<PAGE>
TCW/DW BALANCED FUND TWO WORLD TRADE CENTER, NEW YORK, NEW YORK 10048
LETTER TO THE SHAREHOLDERS MARCH 31, 1997
DEAR SHAREHOLDER:
For most of the six-month period under review, the economy was thought to be in
a prolonged state of equilibrium. Despite two quarters of above-trend growth and
historically low unemployment, inflation had been kept at bay. Investor
enthusiasm for this environment fueled massive inflows into indexed portfolios
and mutual funds during the first quarter of 1997. This created a situation in
which the market's performance was achieved principally by the 50 to 75 most
heavily weighted issues in each. Many diversified equity portfolios, which are
comprised of a number of dynamic long-term investment themes, suffered to the
extent that their holdings included companies not among the chosen few. By the
end of the period, however, it became apparent that the economy was growing at a
pace some considered to be above its noninflationary potential. Rapid job
creation, high consumer confidence and strong real income growth all pointed to
more strength in the months immediately ahead. With a tightening U.S. labor
market and signs of an emerging recovery in Europe and Japan, the momentum
evident in the last quarter prompted numerous warnings from the Federal Reserve
Board of a potential rise in inflation. On March 25, 1997, the Federal Open
Market Committee of the Federal Reserve chose to boost the federal-funds rate by
25 basis points. Subsequent data releases have since confirmed that the
economy's continuing strength is more than temporary and suggests that some
further credit tightening may occur to slow the momentum.
PERFORMANCE AND PORTFOLIO STRATEGY
Against this backdrop, TCW/DW Balanced Fund produced a total return of -0.44
percent for the six-month period ended March 31, 1997, compared to a return of
6.03 percent for the Lipper Balanced Funds Index. During the same period, the
Standard & Poor's 500 Composite Stock Price Index and the Lehman Brothers
Aggregate Bond Index produced returns of 11.26 percent and 2.42 percent,
respectively. Throughout the period, approximately 67 percent of the Fund's net
assets were allocated to stocks and approximately 33 percent to bonds.
<PAGE>
TCW/DW BALANCED FUND
LETTER TO THE SHAREHOLDERS MARCH 31, 1997, CONTINUED
Throughout the last six months, the Fund's investment adviser, TCW Funds
Management, Inc. (TCW), believed that good stock selection at this stage of the
business expansion cycle would depend on company-specific profit dynamics, not
on a rising economic tide. Accordingly, TCW focused investments in those
companies with new product cycles such as pharmaceuticals and telecommunications
equipment; new sources of productivity enhancement, as in outsourcing or
industry consolidation; and companies exploiting the growing demand for modern
business infrastructure all over the globe. Unfortunately, stocks within the
telecommunications and outsourcing sectors performed extremely poorly during the
period as investors were caught off guard by several earnings announcements that
proved disappointing. TCW also emphasized investments in industries such as
airlines, capital goods and aerospace where years of underinvestment are finally
producing a tighter supply/demand balance and where far better than average
profit growth is expected to occur in 1997.
TCW still believes these investment themes appear valid, even though major
weakness in technology stocks has prompted concern that the long bull market in
these sectors may be over. Although some of these issues may have reached
excessive valuations late last year and early in 1997, based on the
inevitability of some growth slowdown, their fundamental prospects for revenue
and profit growth remain exceptionally favorable. Moreover, the recent price
declines have brought many issues back to undervalued levels, even based on
somewhat higher interest rates. Competition will remain intense, but these
companies all represent global leaders, and they should continue to gain share
of these expanding markets. The United States is by far the leading innovator in
the wide range of technologies critical to the development and modernization of
the world's infrastructure. Demand for these products should continue to
increase, especially as Europe and Japan recover and other global markets open
up. As a result, TCW has chosen to make only a few changes in the Fund's
holdings, since it expects that stock prices will soon find a new equilibrium.
In the fixed-income portion of the portfolio, TCW responded early to the rise in
interest rates by shortening the duration of the portfolio to that of the
benchmark index. As it became apparent that the economy was gaining more
strength than anticipated, TCW reversed its previous intention of reducing the
Fund's mortgage exposure and followed through on its reduction in corporate
securities. As a result, the fixed-income portion benefited from the
capital-preserving qualities of its mortgage holdings relative to U.S.
Treasuries during the period, and was buffeted from widening spreads in
corporates following the market's reaction to a possible Federal Reserve
tightening.
LOOKING AHEAD
It is difficult to forecast the depth and duration of any stock market
correction, but investors should bear in mind that the U.S. economy currently
exhibits few of the typical end-of-cycle imbalances that
<PAGE>
TCW/DW BALANCED FUND
LETTER TO THE SHAREHOLDERS MARCH 31, 1997, CONTINUED
lead first to higher inflation and then to a monetary policy response that often
results in a recession. Economic growth is now not as robust as it was in late
1993 and early 1994, when the policy shift was successful in achieving a soft
landing. TCW believes there is no need for the Federal Reserve to tighten policy
as dramatically in 1997 as it did then. The real federal-funds rate
(federal-funds rate minus inflation) was zero in 1994. It now stands at 3
percent. The free market has already helped the Federal Reserve by sharply
boosting the foreign exchange value of the dollar as well as mortgage rates.
Banks have tightened credit standards, and loan demand is not nearly as strong
as it was then. Accordingly, some moderation of the current growth rate is
probable in the second half of the year even without further Federal Reserve
action. More importantly, the market will discount a moderation of growth well
in advance of the actual slowdown. At the end of March, the trailing earnings
yield on the S&P 500 was an estimated 5.7 percent, while the bond equivalent
yield on the one-year U.S. Treasury bill was 6.0 percent, implying that stocks
may be about 5 percent overvalued. Based on forward 1997 earnings estimates and
current interest rates, however, the market appears to be fairly valued, though
some further hike in rates needs to be factored in along with higher profits.
Some time will be required to rebuild investor confidence, but according to
TCW's model, the near-term risks do not appear great and the outlook for an
extended business cycle is still favorable, which suggests that investors can
begin to extend their horizons into 1998 with confidence.
We appreciate your support of TCW/DW Balanced Fund and look forward to
continuing to serve your investment needs and objectives.
Very truly yours,
[SIGNATURE]
CHARLES A. FIUMEFREDDO
CHAIRMAN OF THE BOARD
<PAGE>
TCW/DW BALANCED FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (67.4%)
AIR TRANSPORT (4.1%)
5,400 AMR Corp.*................................................................ $ 445,500
23,000 Delta Air Lines, Inc...................................................... 1,934,875
18,400 UAL Corp.*................................................................ 1,191,400
--------------
3,571,775
--------------
AIRCRAFT & AEROSPACE (5.4%)
21,800 Boeing Co................................................................. 2,150,025
33,200 United Technologies Corp.................................................. 2,498,300
--------------
4,648,325
--------------
AUTO PARTS - ORIGINAL EQUIPMENT (2.9%)
40,300 Lear Corp.*............................................................... 1,345,012
23,100 Magna International, Inc. (Class A) (Canada).............................. 1,146,337
--------------
2,491,349
--------------
AUTOMOTIVE (2.7%)
52,300 Chrysler Corp............................................................. 1,569,000
24,500 Ford Motor Co............................................................. 768,687
--------------
2,337,687
--------------
BANKS (2.5%)
20,100 Citicorp.................................................................. 2,175,825
--------------
BEVERAGES - SOFT DRINKS (1.5%)
39,500 PepsiCo, Inc.............................................................. 1,288,687
--------------
BROADCAST MEDIA (1.0%)
49,932 Westinghouse Electric Corp................................................ 886,293
--------------
BROKERAGE (1.4%)
13,900 Merrill Lynch & Co., Inc.................................................. 1,193,662
--------------
BUSINESS SERVICES (1.5%)
38,300 Green Tree Financial Corp................................................. 1,292,625
--------------
COMMERCIAL SERVICES (1.0%)
37,600 Corrections Corp. of America*............................................. 911,800
--------------
COMMUNICATIONS - EQUIPMENT & SOFTWARE (3.5%)
19,500 Ascend Communications, Inc.*.............................................. 794,625
14,500 Cascade Communicanications Corp.*......................................... 382,438
39,600 Cisco Systems, Inc.*...................................................... 1,905,750
--------------
3,082,813
--------------
COMPUTER EQUIPMENT (1.4%)
30,400 Storage Technology Corp.*................................................. 1,193,200
--------------
COMPUTER SERVICES (1.6%)
22,600 Computer Sciences Corp.*.................................................. 1,395,550
--------------
COMPUTER SOFTWARE (2.6%)
24,400 Microsoft Corp.*.......................................................... 2,235,650
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
CONSUMER PRODUCTS (1.4%)
12,400 Kimberly-Clark Corp....................................................... $ 1,232,250
--------------
DRUGS (1.2%)
18,900 Amgen, Inc.*.............................................................. 1,056,038
--------------
ELECTRICAL EQUIPMENT (1.4%)
18,200 Honeywell, Inc............................................................ 1,235,325
--------------
ELECTRONICS - DEFENSE (1.2%)
20,100 Hewlett-Packard Co........................................................ 1,070,325
--------------
ELECTRONICS - SEMICONDUCTORS/COMPONENTS (4.4%)
27,400 Intel Corp................................................................ 3,808,600
--------------
ENTERTAINMENT (0.9%)
35,500 Mirage Resorts, Inc.*..................................................... 754,375
--------------
FINANCIAL SERVICES (1.5%)
29,500 Associates First Capital Corp............................................. 1,268,500
--------------
HEALTH EQUIPMENT & SERVICES (1.1%)
19,600 United Healthcare Corp.................................................... 933,450
--------------
HEALTHCARE - DIVERSIFIED (1.6%)
15,600 Warner-Lambert Co......................................................... 1,349,400
--------------
HEALTHCARE - DRUGS (2.3%)
17,100 Johnson & Johnson......................................................... 904,163
12,900 Lilly (Eli) & Co.......................................................... 1,061,025
--------------
1,965,188
--------------
HOUSEHOLD APPLIANCES (1.9%)
37,300 American Standard Companies, Inc.*........................................ 1,678,500
--------------
INDUSTRIALS (1.8%)
19,300 Caterpillar, Inc.......................................................... 1,548,825
--------------
INSURANCE BROKERS (1.1%)
8,200 Marsh & McLennan Companies, Inc........................................... 928,650
--------------
OFFICE EQUIPMENT & SUPPLIES (0.9%)
13,600 Xerox Corp................................................................ 773,500
--------------
OIL & GAS EXPLORATION (0.8%)
29,400 Canadian Natural Resources Ltd. (Canada)*................................. 711,119
--------------
OIL - DOMESTIC (0.7%)
7,200 Amoco Corp................................................................ 623,700
--------------
RAILROADS (1.7%)
20,200 Burlington Northern Santa Fe Corp......................................... 1,494,800
--------------
RESTAURANTS (0.8%)
22,500 Boston Chicken, Inc.*..................................................... 683,438
--------------
RETAIL - SPECIALTY (2.2%)
35,600 Home Depot, Inc........................................................... 1,904,600
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------------------------------------------------------
<C> <S> <C>
SOAP & HOUSEHOLD PRODUCTS (2.4%)
17,800 Procter & Gamble Co....................................................... $ 2,047,000
--------------
TELECOMMUNICATIONS (0.8%)
13,200 Lucent Technologies, Inc.................................................. 696,300
--------------
TOBACCO (2.2%)
17,100 Philip Morris Companies, Inc.............................................. 1,951,538
--------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $52,060,413)............................................. 58,420,662
--------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
- ----------- --------- ----------
<C> <S> <C> <C> <C>
CORPORATE BONDS (2.0%)
AIRCRAFT & AEROSPACE (0.2%)
$ 200 Lockheed Martin Corp............................. 7.25 % 05/15/06 197,026
--------------
AUTOMOTIVE (0.2%)
200 General Motors Corp.............................. 8.10 06/15/24 197,434
--------------
BANKS (0.2%)
200 Citicorp......................................... 7.125 03/15/04 197,032
--------------
CABLE & TELECOMMUNICATIONS (0.3%)
200 News America Holdings, Inc....................... 8.50 02/15/05 209,978
--------------
FINANCIAL (0.2%)
200 Abbey National PLC (United Kingdom).............. 6.69 10/17/05 190,756
--------------
HEALTHCARE - DRUGS (0.2%)
150 Lilly (Eli) & Co................................. 8.375 12/01/06 161,165
--------------
INDUSTRIALS (0.3%)
200 Caterpillar, Inc................................. 9.375 03/15/21 234,472
--------------
UTILITIES (0.4%)
200 Florida Power & Light Co......................... 7.05 12/01/26 180,678
200 Texas Utilities Electric Co...................... 7.875 04/01/24 191,376
--------------
372,054
--------------
TOTAL CORPORATE BONDS
(IDENTIFIED COST $1,830,206)............................................ 1,759,917
--------------
U.S. GOVERNMENT OBLIGATIONS (14.2%)
1,230 U.S. Treasury Bond............................... 12.00 08/15/13 1,690,278
800 U.S. Treasury Bond............................... 7.50 11/15/24 826,960
115 U.S. Treasury Bond............................... 6.50 11/15/26 105,879
1,860 U.S. Treasury Note............................... 5.875 01/31/99 1,843,260
1,225 U.S. Treasury Note............................... 6.00 08/15/99 1,211,219
3,390 U.S. Treasury Note............................... 6.625 06/30/01 3,375,321
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 795 U.S. Treasury Note............................... 6.375% 08/15/02 $ 780,579
300 U.S. Treasury Note............................... 5.875 02/15/04 283,674
2,100 U.S. Treasury Note............................... 5.875 11/15/05 1,955,142
250 U.S. Treasury Note............................... 6.50 10/15/06 242,145
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $12,536,140)........................................... 12,314,457
--------------
MORTGAGE-BACKED SECURITIES (11.5%)
1,509 Federal Home Loan Mortgage Corp.................. 7.50 06/01/11 1,512,529
1,632 Federal Home Loan Mortgage Corp.................. 7.50 08/01/11 1,635,272
1,871 Federal Home Loan Mortgage Corp.................. 7.00 08/01/25 1,792,424
1,441 Federal Home Loan Mortgage Corp.................. 8.00 06/01/26 1,449,967
844 Federal National Mortgage Assoc.................. 7.00 04/01/09 833,151
1,541 Government National Mortgage Assoc............... 7.00 04/15/26 1,469,622
1,267 Government National Mortgage Assoc............... 8.00 08/15/26 1,272,413
--------------
TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $10,037,175)........................................... 9,965,378
--------------
ASSET-BACKED SECURITIES (2.2%)
784 Federal Housing Administration Burbank Retirement
Center......................................... 7.50 02/01/32 761,700
346 First Alliance Mortgage Loan Trust 94
A-1............................................ 5.85 04/25/25 328,326
505 First Alliance Mortgage Loan Trust 94
A-2............................................ 7.625 07/25/25 503,517
294 UCFC Home Equity Loan 93 D....................... 5.45 07/10/13 281,249
--------------
TOTAL ASSET-BACKED SECURITIES
(IDENTIFIED COST $1,909,467)............................................ 1,874,792
--------------
COLLATERALIZED MORTGAGE OBLIGATION (1.0%)
1,000 Federal National Mortgage Assoc.
1996-53M (Identified Cost $928,437)............ 6.50 12/18/11 905,038
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
PORTFOLIO OF INVESTMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -----------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (2.5%)
REPURCHASE AGREEMENT
$ 2,168 The Bank of New York (dated 03/31/97; proceeds
$2,168,104; collateralized by $936,337 U.S.
Treasury Note 6.25% due 07/31/98 valued at
$946,167 and $1,269,995 U.S. Treasury Note
6.00% due 08/15/99 valued at $1,264,969)
(Identified Cost $2,167,781)................... 5.375% 04/01/97 $ 2,167,781
--------------
TOTAL INVESTMENTS
(IDENTIFIED COST $81,469,619)(A)............................. 100.8% 87,408,025
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............... (0.8) (714,629)
----- --------------
NET ASSETS................................................... 100.0% $ 86,693,396
----- --------------
----- --------------
<FN>
- ---------------------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $9,899,345 and the
aggregate gross unrealized depreciation is $3,960,939, resulting in net
unrealized appreciation of $5,938,406.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $81,469,619)............................. $87,408,025
Cash........................................................ 13,060
Receivable for:
Interest................................................ 301,077
Dividends............................................... 67,146
Shares of beneficial interest sold...................... 21,111
Deferred organizational expenses............................ 56,357
Prepaid expenses............................................ 78,015
-----------
TOTAL ASSETS........................................... 87,944,791
-----------
LIABILITIES:
Payable for:
Investments purchased................................... 928,438
Shares of beneficial interest repurchased............... 103,741
Plan of distribution fee................................ 77,291
Management fee.......................................... 34,781
Investment advisory fee................................. 23,187
Dividends to shareholders............................... 2,978
Accrued expenses............................................ 80,979
-----------
TOTAL LIABILITIES...................................... 1,251,395
-----------
NET ASSETS:
Paid-in-capital............................................. 75,022,653
Net unrealized appreciation................................. 5,938,406
Accumulated undistributed net investment income............. 32,667
Accumulated undistributed net realized gain................. 5,699,670
-----------
NET ASSETS............................................. $86,693,396
-----------
-----------
NET ASSET VALUE PER SHARE,
7,522,385 SHARES OUTSTANDING (UNLIMITED SHARES AUTHORIZED
OF $.01 PAR VALUE)........................................
$11.52
-----------
-----------
</TABLE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Interest.................................................... $1,032,698
Dividends (net of $694 foreign withholding tax)............. 343,856
----------
TOTAL INCOME........................................... 1,376,554
----------
EXPENSES
Plan of distribution fee.................................... 454,362
Management fee.............................................. 208,575
Investment advisory fee..................................... 139,050
Transfer agent fees and expenses............................ 51,359
Professional fees........................................... 34,264
Organizational expenses..................................... 17,775
Trustees' fees and expenses................................. 17,583
Shareholder reports and notices............................. 14,327
Custodian fees.............................................. 8,976
Registration fees........................................... 7,411
Other....................................................... 5,183
----------
TOTAL EXPENSES......................................... 958,865
----------
NET INVESTMENT INCOME.................................. 417,689
----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 6,256,376
Net change in unrealized appreciation....................... (6,894,116)
----------
NET LOSS............................................... (637,740)
----------
NET DECREASE................................................ $ (220,051)
----------
----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
MARCH 31, 1997 SEPTEMBER 30,
(UNAUDITED) 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income....................................... $ 417,689 $ 1,102,597
Net realized gain........................................... 6,256,376 7,206,334
Net change in unrealized appreciation....................... (6,894,116) 2,886,118
---------------- ----------------
NET INCREASE (DECREASE)................................ (220,051) 11,195,049
---------------- ----------------
DIVIDENDS:
From net investment income.................................. (381,851) (36,468)
In excess of net investment income.......................... -- (838,389)
---------------- ----------------
TOTAL.................................................. (381,851) (874,857)
---------------- ----------------
Net decrease from transactions in shares of beneficial
interest.................................................. (5,195,979) (24,545,353)
---------------- ----------------
NET DECREASE........................................... (5,797,881) (14,225,161)
---------------- ----------------
NET ASSETS:
Beginning of period......................................... 92,491,277 106,716,438
---------------- ----------------
END OF PERIOD
(INCLUDING UNDISTRIBUTED NET INVESTMENT INCOME OF
$32,667 AND DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME
OF $3,171, RESPECTIVELY)................................ $86,693,396 $92,491,277
---------------- ----------------
---------------- ----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW BALANCED FUND
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (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's investment objective is to achieve a high total
return through a combination of income and capital appreciation. The Fund seeks
to achieve its objective by investing in a diversified portfolio of common
stocks and investment grade fixed-income securities. The Fund was organized as a
Massachusetts business trust on March 2, 1993 and commenced operations on
October 29, 1993.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American, other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price (in
cases where securities are traded on more than one exchange; the securities are
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by TCW Funds Management, Inc. (the "Adviser") that sale 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)
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 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.
<PAGE>
TCW/DW BALANCED FUND
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date
except for certain dividends on foreign securities which are recorded as soon as
the Fund is informed after the ex-dividend date. Discounts are accreted over the
life of the respective securities. Interest income is accrued daily.
C. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
D. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company, Inc. (the "Manager"), paid the organizational
expenses of the Fund in the amount of $180,493 which have been reimbursed for
the full amount thereof. Such expenses have been deferred and are being
amortized on the straight-line method over a period not to exceed five years
from the commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the 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 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
<PAGE>
TCW/DW BALANCED FUND
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
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 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 Agreement, the Fund has retained the Adviser to invest
the Fund's assets, including placing orders for the purchase and sale of
portfolio securities. The Adviser obtains and evaluates such information and
advice relating to the economy, securities markets, and specific securities as
it considers necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective. In addition, the Adviser
pays the salaries of all personnel, including officers of the Fund, who are
employees of the Adviser.
4. PLAN OF DISTRIBUTION
Dean Witter Distributors Inc. (the "Distributor"), an affiliate of the Manager,
is the distributor of the Fund's shares and, in accordance with a Plan of
Distribution (the "Plan") pursuant to Rule 12b-1 under the Act, finances certain
expenses in connection therewith.
Under the Plan, the Distributor bears the expense of all promotional and
distribution related activities on behalf of the Fund, except for expenses that
the Trustees determine to reimburse, as described below. The following
activities and services may be provided by Dean Witter Reynolds Inc. ("DWR"), an
affiliate of the Manager and Distributor, its affiliates or any other selected
broker-dealer under the Plan: (1) compensation to, and expenses of, account
executives of DWR 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
<PAGE>
TCW/DW BALANCED FUND
NOTES TO FINANCIAL STATEMENTS MARCH 31, 1997 (UNAUDITED) CONTINUED
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, 1997, the distribution fee
accrued was at the annual rate of 0.98%.
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, 1997 aggregated
$43,527,702 and $48,730,721, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $11,189,266 and
$11,212,928, respectively.
For the six months ended March 31, 1997, the Fund incurred $9,125 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, 1997, the Fund had transfer agent fees and
expenses payable of approximately $23,000.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
MARCH 31, 1997 ENDED
---------------------------- SEPTEMBER 30, 1996
(UNAUDITED) --------------------------
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold............................................................. 809,097 $ 9,748,638 1,434,033 $ 15,701,592
Reinvestment of dividends........................................ 28,570 339,569 71,704 794,910
----------- -------------- ----------- ------------
837,667 10,088,207 1,505,737 16,496,502
Repurchased...................................................... (1,271,460) (15,284,186) (3,751,703) (41,041,855)
----------- -------------- ----------- ------------
Net decrease..................................................... (433,793) $ (5,195,979) (2,245,966) $(24,545,353)
----------- -------------- ----------- ------------
----------- -------------- ----------- ------------
</TABLE>
7. FEDERAL INCOME TAX STATUS
At September 30, 1996, the Fund had a net capital loss carryover of
approximately $312,000 which will be available through September 30, 2003 to
offset future capital gains to the extent provided by regulations.
At September 30, 1996, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
<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 SIX MONTHS FOR THE YEAR FOR THE YEAR OCTOBER 29, 1993*
ENDED MARCH 31, ENDED ENDED THROUGH
1997 SEPTEMBER 30, 1996 SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(UNAUDITED)
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period........................... $ 11.63 $ 10.46 $ 9.43 $ 10.00
------ ------ ------ ------
Net investment income.............. 0.05 0.15 0.20 0.10
Net realized and unrealized gain
(loss)........................... (0.11) 1.12 0.93 (0.58)
------ ------ ------ ------
Total from investment operations... (0.06) 1.27 1.13 (0.48)
------ ------ ------ ------
Less dividends:
From net investment income...... (0.05) -- (0.10) (0.09)
In excess of net investment
income.......................... -- (0.10) -- --
------ ------ ------ ------
Total dividends.................... (0.05) (0.10) (0.10) (0.09)
------ ------ ------ ------
Net asset value, end of period..... $ 11.52 $ 11.63 $ 10.46 $ 9.43
------ ------ ------ ------
------ ------ ------ ------
TOTAL INVESTMENT RETURN+........... (0.44)%(1) 12.20% 11.97% (4.80)%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 2.07%(2) 2.14% 2.11% 2.06%(2)
Net investment income.............. 0.90%(2) 1.12% 1.88% 1.22%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................ $86,693 $92,491 $106,716 $149,357
Portfolio turnover rate............ 48%(1) 117% 123% 113%(1)
Average commission rate paid....... $0.0582 $0.0583 -- --
<FN>
- ---------------------
* Commencement of operations.
+ Calculated based on the net asset value as of the last business day of the
period.
(1) Not annualized.
(2) Annualized.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
