TCW DW INCOME & GROWTH FUND, N-30D, 1997-04-02

TCW DW INCOME & GROWTH FUND
N-30D, 1997-04-02

Previous: MONEY MARKET OBLIGATIONS TRUST II, NSAR-B, 1997-04-02

Next: TCW DW INCOME & GROWTH FUND, 485BPOS, 1997-04-02

<PAGE>
TCW/DW INCOME AND GROWTH FUND
LETTER TO THE SHAREHOLDERS JANUARY 31, 1997

DEAR SHAREHOLDER:

For the fiscal year ended January 31, 1997, most major stock indices posted
strong returns with large cap stocks outperforming their smaller cap
counterparts for the second consecutive year. During the period under review,
small cap underperformance, combined with the fact that bonds were relatively
poor performers (the Lehman Brothers Government/Corporate Bond Index returned
2.39 percent), served as a brake on convertible bond performance.

PERFORMANCE

For the fiscal year, TCW/DW Income and Growth Fund returned 13.46 percent with
the convertible and high yield segments of the Fund up 13.80 percent and 12.40
percent, respectively. This compares with 26.34 percent for the Standard &
Poor's 500 Composite Stock Index (S&P 500), 2.39 percent for the Lehman Brothers
Government/ Corporate Bond Index and 7.02 percent for the Lipper Flexible Income
Funds Index. The accompanying chart illustrates the performance of a $10,000
investment in the Fund since inception (March 31, 1993) through the fiscal year
ended January 31, 1997, versus the performance of similar hypothetical
investments in the S&P 500, the Lehman Brothers Government/Corporate Bond Index
and the Lipper Flexible Income Funds Index.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
LETTER TO THE SHAREHOLDERS JANUARY 31, 1997, CONTINUED

CONVERTIBLE SECURITIES

The convertible market overall remains healthy. While there are pockets of
overvaluation in the secondary market, there are areas of good value as well,
especially in new issues. During 1996, a total of 160 issues with a net value of
over $25 billion were brought to the market, matching the record year of 1993.
The terms of these new issues were generally favorable. In addition, just under
$6 billion in convertible preferreds were created through mergers and
acquisitions. Even with these large numbers of new issues, the convertible
market actually contracted by about $3 billion because many of 1993's issues
were called for redemption.

In the past, we have discussed the importance of short maturity convertible
bonds and the downside protection we believe they provide. In 1996, 77
convertible bonds with maturities of seven years or less were issued, far more
than in any previous year. Of these 77 issues, 18 had underlying stocks that
declined 15 percent or more from the time of issue. In these instances, the
convertibles, on average, only experienced 32.8 percent of the decline of the
underlying stocks.

During the fiscal year ended January 31, 1997, the convertible portion of the
portfolio benefitted substantially from its holdings in technology, airlines,
pollution control and REITs. Early in the year, our holdings in AMR Corp. and
Delta Airlines, Inc. did very well as airlines in general outperformed the
market. We sold both these issues prior to the industry's underperformance in
the second half of the year. Technology was mixed but was, overall, a fruitful
sector for investment. Strong performances by holdings such as Storage
Technology Corp., Quantum Corp., Analog Devices and Altera Corp. offset the
relatively poor results provided by Motorola, Inc. and Silicon Graphics, Inc. In
the pollution control sector, U.S. Filter Corp. was an outstanding performer and
finished the fiscal year up 58.6 percent. Our holdings in REITs, Liberty
Property Trust and LTC Properties, Inc. were also above average performers.

On the negative side, leisure/entertainment, healthcare and retail were a drag
on performance. Leisure/entertainment holdings including News Corp., Scholastic
Corp., International Cabletel, Inc., Tele-Communications International, Inc. and
TCI Pacific Communications underperformed as did retail and healthcare holdings
such as Kmart Financing, Sunglass Hut International, Staples, Inc., Home Depot,
Inc., Vivra, Inc., Alza Corp. and Quintiles Transportational Corp. Looking
forward, we believe that, after a dismal 1996, cable stocks will continue their
recent recovery and that Staples, Inc. (pending merger with Office Depot, Inc.),
Kmart Financing (restructuring progressing) and Home Depot, Inc. (good growth
prospects) will also do well.

Our overall convertible portfolio strategy remains much the same as it has been
for the last several quarters. We will continue to emphasize companies which
appear to have good growth prospects, either fundamentally or due to
restructuring. We will continue to de-emphasize most cyclical and basic
industrial companies due to the lack of pricing power in the continuing
competitive environment. Instead, we will favor technology, healthcare, consumer
services and financials where growth prospects seem more promising.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
LETTER TO THE SHAREHOLDERS JANUARY 31, 1997, CONTINUED

HIGH YIELD BONDS

High yield bonds continued to be supported by the same factors that favorably
impacted performance during the first half of the Fund's fiscal year,
specifically strength in the equity markets and record cash flows into high
yield mutual funds. High levels of liquidity on the part of bond buyers
encouraged prospective high yield issuers to come to market quickly during the
second half of 1996. New issuance totaled $32.4 billion during the second half
of 1996, which was 20 percent greater than the amount issued in last year's
comparable period. This high level of new issuance was driven by several
factors, including meaningful deregulation in the telecommunications industry,
LBO- and acquisition-related financing, as well as the high yield market's
growing acceptance of foreign issuers.

LOOKING AHEAD

The economic outlook for 1997 remains one of moderation. When we examine the
evidence, the probability of another double digit percentage increase in stock
prices seems unlikely. The gains of the last two years, combined with the
current interest rate environment, price/earnings multiples levels and
moderating corporate profitability raise the risks. In addition, the possibility
of a "shock to the system" arising from instability in Russia, the Middle East,
or elsewhere is not insignificant. While we do not foresee a bear market on the
immediate horizon, we believe that the risk/reward of the market has become less
favorable. In fact, the greatest probability may be for a period of below
average returns with increasing volatility. Unless corporate profits surge or
price/earnings multiples expand to historically high levels, mid-single digit
returns may be the most likely outcome. However, if interest rates rise or
corporate profits stagnate or decline, the outlook for the market could be more
negative. In either case, we believe that the Fund's portfolio of convertible
securities and high yield bonds is positioned to perform well relative to
equities, particularly given their yield pickup and generally short maturities.

We appreciate your support of TCW/DW Income and Growth Fund and look forward to
continuing to serve your financial needs and objectives.

Very truly yours,

[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (40.9%)
ADVERTISING (1.1%)
$ 620 Omicom Group, Inc............................. 4.25 % 01/03/07 $ 652,550
--------------
AEROSPACE (1.2%)
345 Hexcel Corp................................... 7.00 08/01/03 473,081
235 Titan Corp.................................... 8.25 11/01/03 273,187
--------------
746,268
--------------
AUTO PARTS (0.6%)
320 Magna International, Inc. (Canada)............ 5.00 10/15/02 369,955
--------------
BANKS - INTERNATIONAL (0.2%)
130 MBL International Finance (Bermuda)........... 3.00 11/30/02 128,849
--------------
BIOTECHNOLOGY (0.8%)
330 Sepracor Inc. - 144A*......................... 7.00 12/01/02 488,400
--------------
CABLE & TELECOMMUNICATIONS (0.5%)
370 Tele-Communications International, Inc........ 4.50 02/15/06 296,925
--------------
COMPUTER EQUIPMENT (1.4%)
1,570 Silicon Graphics, Inc. - 144A*................ 0.00 11/02/13 849,291
--------------
COMPUTER SOFTWARE & SERVICES (0.5%)
350 UBS Finance, Inc. (1)......................... 2.00 05/22/02 322,000
--------------
CONSUMER PRODUCTS (0.5%)
260 Central Garden & Pet Co....................... 6.00 11/15/03 304,564
--------------
ELECTRONICS (1.5%)
280 General Instrument Corp....................... 5.00 06/15/00 303,976
240 Metricom, Inc. - 144A*........................ 8.00 09/15/03 264,000
275 SCI Systems, Inc.............................. 5.00 05/01/06 374,000
--------------
941,976
--------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (1.9%)
365 Analog Devices................................ 3.50 12/01/00 546,496
530 Xilinx Inc. - 144A*........................... 5.25 11/01/02 587,797
--------------
1,134,293
--------------
ENGINEERING & CONSTRUCTION (0.7%)
345 New World Infrastructure Ltd. - 144A* (Hong
Kong)....................................... 5.00 07/15/01 406,238
--------------
ENTERTAINMENT (0.4%)
250 California Hotel Finance Corp................. 11.00 12/01/02 262,500
--------------
ENVIRONMENTAL CONTROL (0.9%)
320 Molten Metal Technology, Inc. - 144A*......... 5.50 05/01/06 217,430
275 United Waste Systems, Inc..................... 4.50 06/01/01 350,281
--------------
567,711
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCIAL SERVICES (2.7%)
$ 355 Berkshire Hathaway............................ 1.00 % 12/02/01 $ 362,544
800 Deutsche Bank Finance BV - 144A*
(Netherlands)............................... 0.00 02/12/17 327,400
190 Morgan Stanley Group, Inc. (2)................ 0.00 09/30/00 231,563
400 Morgan Stanley Group, Inc. (3)................ 2.00 03/29/02 429,500
265 Southern Pacific Funding...................... 6.75 10/15/06 304,750
--------------
1,655,757
--------------
HEALTHCARE (3.5%)
280 Assisted Living Concepts, Inc. - 144A*........ 7.00 07/31/05 312,665
380 Phymatrix Corp. - 144A*....................... 6.75 06/15/03 325,850
325 Physician Resource Group - 144A*.............. 6.00 12/01/01 314,438
235 Renal Treatment Centers, Inc. - 144A*......... 5.625 07/15/06 241,658
470 Tenet Healthcare Corp......................... 6.00 12/01/05 491,150
320 Vivra, Inc. - 144A*........................... 5.00 07/01/01 331,334
95 Vivra, Inc.................................... 5.00 07/01/01 98,266
--------------
2,115,361
--------------
HEALTHCARE SERVICES (0.6%)
305 Quintiles Transportational Corp. - 144A*...... 4.25 05/31/00 339,337
--------------
HOTELS (0.9%)
580 Marriott International Inc.................... 0.00 03/25/11 322,468
240 Signature Resorts............................. 5.75 01/15/07 246,600
--------------
569,068
--------------
INDUSTRIALS (0.6%)
385 U.S. Office Products Co....................... 5.50 05/15/03 361,900
--------------
MEDIA GROUP (0.5%)
715 News America Holdings, Inc.................... 0.00 03/11/13 319,705
--------------
MEDICAL SERVICES (1.1%)
155 ARV Assisted Living - 144A*................... 6.75 04/01/06 130,200
310 Occusystems, Inc. - 144A*..................... 6.00 12/15/01 316,783
320 Sterling House Corp........................... 6.75 06/30/06 224,000
--------------
670,983
--------------
OIL & GAS PRODUCTS (0.5%)
250 Apache Corp. - 144A*.......................... 6.00 01/15/02 332,588
--------------
PHARMACEUTICALS (2.0%)
335 Alza Corp..................................... 5.00 05/01/06 335,419
790 Sandoz Capital BVI, Ltd. - 144A*
(Switzerland)............................... 2.00 10/06/02 859,125
--------------
1,194,544
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
POLLUTION CONTROL (3.6%)
$ 995 Thermo Electron Corp. - 144A*................. 4.25 % 01/01/03 $ 1,092,152
945 U.S. Filter Corp.............................. 4.50 12/15/01 1,045,406
--------------
2,137,558
--------------
PUBLISHING (0.7%)
410 Scholastic Corp. - 144A*...................... 5.00 08/15/05 425,465
--------------
REAL ESTATE INVESTMENT TRUST (1.5%)
270 Liberty Property Trust........................ 8.00 07/01/01 345,938
280 LTC Properties, Inc........................... 8.50 01/01/01 326,018
245 LTC Properties, Inc........................... 8.25 07/01/01 254,976
--------------
926,932
--------------
RESTAURANTS (0.6%)
1,235 Boston Chicken, Inc........................... 0.00 06/01/15 377,367
--------------
RETAIL (4.1%)
305 Charming Shoppes, Inc......................... 7.50 07/15/06 292,800
310 Federated Department Stores, Inc.............. 5.00 10/01/03 348,493
530 Home Depot, Inc............................... 3.25 10/01/01 512,711
300 Nine West Group, Inc. - 144A*................. 5.50 07/15/03 316,500
880 Staples, Inc. - 144A*......................... 4.50 10/01/00 987,606
--------------
2,458,110
--------------
SEMICONDUCTORS (0.6%)
285 C-Cube Microsystems, Inc...................... 5.875 11/01/05 365,250
--------------
TECHNOLOGY (1.8%)
390 Adaptec, Inc. - 144A*......................... 4.75 02/01/04 421,688
330 HMT Technology Corp. - 144A*.................. 5.75 01/15/04 352,688
300 Safeguard Scientifics - 144A*................. 6.00 02/01/06 309,321
--------------
1,083,697
--------------
TELECOMMUNICATIONS (2.0%)
1,500 Motorola, Inc................................. 0.00 09/27/13 1,237,500
--------------
TRANSPORTATION (0.9%)
500 Blue Bird Body Co. (Series B)................. 10.75 11/15/06 527,500
--------------
UTILITIES - ELECTRIC (0.5%)
320 Korea Electric Power Corp.
(South Korea)............................... 5.00 08/01/01 332,800
--------------

TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST $23,365,807).......................................... 24,902,942
--------------

CORPORATE BONDS (42.5%)
BANKS (0.9%)
500 First Nationwide Escrow - 144A*............... 10.625 10/01/03 545,000
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
BUILDING MATERIALS (0.4%)
$ 250 Collins & Aikman Floorcoverings,
Inc. - 144A*................................ 10.00 % 01/15/07 $ 253,750
--------------
BUSINESS SERVICES (2.5%)
531 American Pad & Paper Co....................... 13.00 11/15/05 621,270
320 Big Flower Press, Inc......................... 10.75 08/01/03 334,400
316 Big Flower Press, Inc. (Series A) - 144A*..... 10.75 08/01/03 328,640
235 Jorgensen (Earle M.) Co....................... 10.75 03/01/00 240,875
--------------
1,525,185
--------------
BUSINESS SERVICES - DISTRIBUTORS (1.7%)
250 Data Documents, Inc........................... 13.50 07/15/02 281,250
500 Envirosource, Inc............................. 9.75 06/15/03 476,250
250 Iron Mountain, Inc............................ 10.125 10/01/06 265,000
--------------
1,022,500
--------------
CABLE/CELLULAR (0.9%)
500 Rogers Communications, Inc. (Canada).......... 10.875 04/15/04 525,000
--------------
CHEMICALS (0.7%)
375 NL Industries Inc............................. 11.75 10/15/03 396,562
--------------
COMPUTERS (1.1%)
380 Quantum Corp.................................. 5.00 03/01/03 675,002
--------------
CONSUMER - NON-CYCLICAL (0.6%)
100 E&S Holdings Corp. - 144A*.................... 10.375 10/01/06 104,750
250 International Home Foods,
Inc. - 144A*................................ 10.375 11/01/06 259,375
--------------
364,125
--------------
CONTAINERS (0.8%)
275 Plastic Container, Inc. - 144A*............... 10.00 12/15/06 283,937
225 US Can Corp. - 144A*.......................... 10.125 10/15/06 237,375
--------------
521,312
--------------
ENERGY (1.7%)
250 Chesapeake Energy Corp........................ 12.00 03/01/01 277,500
640 Flores & Rucks, Inc........................... 13.50 12/01/04 764,800
--------------
1,042,300
--------------
ENTERTAINMENT & LEISURE TIME (1.3%)
750 United Artists Theatres....................... 11.50 05/01/02 792,187
--------------
ENTERTAINMENT/GAMING (1.8%)
695 Fitzgeralds Gaming Corp. (Units) ++........... 13.00 12/31/02 608,125
500 Showboat, Inc................................. 9.25 05/01/08 505,000
--------------
1,113,125
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
FINANCIAL SERVICES (1.1%)
$ 400 American Annuity Group, Inc................... 11.125 % 02/01/03 $ 428,060
250 Outsourcing Solutions, Inc. - 144A*........... 11.00 11/01/06 265,000
--------------
693,060
--------------
FOODS (0.5%)
290 American Rice, Inc............................ 13.00 07/31/02 284,200
--------------
HEALTHCARE (0.9%)
500 Dade International, Inc. (Series B)........... 11.125 05/01/06 540,000
--------------
HOME BUILDING (0.6%)
350 U.S. Home Corp................................ 9.75 06/15/03 362,250
--------------
INDUSTRIALS (3.1%)
250 American Media Operations, Inc................ 11.625 11/15/04 266,875
885 Corporate Express, Inc........................ 4.50 07/01/00 840,750
250 Hayes Wheels International, Inc............... 11.00 07/15/06 275,000
210 Oregon Steel Mills, Inc....................... 11.00 06/15/03 229,163
250 Pierce Leahy Corp............................. 11.125 07/15/06 272,500
--------------
1,884,288
--------------
MANUFACTURING (6.7%)
335 Communications & Power Industries, Inc.
(Series B).................................. 12.00 08/01/05 369,338
350 Foamex L.P.................................... 11.25 10/01/02 372,750
250 Mettler Toledo, Inc........................... 9.75 10/01/06 263,125
575 Newflo Corp................................... 13.25 11/15/02 629,625
1,000 Sweetheart Cup, Inc........................... 10.50 09/01/03 1,050,000
750 Talley Manufacturing & Technology Inc......... 10.75 10/15/03 787,500
600 Telex Communications Inc...................... 12.00 07/15/04 660,750
--------------
4,133,088
--------------
MEDIA GROUP (4.8%)
375 Ackerly Communications, Inc. (Series B)....... 10.75 10/01/03 400,313
500 Adams Outdoor Advertising..................... 10.75 03/15/06 535,000
545 Garden State Newspapers, Inc.................. 12.00 07/01/04 594,050
575 Heritage Media Services Inc................... 11.00 06/15/02 615,250
500 K-III Communications Corp..................... 10.625 05/01/02 521,250
250 Outdoor Systems, Inc.......................... 9.375 10/15/06 253,125
--------------
2,918,988
--------------
MULTI-INDUSTRY (0.8%)
500 Valcor, Inc................................... 9.625 11/01/03 497,500
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

TOTAL CORPORATE BONDS
(IDENTIFIED COST $24,747,160).......................................... 25,938,086
--------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF
SHARES
- -----------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (11.3%)
FINANCIAL (0.6%)
7,700 Allstate Corp. $2.30 (4).................................................. 342,650
--------------
FINANCIAL SERVICES (1.6%)
15,400 Merrill Lynch & Co., Inc. $3.12 (5)....................................... 329,175
4,800 Morgan Stanley Group, Inc. $3.99 (6)...................................... 328,200
5,000 Penncorp Financial Group, Inc. $3.50 - 144A*.............................. 299,375
--------------
956,750
--------------
FUNERAL SERVICES (0.2%)
1,200 SCI Finance L.L.C. (Series A) $3.125...................................... 117,150
--------------
HEALTHCARE HMOS (1.1%)
8,600 Aetna Inc. $4.758......................................................... 672,950
--------------
HOTELS (0.5%)
6,200 Host Marriott Financial Trust $3.375 - 144A*.............................. 346,425
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
INDUSTRIALS (2.0%)
5,300 Crown Cork & Seal Co., Inc. $1.885........................................ $ 284,875
6,200 TCI Pacific Communications $5.00 (7)...................................... 578,925
8,300 Vanstar Financing Trust $3.375 - 144A*.................................... 342,375
--------------
1,206,175
--------------
INSURANCE (1.0%)
3,800 American Bankers Insurance Group, Inc. (Series B) $3.125.................. 247,950
11,000 Salomon, Inc. $7.625 (8).................................................. 354,750
--------------
602,700
--------------
MEDIA GROUP (0.4%)
4,900 SFX Broadcasting, Inc. (Series D) $3.25................................... 230,300
--------------
OIL & GAS PRODUCTS (1.1%)
5,200 Occidental Petroleum Corp. (Series A) $3.00 (9)........................... 349,050
5,300 Occidental Petroleum Corp. $3.875 - 144A*................................. 318,662
--------------
667,712
--------------
PUBLISHING (0.6%)
6,700 Golden Books Financing Trust $4.375 - 144A*............................... 378,550
--------------
RETAIL (0.9%)
10,500 Kmart Financing I $3.875.................................................. 535,500
--------------
TELECOMMUNICATION EQUIPMENT (0.8%)
7,800 Corning Delaware, L.P. $3.00.............................................. 477,750
--------------
TELECOMMUNICATIONS (0.5%)
6,100 Loral Space & Communications $3.00 - 144A*................................ 330,547
--------------

TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $6,199,577).............................................. 6,865,159
--------------

COMMON STOCK (1.1%)
COMPUTER EQUIPMENT
13,475 Storage Technology Corp. (Identified Cost $515,180)....................... 660,275
--------------
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE
- ----------- -----------
<C> <S> <C> <C>
WARRANT (0.0%)
ENTERTAINMENT/GAMING
6,654 Fitzgeralds Gaming Corp. - 144A*
(Identified Cost $29,943)................................ 12/19/98 18,299
--------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
PORTFOLIO OF INVESTMENTS JANUARY 31, 1997, CONTINUED

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ----------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
SHORT-TERM INVESTMENT (2.3%)
REPURCHASE AGREEMENT
$ 1,416 The Bank of New York (dated 1/31/97; proceeds
$1,416,703; collateralized by $1,415,570
Federal Farm Credit Bank 4.95% due 03/03/97
valued at $1,444,406)
(Identified Cost $1,416,083)................ 5.25 % 02/03/97 $ 1,416,083
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $56,273,750)(A).............. 98.1% 59,800,844
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES................................... 1.9 1,139,730
----- -----------
NET ASSETS.................................... 100.0% $60,940,574
----- -----------
----- -----------
<FN>
- ---------------------
* Resale is restricted to qualified institutional investors.
++ Consists of more than one class of securities traded together as a unit;
bonds with attached warrants.
(1) Exchangeable into General Motors - Class E common stock.
(2) Exchangeable into Boeing Co. common stock.
(3) Exchangeable into Johnson & Johnson Co. common stock.
(4) Exchangeable into PMI Group Inc. common stock.
(5) Exchangeable into Cox Communications Inc. common stock.
(6) Exchangeable into Cisco Systems Inc. common stock.
(7) Exchangeable into Tele-Communications - Class A common stock.
(8) Exchangeable into Financial Security Assurance Holdings, Ltd. common
stock.
(9) Exchangeable into Canadian Occidental Petroleum common stock.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $4,260,414 and the
aggregate gross unrealized depreciation is $733,320, resulting in net
unrealized appreciation of $3,527,094.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS

STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997

<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $56,273,750)............................. $59,800,844
Cash........................................................ 397,325
Receivable for:
Investments sold........................................ 1,424,926
Interest................................................ 872,434
Shares of beneficial interest sold...................... 155,642
Dividends............................................... 16,544
Deferred organizational expenses............................ 46,235
Prepaid expenses............................................ 31,554
-----------

TOTAL ASSETS........................................... 62,745,504
-----------

LIABILITIES:
Payable for:
Investments purchased................................... 1,619,309
Shares of beneficial interest repurchased............... 57,389
Plan of distribution fee................................ 33,360
Management fee.......................................... 22,880
Investment advisory fee................................. 15,254
Accrued expenses and other payables......................... 56,738
-----------
TOTAL LIABILITIES...................................... 1,804,930
-----------

NET ASSETS:
Paid-in-capital............................................. 56,114,695
Net unrealized appreciation................................. 3,527,094
Accumulated undistributed net investment income............. 443,330
Accumulated undistributed net realized gain................. 855,455
-----------

NET ASSETS............................................. $60,940,574
-----------
-----------

NET ASSET VALUE PER SHARE,
5,335,701 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$11.42
-----------
-----------
</TABLE>

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 31, 1997

<TABLE>
<S> <C>
NET INVESTMENT INCOME:

INCOME
Interest.................................................... $3,854,394
Dividends................................................... 316,816
----------

TOTAL INCOME........................................... 4,171,210
----------

EXPENSES
Plan of distribution fee.................................... 425,303
Management fee.............................................. 260,240
Investment advisory fee..................................... 173,493
Professional fees........................................... 64,615
Transfer agent fees and expenses............................ 52,401
Shareholder reports and notices............................. 47,068
Organizational expenses..................................... 39,916
Trustees' fees and expenses................................. 38,303
Registration fees........................................... 28,555
Custodian fees.............................................. 20,451
Other....................................................... 19,597
----------

TOTAL EXPENSES......................................... 1,169,942
----------

NET INVESTMENT INCOME.................................. 3,001,268
----------

NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 3,798,985
Net change in unrealized appreciation....................... 475,436
----------

NET GAIN............................................... 4,274,421
----------

NET INCREASE................................................ $7,275,689
----------
----------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED

STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1997 JANUARY 31, 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS:
Net investment income....................................... $ 3,001,268 $ 2,973,403
Net realized gain........................................... 3,798,985 1,186,265
Net change in unrealized appreciation....................... 475,436 6,051,315
---------------- ----------------

NET INCREASE........................................... 7,275,689 10,210,983
---------------- ----------------

DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income....................................... (3,008,077) (3,087,769)
Net realized gain........................................... (2,721,147) --
---------------- ----------------

TOTAL.................................................. (5,729,224) (3,087,769)
---------------- ----------------
Net increase (decrease) from transactions in shares of
beneficial interest....................................... 1,763,514 (4,827,749)
---------------- ----------------

NET INCREASE........................................... 3,309,979 2,295,465
---------------- ----------------

NET ASSETS:
Beginning of period......................................... 57,630,595 55,335,130
---------------- ----------------

END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$443,330 AND $450,139, RESPECTIVELY).................... $60,940,574 $57,630,595
---------------- ----------------
---------------- ----------------
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997

1. ORGANIZATIONAL 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, 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); (4) certain portfolio
securities may be valued by an outside pricing service approved by the Trustees.
The pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the 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-
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997, CONTINUED

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.

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.
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997, 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 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, 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.

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
<PAGE>
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS JANUARY 31, 1997, CONTINUED

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 year ended January 31,
1997, the distribution fee was accrued at the annual rate of 0.74%.

5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES

The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended January 31, 1997 aggregated
$57,069,874 and $58,830,492, respectively.

Dean Witter Trust Company, an affiliate of the Manager and Distributor, is the
Fund's transfer agent. At January 31, 1997, the Fund had transfer agent fees and
expenses payable of approximately $4,000.

6. SHARES OF BENEFICIAL INTEREST

Transactions in shares of beneficial interest were as follows:

<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JANUARY 31, 1997 JANUARY 31, 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 1,635,756 $ 18,613,081 1,236,686 $ 13,236,674
Reinvestment of dividends and distributions...................... 431,286 4,808,760 224,382 2,370,537
---------- ------------ ---------- ------------
2,067,042 23,421,841 1,461,068 15,607,211
Repurchased...................................................... (1,909,009) (21,658,327) (1,948,190) (20,434,960)
---------- ------------ ---------- ------------
Net increase (decrease).......................................... 158,033 $ 1,763,514 (487,122) $ (4,827,749)
---------- ------------ ---------- ------------
---------- ------------ ---------- ------------
</TABLE>

7. FEDERAL INCOME TAX STATUS

During the year ended January 31, 1997, the Fund utilized its net capital loss
carryover of approximately $206,000.
<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
FOR THE YEAR ENDED JANUARY 31, MARCH 31, 1993*
--------------------------------- THROUGH JANUARY
1997 1996 1995 31, 1994
- ------------------------------------------------------------------------------------------------

<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:

Net asset value, beginning of
period............................ $ 11.13 $ 9.77 $ 10.98 $ 10.00
------- ------- ------- ------

Net investment income.............. 0.60 0.59 0.59 0.45

Net realized and unrealized gain
(loss)............................ 0.84 1.37 (1.20) 1.02
------- ------- ------- ------

Total from investment operations... 1.44 1.96 (0.61) 1.47
------- ------- ------- ------

Less dividends and distributions
from:
Net investment income........... (0.60) (0.60) (0.55) (0.39)
Net realized gain............... (0.55) -- (0.05) (0.10)
------- ------- ------- ------

Total dividends and
distributions..................... (1.15) (0.60) (0.60) (0.49)
------- ------- ------- ------

Net asset value, end of period..... $ 11.42 $ 11.13 $ 9.77 $ 10.98
------- ------- ------- ------
------- ------- ------- ------

TOTAL INVESTMENT RETURN+........... 13.46% 20.52% (5.59)% 15.06%(1)

RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.02% 2.21% 2.04% 1.57%(2)(3)

Net investment income.............. 5.19% 5.41% 5.83% 5.62%(2)(3)

SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $60,941 $57,631 $55,335 $64,370

Portfolio turnover rate............ 102% 79% 88% 84%(1)

Average commission rate paid....... $0.0540 -- -- --
<FN>

- ---------------------
* 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 Fund had borne expenses that were reimbursed or waived by the
Manager and Investment Adviser, the annualized expense and net investment
income ratios would have been 2.00% and 5.18%, respectively.
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW INCOME AND GROWTH FUND
REPORT OF INDEPENDENT ACCOUNTANTS

TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW INCOME AND GROWTH FUND

In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of TCW/DW Income and Growth Fund (the
"Fund") at January 31, 1997, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for each of the three years in the
period then ended and for the period March 31, 1993 (commencement of operations)
through January 31, 1994, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at January 31, 1997 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
March 13, 1997

1997 FEDERAL TAX NOTICE

During the year ended January 31, 1997, the Fund paid to its
shareholders $0.40 per share from long-term capital gains. For
such period, 7.94% of the income paid qualified for the dividends
received deduction available to corporations.
<PAGE>

TRUSTEES

John C. Argue
Richard M. DeMartini TCW/DW
Charles A. Fiumefreddo
John R. Haire INCOME AND GROWTH FUND
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr. [GRAPHIC]
Michael E. Nugent
John L. Schroeder
Marc I. Stern ANNUAL REPORT

OFFICERS JANUARY 31, 1997

Charles A. Fiumefreddo
Chairman and Chief Executive Officer

Thomas E. Larkin, Jr.
President

Barry Fink
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.

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.

<PAGE>

TCW/DW INCOME AND GROWTH FUND

GROWTH OF $10,000

DATE TOTAL S&P LEHMAN G/C LIPPER
500 BOND INDEX

March 31, 1993 $10,000 $10,000 $10,000 $10,000
January 31, 1994 $11,506 $10,912 $10,769 $11,017
January 31, 1995 $10,863 $10,969 $10,434 $10,577
January 31, 1996 $13,092 $15,203 $12,283 $12,579
January 31, 1997 $14,854 (2) $19,208 $12,577 $13,462

AVERAGE ANNUAL TOTAL RETURN (FUND)
1 YEAR LIFE OF FUND

13.46 (1) 10.86 (1)

___ Fund ___ Lehman (3) ___ S&P 500(4) ___ LIPPER(5)

Past performance is not predictive of future returns.
__________________________________________________________
(1) Figure shown assumes reinvestment of all distributions. There is no front-
end or contingent deferred sales charge.

(2) Closing value, assuming a complete redemption on January 31, 1997.

(3) The Lehman Brothers Government/Corporate Bond Index tracks the performance
of government and corporate obligations, including U.S. government agency
and U.S. treasury securities and corporate and yankee bonds, with
maturities of one to ten year. The performance of the Index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.

(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a broad-
based index, the performance of which is based on the average performance
of 500 widely held common stocks. The performance of the Index does not
include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.

(5) The Lipper Flexible Income Funds Index is an equally-weighted performance
index of the largest qualifying funds (based on net assets) in the Lipper
Flexible Income Funds objective. The Index, which is adjusted for capital
gains distributions and income dividends, is unmanaged and should not be
considered an investment. There are currently 10 funds represented in this
Index.