<PAGE>
TCW/DW TOTAL RETURN TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS July 31, 1997
DEAR SHAREHOLDER:
As of July 28, 1997, TCW/DW Total Return Trust began offering four classes of
shares: A, B, C and D, each with its own sales charge and distribution fee
structure. Fund shares held prior to July 28 were designated Class B shares.
A revised prospectus, which includes complete details regarding the Fund's
conversion to multiple classes of shares, was mailed to shareholders in
mid-summer.
For the fiscal year ended July 31, 1997, the Fund's Class B shares produced a
total return of 51.66 percent, versus 52.08 percent the Standard & Poor's 500
Composite Stock Price Index (S&P 500) and 44.14 percent for the Lipper
Analytical Services, Inc. Growth and Income Funds Index.
The accompanying chart illustrates the performance of a hypothetical $10,000
investment in the Fund's Class B shares since inception (November 30, 1994)
through the fiscal year ended July 31, 1997, versus the performance of
similar hypothetical investments in the issues comprising the S&P 500 and the
Lipper Growth and Income Funds Index.
MARKET COMMENTARY
The U.S. economy and its capital markets continue to confound the
TCW/DW TOTAL RETURN TRUST-CLASS B
DATE TOTAL S&P 500 LIPPER
- ---- ----- ------- ------
November 30, 1994 $10,000 $10,000 $10,000
July 31, 1995 $11,904 $12,610 $12,179
July 31, 1996 $12,883 $14,692 $13,777
July 31, 1997 $19,239 (3) $22,345 $19,857
AVERAGE ANNUAL TOTAL RETURN
ONE YEAR LIFE OF FUND
-------- ------------
51.66 (1) 28.55 (1)
46.66 (2) 27.81 (2)
Fund S&P 500 (4) LIPPER (5)
------ ------ ------
Past performance is not predictive of future returns.
- ----------------------------
(1) Figure shown assumes reinvestment of all distributions and does not
reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction
of the maximum applicable contingent deferred sales charge (CDSC)
(1 year-5%, since inception-3%). See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value after the deduction of a 3% CDSC assuming a complete
redemption on July 31, 1997.
(4) The Standard & Poor's 500 Composite Stock Price Index (S&P 500) is a
broad-based index, the performance of which is based on the average
performance of 500 widely held common stocks. The index does not include
any expenses, fees or charges. Past performance is not predictive of
future returns. The index is unmanaged and should not be considered an
investment.
(5) The Lipper Growth and Income Funds Index is an equally-weighted
performance index of the largest qualifying funds (based on net assets)
in the Lipper Growth and Income Funds objective. The index, which is
adjusted for capital gains distributions and income dividends, is
unmanaged and should not be considered an investment. There are currently
30 funds represented in this index.
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
experts, with corporate profits exceeding expectations and inflation
remaining low. Moreover, the moderation in economic growth seen in the second
quarter suggests that the current business expansion has the potential to
extend at least into next year. All of this is leading to a moderate
expansion of price/earnings ratios.
Stock-market volatility has increased markedly, however, as bond investors
react alternatively to fears of either economic overheating or recession,
depending on the most recent information. Strong performance in the early
part of the year was fueled by an encouraging corporate profits outlook and a
modest decline in fixed-income yields. After rising nearly 10 percent to a
peak in mid-March, the S&P 500 gave up its entire year-to-date gain over the
next 30 days, reacting to fears of a tighter monetary policy from the Federal
Reserve Board.
From mid-March to mid-April bond yields rose by roughly 10 percent to a peak
of 7.2 percent in response to strong first-quarter growth and a Federal
Reserve Board tightening. This coincided almost exactly with the stock market
correction. As second-quarter growth moderated, bond yields retreated to 6.7
percent currently, still above their mid-February low point of 6.5 percent.
This has coincided with a sharp rally in stock prices. From its mid-April
low, the S&P 500 advanced 20 percent in one of the steepest short-term moves
in memory. For the second quarter as a whole, the S&P 500 gained nearly 18
percent, bringing its first half total return to 21 percent.
According to the Fund's adviser, TCW Funds Management, Inc. (TCW), stocks
appeared to be fairly priced at the beginning of the year, based on
then-current interest rate levels and the outlook for a rise in corporate
profits of between six and eight percent. Further gains appeared to be
dependent upon lower interest rates, better-than-expected profit growth and
an extension of the business cycle beyond 1997. Over the near term, TCW
believes that these trends appear to be sustainable. While the various
economic data released in the early part of the year showed economic growth
at an inflationary pace, by the middle of the second quarter the evidence
pointed to a sharp slowdown, which heartened investors. Early in the year it
was feared the Federal Reserve Board was about to embark on a series of
credit tightening moves. Lately, these concerns have receded, yet thus far
the profit outlook remains encouraging, particularly given that many
companies have exposure to the improving economies of Europe, Japan and Latin
America.
PORTFOLIO STRUCTURE
Currently, the portfolio is invested entirely in U.S. stocks. TCW believes
that the long-term outlook for U.S. equities is excellent. The Fund will
continue to focus on companies with attractive growth rates, improving
returns on invested capital and attractive valuations. Specific industries of
focus include technology, aerospace and defense, financial services, and
pharmaceuticals.
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
Demand for technology continues to expand, spurred by such factors as the
rapid industrialization of the world's emerging markets, the rapid growth of
the Internet, and improving overall productivity. Technology stocks held in
the Fund's portfolio include Microsoft Corp., Intel Corp., Hewlett-Packard,
Cisco Systems, Inc. and Storage Technology Corp.
Orders for commercial aircraft are increasing as the need to replace old,
inefficient aircraft continues. Demand is also strong in the emerging Latin
American and Asian economies. Aerospace and defense stocks represented in the
portfolio include Boeing Co., Coltec Industries, Inc., Hexcel Corp., Raytheon
Co. and Goodrich (B.F.) Co.
The increasing savings rate in the United States is stimulating demand for
insurance and investment products. Also, improved technology is lowering the
cost of managing and distributing consumer financial products such as credit
cards and home mortgage loans. As a result, consumers benefit from better
services at a lower cost, which causes more rapid industry growth.
International financial services growth is strong and just beginning. Even
the most basic financial services, such as credit cards and insurance, are
new products in the emerging economies of Asia, Latin America and Eastern
Europe. Financial services stocks in the portfolio at fiscal year end include
INMC Mortgage Holdings, Merrill Lynch, Citicorp, BankAmerica Corp., Wells
Fargo & Co., AIG Inc. and Marsh & McLennan Companies, Inc.
The pharmaceuticals industry is benefiting from the aging of the baby boomers
and very strong new-product cycles. Holdings in this sector include Johnson &
Johnson, Merck & Co., Inc., Pfizer, Inc., Schering-Plough Corp. and
Warner-Lambert Co.
LOOKING AHEAD
Admittedly, the U.S. economy is operating with much less slack (labor and
capacity) then it has for many years. In addition, consumer confidence is
high as job creation has been vigorous, inflation low and real incomes
advancing nicely. Cost competitiveness, technological leadership, and an
undervalued currency have helped U.S. companies maintain solid export
momentum.
While the risk of economic overheating, bringing with it a tighter monetary
policy and a possible recession, is still lurking in the background, two
other factors should be kept in mind. First, productivity gains in the United
States and throughout the highly competitive global economy are enabling more
rapid growth in a low-inflation environment. Second, domestic money-supply
growth has been quite restrained in recent years, supporting the notion of
continued low inflation, which would extend the economic expansion.
Unemployment is at a 24-year low, wage rates are rising at three to four
percent, and benefit costs have probably been pruned about as much as
possible. However, profit margins have been well maintained, as productivity
gains have been surprisingly strong. Moderate increases in one industry's
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1997, continued
selling prices are being offset by cost reductions and lower selling prices
in technology and many other industries. The result is an inflation rate that
is showing no signs of acceleration. On balance, a moderation in U.S. growth,
which takes pressure off inflation and interest rates, is positive for equity
valuations as long as profits are rising.
TCW expects the quarterly pattern of economic growth to remain irregular.
Second quarter gross domestic product (GDP) growth is expected to come in at
two percent or less, and there are signs that this slowdown could extend into
the third quarter. During this period the greater fear for investors is one
of reduced profit expectations, not higher interest rates and lower
multiples. In that regard, TCW is confident that the vast majority of the
Fund's holdings will continue to grow profits at a much more rapid pace than
in the economy overall. The economy is expected to pick up speed again later
in the year, in which case the Federal Reserve Board may engage in another
modest round of preemptive tightening to cool inflationary expectations and
to extend the recovery. However, TCW sees few serious imbalances that would
require a seriously tighter monetary policy.
We appreciate your ongoing support of TCW/DW Total Return Trust and look
forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- --------------
<S> <C> <C>
COMMON STOCKS (99.5%)
Aircraft & Aerospace (11.8%)
34,200 Boeing Co. ..................................................... $ 2,011,387
105,300 Coltec Industries, Inc.* ....................................... 2,316,600
176,000 Hexcel Corp.* .................................................. 4,576,000
37,400 Raytheon Co. ................................................... 2,089,725
37,900 Sundstrand Corp. ................................................ 2,349,800
5,500 United Technologies Corp. ...................................... 465,094
--------------
13,808,606
--------------
Automotive (1.9%)
25,700 Ford Motor Co. ................................................. 1,050,487
26,300 Goodrich (B.F.) Co. ............................................ 1,188,431
--------------
2,238,918
--------------
Banking (4.0%)
17,400 BankAmerica Corp. .............................................. 1,313,700
8,500 Citicorp ....................................................... 1,153,875
8,100 Wells Fargo & Co. .............................................. 2,226,994
--------------
4,694,569
--------------
Beverages -Soft Drinks (3.7%)
24,700 Coca Cola Co. .................................................. 1,710,475
69,100 PepsiCo, Inc. .................................................. 2,647,394
--------------
4,357,869
--------------
Brokerage (3.8%)
34,600 Marsh & McLennan Companies, Inc. ............................... 2,679,337
25,800 Merrill Lynch & Co., Inc. ...................................... 1,817,287
--------------
4,496,624
--------------
Building Materials (1.4%)
76,400 Calmat Co. ..................................................... 1,671,250
--------------
Communications -Equipment & Software (3.7%)
31,400 Ascend Communications, Inc.* ................................... 1,709,337
32,700 Cisco Systems, Inc.* ........................................... 2,597,606
--------------
4,306,943
--------------
Computer Equipment (2.9%)
68,100 Storage Technology Corp.* ...................................... 3,405,000
--------------
Computer Software (1.9%)
15,500 Microsoft Corp.* ............................................... 2,190,344
--------------
Drugs (10.7%)
49,000 Amgen, Inc. .................................................... 2,878,750
21,200 Johnson & Johnson ............................................... 1,321,025
12,800 Lilly (Eli) & Co. .............................................. 1,446,400
13,100 Merck & Co., Inc. .............................................. $ 1,361,581
17,000 Pfizer, Inc. ................................................... 1,013,625
41,800 Schering-Plough Corp. .......................................... 2,280,712
15,700 Warner-Lambert Co. ............................................. 2,193,094
--------------
12,495,187
--------------
Electrical Equipment (2.0%)
32,200 General Signal Corp. ........................................... 1,583,838
10,400 Honeywell, Inc. ................................................ 776,750
--------------
2,360,588
--------------
Electronics -Defense (2.1%)
35,900 Hewlett-Packard Co. ............................................ 2,515,244
--------------
Electronics -Semiconductors/ Components (5.0%)
24,800 General Electric Co. ........................................... 1,740,650
9,600 Grainger (W.W.), Inc. .......................................... 921,600
34,800 Intel Corp. .................................................... 3,192,900
--------------
5,855,150
--------------
Engineering & Construction (2.9%)
55,700 Fluor Corp. .................................................... 3,425,550
--------------
Entertainment/Gaming (2.0%)
87,500 Mirage Resorts, Inc.* .......................................... 2,340,625
--------------
Financial (5.4%)
21,900 Ahmanson (H.F.) & Co. .......................................... 1,164,806
27,900 Associates First Capital Corp. (Class A) ....................... 1,839,656
10,700 Chase Manhattan Corp. .......................................... 1,215,119
20,500 Fannie Mae ..................................................... 969,906
32,000 Freddie Mac .................................................... 1,154,000
--------------
6,343,487
--------------
Heavy Duty Trucks & Parts (1.2%)
66,500 Navistar International Corp.* .................................. 1,371,563
--------------
Household Products (1.1%)
8,400 Procter & Gamble Co. ........................................... 1,277,850
--------------
Insurance (3.9%)
21,900 American International Group, Inc. .............................. 2,332,350
54,400 Hartford Life, Inc. (Class A) .................................. 2,237,200
--------------
4,569,550
--------------
Machinery -Construction & Materials (1.3%)
24,000 Case Corp. ..................................................... 1,498,500
--------------
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1997, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------- --------------
Oil & Gas Products (4.0%)
71,700 Canadian Natural Resources Ltd. (Canada)* ...................... $1,929,806
166,000 Daniel Industries, Inc. ........................................ 2,687,125
--------------
4,616,931
--------------
Oil -Foreign (3.6%)
15,000 Amoco Corp. .................................................... 1,410,000
13,600 Chevron Corp. .................................................. 1,076,100
26,000 Exxon Corp. .................................................... 1,670,500
--------------
4,156,600
--------------
Paper & Forest Products (1.9%)
54,200 James River Corp. of Virginia ................................... 2,232,363
--------------
Railroads (1.9%)
23,600 Burlington Northern Santa Fe Corp. ............................. 2,278,875
--------------
Real Estate Investment Trust (4.8%)
5,800 CCA Prison Realty Trust ........................................ 179,800
147,900 INMC Mortgage Holdings, Inc. ................................... 3,568,088
74,000 Kilroy Realty Corp. ............................................ 1,859,250
--------------
5,607,138
--------------
Retail -Department Stores (4.1%)
43,200 Smith's Food & Drug Centers, Inc. ............................... 2,565,000
59,800 Wal-Mart Stores, Inc. (Class A) ................................. 2,246,238
--------------
4,811,238
--------------
Retail -Specialty (3.2%)
249,700 Corporate Express, Inc.* ....................................... $3,729,894
--------------
Tobacco (1.6%)
40,800 Philip Morris Companies, Inc. .................................. 1,841,100
--------------
Wholesale Distributor (1.7%)
49,700 Supervalu, Inc. ................................................ 2,012,850
--------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $92,320,586)(a) . 99.5% 116,510,406
OTHER ASSETS IN EXCESS OF
LIABILITIES....................... 0.5 589,423
--------- -------------
NET ASSETS........................ 100.0% $117,099,829
========= =============
</TABLE>
- ------------
* Non-income producing security.
(a) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$24,806,787 and the aggregate gross unrealized depreciation is
$616,967, resulting in net unrealized appreciation of $24,189,820.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1997
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $92,320,586)............................ $116,510,406
Receivable for:
Investments sold ....................................... 841,587
Shares of beneficial interest sold ..................... 515,434
Dividends .............................................. 135,863
Deferred organizational expenses ......................... 70,816
Prepaid expenses and other assets ........................ 18,884
--------------
TOTAL ASSETS ........................................... 118,092,990
--------------
LIABILITIES:
Payable for:
Investments purchased .................................. 415,188
Shares of beneficial interest repurchased .............. 98,811
Plan of distribution fee ............................... 73,099
Management fee ......................................... 41,641
Investment advisory fee ................................ 27,761
Payable to bank .......................................... 266,041
Accrued expenses and other payables ...................... 70,620
--------------
TOTAL LIABILITIES ...................................... 993,161
--------------
NET ASSETS ............................................. $117,099,829
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital .......................................... $ 85,711,669
Net unrealized appreciation .............................. 24,189,820
Accumulated undistributed net investment income .......... 5,972
Accumulated undistributed net realized gain .............. 7,192,368
--------------
NET ASSETS ............................................. $117,099,829
==============
CLASS A SHARES:
Net Assets ............................................... $10,350
Shares Outstanding (unlimited authorized, $.01 par value) 624
NET ASSET VALUE PER SHARE .............................. $ 16.59
==============
MAXIMUM OFFERING PRICE PER SHARE
(net asset value plus 5.54% of net asset value) ...... $ 17.51
==============
CLASS B SHARES:
Net Assets ............................................... $117,040,785
Shares Outstanding (unlimited authorized, $.01 par
value)................................................... 7,055,856
NET ASSET VALUE PER SHARE .............................. $ 16.59
==============
CLASS C SHARES:
Net Assets ............................................... $ 38,344
Shares Outstanding (unlimited authorized, $.01 par value) 2,311
NET ASSET VALUE PER SHARE .............................. $ 16.59
==============
CLASS D SHARES:
Net Assets ............................................... $ 10,350
Shares Outstanding (unlimited authorized, $.01 par
value)................................................... 624
NET ASSET VALUE PER SHARE .............................. $ 16.59
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended July 31, 1997*
<TABLE>
<CAPTION>
<S> <C>
NET INVESTMENT INCOME:
INCOME
Dividends ................................. $ 1,462,610
Interest .................................. 200,086
------------
TOTAL INCOME ............................ 1,662,696
------------
EXPENSES
Plan of distribution fee (Class B Shares) 591,600
Management fee ............................ 320,431
Investment advisory fee ................... 213,621
Registration fees ......................... 74,768
Transfer agent fees and expenses .......... 73,345
Professional fees ......................... 57,352
Shareholder reports and notices ........... 38,860
Trustees' fees and expenses ............... 34,167
Organizational expenses ................... 30,313
Other ..................................... 25,361
------------
TOTAL EXPENSES .......................... 1,459,818
------------
NET INVESTMENT INCOME ................... 202,878
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................... 7,872,093
Net change in unrealized appreciation .... 23,391,695
------------
NET GAIN ................................ 31,263,788
------------
NET INCREASE .............................. $31,466,666
============
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1997* JULY 31, 1996
- ------------------------------------------------------ -------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income ................................. $ 202,878 $ 592,093
Net realized gain ..................................... 7,872,093 4,933,040
Net change in unrealized appreciation ................. 23,391,695 (2,291,729)
-------------- ---------------
NET INCREASE ........................................ 31,466,666 3,233,404
-------------- ---------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class B shares ...................................... (243,888) (762,557)
Net realized gain
Class B shares ...................................... (5,079,906) (1,768,960)
-------------- ---------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ................... (5,323,794) (2,531,517)
-------------- ---------------
Net increase from transactions in shares of beneficial
interest ............................................. 42,432,561 11,804,931
-------------- ---------------
TOTAL INCREASE ...................................... 68,575,433 12,506,818
NET ASSETS:
Beginning of period ................................... 48,524,396 36,017,578
-------------- ---------------
END OF PERIOD
(Including undistributed net investment income of
$5,972 and $46,982, respectively) ................... $117,099,829 $48,524,396
============== ===============
</TABLE>
- ------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997
1. ORGANIZATION AND ACCOUNTING POLICIES
TCW/DW Total Return Trust (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 high total
return from capital growth and income. The Fund seeks to achieve its
objective by investing primarily in equity and equity-related securities
issued by domestic and foreign companies. The Fund was organized as a
Massachusetts business trust on June 29, 1994 and commenced operations on
November 30, 1994. On July 28, 1997, the Fund commenced offering three
additional classes of shares, with the then current shares designated as
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); (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; and (4) 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 TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, 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. 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.
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. Distribution fees are charged directly to the
respective class.
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 record date. The amount of
dividends and distributions from net investment income and net realized
capital gains are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the capital accounts based on their federal tax-basis
treatment; temporary differences do not require reclassification. Dividends
and distributions which exceed net investment income and net realized capital
gains for financial reporting purposes but not for tax purposes are reported
as dividends in excess of net investment income or distributions in excess of
net realized capital gains. To the extent they exceed net investment income
and net realized capital gains for tax purposes, they are reported as
distributions of paid-in-capital.
E. ORGANIZATIONAL EXPENSES -- Dean Witter InterCapital Inc., an affiliate of
Dean Witter Services Company Inc. (the "Manager"), paid the organizational
expenses of the Fund in the amount of approximately $127,000 of which
approximately $122,000 has been reimbursed. Such expenses have been deferred
and are being amortized on the straight-line method over a period not to
exceed five years from the commencement of operations.
2. MANAGEMENT AGREEMENT
Pursuant to a Management Agreement, the Fund pays the 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.
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
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 the Adviser, the Fund pays
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.
4. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by 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 -0.25% of the
average daily net assets of Class A; (ii) Class B -1.0% of the lesser of: (a)
the average daily aggregate gross sales of the Class B shares since the
inception of the Fund (not including reinvestment of dividend or capital gain
distributions) less the average daily aggregate net asset value of the Class
B shares redeemed since the Fund's inception upon which a contingent deferred
sales charge has been imposed or waived; or (b) the average daily net assets
of Class B; and (iii) Class C -1.0% 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, account executives of
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Manager and
Distributor, and others who engage in or support distribution of the shares
or who service shareholder accounts, including
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
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 DWR 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. The Distributor had advised the Fund that such
excess amounts, including carrying charges, totaled $3,762,474 at
July 31, 1997.
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 1.0% 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 account executives may be reimbursed in
the subsequent calendar year. For the period ended July 31, 1997, the
distribution fee was accrued for Class A shares and Class C shares at the
annual rate of 0.25% and 1.0%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 1997,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares of approximately $180,978. The 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 year ended July 31, 1997 aggregated
$178,407,194 and $140,120,133, respectively. Included in the aforementioned
are purchases and sales of U.S. Government securities of $25,521,315 and
$30,960,108, respectively.
For the year ended July 31, 1997, the Fund incurred brokerage commissions of
$43,448 with DWR for portfolio transactions executed on behalf of the Fund.
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1997, continued
For the period May 31, 1997 through July 31, 1997, the Fund incurred
brokerage commissions of $1,850 with Morgan Stanley Inc., an affiliate of the
Manager since May 31, 1997, for portfolio transactions executed on behalf of
the Fund.
At July 31, 1997, the Fund's receivable for investments sold included an
unsettled trade with Morgan Stanley, Inc. of $216,268.
Dean Witter Trust Company, an affiliate of the Manager and Distributor, is
the Fund's transfer agent. At July 31, 1997, the Fund had transfer agent fees
and expenses payable of approximately $1,800.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1997 JULY 31, 1996
----------------------------- --------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
CLASS A SHARES*
Sold 624 $ 10,020 -- --
------------- -------------- ----------- --------------
CLASS B SHARES
Sold 3,902,145 54,982,768 1,659,330 $ 20,294,836
Reinvestment of dividends and distributions 356,843 4,658,943 190,676 2,261,482
Redeemed (1,245,479) (17,266,663) (872,725) (10,751,387)
------------- -------------- ----------- --------------
Net increase -Class B 3,013,509 42,375,048 977,281 11,804,931
------------- -------------- ----------- --------------
CLASS C SHARES*
Sold 2,311 37,473 -- --
------------- -------------- ----------- --------------
CLASS D SHARES*
Sold 624 10,020 -- --
------------- -------------- ----------- --------------
Net increase in Fund 3,017,068 $ 42,432,561 977,281 $ 11,804,931
============= ============== =========== ==============
</TABLE>
- ------------
* For the period July 28, 1997 (issue date) through July 31, 1997.
7. FEDERAL INCOME TAX STATUS
As of July 31, 1997, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR NOVEMBER 30, 1994*
ENDED ENDED THROUGH
JULY 31, 1997** JULY 31, 1996 JULY 31, 1995
- --------------------------------------- --------------- --------------- ------------------
<S> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ... $12.00 $11.75 $10.00
--------------- --------------- ------------------
Net investment income................... 0.04 0.15 0.21
Net realized and unrealized gain ...... 5.81 0.80 1.68
--------------- --------------- ------------------
Total from investment operations ....... 5.85 0.95 1.89
--------------- --------------- ------------------
Less dividends and distributions from:
Net investment income.................. (0.06) (0.21) (0.14)
Net realized gain...................... (1.20) (0.49) --
--------------- --------------- ------------------
Total dividends and distributions ..... (1.26) (0.70) (0.14)
--------------- --------------- ------------------
Net asset value, end of period.......... $16.59 $12.00 $11.75
=============== =============== ==================
TOTAL INVESTMENT RETURN+................ 51.66% 8.23% 19.04%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.05% 1.98%(3) 0.94%(2)(3)
Net investment income .................. 0.28% 1.30%(3) 3.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $117,041 $48,524 $36,018
Portfolio turnover rate................. 198% 261% 91%(1)
--
Average commission rate paid ........... $0.0585 $0.0582
<FN>
- ------------
* 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 have been designated Class B
shares.
+ 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 Fund had borne all of its expenses that were reimbursed or
waived by the Manager and Investment Adviser, the above annualized
expense and net investment ratios would have been 2.21% and 1.07%,
respectively, for the year ended July 31, 1996 and 2.66% and 1.47%,
respectively, for the period ended July 31, 1995.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- --------------------------------------- --------------
<S> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 16.07
--------------
Net investment income .................. 0.01
Net realized and unrealized gain ....... 0.51
--------------
Total from investment operations ...... 0.52
--------------
Net asset value, end of period ......... $ 16.59
==============
TOTAL INVESTMENT RETURN+................ 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 1.31%(2)
Net investment income................... 4.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $ 10
Portfolio turnover rate................. 198%
Average commission rate paid............ $0.0585
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 16.07
--------------
Net investment income .................. 0.01
Net realized and unrealized gain ....... 0.51
--------------
Total from investment operations ...... 0.52
--------------
Net asset value, end of period ......... $ 16.59
==============
TOTAL INVESTMENT RETURN+................ 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses................................ 2.06 %(2)
Net investment income................... 2.75 %(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $ 38
Portfolio turnover rate................. 198%
Average commission rate paid............ $0.0585
<FN>
- ------------
* The date shares were first issued.
+ 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.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 28, 1997*
THROUGH
JULY 31, 1997
- --------------------------------------- --------------
<S> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period .. $ 16.07
--------------
Net investment income .................. 0.01
Net realized and unrealized gain ....... 0.51
--------------
Total from investment operations ...... 0.52
--------------
Net asset value, end of period ......... $ 16.59
==============
TOTAL INVESTMENT RETURN+................ 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses ............................... 1.06%(2)
Net investment income................... 4.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands.............................. $ 10
Portfolio turnover rate................. 198%
Average commission rate paid............ $0.0585
<FN>
- ------------
* The date shares were first issued.
+ 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
<PAGE>
TCW/DW TOTAL RETURN TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF TCW/DW TOTAL RETURN TRUST
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of TCW/DW Total
Return Trust (the "Fund") at July 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of periods
presented, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 1997 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
September 12, 1997
- -------------------------------------------------------------------------------
1997 FEDERAL TAX NOTICE (unaudited)
During the year ended July 31, 1997, the Fund paid to its shareholders
$0.33 per share from long-term capital gains. For such period, 19% of
the income paid qualified for the dividends received deduction
available to corporations.
- -------------------------------------------------------------------------------
<PAGE>
TRUSTEES
John C. Argue
Richard M. DeMartini
Charles A. Fiumefreddo
John R. Haire
Dr. Manuel H. Johnson
Thomas E. Larkin, Jr.
Michael E. Nugent
John L. Schroeder
Marc I. Stern
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Thomas E. Larkin, Jr.
President
Barry Fink
Vice President, Secretary and
General Counsel
James A. Tilton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANT
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus.
TCW/DW
TOTAL RETURN
TRUST
Annual Report
July 31, 1997
