broker-dealers under the Plan: (1) compensation to, and
expenses of, DWR's account executives and others, including overhead and
telephone expenses; (2) sales incentives and bonuses to sales representatives
and to marketing personnel in connection with promoting sales of the Fund's
shares; (3) expenses incurred in connection with promoting sales of the Fund's
shares; (4) preparing and distributing sales literature; and (5) providing
advertising and promotional activities, including direct mail solicitation and
television, radio, newspaper, magazine and other media advertisements.
The Fund is authorized to reimburse the Distributor for specific expenses
the Distributor incurs or plans to incur in promoting the distribution of the
Fund's shares. The amount of each monthly reimbursement payment may in no event
exceed an amount equal to a payment at the annual rate of 0.75% of the Fund's
average daily net assets during the month. Expenses incurred by the Distributor
pursuant to the Plan in any fiscal year will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. For the six months ended
July 31, 1996, the distribution fee was accrued at the annual rate of 0.75%.
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 July 31, 1996 aggregated $27,386,088 and
$28,283,082, respectively.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At July 31, 1996, the Fund had transfer agent fees
and expenses payable of approximately $7,000.
6. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JULY 31, 1996
------------------------- FOR THE YEAR ENDED
JANUARY 31, 1996
(UNAUDITED) ---------------------------
SHARES AMOUNT SHARES AMOUNT
--------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Sold..................................................... 861,854 $ 9,743,377 1,236,686 $ 13,236,674
Reinvestment of dividends................................ 53,903 604,256 224,382 2,370,537
--------- -------------- ----------- --------------
915,757 10,347,633 1,461,068 15,607,211
Repurchased.............................................. (989,362) (11,139,436) (1,948,190) (20,434,960)
--------- -------------- ----------- --------------
Net decrease............................................. (73,605) $ (791,803) (487,122) $ (4,827,749)
--------- -------------- ----------- --------------
--------- -------------- ----------- --------------
</TABLE>
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JULY 31, 1996 (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
7. FEDERAL INCOME TAX STATUS--At January 31, 1996, the Fund had a net capital
loss carryover of approximately $212,000 which will be available through January
31, 2003 to offset future capital gains to the extent provided by regulations.
<PAGE>
TCW/DW INCOME AND 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
MARCH 31,
FOR THE YEAR FOR THE YEAR 1993*
FOR THE SIX ENDED ENDED THROUGH
MONTHS ENDED JANUARY 31, JANUARY 31, JANUARY 31,
JULY 31, 1996 1996 1995 1994
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $11.13 $ 9.77 $10.98 $10.00
------- ------- ------- -------
Net investment income................... 0.28 0.59 0.59 0.45
Net realized and unrealized gain
(loss)................................. (0.18) 1.37 (1.20) 1.02
------- ------- ------- -------
Total from investment operations........ 0.10 1.96 (0.61) 1.47
------- ------- ------- -------
Less dividends and distributions from:
Net investment income................. (0.30) (0.60) (0.55) (0.39)
Net realized gain..................... -- -- (0.05) (0.10)
------- ------- ------- -------
Total dividends and distributions....... (0.30) (0.60) (0.60) (0.49)
------- ------- ------- -------
Net asset value, end of period.......... $10.93 $11.13 $ 9.77 $10.98
------- ------- ------- -------
------- ------- ------- -------
TOTAL INVESTMENT RETURN+................ 0.85%(1) 20.52% (5.59)% 15.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.03%(2) 2.21% 2.04% 1.57%(2)(3)
Net investment income................... 4.97%(2) 5.41% 5.83% 5.62%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $ 55,775 $ 57,631 $ 55,335 $ 64,370
Portfolio turnover rate................. 49%(1) 79% 88% 84%(1)
Average commission rate paid............ $ 0.0600 -- -- --
</TABLE>
- --------------
* COMMENCEMENT OF OPERATIONS.
+ CALCULATED BASED ON THE NET ASSET VALUE AS OF THE LAST BUSINESS DAY OF THE
PERIOD.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
(3) IF THE MANAGER AND INVESTMENT ADVISER HAD NOT REIMBURSED ALL EXPENSES AND
WAIVED THE MANAGEMENT FEE, THE ABOVE ANNUALIZED EXPENSE AND NET INVESTMENT
INCOME RATIOS WOULD HAVE BEEN 2.00% AND 5.18%, RESPECTIVELY.
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
Sheldon Curtis
Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
Kevin A. Hunter
Vice President
Mark L. Attanasio
Vice President
Melissa Weiler
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in
the Fund unless preceded or accompanied by an effective prospectus.
INCOME AND
GROWTH FUND
[graphic]
SEMIANNUAL REPORT
JULY 31, 1996
