<PAGE>
TCW/DW BALANCED FUND
Two World Trade Center
New York, New York 10048
Dear Shareholder:
- --------------------------------------------------------------------------------
The first half of TCW/DW Balanced Fund's current fiscal year was a difficult
period, marked by disappointing investment results. For the six-month period
ended March 31, 1995, the Fund posted a total return of -1.47 percent, versus
9.72 percent for the Standard & Poor's 500 Composite Stock Price Index (S&P 500)
and 5.37 percent for the Lehman Brothers Government/Corporate Bond Index. This
underperformance of the broader stock and bond markets is attributable primarily
to the negative impact on many of the Fund's holdings of sharply higher interest
rates and volatility associated with the Fund's Mexican holdings -- both equity
and fixed income.
RISING INTEREST RATES AND MEXICO CAUSE PROBLEMS FOR STOCKS
Although inflation remained low in the months following our last report to
shareholders (dated September 30, 1994), in its 13-month campaign to keep ahead
of inflation the Federal Reserve Board raised interest rates two more times
during the past six months. This created a difficult environment for stocks.
Although the companies represented in the Fund's portfolio generally reported
outstanding earnings in 1994, their fundamental strengths were not recognized in
their stock prices.
At the beginning of 1994, the Fund's investment adviser, TCW Funds
Management, Inc. (TCW), believed the outlook for Mexico and other Latin American
countries was promising. Following the November 1993 approval of the North
American Free Trade Agreement (NAFTA), TCW began to establish positions in high-
quality Mexican companies the portfolio managers believed would benefit from
accelerating economic growth. These companies included Telefonos de Mexico, the
rapidly growing telephone monopoly; Grupo Televisa, which owns all of Mexico's
leading media networks; and Cifra, Mexico's dominant retailer, which has
successful joint ventures with Wal-Mart and Dillard Department Stores in the
U.S. Despite social and political problems, the economic fundamentals in Mexico
remained encouraging throughout most of 1994.
Then, on December 20, 1994, the Mexican government unexpectedly abandoned
its eight-year-old stable exchange rate policy. This surprise move resulted in
significant losses for U.S. investors in Mexican equities. Furthermore, the
rapid decline in the peso's value sharply increased Mexico's rate of inflation
and is likely to continue to dampen economic growth. It goes without saying that
the fundamental investment case for Mexico has changed dramatically. Soon after
the situation broke, the Fund's portfolio managers sold its Telefonos de Mexico,
Grupo Televisa and Cifra positions. YPF Sociedad Anonima, Argentina's privatized
oil company was also sold. As a result, throughout the first quarter of 1995,
the portfolio managers focused on increasing the Fund's positions in
high-quality U.S. companies.
As of March 31, 1995, the Fund's equity holdings were concentrated in
domestic energy (Texaco, Inc. and Occidental Petroleum Corp.);
telecommunications (GTE Corp. and AT&T Corp.); technology (Motorola, Inc. and
Intel, Corp.); capital goods (Chrysler Corp. and Ford Motor Co.); financial
services (Citicorp South Dakota and Fleet Financial Group, Inc.) and household
products (Proctor & Gamble Co. and Philip Morris Companies, Inc.).
The Fund employs a top-down approach to equity investing; all purchase and
sale decisions are based on investment fundamentals and stock valuations. TCW
focuses on long-term company performance more than short-term stock price
activity. The Fund's portfolio managers believe these companies will continue to
<PAGE>
generate strong earnings and cash flow, leading to future stock buybacks,
dividend increases and strong stock price performance.
FIXED-INCOME HOLDINGS NOT IMMUNE TO VOLATILITY
The Federal Reserve Board's efforts in the early 1990s to increase liquidity
in the U.S. banking system led to the lowest interest rates in decades. The
central bank's policy reversal in early 1994, however, led to an unprecedented
sell-off in all fixed-income markets, which negatively affected the value of the
portfolio's fixed income holdings and ultimately proved to be a major stumbling
block for the Fund. Although the Fund's portfolio managers were more
conservative in the latter half of 1994 (in October 1994, the fixed-income
portfolio's maturity duration was shortened from 4.5 years to 4 years), as
mentioned earlier, results were adversely impacted by the Fund's Mexican
fixed-income investments. Thus far in 1995, as interest rates have declined, the
situation has improved: for the first quarter, the Fund's fixed-income portion
gained 4.62 percent, versus 4.98 percent for the Lehman Brothers
Government/Corporate Bond Index. The Fund's slight underperformance is
attributable to the portfolio's more conservative, shorter duration versus the
Index (duration measures a bond fund's sensitivity to interest rate increases
and declines; basically, the effect of interest rate fluctuations on a bond fund
can be determined by multiplying its duration by the percentage rates rise or
fall).
LOOKING AHEAD
TCW believes real growth during the first half of 1995 will run at a 2.5
percent pace, down from the 4.5 percent gain registered in the last half of
1994. Assuming no sharp acceleration or deceleration from current levels, real
gross domestic product (GDP) should average 3.0 percent in 1995, down from
approximately 4 percent in 1994. The economic slowdown has already impacted the
residential housing and automobile sectors, the areas most vulnerable to the
Federal Reserve Board's drive to quell inflation through sharply higher interest
rates. Economic slowing has also emerged in the level of U.S. exports to Latin
America. Although inflationary pressures are building, slowing economic growth
is containing prices for finished goods. With economic growth down and inflation
moderate, TCW estimates a Consumer Price Index (also known as the cost-of-living
index) increase of 3.4 percent, down from the previous forecast of 3.8 percent.
The robust earnings and cash flow generated during 1994 improved the
financial and competitive position of the Fund's equity and corporate
fixed-income holdings. Thus far in 1995, market prices are more accurately
reflecting fair value, which will be beneficial for the Fund going forward. As
of March 31, 1995, the Fund's assets remained approximately allocated 60 percent
to equities and 40 percent to fixed income.
We thank you for your continued support and look forward to continuing to
serve your investment needs in the months and years to come.
Very truly yours,
[SIG]
Charles A. Fiumefreddo
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW BALANCED FUND
Portfolio of Investments MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- -------------
<C> <S> <C>
COMMON STOCKS (60.8%)
AIRCRAFT & AEROSPACE (2.0%)
43,300 Boeing Co.................................................................................. $ 2,332,788
-------------
AUTOMOTIVE (2.4%)
30,900 Chrysler Corp.............................................................................. 1,293,938
53,000 Ford Motor Co.............................................................................. 1,431,000
-------------
2,724,938
-------------
BANKS (1.8%)
48,600 Citicorp................................................................................... 2,065,500
-------------
BANKS - REGIONAL (1.4%)
49,200 Fleet Financial Group, Inc................................................................. 1,592,850
-------------
BROKERAGE (1.9%)
51,600 Merrill Lynch & Co., Inc................................................................... 2,199,450
-------------
BUILDING MATERIALS (1.9%)
78,300 Masco Corp................................................................................. 2,163,039
-------------
BUSINESS SYSTEMS (1.8%)
54,400 General Motors Corp. (Class E)............................................................. 2,114,800
-------------
CHEMICALS (0.5%)
28,100 Occidental Petroleum Corp.................................................................. 614,688
-------------
COMPUTER SOFTWARE (1.5%)
24,800 Microsoft Corp.*........................................................................... 1,760,800
-------------
COMPUTERS - SYSTEMS (0.6%)
15,700 Tandy Corp................................................................................. 749,675
-------------
ELECTRIC - MAJOR (1.8%)
38,500 General Electric Co........................................................................ 2,083,812
-------------
ELECTRONICS - DEFENSE (1.9%)
53,400 General Motors Corp. (Class H)............................................................. 2,202,750
-------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (4.6%)
22,400 Intel Corp................................................................................. 1,898,400
21,000 Motorola, Inc.............................................................................. 1,147,125
126,200 National Semiconductor Corp.*.............................................................. 2,208,500
-------------
5,254,025
-------------
HEALTH CARE DRUGS (1.6%)
44,500 Merck & Co., Inc........................................................................... 1,896,813
-------------
HEALTH EQUIPMENT & SERVICES (1.9%)
50,200 Columbia/HCA Healthcare Corp............................................................... 2,158,600
-------------
HOTELS/MOTELS (2.1%)
32,000 Hilton Hotels Corp......................................................................... 2,372,000
-------------
HOUSEHOLD PRODUCTS (2.0%)
35,200 Procter & Gamble Co........................................................................ 2,332,000
-------------
INSURANCE (1.3%)
14,400 American International Group, Inc.......................................................... 1,501,200
-------------
</TABLE>
<PAGE>
TCW/DW BALANCED FUND
Portfolio of Investments MARCH 31, 1995 (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------- METALS & BASIC MATERIALS (0.8%) -----------
<C> <S> <C>
17,000 Phelps Dodge Corp................................................................ $ 966,875
-----------
METALS & MINING (1.6%)
72,200 Case Corporation................................................................. 1,805,000
-----------
OFFICE EQUIPMENT & SUPPLIES (2.7%)
145,400 Unisys Corp.*.................................................................... 1,344,950
14,900 Xerox Corp....................................................................... 1,748,888
-----------
3,093,838
-----------
OIL - DOMESTIC (3.6%)
43,400 Amerada Hess Corp................................................................ 2,142,875
70,000 Unocal Corp...................................................................... 2,012,500
-----------
4,155,375
-----------
OIL - INTERNATIONAL (2.9%)
37,400 Chevron Corp..................................................................... 1,795,200
23,300 Texaco, Inc...................................................................... 1,549,450
-----------
3,344,650
-----------
PAPER & FOREST PRODUCTS (1.9%)
57,500 Weyerhaeuser Co.................................................................. 2,235,312
-----------
RAILROADS (1.2%)
62,079 Santa Fe Pacific Corp............................................................ 1,427,817
-----------
RESTAURANTS (1.4%)
47,600 McDonald's Corp.................................................................. 1,624,350
-----------
RETAIL - DEPARTMENT STORES (3.3%)
51,100 Penney (J.C.) Co., Inc........................................................... 2,293,113
28,000 Sears, Roebuck & Co.............................................................. 1,494,500
-----------
3,787,613
-----------
SUPERMARKETS (1.7%)
59,500 Albertson's Inc.................................................................. 1,918,875
-----------
TELECOMMUNICATIONS (1.3%)
23,600 Ericsson (L.M.) Telephone Co. (ADR) (Sweden)..................................... 1,457,300
-----------
TELEPHONES (1.7%)
37,400 AT&T Corp........................................................................ 1,935,450
-----------
TOBACCO (1.6%)
27,600 Philip Morris Companies, Inc..................................................... 1,800,900
-----------
UTILITIES (2.1%)
72,500 GTE Corp......................................................................... 2,410,625
-----------
TOTAL COMMON STOCKS (IDENTIFIED COST $66,828,419)................................ 70,083,708
-----------
</TABLE>
<PAGE>
TCW/DW BALANCED FUND
Portfolio of Investments MARCH 31, 1995 (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- -------------
<C> <S> <C> <C> <C>
CORPORATE BONDS (7.2%)
BANKS (1.0%)
$ 1,200 Citicorp South Dakota.................................................... 7.125% 03/15/04 $ 1,130,268
-------------
FINANCE (0.9%)
1,000 General Motors Acceptance Corp........................................... 7.75 04/15/97 1,004,620
-------------
INDUSTRIALS (3.4%)
600 Caterpillar, Inc......................................................... 9.375 03/15/21 675,534
500 CBS Inc.................................................................. 7.125 11/01/23 412,225
800 International Paper Co................................................... 6.875 11/01/23 679,416
1,400 May Department Stores Co................................................. 8.375 08/01/24 1,393,560
1,000 Mead Corp................................................................ 7.125 08/01/25 876,650
-------------
4,037,385
-------------
UTILITIES (1.9%)
800 Florida Power & Light Co................................................. 7.05 12/01/26 692,080
800 GTE Corp................................................................. 7.83 05/01/23 740,920
800 Texas Utilities Electric Co.............................................. 7.875 04/01/24 741,952
-------------
2,174,952
-------------
TOTAL CORPORATE BONDS (IDENTIFIED COST $9,139,076).............................................. 8,347,225
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
U.S. GOVERNMENT AGENCY MORTGAGE
PASS-THROUGH CERTIFICATES (14.1%)
1,381 Federal Home Loan Mortgage Corp.......................................... 6.50 04/01/09 1,312,357
24 Federal Home Loan Mortgage Corp.......................................... 7.50 07/01/09 23,510
1,137 Federal Home Loan Mortgage Corp.......................................... 7.50 07/01/09 1,125,191
742 Federal Home Loan Mortgage Corp.......................................... 7.50 08/01/09 734,788
3,737 Federal Home Loan Mortgage Corp.......................................... 9.00 02/01/25 3,841,987
1,980 Federal Home Loan Mortgage Corp.......................................... 9.00 02/01/25 2,035,688
989 Federal National Mortgage Association.................................... 5.50 11/01/00 922,814
182 Federal National Mortgage Association.................................... 5.50 12/01/00 169,326
2,138 Federal National Mortgage Association.................................... 8.50 10/01/24 2,160,717
2,220 Federal National Mortgage Association.................................... 8.00 11/01/24 2,198,620
1,770 Government National Mortgage Association................................. 8.50 04/01/25 1,794,338
-------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE PASS-THROUGH CERTIFICATES
(IDENTIFIED COST $16,242,644)................................................................. 16,319,336
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
U.S. GOVERNMENT OBLIGATIONS (14.1%)
4,320 U.S. Treasury Bond....................................................... 7.50 11/15/24 4,327,425
900 U.S. Treasury Note....................................................... 4.25 11/30/95 887,906
280 U.S. Treasury Note....................................................... 4.375 08/15/96 271,775
1,200 U.S. Treasury Note....................................................... 4.375 11/15/96 1,157,250
670 U.S. Treasury Note....................................................... 6.00 06/30/96 665,080
1,950 U.S. Treasury Note....................................................... 6.25 08/31/96 1,938,726
900 U.S. Treasury Note....................................................... 6.50 05/15/97 894,094
180 U.S. Treasury Note....................................................... 6.75 05/31/99 177,947
1,000 U.S. Treasury Note....................................................... 6.875 02/28/97 1,001,406
</TABLE>
<PAGE>
TCW/DW BALANCED FUND
Portfolio of Investments MARCH 31, 1995 (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT (IN COUPON MATURITY
THOUSANDS) RATE DATE VALUE
- ----------- ---------- --------- -------------
<C> <S> <C> <C> <C>
$ 315 U.S. Treasury Note....................................................... 7.25% 11/30/96 $ 317,363
4,485 U.S. Treasury Note....................................................... 7.75 11/30/99 4,600,629
-------------
TOTAL U.S. GOVERNMENT OBLIGATIONS (IDENTIFIED COST $16,097,723)................................. 16,239,601
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C>
ASSET-BACKED SECURITIES (3.0%)
557 First Alliance Mortgage Loan Trust 94 A-1................................ 5.85 04/25/25 512,869
725 First Alliance Mortgage Loan Trust 94 A-2................................ 7.625 07/25/25 707,134
1,727 The Money Stores Home Equity Trust 93 D.................................. 5.675 02/15/09 1,596,896
647 UCFC Home Equity Loan 93 D............................................... 5.45 07/10/13 600,972
-------------
TOTAL ASSET-BACKED SECURITIES (IDENTIFIED COST $3,636,246)...................................... 3,417,871
-------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C> <C>
SHORT-TERM INVESTMENT (1.6%)
REPURCHASE AGREEMENT
1,842 The Bank of New York 5.875% due 04/03/95 (dated 03/31/95; proceeds $1,842,257,
collateralized by $1,903,999 U.S. Treasury Bill 5.76%
due 09/07/95 valued at $1,855,771) (Identified Cost $1,841,956)................................. 1,841,956
-------------
TOTAL INVESTMENTS (IDENTIFIED COST $113,786,064)(A)............................................. 100.8% 116,249,697
LIABILITIES IN EXCESS OF OTHER ASSETS........................................................... (0.8) (888,440)
------ -------------
NET ASSETS...................................................................................... 100.0% $115,361,257
------ -------------
------ -------------
<FN>
- -------------
ADR AMERICAN DEPOSITORY RECEIPT.
* NON-INCOME PRODUCING SECURITY.
(A) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES IS $114,355,399; THE
AGGREGATE GROSS UNREALIZED APPRECIATION IS $5,548,532 AND THE AGGREGATE
GROSS UNREALIZED DEPRECIATION IS $3,654,234, RESULTING IN NET UNREALIZED
APPRECIATION OF $1,894,298.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
MARCH 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $113,786,064)........... $116,249,697
Receivable for:
Investments sold......................... 952,846
Interest................................. 644,911
Dividends................................ 178,891
Shares of beneficial interest sold....... 87,249
Deferred organizational expenses........... 127,747
Prepaid expenses........................... 66,699
-----------
TOTAL ASSETS....................... 118,308,040
-----------
LIABILITIES:
Payable for:
Investments purchased.................... 2,018,343
Shares of beneficial interest
repurchased............................ 213,628
Plan of distribution fee................. 99,151
Management fee........................... 44,618
Investment advisory fee.................. 29,745
Dividends to shareholders................ 5,474
Payable to bank............................ 484,356
Accrued expenses........................... 51,468
-----------
TOTAL LIABILITIES.................. 2,946,783
-----------
NET ASSETS:
Paid-in-capital............................ 128,154,165
Net unrealized appreciation................ 2,463,597
Accumulated undistributed net investment
income................................... 420,973
Accumulated net realized loss.............. (15,677,478)
-----------
NET ASSETS......................... $115,361,257
-----------
-----------
NET ASSET VALUE PER SHARE, 12,489,247
shares outstanding (unlimited shares
authorized of $.01 par value)............
$9.24
-----------
-----------
</TABLE>
Statement of Operations FOR THE SIX MONTHS ENDED MARCH 31, 1995 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends.............................. $ 926,997
Interest............................... 1,726,750
-----------
TOTAL INCOME....................... 2,653,747
-----------
EXPENSES
Plan of distribution fee............... 623,704
Management fee......................... 291,478
Investment advisory fee................ 194,319
Transfer agent fees and expenses....... 78,694
Professional fees...................... 33,444
Shareholder reports and notices........ 31,649
Trustees' fees and expenses............ 24,452
Registration fees...................... 18,568
Organizational expenses................ 17,774
Custodian fees......................... 15,652
Other.................................. 11,990
-----------
TOTAL EXPENSES..................... 1,341,724
-----------
NET INVESTMENT INCOME............ 1,312,023
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
NET REALIZED LOSS ON:
Investments.......................... (9,766,148)
Foreign exchange transactions........ (1,869,857)
-----------
TOTAL.............................. (11,636,005)
-----------
NET CHANGE IN UNREALIZED APPRECIATION/
DEPRECIATION ON:
Investments.......................... 7,430,982
Net translation of other assets and
liabilities denominated in foreign
currencies......................... 6,052
-----------
TOTAL.............................. 7,437,034
-----------
NET LOSS........................... (4,198,971)
-----------
NET DECREASE..................... $(2,886,948)
-----------
-----------
</TABLE>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE PERIOD
ENDED OCTOBER 29,1993*
MARCH 31, 1995 THROUGH
(UNAUDITED) SEPTEMBER 30, 1994
------------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income............................................ $ 1,312,023 $ 1,538,998
Net realized loss................................................ (11,636,005) (4,424,442)
Net change in unrealized appreciation (depreciation)............. 7,437,034 (4,973,437)
------------------- ---------------------
Net decrease................................................. (2,886,948) (7,858,881)
------------------- ---------------------
Dividends to shareholders from net investment income............... (676,511) (1,370,568)
Net increase (decrease) from transactions in shares of beneficial
interest.......................................................... (30,432,235) 158,486,400
------------------- ---------------------
Total increase (decrease).................................... (33,995,694) 149,256,951
NET ASSETS:
Beginning of period................................................ 149,356,951 100,000
------------------- ---------------------
END OF PERIOD (including undistributed net investment income of
$420,973 and distributions in excess of net investment income
$214,539, respectively)........................................... $ 115,361,257 $ 149,356,951
------------------- ---------------------
------------------- ---------------------
- ---------------
* COMMENCEMENT OF OPERATIONS.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
Notes to Financial Statements (UNAUDITED)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND ACCOUNTING POLICIES--TCW/DW Balanced Fund (the "Fund") is
registered under the Investment Company Act of 1940, as amended (the "Act"), as
a diversified, open-end management investment company. The Fund was organized as
a Massachusetts business trust on March 2, 1993 and on July 1, 1993 issued
10,000 shares of beneficial interest for $100,000 to Dean Witter InterCapital
Inc. ("InterCapital"), an affiliate of Dean Witter Services Company, Inc. (the
"Manager"), to effect the Fund's initial capitalization. The Fund commenced
operations on October 29, 1993.
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 Stock Exchange or other domestic or foreign stock
exchanges is valued at its latest sale price on that exchange prior to the
time when assets are valued; if there were no sales that day, the security
is valued at the latest bid price (in cases where securities are traded on
more than one exchange; the securities are valued on the exchange designated
as the primary market by the Adviser); (2) all other portfolio securities
for which over-the-counter market quotations are readily available are
valued at the latest available bid price prior to the time of valuation; (3)
when market quotations are not readily available, including circumstances
under which it is determined by the Adviser that sale and bid prices are not
reflective of a security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures established by
and under the general supervision of the Trustees (valuation of debt
securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in
coupon, rating and maturity or an appropriate matrix utilizing similar
factors); (4) portfolio securities may be valued by an outside pricing
service approved by the Trustees. The pricing service utilizes a matrix
system incorporating security quality, maturity and coupon as the evaluation
model parameters, and/or research and evaluation by its staff, including
review of broker-dealer market price quotations, if available, in
determining what it believes is the fair valuation of the portfolio
securities valued by such pricing service; and (5) short-term debt
securities having a maturity date of more than sixty days at time of
purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st
day. Short-term debt securities having a maturity date of sixty days or less
at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS--Security transactions are accounted for on
the trade date (date the order to buy or sell is executed). Realized gains
and losses on security transactions are determined by the identified cost
method. Discounts on securities purchased are amortized over the life of the
respective securities. The Fund does not amortize premiums on securities.
Dividend income is recorded on the ex-dividend date except with respect for
certain dividends on foreign securities which are recorded as soon as the
Fund is informed after the ex-dividend date. Interest income is accrued
daily.
C. FOREIGN CURRENCY TRANSLATION--The books and records of the Fund are
maintained in U.S. dollars as follows: (1) the foreign currency market value
of investment securities, other assets and liabilities and forward contracts
are translated at the exchange rates prevailing at the end of the period;
and (2) purchases, sales, income and expenses are translated at the exchange
rates prevailing on the respective dates of such transactions. The resultant
exchange gains and losses are included in the Statement of Operations as
realized and unrealized gain/loss on foreign exchange transactions. Pursuant
to U.S. Federal income tax regulations, certain foreign exchange
gains/losses included in realized and unrealized gain/loss are included in
or are a reduction of ordinary income for federal income tax purposes. The
Fund does not isolate that
<PAGE>
TCW/DW BALANCED FUND
Notes to Financial Statements (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the changes in the market prices of the
securities.
D. FORWARD FOREIGN CURRENCY CONTRACTS--The Fund may enter into forward
foreign currency contracts which are valued daily at the appropriate
exchange rates. The resultant exchange gains and losses are included in the
Statement of Operations as unrealized gain/loss on foreign exchange
transactions. The Fund records realized gains or losses on delivery of the
currency or at the time the forward contract is extinguished (compensated)
by entering into a closing transaction prior to delivery.
E. 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.
F. 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.
G. ORGANIZATIONAL EXPENSES--InterCapital paid the organizational expenses
of the Fund in the amount of $180,493 which has been reimbursed for the full
amount thereof. Such expenses have been deferred and are being amortized by
the Fund on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. MANAGEMENT AGREEMENT--Pursuant to a Management Agreement, the Fund pays its
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.45% to the net assets of the Fund determined as of the close of
each business day. Under the terms of the Management Agreement, the Manager
maintains certain of the Fund's books and records and furnishes, at its own
expense, office space, facilities, equipment, clerical, bookkeeping and certain
legal services and pays the salaries of all personnel, including officers of the
Fund who are employees of the Manager. The Manager also bears the cost of
telephone services, heat, light, power and other utilities provided to the Fund.
3. INVESTMENT ADVISORY AGREEMENT--Pursuant to an Investment Advisory Agreement
with TCW Funds Management, Inc. (the "Adviser"), the Fund pays the Adviser an
advisory fee, accrued daily and payable monthly, by applying the annual rate of
0.30% to the net assets of the Fund determined as of the close of each business
day. Under the terms of the Investment Advisory Agreement, the Fund has retained
the Adviser to invest the Fund's assets, including placing orders for the
purchase and sale of portfolio securities. The Adviser obtains and evaluates
such information and advice relating to the economy, securities markets, and
specific securities as it considers necessary or useful to continuously manage
the assets of the Fund in a manner consistent with its investment objective. In
addition, the Adviser pays the salaries of all personnel, including officers of
the Fund, who are employees of the Adviser.
<PAGE>
TCW/DW BALANCED FUND
Notes to Financial Statements (UNAUDITED)(CONTINUED)
- --------------------------------------------------------------------------------
4. PLAN OF DISTRIBUTION--Dean Witter Distributors Inc. (the "Distributor"), an
affiliate of the Manager, is the distributor of the Fund's shares and, in
accordance with a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under
the Act, finances certain expenses in connection therewith. Under the Plan, the
Distributor bears the expense of all promotional and distribution related
activities on behalf of the Fund, except for expenses that the Trustees
determine to reimburse, as described below. The following activities and
services may be provided by the Distributor, Dean Witter Reynolds Inc. ("DWR"),
an affiliate of the Manager and Distributor, its affiliates and other dealers
who have entered into selected dealer agreements with the Distributor under the
Plan: (1) compensation to, and expenses of, DWR's account executives and other
selected broker-dealers and others including overhead and telephone expenses;
(2) sales incentives and bonuses to sales representatives and to marketing
personnel in connection with promoting sales of the Fund's shares; (3) expenses
incurred in connection with promoting sales of the Fund's shares; (4) preparing
and distributing sales literature; and (5) providing advertising and promotional
activities, including direct mail solicitation and television, radio, newspaper,
magazine and other media advertisements.
The amount of each monthly reimbursement may in no event exceed an amount
equal to a payment at the annual rate of 1.0% of the Fund's average daily net
assets. Expenses incurred pursuant to the Plan in any fiscal year in excess of
1.0% of the Fund's average daily net assets will not be reimbursed by the Fund
through payments accrued in any subsequent fiscal year. For the six months ended
March 31, 1995, the distribution fee accrued was at the annual rate of 0.96%.
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 March 31, 1995 aggregated $64,205,464 and
$87,959,062, respectively. For the six months ended March 31, 1995, the Fund
incurred $32,288 in brokerage commissions with DWR for portfolio transactions
executed on behalf of the Fund. Dean Witter Trust Company, an affiliate of the
Manager and Distributor, is the Fund's transfer agent. At March 31, 1995, the
Fund had transfer agent fees and expenses payable of approximately $17,000.
6. SHARES OF BENEFICIAL INTEREST--Transactions in shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE FOR THE PERIOD
SIX MONTHS ENDED OCTOBER 29, 1993*
MARCH 31, 1995 (UNAUDITED) THROUGH SEPTEMBER 31, 1994
--------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sold.............................................. 1,029,574 $ 9,405,360 21,141,779 $ 209,527,754
Reinvestment of dividends......................... 67,635 610,604 127,755 1,222,256
----------- -------------- ------------ --------------
1,097,209 10,015,964 21,269,534 210,750,010
Repurchased....................................... (4,452,008) (40,448,199) (5,435,488) (52,263,610)
----------- -------------- ------------ --------------
Net increase (decrease)........................... (3,354,799) $ (30,432,235) 15,834,046 $ 158,486,400
----------- -------------- ------------ --------------
----------- -------------- ------------ --------------
<FN>
- ------------
* COMMENCEMENT OF OPERATIONS.
</TABLE>
7. FEDERAL INCOME TAX STATUS--Any net capital or foreign currency losses
incurred after October 31 ("post-October losses") within the taxable year are
deemed to arise on the first business day of the Fund's next taxable year. The
Fund incurred and will elect to defer post-October capital and foreign currency
losses of approximately $3,472,000 and $389,000, respectively, during fiscal
1994. At September 30, 1994, the Fund had temporary book/tax differences
primarily attributable to post-October losses and capital loss deferrals on wash
sales and permanent book/tax differences attributable to foreign currency
losses.
<PAGE>
TCW/DW BALANCED 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 OCTOBER 29,
SIX MONTHS 1993*
ENDED THROUGH
MARCH 31, 1995 SEPTEMBER 30,
(UNAUDITED) 1994
-------------- --------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period.... $ 9.43 $10.00
-------------- --------------
Net investment income................... 0.10 0.10
(0.24) (0.58)
Net realized and unrealized loss........
-------- --------
Total from investment operations........ (0.14) (0.48)
Less dividends from net investment
income................................. (0.05) (0.09)
-------- --------
Net asset value, end of period.......... $ 9.24 $ 9.43
-------------- --------------
-------------- --------------
TOTAL INVESTMENT RETURN................. (1.47)%(1) (4.80)%(1)
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands)............................. $115,361 $149,357
Ratios to average net assets:
Expenses.............................. 2.07%(2) 2.06%(2)
Net investment income................. 2.03%(2) 1.22%(2)
Portfolio turnover rate................. 52%(1) 113%(1)
<FN>
- ---------------
* COMMENCEMENT OF OPERATIONS.
(1) NOT ANNUALIZED.
(2) ANNUALIZED.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TRUSTEES
John C. Argue TCW/DW
Richard M. DeMartini BALANCED FUND
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Paul Kolton
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Sheldon Curtis
Vice President, Secretary and
General Counsel
James A. Tilton
Vice President
James M. Goldberg
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT [GRAPHIC]
Dean Witter Trust Company
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have
been taken from the records of the Fund without
examination by the independent accountants and
accordingly they do not express an opinion
thereon.
This report is submitted for the general
information of shareholders of the Fund. For
more detailed information about the Fund, its
officers and trustees, fees, expenses and other
pertinent information, please see the
prospectus of the Fund.
This report is not authorized for distribution
to prospective investors in the Fund unless
preceded or accompanied by an effective
prospectus.
SEMIANNUAL REPORT
MARCH 31, 1995
