<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1999
Two World Trade Center, New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the annual letter to shareholders of Morgan Stanley
Dean Witter Total Return Trust, formerly TCW/DW Total Return Trust, for the
twelve-month period ended July 31, 1999.
At a special meeting held on June 8, 1999, shareholders of TCW/DW Total Return
Trust approved several proposals (see below) related to an overall
consolidation of the TCW/DW Family of Funds and the Morgan Stanley Dean Witter
Family of Funds. Accordingly, on June 28, 1999, TCW/DW Total Return Trust
became part of the Morgan Stanley Dean Witter Family of Funds and was renamed
Morgan Stanley Dean Witter Total Return Trust.
Among the proposals approved by shareholders were a new investment management
agreement between the Fund and Morgan Stanley Dean Witter Advisors Inc. (MSDW
Advisors) and a new sub-advisory agreement between MSDW Advisors and TCW Funds
Management, Inc. (TCW). Under the new investment management agreement, MSDW
Advisors serves as the investment manager for the Fund. The advisory fee rate
that MSDW Advisors charges the Fund is identical to the total aggregate fee
rate that was in effect under the previous management and advisory agreements.
In return for the services that TCW will render under the new sub-advisory
agreement, MSDW Advisors pays TCW monthly compensation equal to 40 percent of
the compensation it receives under the new investment management agreement.
MARKET OVERVIEW
During the 12-month period ended July 31, 1999, the U.S. stock market
experienced dramatic price fluctuations. Beginning in July 1998, concerns
regarding emerging economies in Asia, Latin America and Russia caused a sharp
decline in stock prices (down 18.2 percent from the high) that continued until
early October. The stock market rallied in the fall as the Federal Reserve
Board, along with most major central banks, eased
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1999, continued
interest rates. While market volatility continued throughout the first seven
months of 1999, the S&P 500 has rebounded 38 percent from the low reached
October 8, 1998.
During the first half of 1999, U.S. corporate earnings were impressive
reflecting strong domestic economic growth. During the second quarter of 1999,
60 percent of companies in the S&P 500 exceeded Wall Street's earnings
estimates. In addition, Asia and Europe are beginning to show signs of economic
growth. This should further increase the earnings growth rate for U.S.
companies.
PERFORMANCE
For the 12-month period ended July 31, 1999, the Fund's Class B shares returned
27.04 percent compared to 13.07 percent for the Lipper Growth and Income Funds
Index and 20.21 percent for the broad-based S&P 500. For the same period the
Fund's Class A, C and D shares returned 27.78 percent, 27.33 percent and 28.08
percent, respectively. The performance of the Fund's four share classes varies
because of differing expenses. The accompanying chart compares the Fund's
performance with that of the Lipper and S&P 500 indexes.
PORTFOLIO STRATEGY
Equity selection is based on a combination of reasonable value and earnings
growth potential. TCW firmly believes that earnings and cash flow growth drive
stock prices; however, the sub-advisor does not believe in growth at any price.
The Fund's focus is to seek undervalued stocks poised for significant earnings
improvement. TCW looks for companies that are generating improving returns on
invested capital. This leads the sub-advisor to a combination of out-of-favor
cyclical stocks and undervalued growth stocks. This approach has led TCW to
invest in the following sectors.
Energy. With crude oil prices hovering near $11 per barrel in January, the Fund
took advantage of undervalued energy stocks and increased its exposure to that
sector. The primary focus was in the oil services industry, which now
represents more than 8 percent of the Fund's portfolio. The Fund's overall
energy weighting is currently 16 percent, compared to 8 percent for the S&P
500. This move benefited the Fund's overall performance, as the energy sector
rebounded when oil prices increased sharply during the first half of 1999.
Aerospace. During the first six months of 1999, the Fund's aerospace holdings,
which benefited from increased merger and acquisition activity within the
sector, contributed strongly to the Fund's overall investment returns. Among
the Fund's aerospace positions were Sundstrand, Honeywell, Coltec and
Wyman-Gordon.
Technology. Approximately 25 percent of the Fund's assets is allocated to
technology stocks. Today technology represents 10 percent of U.S. GDP. During
the next five to ten years, TCW anticipates this
2
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS July 31, 1999, continued
figure to increase to 15 to 20 percent of U.S. GDP. The technology companies in
the Fund's portfolio are dominant in their respective businesses. These
companies include Intel, Microsoft, Cisco Systems, Motorola, Texas Instruments,
Applied Materials, Dell and Siebel Systems.
Financial Services. Many financial services companies are currently
undervalued. However, TCW believes that the long-term outlook for the financial
services sector is encouraging. Technology and demographics are driving demand
for investment advice and credit card and insurance products. Within this
sector, the Fund's holdings include Merrill Lynch, Goldman Sachs, Citigroup,
Wells Fargo, Indymac, T. Rowe Price, American International Group, American
Express, J. P. Morgan and Marsh & McLennan.
Pharmaceuticals. TCW believes that pharmaceutical stocks are attractive, due to
a surge of new products and strong unit demand driven by demographics and FDA
reforms. Strong cash flow, stable balance sheets and stock buybacks should
enhance the outlook for the sector in the months ahead. Among the Fund's
pharmaceutical holdings are Merck, Lilly, Schering-Plough, and Warner-Lambert.
LOOKING AHEAD
Strong economic growth, low inflation, and falling or stable interest rates
provide a nearly ideal environment for investing in U.S. stocks. During the
second quarter, the rise in interest rates removed one of the positive elements
of an otherwise favorable environment for equities. However, strong economic
growth and low inflation remain intact.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is the President and Chief Operating Officer of
Asset Management for Morgan Stanley Dean Witter & Co. and President, Chief
Executive Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the
Fund's investment manager. He also serves as Chairman, Chief Executive Officer
and Director of the Fund's distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Total Return
Trust and look forward to continuing to serve your investment needs and
objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
RESULTS OF SPECIAL MEETING
* * *
On June 8, 1999, a special meeting of the Fund's shareholders was held for the
purpose of voting on three separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
MORGAN STANLEY DEAN WITTER ADVISORS INC.:
For ............... 4,583,353
Against ........... 103,359
Abstain ........... 622,496
(2) APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN MORGAN STANLEY DEAN WITTER
ADVISORS INC. AND TCW FUNDS MANAGEMENT, INC.:
For ............... 4,553,014
Against ........... 105,834
Abstain ........... 650,360
(3) ELECTION OF TRUSTEES:
Michael Bozic
For ................ 5,004,210
Withheld ........... 304,998
Charles A. Fiumefreddo
For ................ 5,011,817
Withheld ........... 297,391
Edwin J. Garn
For ................ 5,012,129
Withheld ........... 297,079
Wayne E. Hedien
For ................ 5,016,606
Withheld ........... 292,602
Manuel H. Johnson
For ................ 5,009,179
Withheld ........... 300,029
Michael E. Nugent
For ................ 5,017,476
Withheld ........... 291,732
Philip J. Purcell
For ................ 5,018,875
Withheld ........... 290,333
John L. Schroeder
For ................ 5,000,292
Withheld ........... 308,916
4
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FUND PERFORMANCE July 31, 1999
GROWTH OF $10,000 -- CLASS B SHARES
($ in Thousands)
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 $13,778
July 31, 1997 $19,539 $22,342 $19,858
July 31, 1998 $21,151 $26,649 $22,075
July 31, 1999 $26,670(3) $32,034 $24,960
-- Fund -- S&P 500(4) -- Lipper(5)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS C, AND CLASS D SHARES WILL VARY FROM THE PERFORMANCE OF CLASS B SHARES
SHOWN ABOVE DUE TO DIFFERENCES IN SALES CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
CLASS B SHARES*
- --------------------------------------------------------------
PERIOD ENDED 7/31/99
- ----------------------------
1 Year 27.04%(1) 22.04%(2)
Since Inception (11/30/94) 23.60%(1) 23.40%(2)
CLASS C SHARES++
- -------------------------------------------------------------
PERIOD ENDED 7/31/99
- ---------------------------
1 Year 27.33%(1) 26.33%(2)
Since Inception (7/28/97) 19.14%(1) 19.14%(2)
CLASS A SHARES+
- -------------------------------------------------------------
PERIOD ENDED 7/31/99
- ---------------------------
1 Year 27.78%(1) 21.07%(2)
Since Inception (7/28/97) 19.80%(1) 16.63%(2)
CLASS D SHARES#
- ---------------------------------------------
PERIOD ENDED 7/31/99
- ---------------------------
1 Year 28.08%(1)
Since Inception (7/28/97) 20.08%(1)
- ---------------
(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 sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value after the deduction of a 2% contingent deferred sales charge
(CDSC), assuming a complete redemption on July 31, 1999.
(4) The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based index, the
performance of which is based on the average performance of 500 widely held
common stocks. The performance of the Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
(5) The Lipper 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.
* The maximum CDSC for Class B is 5.0%. The CDSC declines to 0% after six
years.
+ The maximum front-end sales charge for Class A is 5.25%.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
# Class D shares have no sales charge.
5
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1999
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS (97.0%)
Aerospace (8.2%)
109,900 Boeing Co. ................................ $ 4,986,712
8,400 Northrop Grumman Corp. .................... 605,850
1,785 United Technologies Corp. ................. 119,037
1,000 Honeywell, Inc. ........................... 119,812
567,700 Wyman-Gordon Co.* ......................... 10,821,781
------------
16,653,192
------------
Air Freight/Delivery Services (1.1%)
49,000 FDX Corp.* ................................ 2,195,812
------------
Auto Parts: O.E.M. (2.2%)
249,298 Delphi Automotive Systems Corp. 4,487,364
------------
Beverages -- Non-Alcoholic (2.5%)
2,000 Coca Cola Co. ............................. 120,625
127,850 PepsiCo, Inc. ............................. 5,002,131
------------
5,122,756
------------
Computer Communications (3.4%)
111,150 Cisco Systems, Inc.* ...................... 6,905,194
------------
Computer Hardware (2.3%)
113,200 Dell Computer Corp.* ...................... 4,627,050
------------
Computer Software (6.2%)
83,000 Microsoft Corp.* .......................... 7,117,250
88,500 Siebel Systems, Inc.* ..................... 5,215,969
------------
12,333,219
------------
Discount Chains (2.2%)
103,400 Wal-Mart Stores, Inc. ..................... 4,368,650
------------
Diversified Financial Services (2.2%)
15,100 American Express Co. ...................... 1,989,425
57,000 Citigroup Inc. ............................ 2,540,062
------------
4,529,487
------------
Electric Utilities (1.0%)
31,000 Montana Power Co. ......................... 2,098,312
------------
Electronic Production Equipment (1.1%)
31,200 Applied Materials, Inc.* .................. 2,242,500
------------
Finance Companies (1.4%)
13,500 Fannie Mae ................................ 931,500
32,000 Freddie Mac ............................... 1,836,000
------------
2,767,500
------------
Food Chains (2.7%)
111,500 Albertson's, Inc. ......................... $ 5,540,156
------------
Insurance Brokers/Services (0.9%)
25,100 Marsh & McLennan Companies,
Inc. ...................................... 1,907,600
------------
Integrated Oil Companies (7.8%)
43,800 Chevron Corp. ............................. 3,996,750
72,100 Exxon Corp. ............................... 5,722,937
95,600 Royal Dutch Petroleum Co. (ADR)
(Netherlands) ........................... 5,831,600
3,600 Texaco, Inc. .............................. 224,325
------------
15,775,612
------------
Investment Bankers/
Brokers/Services (2.2%)
8,500 Goldman Sachs Group, Inc. ................. 546,656
57,800 Merrill Lynch & Co., Inc. ................. 3,934,013
------------
4,480,669
------------
Investment Managers (1.3%)
73,000 Price (T.) Rowe Associates, Inc. .......... 2,545,875
------------
Life Insurance (0.7%)
28,300 Hartford Life, Inc. (Class A) ............. 1,432,688
------------
Major Banks (1.7%)
2,910 Bank of America Corp. ..................... 193,151
15,100 Morgan (J.P.) & Co., Inc. ................. 1,930,913
34,500 Wells Fargo & Co. ......................... 1,345,500
------------
3,469,564
------------
Major Pharmaceuticals (5.5%)
8,700 Johnson & Johnson ......................... 801,488
54,800 Lilly (Eli) & Co. ......................... 3,596,250
36,000 Merck & Co., Inc. ......................... 2,436,750
59,800 Schering-Plough Corp. ..................... 2,930,200
18,800 Warner-Lambert Co. ........................ 1,240,800
------------
11,005,488
------------
Major U.S. Telecommunications (2.2%)
12,500 Ameritech Corp. ........................... 915,625
59,850 AT&T Corp. ................................ 3,108,459
3,000 Bell Atlantic Corp. ....................... 191,250
2,700 GTE Corp. ................................. 198,956
1,400 SBC Communications, Inc. .................. 80,063
------------
4,494,353
------------
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS July 31, 1999, continued
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------
Media Conglomerates (1.0%)
2,000 Disney (Walt) Co. ..................... $ 55,250
27,400 Time Warner Inc. ...................... 1,972,800
-----------
2,028,050
-----------
Military/Gov't/Technical (2.1%)
61,000 Raytheon Co. (Class B) ................ 4,289,063
-----------
Motor Vehicles (0.9%)
29,900 General Motors Corp. .................. 1,822,031
-----------
Multi-Line Insurance (1.4%)
23,750 American International Group, Inc. 2,757,969
-----------
Multi-Sector Companies (1.9%)
36,200 General Electric Co. .................. 3,945,800
-----------
Oil/Gas Transmission (1.6%)
79,300 Williams Companies, Inc. .............. 3,335,556
-----------
Oilfield Services/Equipment (7.4%)
254,000 Baker Hughes Inc. ..................... 8,842,375
131,700 Halliburton Co. ....................... 6,074,663
-----------
14,917,038
-----------
Package Goods/Cosmetics (0.1%)
1,700 Procter & Gamble Co. .................. 153,850
-----------
Paper (3.0%)
167,200 Fort James Corp. ...................... 6,102,800
-----------
Property -- Casualty Insurers (1.4%)
21,900 Progressive Corp. ..................... 2,797,725
-----------
Real Estate Investment Trusts (2.3%)
300,600 Indymac Mortgage Holdings, Inc. 4,753,238
-----------
Restaurants (4.0%)
112,800 McDonald's Corp. ...................... 4,702,350
83,210 Tricon Global Restaurants, Inc.* ...... 3,385,607
-----------
8,087,957
-----------
Semiconductors (5.4%)
81,800 Intel Corp. ........................... 5,644,200
35,000 Texas Instruments, Inc. ............... 5,040,000
-----------
10,684,200
-----------
Telecommunications Equipment (3.9%)
87,500 Motorola, Inc. ........................ 7,984,375
-----------
Wholesale Distributors (1.8%)
78,500 Grainger (W.W.), Inc. ................. 3,709,126
-----------
TOTAL COMMON STOCKS
(Identified Cost $143,478,487) ........ 196,351,819
-----------
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ------------------------------------------------------------------
SHORT-TERM INVESTMENT (2.3%)
REPURCHASE AGREEMENT
$ 4,732 The Bank of New York 5.00%
due 08/02/99 (dated 07/30/99;
proceeds $4,733,739) (a)
(Identified Cost $4,731,767) ....... $ 4,731,767
------------
TOTAL INVESTMENTS
(Identified Cost $148,210,254) (b)......... 99.3% 201,083,586
OTHER ASSETS IN EXCESS OF
LIABILITIES ............................... 0.7 1,357,445
----- -----------
NET ASSETS ................................ 100.0% $202,441,031
===== ============
- ------------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $4,459,344 Government National Mortgage Assoc. 6.50%
due 06/15/28 valued at $4,077,338 and $730,796 U.S. Treasury Note
6.50% due 10/15/06 valued at $760,420.
<PAGE>
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$55,724,391 and the aggregate gross unrealized depreciation is
$2,851,059, resulting in net unrealized appreciation of
$52,873,332.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
July 31, 1999
ASSETS:
Investments in securities, at value
(identified cost $148,210,254).................................. $201,083,586
Receivable for:
Shares of beneficial interest sold ............................ 4,358,502
Dividends ..................................................... 170,691
Deferred organizational expenses ................................. 10,176
Prepaid expenses and other assets ................................ 97,891
------------
TOTAL ASSETS .................................................. 205,720,846
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ..................... 2,066,400
Investments purchased ......................................... 892,688
Management fee ................................................ 131,346
Plan of distribution fee ...................................... 129,662
Accrued expenses and other payables .............................. 59,719
------------
TOTAL LIABILITIES ............................................. 3,279,815
------------
NET ASSETS .................................................... $202,441,031
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $135,577,506
Net unrealized appreciation ...................................... 52,873,332
Accumulated undistributed net realized gain ...................... 13,990,193
------------
NET ASSETS .................................................... $202,441,031
============
CLASS A SHARES:
Net Assets ....................................................... $4,079,450
Shares Outstanding (unlimited authorized, $.01 par value)......... 200,373
NET ASSET VALUE PER SHARE ..................................... $20.36
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) .............. $21.49
======
CLASS B SHARES:
Net Assets ....................................................... $194,763,303
Shares Outstanding (unlimited authorized, $.01 par value)......... 9,690,075
NET ASSET VALUE PER SHARE ..................................... $20.10
======
CLASS C SHARES:
Net Assets ....................................................... $1,608,779
Shares Outstanding (unlimited authorized, $.01 par value)......... 79,957
NET ASSET VALUE PER SHARE ..................................... $20.12
======
CLASS D SHARES:
Net Assets ....................................................... $1,989,499
Shares Outstanding (unlimited authorized, $.01 par value)......... 97,256
NET ASSET VALUE PER SHARE ..................................... $20.46
============
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the year ended July 31, 1999
NET INVESTMENT LOSS:
INCOME
Dividends (net of $16,189 foreign withholding tax)......... $ 1,941,524
Interest .................................................. 82,050
------------
TOTAL INCOME ........................................... 2,023,574
------------
EXPENSES
Plan of distribution fee (Class A shares) ................. 4,996
Plan of distribution fee (Class B shares) ................. 1,395,453
Plan of distribution fee (Class C shares) ................. 5,667
Management fee ............................................ 671,221
Investment advisory fee ................................... 447,480
Transfer agent fees and expenses .......................... 185,025
Investment management fee ................................. 151,303
Shareholder reports and notices ........................... 88,654
Registration fees ......................................... 73,731
Professional fees ......................................... 65,411
Organizational expenses ................................... 30,328
Trustees' fees and expenses ............................... 26,722
Custodian fees ............................................ 17,327
Other ..................................................... 16,431
------------
TOTAL EXPENSES ......................................... 3,179,749
------------
NET INVESTMENT LOSS .................................... (1,156,175)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ......................................... 14,349,364
Net change in unrealized appreciation ..................... 26,980,524
------------
NET GAIN ............................................... 41,329,888
------------
NET INCREASE .............................................. $ 40,173,713
============
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JULY 31, 1999 JULY 31, 1998
--------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ................................... $ (1,156,175) $ (717,671)
Net realized gain ..................................... 14,349,364 10,549,425
Net change in unrealized appreciation ................. 26,980,524 1,702,988
------------ ------------
NET INCREASE ....................................... 40,173,713 11,534,742
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED GAIN:
Class A shares ........................................ (78,538) (7,061)
Class B shares ........................................ (8,017,342) (9,224,024)
Class C shares ........................................ (36,827) (24,164)
Class D shares ........................................ (597) (712)
------------ ------------
TOTAL DISTRIBUTIONS ................................ (8,133,304) (9,255,961)
------------ ------------
Net increase from transactions in shares of beneficial
interest ............................................ 16,076,667 34,945,345
------------ ------------
NET INCREASE ....................................... 48,117,076 37,224,126
NET ASSETS:
Beginning of period ................................... 154,323,955 117,099,829
------------ ------------
END OF PERIOD
(Including undistributed net investment income of $0
and $3,083, respectively)........................... $202,441,031 $154,323,955
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Total Return Trust (the "Fund"), formerly TCW/DW
Total Return Trust, 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 converted to a multiple class share structure.
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 and 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 Morgan Stanley Dean Witter Advisors Inc. (the "Investment
Manager") or TCW Funds Management, Inc. (the "Sub-Advisor") 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; and (4)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are
11
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued
valued on a mark-to-market basis until sixty days prior to maturity and
thereafter at amortized cost based on their value on the 61st day. Short-term
debt securities having a maturity date of sixty days or less at the time of
purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Discounts are accreted over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date
such items are recognized. Distribution fees are allocated directly to the
respective class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends
and distributions to its shareholders on the 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.
F. ORGANIZATIONAL EXPENSES -- The Investment Manager paid the organizational
expenses of the Fund in the amount of approximately $127,000 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to a new Investment Management Agreement that took effect June 28,
1999, the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 0.75% to the net assets of the
Fund determined as of the close of each business day.
Under the terms of the Agreement, in addition to managing the Fund's
Investments, the Investment 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 Investment
Manager. The Investment Manager also bears the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
Under a New Sub-Advisory Agreement that took effect June 28, 1999 between the
Investment Manager and the Sub-Advisor, the Sub-Advisor provides the Fund with
investment advice and portfolio management relating to the Fund's investments
in securities, subject to the overall supervision of the Investment Manager. As
compensation for its services provided pursuant to the Sub-Advisory Agreement,
the Investment Manager pays the Sub-Advisor compensation equal to 40% of its
monthly compensation.
Prior to June 28, 1999, pursuant to a Management Agreement with Morgan Stanley
Dean Witter Services Company Inc. (the "Former Manager"), the Fund paid the
Former 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 maintained certain of
the Fund's books and records and furnished, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and
paid the salaries of all personnel, including officers of the Fund who were
employees of the Manager. The Manager also bore the cost of telephone services,
heat, light, power and other utilities provided to the Fund.
Prior to June 28, 1999, pursuant to an Investment Advisory Agreement with the
current Sub-Advisor, the Fund paid 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 had retained the
current Sub-Advisor to invest the Fund's assets, including placing orders for
the purchase and sale of portfolio securities. The current Sub-Advisor obtained
and evaluated such information and advice relating to the economy, securities
markets, and specific securities as it considered necessary or useful to
continuously manage the
13
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued
assets of the Fund in a manner consistent with its investment objective. In
addition, the current Sub-Advisor paid the salaries of all personnel, including
officers of the Fund, who were employees of the current Sub-Advisor.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 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 - up to 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 (1)
services provided and the expenses borne by it and others in the distribution
of the shares of these Classes, including the payment of commissions for sales
of these Classes and incentive compensation to, and expenses of, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
shareholders; and (3) preparation, printing and distribution of sales
literature and advertising materials. In addition, the Distributor may utilize
fees paid pursuant to the Plan, in the case of Class B shares, to compensate
Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment Manager and
Distributor, and other selected broker-dealers for their opportunity costs in
advancing such amounts, which compensation would be in the form of a carrying
charge on any unreimbursed expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund
pursuant to the Plan and contingent deferred sales charges paid by investors
upon redemption of Class B shares. Although there is no legal obligation for
the Fund to pay expenses incurred in excess of payments made to the Distributor
under the Plan and the proceeds of contingent deferred sales charges paid by
investors upon redemption of shares, if for any reason the Plan is terminated,
the
14
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $4,988,978 at July 31, 1999.
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 Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended July 31, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.24% and
0.66%, respectively.
The Distributor has informed the Fund that for the year ended July 31, 1999, it
received contingent deferred sales charges from certain redemptions of the
Fund's Class B shares and Class C shares of $315,135 and $911, respectively and
received $5,300 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.
4. 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, 1999 aggregated
$134,004,115 and $131,986,747, respectively.
For the year ended July 31, 1999, the Fund incurred brokerage commissions of
$20,882 with Morgan Stanley & Co., Inc., an affiliate of the Investment Manager
and Distributor, for portfolio transactions executed on behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At July 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $300.
15
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS July 31, 1999, continued
5. 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, 1999 JULY 31, 1998
--------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 262,041 $ 5,265,953 77,071 $ 1,323,814
Reinvestment of distributions ......... 4,229 73,536 473 7,061
Redeemed .............................. (140,633) (2,838,266) (3,432) (58,689)
-------- ----------- ------ ------------
Net increase - Class A ................ 125,637 2,501,223 74,112 1,272,186
-------- ----------- ------ ------------
CLASS B SHARES
Sold .................................. 2,294,287 41,396,214 3,642,674 60,041,237
Reinvestment of distributions ......... 423,058 7,289,285 553,040 8,234,768
Redeemed .............................. (2,161,664) 37,861,050) (2,117,176) 35,250,499)
---------- ----------- ---------- ------------
Net increase - Class B ................ 555,681 10,824,449 2,078,538 33,025,506
---------- ----------- ---------- ------------
CLASS C SHARES
Sold .................................. 48,860 970,933 42,555 699,553
Reinvestment of distributions ......... 2,093 36,001 1,578 23,504
Redeemed .............................. (13,007) (236,796) (4,433) (76,116)
---------- ----------- ---------- ------------
Net increase - Class C ................ 37,946 770,138 39,700 646,941
---------- ----------- ---------- ------------
CLASS D SHARES
Sold .................................. 96,551 1,980,260 -- --
Reinvestment of distributions ......... 34 597 47 712
---------- ----------- ---------- ------------
Net increase - Class D ................ 96,585 1,980,857 47 712
---------- ----------- ---------- ------------
Net increase in Fund .................. 815,849 $16,076,667 2,192,397 $ 34,945,345
========== =========== ========== ============
</TABLE>
6. FEDERAL INCOME TAX STATUS
At July 31, 1999, the Fund had temporary book/tax differences attributable to
capital loss deferrals on wash sales and permanent book/tax differences
primarily attributable to a net operating loss. To reflect reclassifications
arising from the permanent differences, paid-in-capital was charged $1,156,175,
accumulated undistributed net realized gain was credited $3,083 and net
investment loss was credited $1,153,092.
16
<PAGE>
MORGAN STANLEY DEAN WITTER 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 JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
------------------ --------------- ---------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.78 $16.59 $16.07
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ..................... -- (0.01) 0.01
Net realized and unrealized gain ................. 4.47 1.34 0.51
------ ------ ------
Total income from investment operations ........... 4.47 1.33 0.52
------ ------ ------
Less distributions from net realized gain ......... (0.89) (1.14) --
------ ------ ------
Net asset value, end of period .................... $20.36 $16.78 $16.59
====== ====== ======
TOTAL RETURN+ ..................................... 27.78% 8.94% 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.30%(3) 1.31% 1.31%(2)
Net investment income (loss) ...................... (0.10)%(3) (0.07)% 4.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $4,079 $1,254 $10
Portfolio turnover rate ........................... 79% 93% 198%
</TABLE>
- -------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JULY 31,
------------------------------------------------------------------
1999++ 1998++ 1997** 1996
------------------ --------------- -------------- ----------------
<S> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........ $16.68 $16.59 $12.00 $11.75
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ............... (0.12) (0.08) 0.04 0.15
Net realized and unrealized gain ........... 4.43 1.31 5.81 0.80
------ ------ ------ ------
Total income from investment operations ..... 4.31 1.23 5.85 0.95
------ ------ ------ ------
Less dividends and distributions from:
Net investment income ...................... -- -- (0.06) (0.21)
Net realized gain .......................... (0.89) (1.14) (1.20) (0.49)
------ ------ ------ ------
Total dividends and distributions ........... (0.89) (1.14) (1.26) (0.70)
------ ------ ------ ------
Net asset value, end of period .............. $20.10 $16.68 $16.59 $12.00
====== ====== ====== ======
TOTAL RETURN+ ............................... 27.04 % 8.25 % 51.66% 8.23%
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 1.90 %(4) 1.90 % 2.05% 1.98%(3)
Net investment income (loss) ................ (0.70)%(4) (0.50)% 0.28% 1.30%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $194,763 $152,358 $117,041 $48,524
Portfolio turnover rate ..................... 79 % 93 % 198% 261%
<CAPTION>
FOR THE PERIOD
NOVEMBER 30, 1994*
THROUGH
JULY 31, 1995
---------------------
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ........ $10.00
------
Income (loss) from investment operations:
Net investment income (loss) ............... 0.21
Net realized and unrealized gain ........... 1.68
------
Total income from investment operations ..... 1.89
------
Less dividends and distributions from:
Net investment income ...................... (0.14)
Net realized gain .......................... --
------
Total dividends and distributions ........... (0.14)
------
Net asset value, end of period .............. $11.75
======
TOTAL RETURN+ ............................... 19.04%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .................................... 0.94%(2)(3)
Net investment income (loss) ................ 3.19%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ..... $36,018
Portfolio turnover rate ..................... 91%(1)
</TABLE>
- --------------
* Commencement of operations.
** Prior to July 28, 1997, the Fund issued one class of shares. All shares
of the Fund held prior to that date have been designated Class B shares.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived
by Morgan Stanley Dean Witter Services Company Inc. (the then current
Manager) and TCW Funds Management Inc. (the then current Adviser), the
above annualized expense and net investment income 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.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.66 $16.59 $16.07
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ..................... (0.09) (0.12) 0.01
Net realized and unrealized gain ................. 4.44 1.33 0.51
------ ------ ------
Total income from investment operations ........... 4.35 1.21 0.52
------ ------ ------
Less distributions from net realized gain ......... (0.89) (1.14) --
------ ------ ------
Net asset value, end of period .................... $20.12 $16.66 $16.59
====== ====== ======
TOTAL RETURN+ ..................................... 27.33 % 8.12 % 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.72 %(3) 2.06 % 2.06%(2)
Net investment income (loss) ...................... (0.52)%(3) (0.70)% 2.75%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,609 $ 700 $38
Portfolio turnover rate ........................... 79 % 93 % 198%
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Does not reflect the deduction of sales charge. Calculated based on the
net asset value as of the last business day of the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR JULY 28, 1997*
ENDED ENDED THROUGH
JULY 31, 1999 JULY 31, 1998 JULY 31, 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.83 $16.59 $16.07
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ..................... 0.02 0.06 0.01
Net realized and unrealized gain ................. 4.50 1.32 0.51
------ ------ ------
Total income from investment operations ........... 4.52 1.38 0.52
------ ------ ------
Less distributions from net realized gain ......... (0.89) (1.14) --
------ ------ ------
Net asset value, end of period .................... $20.46 $16.83 $16.59
====== ====== ======
TOTAL RETURN+ ..................................... 28.08% 9.20% 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.06%(3) 1.06% 1.06%(2)
Net investment income ............................. 0.14%(3) 0.34% 4.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,990 $11 $10
Portfolio turnover rate ........................... 79% 93% 198%
</TABLE>
- --------------
* The date shares were first issued.
++ The per share amounts were computed using an average number of shares
outstanding during the period.
+ Calculated based on the net asset value as of the last business day of
the period.
(1) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER TOTAL RETURN TRUST
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER 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 Morgan Stanley Dean Witter Total
Return Trust (the "Fund"), formerly TCW/DW Total Return Trust, at July 31,
1999, the results of its operations for the year then ended, the changes in its
net assets for each of the two years in the period then ended and the financial
highlights for each of the periods indicated, 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, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
September 10, 1999
1999 FEDERAL TAX NOTICE (unaudited)
For the year ended July 31, 1999, the Fund paid to its shareholders $0.46
per share from long-term capital gains. For such period, 30.65% of the
income paid qualified for the dividends received deduction available to
corporations.
21
<PAGE>
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<PAGE>
(This page has been left blank intentionally.)
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
James A. Tilton
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
TCW Funds Management, Inc.
865 South Figueroa Street, Suite 1800
Los Angeles, California 90017
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. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
TOTAL RETURN TRUST
[Graphic Omitted}
ANNUAL REPORT
JULY 31, 1999
