<PAGE> 1
TCW/DW INCOME & GROWTH FUND Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS July 31, 1998
DEAR SHAREHOLDER:
During the six-month period ended July 31, 1998, U.S. interest rates fell
because of lower projected real GDP growth and the Asian financial crisis, which
helped to push U.S. commodity prices significantly lower, placing further
downward pressure on inflation. However, the TCW/DW Income and Growth Fund's
advisor, TCW Funds Management, Inc. (TCW), remains concerned about accelerating
wage rates and the overall increase in service sector prices. If the Asian
economies begin to stabilize, the downward trend in inflation and interest rates
could come to an end.
Investor concerns regarding Asia, in addition to weakening U.S. corporate
profits, adversely affected small- and mid-cap issues during the period;
however, many large caps posted significant gains. Convertible securities posted
mixed results as the benefit of lower interest rates was somewhat offset by the
poor equity performance of the small- and mid-cap companies that represent a
significant portion of the convertible universe.
PERFORMANCE
For the six months ended July 31, 1998, TCW/DW Income and Growth Fund's Class C
shares produced a total return of 3.18 percent compared to 15.18 percent for the
Standard & Poor's Composite Stock Price Index (S&P 500), 2.81 percent for the
Lehman Brothers Government/Corporate Bond Index and 1.65 percent for the Lipper
Flexible Income Fund Average. For the same period, the Fund's Class A, B and D
shares had total returns of 3.50 percent, 3.19 percent and 3.56 percent,
respectively. The performance of the Fund's four share classes varies because of
differing expenses.
CONVERTIBLE SECURITIES
During the first half of 1998, the convertible portion of the Fund benefited
from its holdings in media, health care and retailing, and from its
underweighting in technology and energy. In the media area, AT&T's
<PAGE> 2
TCW/DW INCOME & GROWTH FUND
LETTER TO THE SHAREHOLDERS July 31, 1998, continued
acquisition of Telecommunications Inc. helped to drive the stock prices of cable
companies to record levels. The Fund's holdings in Telecommunications Inc.,
Mediaone, Cox Communications and Time Warner all appreciated significantly. In
addition, the Fund's holdings in the radio industry, such as Chancellor
Broadcasting and Clear Channel Communications, also did well. In the health care
sector, the Fund's positions in Elan, Omnicare, and Sepracor contributed
positively to performance. The retail sector, driven by robust consumer spending
over the past several months, was the strongest-performing sector. Some of the
best performance was generated by retailers holding dominant positions within
their niches, such as Costco, Home Depot, Staples and Rite Aid -- all of which
were represented in the Fund during the period under review.
The positive performance of the Fund's convertible holdings in media and
retailing were somewhat offset by declines in Cendant, Motorola and the
assisted-living industry. Cendant's stock declined when accounting problems were
found at its recently acquired holding CUC International. While the problems are
serious, TCW believes they are now reflected in Cendant's valuation leading them
to retain the position. Cendant is a high-quality credit with $1.3 billion in
cash, and the company generates significant free cash flow. However, TCW
liquidated the Fund's position in Motorola, because the problems at this company
appear relatively long-term in nature. TCW also continues to believe in the
long-term growth of the assisted-living industry and accordingly added slightly
to the Fund's position in Sunrise Assisted Living.
During the period under review, TCW liquidated the Fund's positions in Omnicom,
Sandoz, Chancellor Broadcasting, Staples and Cisco, because these convertibles
appreciated significantly. The proceeds have been reallocated to more defensive
convertibles, primarily in consumer staples and capital goods.
During the last few quarters, TCW has viewed both the new issue and secondary
markets as expensive, but in the second quarter of 1998 this pattern began to
reverse itself. As investors became more cautious about the prospects for the
financial markets, they demanded more reasonable terms on new issues. This
trend, which was most evident near the end of the second quarter, resulted in
several deals being priced very attractively. In the secondary market, hedge
funds were unable to guard against widening spreads and sold some of their
positions. As losses became magnified by leverage, these funds were forced to
sell securities quickly, which placed further downward pressure on the prices of
many convertibles.
The convertible new-issue market was very active during the first half of 1998.
In total, 103 new issues with a net value of $26.5 billion came to market. These
figures significantly exceeded the 66 issues with a net value of $11.7 billion
that were brought to market in the first half of 1997. The robust demand
2
<PAGE> 3
TCW/DW INCOME & GROWTH FUND
LETTER TO THE SHAREHOLDERS July 31, 1998, continued
from investors for convertibles kept terms relatively aggressive, particularly
for speculative issuers. As a result, the Fund participated in only about one of
every five new issues brought to market.
HIGH-YIELD BONDS
The volatility in the Asian financial markets and heightened concerns over U.S.
economic growth resulted in a "flight to quality" by bond investors. Surging
demand for U.S. Treasury bonds and investors' expectations that the Fed would
leave rates unchanged at its June 30 meeting resulted in a Treasury market
rally. However, this did not carry over to the high-yield market whose issues
underperformed Treasuries during the period. This uncoupling of the
investment-grade and below-investment-grade fixed-income markets was more deeply
rooted than simply the high-yield market's traditional lag to movements in
interest rates. High-yield investors' potential enthusiasm over lower rates was
tempered by the prospects of an uptick in default rates and the corresponding
increase in credit losses in their portfolios. Thus, lower-rated issues fared
the worst during the period.
New issuance in the high-yield market continues to exceed all previously
achieved levels -- the $56.4 billion issued in the second quarter brought
first-half issuance to $106 billion. The amount of high-yield debt issued in the
first half of 1998 far exceeds that of any year prior to 1997, and the market is
on track to significantly outpace 1997's primary issuance of $126 billion.
However, during the second quarter the bottom-tier component of new issuance
eased somewhat. New high-yield offerings rated single-B and below fell from 75.4
percent of total new issuance in the first quarter to 66.3 percent in the second
quarter. This drop is due in part to the slowdown in mutual fund cash inflows
from $9.0 billion in the first quarter to $4.2 billion in the second, because
mutual funds tend to be the largest purchasers of speculative high-yield issues.
LOOKING AHEAD
With the equity market volatile, household exposure to the market at high levels
and no end in sight to the Asian crisis, TCW believes it is best to remain
cautious. TCW will continue to follow the course charted at the beginning of the
year by realizing profits on convertible positions that have appreciated
significantly and investing the proceeds in more-defensive issues. While TCW
remains tentative regarding technology and energy convertibles, they believe
valuations are attractive and have begun to add positions selectively in these
sectors. The high-yield portion of the Fund remains positioned to earn high
current income while minimizing the incidence of credit loss in any economic
environment. TCW will continue to focus on bonds issued by companies projected
to easily meet their fixed-charge obligations going forward, with plenty of
cushion to endure unforeseen sector or macroeconomic
3
<PAGE> 4
TCW/DW INCOME & GROWTH FUND
LETTER TO THE SHAREHOLDERS July 31, 1998, continued
downturns. TCW believes that their research-driven process emphasizing superior,
upper-tier credits will continue to provide attractive returns as the economy
runs its full cyclical course.
We appreciate your ongoing support of TCW/DW Income and Growth Fund and look
forward to continuing to serve your investment needs.
Very truly yours,
/S/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
4
<PAGE> 5
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CONVERTIBLE BONDS (31.9%)
Aerospace (1.1%)
$ 345 Hexcel Corp. ......................... 7.00 % 08/01/03 $ 373,414
285 Morgan Stanley Group, Inc.+
(exchangeable into Boeing Co. common
stock)............................... 0.00 09/30/00 289,888
----------
663,302
----------
Auto Parts (1.2%)
300 Magna International, Inc. - 144A*
(Canada)............................. 4.875 02/15/05 330,750
345 Tower Automotive, Inc. - 144A*........ 5.00 08/01/04 381,639
----------
712,389
----------
Biotechnology (0.5%)
65 Centocor, Inc. ....................... 4.75 02/15/05 63,622
255 Centocor, Inc. - 144A*................ 4.75 02/15/05 249,594
----------
313,216
----------
Business Services (1.0%)
330 COREStaff, Inc. ...................... 2.94 08/15/04 308,501
295 Interim Services, Inc. ............... 4.50 06/01/05 290,852
----------
599,353
----------
Cable & Telecommunications (0.3%)
190 Tele-Communications International,
Inc. ................................ 4.50 02/15/06 191,900
----------
Commercial Services (0.5%)
300 CUC International, Inc. - 144A*....... 3.00 02/15/02 279,534
----------
Computer Software (0.6%)
745 Network Associates, Inc. - 144A*...... 0.00 02/13/18 350,813
----------
Drugs (3.7%)
810 Athena Neurosciences, Inc. - 144A*.... 4.75 11/15/04 1,006,854
400 Dura Pharmaceuticals, Inc. ........... 3.50 07/15/02 344,000
430 Sepracor, Inc. - 144A*................ 6.25 02/15/05 584,306
260 Morgan Stanley Group, Inc.+
(exchangeable into Johnson & Johnson
Co. common stock).................... 2.00 03/29/02 320,289
----------
2,255,449
----------
Electronics - Semiconductors (0.5%)
245 Analog Devices, Inc. ................. 3.50 12/01/00 282,245
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Entertainment (2.3%)
$ 180 Action Performance
Companies - 144A*.................... 4.75 % 04/01/05 $ 165,127
1,120 Clear Channel Communications, Inc. ... 2.625 04/01/03 1,233,277
----------
1,398,404
----------
Financial (0.9%)
540 Swiss Life Finance Ltd. - 144A*....... 2.00 05/20/05 542,700
----------
Healthcare Services (5.5%)
490 Alternative Living Services, Inc. .... 5.25 12/15/02 567,655
300 Assisted Living Concepts, Inc. ....... 6.00 11/01/02 276,000
360 Assisted Living Concepts,
Inc. - 144A*......................... 5.625 05/01/03 307,451
650 Concentra Managed Care,
Inc. - 144A*......................... 4.50 03/15/03 553,923
545 Omnicare, Inc. - 144A*................ 5.00 12/01/07 656,044
275 Quadramed Corp. - 144A*............... 5.25 05/01/05 297,905
280 Quintiles Transportational
Corp. - 144A*........................ 4.25 05/31/00 341,905
100 Sunrise Assisted Living, Inc. ........ 5.50 06/15/02 104,482
200 Sunrise Assisted Living,
Inc. - 144A*......................... 5.50 06/15/02 208,964
----------
3,314,329
----------
Insurance (0.6%)
285 American International Group, Inc. ... 2.25 07/30/04 370,500
----------
Leisure (0.6%)
570 News America Holdings, Inc. .......... 0.00 03/11/13 332,230
----------
Leisure Time (0.4%)
255 Speedway Motorsports, Inc. ........... 5.75 09/30/03 263,407
----------
Miscellaneous (0.5%)
290 Level One Communications, Inc. ....... 4.00 09/01/04 309,372
----------
Pollution Control (3.8%)
295 Thermo Electron Corp. - 144A*......... 4.25 01/01/03 275,683
1,000 U.S. Filter Corp. .................... 4.50 12/15/01 1,003,960
775 Waste Management, Inc. ............... 4.00 02/01/02 1,024,945
----------
2,304,588
----------
Real Estate Investment Trust (0.7%)
135 LTC Properties, Inc. ................. 8.25 07/01/01 139,891
370 Security Capital U.S.
Realty - 144A*....................... 2.00 05/22/03 297,850
----------
437,741
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Retail (2.1%)
$ 270 Charming Shoppes, Inc. ............... 7.50 % 07/15/06 $ 251,370
1,045 Costco Companies, Inc. - 144A*........ 0.00 08/19/17 741,752
155 Home Depot, Inc. ..................... 3.25 10/01/01 285,775
----------
1,278,897
----------
Technology (2.1%)
265 Adaptec, Inc. - 144A*................. 4.75 02/01/04 200,594
115 Adaptec, Inc. ........................ 4.75 02/01/04 87,050
360 Merrill Lynch & Co., Inc. ............ 0.00 02/02/05 398,700
525 Safeguard Scientifics, Inc. - 144A*... 6.00 02/01/06 588,657
----------
1,275,001
----------
Telecommunications (2.5%)
440 Bell Atlantic Finance
Service - 144A*...................... 5.75 04/01/03 455,620
275 Comverse Technology, Inc. - 144A*..... 4.50 07/01/05 281,314
195 MRV Communications Inc. - 144A*....... 5.00 06/15/03 189,150
415 Premiere Technologies, Inc. - 144A*... 5.75 07/01/04 286,155
280 SmarTalk TeleServices, Inc. - 144A*... 5.75 09/15/04 239,663
80 SmarTalk TeleServices, Inc. .......... 5.75 09/15/04 68,475
----------
1,520,377
----------
Transportation (0.5%)
250 Blue Bird Body Co. (Shares B)......... 10.75 11/15/06 272,500
----------
TOTAL CONVERTIBLE BONDS
(Identified Cost $18,272,713)............................ 19,268,247
----------
CORPORATE BONDS (49.5%)
Aerospace (0.3%)
150 Wyman-Gordon Co. ..................... 8.00 12/15/07 153,000
----------
Auto Parts (0.8%)
225 Eagle Picher Industries, Inc. ........ 9.375 03/01/08 227,813
200 Hayes Wheels International, Inc. ..... 11.00 07/15/06 225,000
----------
452,813
----------
Banks (0.3%)
75 Chevy Chase Savings Bank.............. 9.25 12/01/05 76,313
125 Chevy Chase Savings Bank, F.S.B....... 9.25 12/01/08 126,875
----------
203,188
----------
Broadcast Media (0.9%)
100 JCAC, Inc. ........................... 10.125 06/15/06 109,750
145 Outdoor Communications, Inc. ......... 9.25 08/15/07 150,800
275 STC Broadcasting, Inc. ............... 11.00 03/15/07 304,563
----------
565,113
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Building Materials (1.4%)
$ 225 American Standard Co. ................ 7.375% 02/01/08 $ 222,750
100 MDC Holdings, Inc. ................... 8.375 02/01/08 101,375
350 Nortek Inc. - 144A*................... 8.875 08/01/08 352,625
150 Standard Pacific Corp. (Series A)..... 8.00 02/15/08 149,625
----------
826,375
----------
Business Services (1.5%)
631 American Pad & Paper Co. ............. 13.00 11/15/05 353,360
150 Federal Data Corp. ................... 10.125 08/01/05 154,500
100 Pierce Leahy Command Co. - 144A*...... 8.125 05/15/08 99,000
300 Rental Service Corp. - 144A*.......... 9.00 05/15/08 303,000
----------
909,860
----------
Business Services - Distributors
(1.8%)
75 American Business Information, Inc. -
144A*................................ 9.50 06/15/08 76,500
100 Anthony Crane Rentals - 144A*......... 10.375 08/01/08 100,250
150 Coinmach Corp. (Series D)............. 11.75 11/15/05 165,750
350 Iron Mountain, Inc. .................. 10.125 10/01/06 380,624
350 Safety-Kleen Services - 144A*......... 9.25 06/01/08 362,250
----------
1,085,374
----------
Cable & Telecommunications (0.9%)
200 Adelphia Communications Corp. (Series
B)................................... 9.25 10/01/02 207,500
100 Adelphia Communications Corp. (Series
B)................................... 8.375 02/01/08 101,000
60 Paging Network, Inc. ................. 10.125 08/01/07 63,450
150 Paging Network, Inc. ................. 10.00 10/15/08 158,625
----------
530,575
----------
Cable/Cellular (1.5%)
75 Century Communications................ 9.50 03/01/05 81,750
75 Century Communications................ 8.75 10/01/07 80,250
150 Classic Cable, Inc. - 144A*........... 9.875 08/01/08 156,750
70 Comcast Cellular Holdings, Inc.
(Series B)........................... 9.50 05/01/07 74,200
25 CSC Holdings, Inc. ................... 9.875 05/15/06 27,313
300 CSC Holdings, Inc. ................... 7.25 07/15/08 297,909
50 CSC Holdings, Inc. (Series B)......... 8.125 08/15/09 52,700
125 CSC Holdings, Inc. ................... 7.625 07/15/18 124,473
----------
895,345
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
Chemicals (0.8%)
$ 60 Geo Specialty Chemicals - 144A*....... 10.125% 08/01/08 $ 61,200
100 Polymer Group Inc. - 144A*............ 8.75 03/01/08 101,500
300 Texas Petrochemicals Corp. ........... 11.125 07/01/06 322,500
----------
485,200
----------
Commercial Services (1.4%)
150 Intermedia Communications, Inc.
(Series B)........................... 8.50 01/15/08 152,250
250 MasTec, Inc. (Series B)............... 7.75 02/01/08 243,750
415 NEXTLINK Communications, Inc. ........ 9.625 10/01/07 431,600
----------
827,600
----------
Communications Equipment (0.8%)
175 Globalstar L.P./Capital Corp. ........ 11.25 06/15/04 161,875
325 Globalstar L.P./Capital Corp. ........ 10.75 11/01/04 295,750
----------
457,625
----------
Consumer - Noncyclical (3.1%)
225 Boyds Collection Ltd. - 144A*......... 9.00 05/15/08 225,000
190 Cott Corp. (Canada)................... 9.375 07/01/05 195,225
175 Holmes Products Corp. (Series B)...... 9.875 11/15/07 178,063
300 Home Interiors & Gift - 144A*......... 10.125 06/01/08 312,000
475 International Home Foods, Inc. ....... 10.375 11/01/06 523,687
100 Revlon Consumer Products, Inc. ....... 8.125 02/01/06 101,250
300 Revlon Consumer Products, Inc. ....... 8.625 02/01/08 306,749
----------
1,841,974
----------
Containers (1.3%)
275 Huntsman Packaging Corp. ............. 9.125 10/01/07 280,500
275 Plastic Containers, Inc. (Series B)... 10.00 12/15/06 296,312
225 U.S. Can Corp. ....................... 10.125 10/15/06 233,438
----------
810,250
----------
Energy (0.5%)
150 National Energy Group, Inc. (Series
D)................................... 10.75 11/01/06 134,250
154 Transamerican Energy (Series B)....... 11.50 06/15/02 140,525
----------
274,775
----------
Entertainment (0.3%)
150 Six Flags Entertainment Corp. ........ 8.875 04/01/06 155,250
----------
Entertainment/Gaming (1.6%)
200 Boyd Gaming Corp. .................... 9.25 10/01/03 211,000
115 Grand Casinos, Inc. .................. 10.125 12/01/03 125,925
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 450 Hard Rock Hotel Inc. - 144A*.......... 9.25 % 04/01/05 $ 464,063
175 Hollywood Park (Series B)............. 9.50 08/01/07 178,500
----------
979,488
----------
Finance - Leasing (1.1%)
290 Williams Scotsman, Inc. .............. 9.875 06/01/07 300,150
295 Xerox Credit Corp. ................... 2.875 07/01/02 355,000
----------
655,150
----------
Financial Services (1.8%)
300 Forest City Enterprises, Inc. ........ 8.50 03/15/08 303,000
700 GS Escrow Corp - 144A*................ 7.125 08/01/05 699,125
65 Nationwide Credit, Inc. - 144A*....... 10.25 01/15/08 65,163
----------
1,067,288
----------
Food Services (1.2%)
325 Fred Meyer, Inc. ..................... 7.45 03/01/08 327,191
85 Jitney-Jungle Stores of America,
Inc. ................................ 12.00 03/01/06 96,688
300 Jitney-Jungle Stores of America,
Inc. ................................ 10.375 09/15/07 325,500
----------
749,379
----------
Forest Products, Paper & Packaging
(1.4%)
125 Paperboard Industrial International,
Inc. ................................ 8.375 09/15/07 125,313
225 Riverwood International Corp. ........ 10.625 08/01/07 236,250
435 Tembec Finance Corp. ................. 9.875 09/30/05 461,100
----------
822,663
----------
Health Equipment & Services (0.4%)
225 Prime Medical Services Inc. .......... 8.75 04/01/08 220,500
----------
Health Services (0.6%)
385 Integrated Health Services (Series
A)................................... 9.50 09/15/07 394,625
----------
Healthcare (0.7%)
360 Dade International, Inc. (Series B)... 11.125 05/01/06 404,100
----------
Hospital Management & Health
Maintenance Organizations (0.2%)
100 Rural Metro Corp. .................... 7.875 03/15/08 95,000
----------
Industrials (0.8%)
440 Diamond Offshore Drilling, Inc. ...... 3.75 02/15/07 463,967
----------
Lodging (3.2%)
500 HMC Acquisition Properties (Series
B)................................... 9.00 12/15/07 552,734
900 HMH Properties, Inc. (Series B)....... 7.875 08/01/08 896,624
75 Signature Resorts, Inc. .............. 9.25 05/15/06 75,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 75 Signature Resorts, Inc. .............. 9.75 % 10/01/07 $ 72,375
400 Starwood Hotels & Resorts............. 7.375 11/15/15 372,632
----------
1,969,365
----------
Manufacturing (4.5%)
200 Ametek Inc. - 144A*................... 7.20 07/15/08 199,296
215 BE Aerospace, Inc. (Series B)......... 8.00 03/01/08 217,150
335 Communications & Power Industries,
Inc. (Series B)...................... 12.00 08/01/05 375,200
275 Doskocil Manufacturing Co., Inc. ..... 10.125 09/15/07 287,375
50 Foamex L.P. .......................... 9.875 06/15/07 54,125
60 GSI Group Inc. ....................... 10.25 11/01/07 63,000
100 International Wire Group (Series B)... 11.75 06/01/05 109,750
500 Jordan Telecom Products (Series B).... 9.875 08/01/07 512,499
150 Morris Materials Handling - 144A*..... 9.50 04/01/08 136,500
350 Packaged Ice, Inc. ................... 9.75 02/01/05 360,500
200 Telecommunication Techniques
Co. - 144A*.......................... 9.75 05/15/08 206,500
175 Viasystems, Inc. - 144A*.............. 9.75 06/01/07 168,875
----------
2,690,770
----------
Media Group (2.5%)
500 Adams Outdoor Advertising, L.P. ...... 10.75 03/15/06 549,999
50 Chancellor Media Corp. ............... 9.375 10/01/04 52,688
850 Chancellor Media Corp. (Series B)..... 8.125 12/15/07 861,687
25 Outdoor Systems, Inc. ................ 8.875 06/15/07 26,688
----------
1,491,062
----------
Metals & Mining (1.5%)
300 Geneva Steel Co. ..................... 11.125 03/15/01 276,000
300 Metal Management, Inc. - 144A*........ 10.00 05/15/08 292,500
200 P&L Coal Holdings Corp. - 144A*....... 8.875 05/15/08 207,750
150 Wheeling-Pittsburg Corp. ............. 9.25 11/15/07 153,750
----------
930,000
----------
Oil International - Exploration &
Production (0.5%)
275 Magnum Hunter Resources, Inc. ........ 10.00 06/01/07 280,500
----------
Paper & Forest Products (0.5%)
300 Stone Container Corp. ................ 10.75 10/01/02 319,125
----------
Publishing (1.5%)
175 American Media Operations, Inc. ...... 11.625 11/15/04 187,250
425 Garden State Newspapers (Series B).... 8.75 10/01/09 435,625
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 50 Primedia, Inc. ....................... 7.625% 04/01/08 $ 49,250
250 Von Hoffman Press, Inc. - 144A*....... 10.375 05/15/07 261,875
----------
934,000
----------
Restaurants (0.6%)
225 American Restaurant Group,
Inc. - 144A*......................... 11.50 02/15/03 225,000
150 Perkins Family Restaurant, L.P.
(Series B)........................... 10.125 12/15/07 159,563
----------
384,563
----------
Retail (2.5%)
100 Cole National Group, Inc. ............ 8.625 08/15/07 103,000
100 Finlay Fine Jewelry Corp. ............ 8.375 05/01/08 101,500
346 Guitar Center Management.............. 11.00 07/01/06 381,465
100 Leslie's Poolmart..................... 10.375 07/15/04 105,000
600 Michaels Stores, Inc. ................ 10.875 06/15/06 662,999
200 Zale Corp. (Series B)................. 8.50 10/01/07 207,000
----------
1,560,964
----------
Semiconductors (0.5%)
370 ST Microelectronics N.V. (France)..... 0.00 06/10/08 306,175
----------
Telecommunications (2.0%)
150 Intermedia Communications, Inc.
(Series B)........................... 8.875 11/01/07 154,875
200 Level 3 Communications, Inc. ......... 9.125 05/01/08 199,250
825 Verio Inc. - 144A*.................... 10.375 04/01/05 866,250
----------
1,220,375
----------
Textiles - Apparel (0.4%)
50 Globe Manufacturing Corp. - 144A*..... 10.00 08/01/08 50,375
175 Westpoint Stevens, Inc. - 144A*....... 7.875 06/15/08 178,938
----------
229,313
----------
Transportation (1.1%)
75 Atlas Air, Inc. ...................... 10.75 08/01/05 80,625
550 Moran Transportation Co. ............. 11.75 07/15/04 607,750
----------
688,375
----------
Utilities (0.8%)
180 Cal Energy Co., Inc. ................. 9.50 09/15/06 194,400
75 Cal Energy Co., Inc. ................. 7.63 10/15/07 74,990
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 100 Niagara Mohawk Power (Series F)....... 7.625% 10/01/05 $ 101,515
125 Niagara Mohawk Power (Series G)....... 7.75 10/01/08 128,726
----------
499,631
----------
TOTAL CORPORATE BONDS
(Identified Cost $29,701,228)............................ 29,830,695
----------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES
- ---------
<C> <S> <C>
CONVERTIBLE PREFERRED STOCKS (17.0%)
Aerospace (0.4%)
14,700 Cooper Industries, Inc. $0.81.............................. 220,500
----------
Banks (1.7%)
10,500 CNB Capital Trust $1.50.................................... 288,750
4,000 St. George Bank Ltd. $4.50 - 144A*......................... 195,000
18,000 WBK Trust (STRYPES) $3.35.................................. 554,625
----------
1,038,375
----------
Cable & Telecommunications (3.8%)
17,400 Houston Industries, Inc. $3.22............................. 1,361,550
5,900 Mediaone Group Inc. $2.25.................................. 600,694
5,200 Mediaone Group Inc. $3.63.................................. 302,900
----------
2,265,144
----------
Commercial Services (0.4%)
6,600 Vanstar Financing Trust $3.375 - 144A*..................... 242,629
----------
Consumer Services (1.6%)
4,100 Cendant Corp. $0.65........................................ 111,725
25,800 Cendant Corp. $3.75........................................ 848,175
----------
959,900
----------
Equipment (0.7%)
8,000 United Rentals Trust $3.25 - 144A*......................... 400,000
----------
Financial Services (0.7%)
11,300 Merrill Lynch & Co., Inc. $3.12 (STRYPES) (exchangeable
into Cox Cable Communications Inc. common stock).......... 465,424
----------
Foods & Beverages (0.5%)
6,400 Suiza Capital Trust II. $2.75 - 144A*...................... 290,822
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE> 14
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------------------------------------------------------------------------------
<C> <S> <C>
Hotels (0.4%)
4,900 Host Marriott Financial Trust $3.375 - 144A*............... $ 244,814
----------
Insurance (1.0%)
10,200 AmerUs Life Holdings, Inc. $2.21........................... 315,567
2,800 Life Re Capital Trust II $3.96............................. 209,825
9,500 Philadelphia Consolidated Holding Co. $0.70................ 91,438
----------
616,830
----------
Medical Services (0.5%)
6,000 Laboratory Corp. of America (Series A) $4.25............... 315,000
----------
Oil & Gas Products (0.5%)
4,200 Occidental Petroleum Corp. (Series A) $3.00
(exchangeable into Canadian Occidental Petroleum common
stock).................................................... 280,875
----------
Packaging & Bottling (0.5%)
6,500 Sealed Air Corp. (Series A) $2.00.......................... 290,063
----------
Pollution Control (0.2%)
3,800 Laidlaw One, Inc. (Canada) $1.22........................... 133,000
----------
Publishing (0.6%)
12,500 Readers Digest Association, Inc. $1.93..................... 337,500
----------
Railroads (0.9%)
12,000 Union Pacific Capital Trust $3.125 - 144A*................. 545,256
----------
Restaurants (0.5%)
5,400 Apple South Inc. $3.50 - 144A*............................. 282,150
----------
Retail (1.0%)
7,600 Dollar General (STRYPES) $3.35............................. 305,900
5,200 Kmart Financing I $3.875................................... 322,400
----------
628,300
----------
Technology (1.1%)
6,600 Morgan Stanley Group, Inc. $3.99+
(exchangeable into Cisco Systems Inc. common stock)....... 671,055
----------
TOTAL CONVERTIBLE PREFERRED STOCKS
(Identified Cost $9,108,846)............................... 10,227,637
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE> 15
TCW/DW INCOME & GROWTH FUND
PORTFOLIO OF INVESTMENTS July 31, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION
WARRANTS DATE VALUE
- -------------------------------------------------------------------------------------
<C> <S> <C> <C>
WARRANT (a) (0.0%)
Entertainment/Gaming
4,685 Fitzgeralds Gaming Corp. - 144A*
(Identified Cost $21,083)................... 12/19/98 $ 9,370
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C> <C>
SHORT-TERM INVESTMENT (2.4%)
REPURCHASE AGREEMENT
$ 1,440 The Bank of New York 5.50% due 08/03/98
(dated 07/31/98; proceeds $1,440,988) (b)
(Identified Cost $1,440,328)............................ 1,440,328
-----------
TOTAL INVESTMENTS
(Identified Cost $58,544,198) (c)............. 100.8% 60,776,277
LIABILITIES IN EXCESS OF OTHER ASSETS............. (0.8) (455,839)
----- -----------
NET ASSETS......................................... 100.0% $60,320,438
===== ===========
</TABLE>
- ---------------------
STRYPES Structured yield product exchangeable for stock.
* Resale is restricted to qualified institutional investors.
+ Issuer is an affiliate of the Fund's Manager, Morgan Stanley Dean
Witter Services Company Inc.
(a) Non-income producing security.
(b) Collateralized by $1,138,381 U.S. Treasury Bond 11.125% due 08/15/03
valued at $1,469,134.
(c) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$3,930,056 and the aggregate gross unrealized depreciation is
$1,697,977, resulting in net unrealized appreciation of $2,232,079.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE> 16
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $58,544,198).............................. $60,776,277
Receivable for:
Investments sold........................................ 1,335,724
Interest................................................ 915,760
Dividends............................................... 29,826
Shares of beneficial interest sold...................... 16,791
Prepaid expenses and other assets........................... 35,579
-----------
TOTAL ASSETS............................................ 63,109,957
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 2,617,294
Plan of distribution fee................................ 39,148
Shares of beneficial interest repurchased............... 38,952
Management fee.......................................... 23,509
Investment advisory fee................................. 15,673
Accrued expenses and other payables......................... 54,943
-----------
TOTAL LIABILITIES....................................... 2,789,519
-----------
NET ASSETS.............................................. $60,320,438
===========
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $54,955,631
Net unrealized appreciation................................. 2,232,079
Accumulated undistributed net investment income............. 310,394
Accumulated undistributed net realized gain................. 2,822,334
-----------
NET ASSETS.............................................. $60,320,438
===========
CLASS A SHARES:
Net Assets.................................................. $62,993
Shares Outstanding (unlimited authorized, $.01 par value)... 5,477
NET ASSET VALUE PER SHARE............................... $11.50
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 4.44% of net asset value)........ $12.01
======
CLASS B SHARES:
Net Assets.................................................. $7,894,339
Shares Outstanding (unlimited authorized, $.01 par value)... 686,564
NET ASSET VALUE PER SHARE............................... $11.50
======
CLASS C SHARES:
Net Assets.................................................. $52,352,093
Shares Outstanding (unlimited authorized, $.01 par value)... 4,549,528
NET ASSET VALUE PER SHARE............................... $11.51
======
CLASS D SHARES:
Net Assets.................................................. $11,013
Shares Outstanding (unlimited authorized, $.01 par value)... 957
NET ASSET VALUE PER SHARE............................... $11.51
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE> 17
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended July 31, 1998 (unaudited)
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $ 1,786,783
Dividends................................................... 252,811
-----------
TOTAL INCOME............................................ 2,039,594
-----------
EXPENSES
Investment advisory fee..................................... 231,632
Plan of distribution fee (Class A shares)................... 41
Plan of distribution fee (Class B shares)................... 26,676
Plan of distribution fee (Class C shares)................... 200,171
Registration fees........................................... 73,637
Transfer agent fees and expenses............................ 28,916
Shareholder reports and notices............................. 24,140
Professional fees........................................... 20,742
Trustees' fees and expenses................................. 15,952
Custodian fees.............................................. 12,548
Organizational expenses..................................... 6,325
Other....................................................... 7,701
-----------
TOTAL EXPENSES.......................................... 648,481
-----------
NET INVESTMENT INCOME................................... 1,391,113
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 2,826,909
Net change in unrealized appreciation....................... (2,245,984)
-----------
NET GAIN................................................ 580,925
-----------
NET INCREASE................................................ $ 1,972,038
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE> 18
TCW/DW INCOME AND GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JULY 31, 1998 JANUARY 31, 1998*
- ---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income................................ $ 1,391,113 $ 2,953,221
Net realized gain.................................... 2,826,909 4,031,439
Net change in unrealized appreciation................ (2,245,984) 950,969
----------- -----------
NET INCREASE..................................... 1,972,038 7,935,629
----------- -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................... (1,113) (582)
Class B shares................................... (159,344) (144,769)
Class C shares................................... (1,192,722) (2,979,361)
Class D shares................................... (280) (290)
Net realized gain
Class A shares................................... (1,085) (1,133)
Class B shares................................... (139,454) (298,812)
Class C shares................................... (954,908) (3,495,390)
Class D shares................................... (196) (491)
----------- -----------
TOTAL DIVIDENDS AND DISTRIBUTIONS................ (2,449,102) (6,920,828)
----------- -----------
Net decrease from transactions in shares of
beneficial interest................................. (700,817) (457,056)
----------- -----------
NET INCREASE (DECREASE).......................... (1,177,881) 557,745
NET ASSETS:
Beginning of period.................................. 61,498,319 60,940,574
----------- -----------
END OF PERIOD
(Including undistributed net investment income of
$310,394 and $272,740, respectively)............. $60,320,438 $61,498,319
=========== ===========
</TABLE>
- ---------------------
* Class A, Class B and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited)
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. On July 28, 1997, the Fund commenced offering three
additional classes of shares, with the then current shares, other than shares
which were acquired in exchange for shares of Funds for which Morgan Stanley
Dean Witter Services Company Inc. serves as Manager and TCW Funds Management,
Inc. serves as Adviser ("TCW/DW Funds") offered with a contingent deferred sales
charge ("CDSC") and shares acquired through reinvestment of dividends and
distributions thereon, designated Class C shares. Shares held prior to July 28,
1997 which were acquired in exchange for shares of a TCW/DW Fund sold with a
CDSC, including shares acquired through reinvestment of dividends and
distributions thereon, have been designated Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase, some Class
A shares, and most Class B shares and Class C shares are subject to a contingent
deferred sales charge imposed on shares redeemed within one year, six years and
one year, respectively. Class D shares are not subject to a sales charge.
Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, 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);
19
<PAGE> 20
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited) continued
(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; (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. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are
20
<PAGE> 21
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited) continued
either considered temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within the
capital accounts based on their federal tax-basis treatment; temporary
differences do not require reclassification. Dividends and distributions which
exceed net investment income and net realized capital gains for financial
reporting purposes but not for tax purposes are reported as dividends in excess
of net investment income or distributions in excess of net realized capital
gains. To the extent they exceed net investment income and net realized capital
gains for tax purposes, they are reported as distributions of paid-in-capital.
F. ORGANIZATIONAL EXPENSES -- Morgan Stanley Dean Witter Advisors Inc., formerly
Dean Witter InterCapital Inc., an affiliate of Morgan Stanley 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 were fully amortized as of March 30, 1998.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the 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
21
<PAGE> 22
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited) continued
Adviser obtains and evaluates such information and advice relating to the
economy, securities markets, and specific securities as it considers necessary
or useful to continuously manage the assets of the Fund in a manner consistent
with its investment objective. In addition, the Adviser pays the salaries of all
personnel, including officers of the Fund, who are employees of the Adviser.
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
provides that the Fund will pay the Distributor a fee which is accrued daily and
paid monthly at the following annual rates: (i) Class A -- up to 0.25% of the
average daily net assets of Class A; (ii) Class B -- 0.75% of the average daily
net assets of Class B, and (iii) Class C -- up to 0.75% of the average daily net
assets of Class C. In the case of Class A shares, amounts paid under the Plan
are paid to the Distributor for services provided. In the case of Class B and
Class C shares, amounts paid under the Plan are paid to the Distributor for
services provided and the expenses borne by it and others in the distribution of
the shares of these Classes, including the payment of commissions for sales of
these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; printing and distribution of prospectuses and reports used
in connection with the offering of these shares to other than current
shareholders; and the preparation, printing and distribution of sales literature
and advertising materials. In addition, the Distributor may utilize fees paid
pursuant to the Plan, in the case of Class B shares, to compensate Dean Witter
Reynolds Inc. ("DWR"), an affiliate of the Manager and Distributor, and other
selected broker-dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
22
<PAGE> 23
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited) continued
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $131,714 at July 31, 1998.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 0.75% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended July 31, 1998, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.19% and
0.73%, respectively.
The Distributor has informed the Fund that for the six months ended July 31,
1998, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $23,479, and $2,205,
respectively and received $637 in front-end sales charges from sales of the
Fund's Class A shares. The respective shareholders pay such charges which are
not an expense of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended July 31, 1998 aggregated
$38,745,006 and $33,697,396, respectively.
Included in the aforementioned sales of portfolio securities are sales of Morgan
Stanley Group Inc., an affiliate of the Manager, of $57,813, as well as realized
gain of $2,625. The Fund's interest and dividend income included $2,585 and
$13,167, respectively, from Morgan Stanley Group, Inc. securities.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent.
23
<PAGE> 24
TCW/DW INCOME AND GROWTH FUND
NOTES TO FINANCIAL STATEMENTS July 31, 1998 (unaudited) continued
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JULY 31, 1998 JANUARY 31, 1998+*
---------------------- -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
-------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 4,891 $ 58,330 2,751 $ 33,065
Reinvestment of dividends and distributions................. 190 2,198 142 1,614
Redeemed.................................................... (2,005) (23,937) (492) (5,989)
-------- ----------- ---------- ------------
Net increase - Class A...................................... 3,076 36,591 2,401 28,690
-------- ----------- ---------- ------------
CLASS B SHARES
Sold........................................................ 253,687 3,019,869 209,588 2,492,309
Reinvestment of dividends and distributions................. 21,281 247,761 32,187 368,173
Redeemed.................................................... (157,093) (1,861,851) (89,344) (1,054,299)
-------- ----------- ---------- ------------
Net increase - Class B...................................... 117,875 1,405,779 152,431 1,806,183
-------- ----------- ---------- ------------
CLASS C SHARES
Sold........................................................ 199,227 2,368,848 912,536 10,493,055
Reinvestment of dividends and distributions................. 156,431 1,825,107 485,664 5,548,520
Redeemed.................................................... (533,009) (6,337,618) (1,590,764) (18,344,299)
-------- ----------- ---------- ------------
Net decrease - Class C...................................... (177,351) (2,143,663) (192,564) (2,302,724)
-------- ----------- ---------- ------------
CLASS D SHARES
Sold........................................................ -- -- 848 10,014
Reinvestment of dividends and distributions................. 41 476 68 781
-------- ----------- ---------- ------------
Net increase - Class D...................................... 41 476 916 10,795
-------- ----------- ---------- ------------
Net decrease in Fund........................................ (56,359) $ (700,817) (36,816) $ (457,056)
======== =========== ========== ============
</TABLE>
- ---------------------
+ On July 28, 1997, 416,258, shares representing $4,916,004 were transferred to
Class B.
* For Class A, B and D shares, for the period July 28, 1997 (issue date) through
January 31, 1998.
24
<PAGE> 25
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 SIX FOR THE YEAR ENDED JANUARY 31, MARCH 31, 1993*
MONTHS ENDED -------------------------------------- THROUGH
JULY 31, 1998++ 1998**++ 1997 1996 1995 JANUARY 31, 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........... $11.61 $11.42 $11.13 $ 9.77 $10.98 $10.00
------ ------ ------ ------ ------ ------
Net investment income.......................... 0.27 0.57 0.60 0.59 0.59 0.45
Net realized and unrealized gain (loss)........ 0.10 0.96 0.84 1.37 (1.20) 1.02
------ ------ ------ ------ ------ ------
Total from investment operations............... 0.37 1.53 1.44 1.96 (0.61) 1.47
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income......................... (0.26) (0.60) (0.60) (0.60) (0.55) (0.39)
Net realized gain............................. (0.21) (0.74) (0.55) -- (0.05) (0.10)
------ ------ ------ ------ ------ ------
Total dividends and distributions.............. (0.47) (1.34) (1.15) (0.60) (0.60) (0.49)
------ ------ ------ ------ ------ ------
Net asset value, end of period................. $11.51 $11.61 $11.42 $11.13 $ 9.77 $10.98
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+....................... 3.18%(1) 14.03% 13.46% 20.52% (5.59)% 15.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses....................................... 2.10%(2) 2.01% 2.02% 2.21% 2.04% 1.57%(2)(3)
Net investment income.......................... 4.50%(2) 4.84% 5.19% 5.41% 5.83% 5.62%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands........ $52,352 $54,863 $60,941 $57,631 $55,335 $64,370
Portfolio turnover rate........................ 58%(1) 96% 102% 79% 88% 84%(1)
</TABLE>
- ---------------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares which were acquired in
exchange for shares of Funds for which Morgan Stanley Dean Witter Services
Company Inc. serves as Manager and TCW Funds Management, Inc. serves as
Adviser ("TCW/DW Funds") offered with a contingent deferred sales charge
("CDSC") and shares acquired through reinvestment of dividends and
distributions thereon, have been designated Class C shares. Shares held
prior to July 28, 1997 which were acquired in exchange for shares of a
TCW/DW Fund sold with a CDSC, including shares acquired through reinvestment
of dividends and distributions thereon, have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the 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
25
<PAGE> 26
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JULY 31, 1998++ JANUARY 31, 1998++
- --------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $11.60 $11.81
------ ------
Net investment income....................................... 0.30 0.30
Net realized and unrealized gain............................ 0.11 0.39
------ ------
Total from investment operations............................ 0.41 0.69
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.30) (0.33)
Net realized gain.......................................... (0.21) (0.57)
------ ------
Total dividends and distributions........................... (0.51) (0.90)
------ ------
Net asset value, end of period.............................. $11.50 $11.60
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.50%(1) 6.03%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.58%(2) 1.54%(2)
Net investment income....................................... 5.11%(2) 5.04%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $63 $28
Portfolio turnover rate..................................... 58%(1) 96%
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $11.60 $11.81
------ ------
Net investment income....................................... 0.27 0.28
Net realized and unrealized gain............................ 0.10 0.38
------ ------
Total from investment operations............................ 0.37 0.66
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.26) (0.30)
Net realized gain.......................................... (0.21) (0.57)
------ ------
Total dividends and distributions........................... (0.47) (0.87)
------ ------
Net asset value, end of period.............................. $11.50 $11.60
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.19%(1) 5.80%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.12%(2) 2.02%(2)
Net investment income....................................... 4.50%(2) 4.58%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $7,894 $6,597
Portfolio turnover rate..................................... 58%(1) 96%
</TABLE>
- ---------------------
* The date the shares were first issued. Class B participants who held shares
prior to July 28, 1997 should refer to the Financial Highlights of Class C
to obtain the historical per share data and ratio information of their
shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the net
asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
26
<PAGE> 27
TCW/DW INCOME AND GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
JULY 31, 1998 JANUARY 31, 1998++
- -------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $11.61 $11.81
------ ------
Net investment income....................................... 0.31 0.32
Net realized and unrealized gain............................ 0.10 0.39
------ ------
Total from investment operations............................ 0.41 0.71
------ ------
Less dividends and distributions from:
Net investment income...................................... (0.30) (0.34)
Net realized gain.......................................... (0.21) (0.57)
------ ------
Total dividends and distributions........................... (0.51) (0.91)
------ ------
Net asset value, end of period.............................. $11.51 $11.61
====== ======
TOTAL INVESTMENT RETURN+.................................... 3.56%(1) 6.21%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.37%(2) 1.27%(2)
Net investment income....................................... 5.24%(2) 5.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $11 $11
Portfolio turnover rate..................................... 58%(1) 96%
</TABLE>
- ---------------------
* The date the shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
27
<PAGE> 28
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
Robert M. Hanisee
Vice President
Kevin A. Hunter
Vice President
Mark L. Attanasio
Vice President
Melissa V. Weiler
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PriceWaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and
trustees, fees, expenses and other pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
TCW/DW
INCOME AND
GROWTH FUND
[LOGO]
Semiannual Report
July 31, 1998
