<PAGE>
TCW/DW TOTAL RETURN TRUST Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS January 31, 1999
DEAR SHAREHOLDER:
During the six-month period ended January 31, 1999, the equity markets
continued to take investors on a wild ride. After soaring to a record high of
9338 in July 1998, the Dow plunged nearly 1,800 points by the end of August.
Several factors combined to drag down the prices of stocks, including a
slowdown in profits growth, the persistent Asian contagion, Russia's debt
default and devaluation of the ruble, the worsening White House scandal and the
near collapse of a major hedge fund. Fortunately, the steadying influence of
the Goldilocks economy -- featuring economic expansion with low inflation --
pulled the market out of its summer slump and propelled it toward new highs in
mid-January.
PERFORMANCE AND PORTFOLIO STRATEGY
For the six-month period ended January 31, 1999, TCW/DW Total Return Trust's
Class B shares posted a total return of 12.85 percent compared to returns of
5.30 percent for the Lipper Growth and Income Funds Index and 15.03 percent for
the broad-based Standard & Poor's 500 Composite Stock Price Index. For the same
period the Fund's Class A, C and D shares returned 13.19 percent, 12.81 percent
and 13.34 percent, respectively. The performance of the Fund's four share
classes varies because of differing expenses.
Currently, the Fund's portfolio is invested entirely in equities -- there are
no bond holdings at this time. TCW Funds Management Inc., the Fund's adviser,
looks for companies with attractive growth rates, improving returns on invested
capital and attractive valuations. Specific industries that the Fund is focused
on are technology, aerospace, financial services, pharmaceuticals and energy.
Among the Fund's technology holdings are Microsoft, Intel, Cisco Systems,
Motorola, Dell, Texas Instruments and Applied Materials. The demand for
technology stocks continues to expand due to improving productivity and the
rapid growth of the Internet. TCW believes that better technology products at
lower prices will accelerate the industry growth rate.
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
The aerospace and defense companies in the Fund's portfolio include Boeing,
Hexcel, Wyman Gordon and Raytheon. In addition, U.S. defense spending is
increasing for the first time in a decade. Concerns about Asia have hurt
aerospace stocks over the past twelve months, but these economies are starting
to improve. At current prices, TCW believes these stocks are undervalued.
The Fund's financial services holdings include IndyMac Mortgage Holdings,
Merrill Lynch, Citigroup, Bank of America, Wells Fargo, American International
Group, Marsh & McLennan and J.P. Morgan. An increasing savings rate in the
United States is stimulating demand for insurance and investment products.
Technology is lowering the cost of managing and distributing consumer financial
products such as credit cards, home mortgage loans and mutual funds. As a
result, the consumer benefits from better services at lower cost. TCW believes
that this trend will lead to more rapid industry growth.
The pharmaceutical companies held in the Fund's portfolio include Johnson &
Johnson, Merck, Schering-Plough, Lilly Eli and Warner-Lambert. The industry is
benefiting from the aging of the baby boomers and new product growth. TCW
expects that these stocks should do well in either a strong or a weak economy.
Energy prices have declined sharply over the past twelve months. The valuation
levels for many oil companies are at 10-year lows. However, oil prices are
likely to recover sometime during 1999 as crude oil supply and demand come into
balance. In anticipation of this scenario, TCW has increased the Fund's
positions in Exxon, Royal Dutch, Chevron, Baker Hughes and Halliburton.
LOOKING AHEAD
We believe that the deflationary trend of the Asian and emerging-market
economies is likely to help keep inflation in check in the United States well
into 1999. It is possible that the Federal Reserve will lower interest rates
again in 1999 as continued world economic turmoil curtails the economic growth
of our Latin American neighbors. However, should our economy show signs of
inordinately strong growth coupled with an unacceptably high level of
inflation, the central bank might feel the need to reassess its stance on
monetary policy. Regardless, TCW believes that the outlook for the U.S. is
encouraging.
2
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
We appreciate your ongoing support of TCW/DW Total Return Trust and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ Charles A. Fiumefreddo
CHARLES A. FIUMEFREDDO
Chairman of the Board
TRUSTEES RECOMMEND FUND CONVERSION TO
MORGAN STANLEY DEAN WITTER FUND
On February 25, 1999, the Board of Trustees for the Fund, acting on a proposal
in connection with an overall consolidation of the TCW/DW Family of Funds and
the Morgan Stanley Dean Witter Family of Funds, recommended that
o Morgan Stanley Dean Witter Advisors Inc. (MSDW Advisors), the parent
company of Morgan Stanley Dean Witter Services Company, the Fund's current
manager, serve as the Fund's new investment manager and that a new
investment management agreement between the Fund and MSDW Advisors be
submitted to shareholders for approval at a special meeting expected to be
held in June 1999. Under the new investment management agreement, the
advisory fee rates that MSDW Advisors would charge would be 0.75% of
average daily net assets. This fee rate is identical to the total aggregate
fee rate now in effect under the current management and advisory
agreements.
o A new subadvisory agreement between MSDW Advisors and TCW Funds Management,
Inc. (TCW) be submitted to shareholders at the same special meeting. TCW is
a wholly owned subsidiary of The TCW Group, Inc., and currently serves as
the Fund's adviser. In return for the services that TCW would render under
the new sub-advisory agreement, MSDW Advisors would pay TCW monthly
compensation equal to 40 percent of the compensation it receives under the
new investment management agreement.
It was also voted that the Fund's name be changed from TCW/DW Total Return
Trust to Morgan Stanley Dean Witter Total Return Trust upon the effectiveness
of the aforementioned proposals.
3
<PAGE>
TCW/DW TOTAL RETURN TRUST
LETTER TO THE SHAREHOLDERS January 31, 1999, continued
The Trustees also nominated for election or reelection, as appropriate, the
following eight nominees to the Fund's Board of Trustees: Michael Bozic,
Charles A. Fiumefreddo, Edwin Jacob (Jake) Garn, Wayne E. Hedien, Dr. Manuel H.
Johnson, Michael E. Nugent, Philip J. Purcell and John L. Schroeder. Messrs.
Fiumefreddo, Johnson, Nugent and Schroeder currently serve as Trustees of the
Fund and, with the exception of Mr. Schroeder, were previously elected by
shareholders. Messrs. Bozic, Garn, Hedien and Purcell currently hold
directorships or trusteeships with 84 other investment companies for which MSDW
Advisors serves as investment manager or investment advisor.
A proxy statement formally detailing this proposal and the reasons for the
Trustees' action has been distributed to shareholders of the Fund, who were
shareholders on March 12, 1999.
4
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
COMMON STOCKS (99.8%)
Aerospace (7.4%)
143,900 Boeing Co. ................................ $ 4,973,544
387,700 Hexcel Corp.* ............................. 3,586,225
71,600 Lockheed Martin Corp. ..................... 2,523,900
26,700 Northrop Grumman Corp. .................... 1,521,900
3,200 Sundstrand Corp. .......................... 142,400
------------
12,747,969
------------
Air Freight/Delivery Services (1.4%)
28,900 FDX Corp.* ................................ 2,360,769
------------
Beverages -- Non-Alcoholic (1.0%)
2,000 Coca Cola Co. ............................. 130,875
41,750 PepsiCo, Inc. ............................. 1,630,859
------------
1,761,734
------------
Books/Magazines (1.0%)
27,400 Time Warner, Inc. ......................... 1,712,500
------------
Building Products (2.1%)
95,100 Fort James Corp. .......................... 3,411,712
1,700 Procter & Gamble Co. ...................... 154,487
------------
3,566,199
------------
Casino/Gambling (2.3%)
272,900 Mirage Resorts, Inc.* ..................... 3,905,881
------------
Cellular Telephone (2.1%)
39,900 AT&T Corp. ................................ 3,620,925
------------
Computer Communications (3.6%)
55,575 Cisco Systems, Inc.* ...................... 6,207,033
------------
Computer Hardware (3.3%)
56,600 Dell Computer Corp.* ...................... 5,660,000
------------
Computer Software (4.2%)
41,500 Microsoft Corp.* .......................... 7,259,906
------------
Department Stores (2.6%)
51,700 Wal-Mart Stores, Inc. ..................... 4,446,200
------------
Diversified Commercial
Services (1.0%)
75,400 Sodexho Marriott Services, Inc.* .......... 1,677,650
------------
Diversified Financial Services (1.6%)
38,000 Citigroup Inc. ............................ 2,130,375
6,500 Morgan (J.P.) & Co., Inc. ................. 685,750
------------
2,816,125
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------- ------------------
<S> <C> <C>
Electrical Products (2.9%)
1,000 Honeywell, Inc. ........................... $ 65,187
567,700 Wyman-Gordon Co.* ......................... 4,860,931
------------
4,926,118
------------
Electronics (9.3%)
36,200 General Electric Co. ...................... 3,796,475
87,500 Motorola, Inc. ............................ 6,321,875
10,200 Raytheon Co. (Class B) .................... 570,562
53,800 Texas Instruments, Inc. ................... 5,319,475
------------
16,008,387
------------
Energy (2.1%)
218,100 Baker Hughes, Inc. ........................ 3,680,437
------------
Finance Companies (1.7%)
13,500 Fannie Mae ................................ 983,812
32,000 Freddie Mac ............................... 1,984,000
------------
2,967,812
------------
Financial Services (0.5%)
8,000 American Express Co. ...................... 823,000
------------
Insurance (2.6%)
23,750 American International Group,
Inc. ...................................... 2,444,766
35,700 Hartford Life, Inc. (Class A) ............. 2,012,588
------------
4,457,354
------------
Integrated Oil Companies (7.4%)
29,600 Chevron Corp. ............................. 2,212,600
72,100 Exxon Corp. ............................... 5,078,544
69,600 Royal Dutch Petroleum Co. (ADR)
(Netherlands) ............................. 2,788,350
55,000 Texaco, Inc. .............................. 2,605,625
------------
12,685,119
------------
Investment Bankers/Brokers/
Services (3.5%)
25,100 Marsh & McLennan Companies,
Inc. ...................................... 1,578,163
57,800 Merrill Lynch & Co., Inc. ................. 4,392,800
------------
5,970,963
------------
Major Banks (2.3%)
10,410 BankAmerica Corp. ......................... 696,169
95,000 Wells Fargo & Co. ......................... 3,319,063
------------
4,015,232
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
TCW/DW TOTAL RETURN TRUST
PORTFOLIO OF INVESTMENTS January 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ---------- ---------------
<S> <C> <C>
Major Pharmaceuticals (7.7%)
8,700 Johnson & Johnson ..................... $ 739,500
54,800 Lilly (Eli) & Co. ..................... 5,134,075
18,000 Merck & Co., Inc. ..................... 2,641,500
59,800 Schering-Plough Corp. ................. 3,259,100
18,800 Warner-Lambert Co. .................... 1,357,125
------------
13,131,300
------------
Major U.S. Telecommunications (1.9%)
24,200 GTE Corp. ............................. 1,633,500
29,400 SBC Communications, Inc. .............. 1,587,600
------------
3,221,100
------------
Movies/Entertainment (0.7%)
38,200 Walt Disney Co. ....................... 1,260,600
------------
Oil & Gas Production (1.0%)
135,000 Nabors Industries, Inc.* .............. 1,687,500
------------
Oilfield Services/Equipment (1.7%)
99,700 Halliburton Co. ....................... 2,959,844
------------
Real Estate Investment Trust (2.1%)
300,600 Indymac Mortgage Holdings, Inc......... 3,625,988
------------
Restaurants (5.5%)
56,400 McDonald's Corp. ...................... 4,445,025
102,710 Tricon Global Restaurants, Inc.* ...... 4,885,144
------------
9,330,169
------------
Retail (0.2%)
6,720 Fred Meyer, Inc.* ..................... 420,000
------------
Semiconductors (7.9%)
122,200 Applied Materials, Inc.* .............. 7,713,875
40,900 Intel Corp. ........................... 5,759,231
------------
13,473,106
------------
Supermarkets (2.8%)
79,800 Albertson's, Inc. ..................... 4,867,800
------------
Wholesale Distributor (2.4%)
147,400 Supervalu, Inc. ....................... 4,044,288
------------
TOTAL COMMON STOCKS
(Identified Cost $136,544,805)......... 171,299,008
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ----------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.3%)
REPURCHASE AGREEMENT
$ 482 The Bank of New York 4.6875%
due 02/01/99 (dated 01/29/99;
proceeds $482,284) (a)
(Identified Cost $482,096).......... $ 482,096
-------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $137,026,901) (b)..... 100.1% 171,781,104
LIABILITIES IN EXCESS OF OTHER
ASSETS ................................ (0.1) (207,391)
----- -----------
NET ASSETS ............................ 100.0% $171,573,713
===== ============
</TABLE>
- --------------------------------
* Non-income producing security.
(a) Collateralized by $484,833 U.S. Treasury Note 4.75% due 11/15/08
valued at $491,737.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$45,473,855 and the aggregate gross unrealized depreciation is
$10,719,652, resulting in net unrealized appreciation of $34,754,203.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
January 31, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $137,026,901).................................. $171,781,104
Receivable for:
Investment sold ............................................... 2,442,656
Shares of beneficial interest sold ............................ 352,729
Dividends ..................................................... 108,992
Deferred organizational expenses ................................. 25,221
Prepaid expenses and other assets ................................ 70,386
------------
TOTAL ASSETS .................................................. 174,781,088
------------
LIABILITIES:
Payable for:
Investments purchased ......................................... 2,787,730
Shares of beneficial interest repurchased ..................... 155,017
Plan of distribution fee ...................................... 118,171
Management fee ................................................ 64,525
Investment advisory fee ....................................... 43,016
Accrued expenses and other payables .............................. 38,916
------------
TOTAL LIABILITIES ............................................. 3,207,375
------------
NET ASSETS .................................................... $171,573,713
============
COMPOSITION OF NET ASSETS:
Paid-in-capital .................................................. $126,771,841
Net unrealized appreciation ...................................... 34,754,203
Accumulated net investment loss .................................. (689,415)
Accumulated undistributed net realized gain ...................... 10,737,084
------------
NET ASSETS .................................................... $171,573,713
============
CLASS A SHARES:
Net Assets ....................................................... $ 1,959,070
Shares Outstanding (unlimited authorized, $.01 par value)......... 108,362
NET ASSET VALUE PER SHARE ..................................... $ 18.08
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............. $ 19.08
============
CLASS B SHARES:
Net Assets ....................................................... $168,835,300
Shares Outstanding (unlimited authorized, $.01 par value)......... 9,432,806
NET ASSET VALUE PER SHARE ..................................... $ 17.90
============
CLASS C SHARES:
Net Assets ....................................................... $ 766,542
Shares Outstanding (unlimited authorized, $.01 par value)......... 42,902
NET ASSET VALUE PER SHARE ..................................... $ 17.87
============
CLASS D SHARES:
Net Assets ....................................................... $ 12,801
Shares Outstanding (unlimited authorized, $.01 par value)......... 705
NET ASSET VALUE PER SHARE ..................................... $ 18.16
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended January 31, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends (net of $3,451 foreign withholding tax)......... $ 734,829
Interest ................................................. 45,961
------------
TOTAL INCOME .......................................... 780,790
------------
EXPENSES
Plan of distribution fee (Class A shares) ................ 1,791
Plan of distribution fee (Class B shares) ................ 681,784
Plan of distribution fee (Class C shares) ................ 3,459
Management fee ........................................... 344,492
Investment advisory fee .................................. 229,662
Transfer agent fees and expenses ......................... 80,065
Registration fees ........................................ 35,261
Professional fees ........................................ 25,620
Shareholder reports and notices .......................... 24,990
Trustees' fees and expenses .............................. 17,379
Organizational expenses .................................. 15,282
Custodian fees ........................................... 8,276
Other .................................................... 5,227
------------
TOTAL EXPENSES ........................................ 1,473,288
------------
NET INVESTMENT LOSS ................................... (692,498)
------------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain ........................................ 11,099,338
Net change in unrealized appreciation .................... 8,861,395
------------
NET GAIN .............................................. 19,960,733
------------
NET INCREASE ............................................. $ 19,268,235
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1999 JULY 31, 1998
------------------ ----------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss .................................... $ (692,498) $ (717,671)
Net realized gain ...................................... 11,099,338 10,549,425
Net change in unrealized appreciation .................. 8,861,395 1,702,988
------------ ------------
NET INCREASE ........................................ 19,268,235 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 ............................................. 6,114,827 34,945,345
------------ ------------
NET INCREASE ........................................ 17,249,758 37,224,126
NET ASSETS:
Beginning of period .................................... 154,323,955 117,099,829
------------ ------------
END OF PERIOD
(Including an accumulated net investment loss of
$689,415 and undistributed net investment income of
$3,083, respectively) ............................... $171,573,713 $154,323,955
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited)
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 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 TCW Funds Management, Inc. (the "Adviser") that sale and bid
prices are not reflective of a security's market value, portfolio securities
are valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees; 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.
10
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
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 charged 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 -- Morgan Stanley Dean Witter Advisors Inc., an
affiliate of Morgan Stanley Dean Witter Services Company Inc. (the "Manager"),
paid the organizational expenses of the Fund in the amount of approximately
$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.
11
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) 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 Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Manager. The Fund has adopted a
Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The
Plan provides that the Fund will pay the Distributor a fee which is accrued
daily and paid monthly at the following annual rates: (i) Class A -- up to
0.25% of the average daily net assets of Class A; (ii) Class B -- 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
12
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
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 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 $4,841,950 at January 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 six months ended January 31, 1999, 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 six months ended January 31,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $174,028 and $603, respectively
and received $1,345 in front-end sales charges from sales of the Fund's Class A
shares. The respective shareholders pay such charges which are not an expense
of the Fund.
5. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended January 31, 1999
aggregated $86,631,099 and $88,409,387, respectively.
13
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
For the six months ended January 31, 1999, the Fund incurred brokerage
commissions of $11,547 with Morgan Stanley & Co., Inc., an affiliate of the
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Manager and
Distributor, is the Fund's transfer agent. At January 31, 1999, the Fund had
transfer agent fees and expenses payable of approximately $1,000.
6. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JANUARY 31, 1999 JULY 31, 1998
---------------------------------- ----------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold .................................. 33,753 $ 576,818 77,071 $ 1,323,814
Reinvestment of distributions ......... 4,229 73,535 473 7,061
Redeemed .............................. (4,356) (74,913) (3,432) (58,689)
------ ------------- ------ -------------
Net increase -- Class A ............... 33,626 575,440 74,112 1,272,186
------ ------------- ------ -------------
CLASS B SHARES
Sold .................................. 1,100,376 18,053,362 3,642,674 60,041,237
Reinvestment of distributions ......... 423,058 7,289,285 553,040 8,234,768
Redeemed .............................. (1,225,022) (19,817,409) (2,117,176) (35,250,499)
---------- ------------- ---------- -------------
Net increase -- Class B ............... 298,412 5,525,238 2,078,538 33,025,506
---------- ------------- ---------- -------------
CLASS C SHARES
Sold .................................. 5,041 80,791 42,555 699,553
Reinvestment of distributions ......... 2,093 36,001 1,578 23,504
Redeemed .............................. (6,243) (103,240) (4,433) (76,116)
---------- ------------- ---------- -------------
Net increase -- Class C ............... 891 13,552 39,700 646,941
---------- ------------- ---------- -------------
CLASS D SHARES
Reinvestment of distributions ......... 34 597 47 712
---------- ------------- ---------- -------------
Net increase in Fund .................. 332,963 $ 6,114,827 2,192,397 $ 34,945,345
========== ============= ========== =============
</TABLE>
7. FEDERAL INCOME TAX STATUS
At July 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
14
<PAGE>
TCW/DW TOTAL RETURN TRUST
NOTES TO FINANCIAL STATEMENTS January 31, 1999 (unaudited) continued
8. SUBSEQUENT EVENT
On February 25, 1999, the Board of Trustees of the Fund recommended that the
Fund engage Morgan Stanley Dean Witter Advisors Inc. ("MSDW Advisors"), an
affiliate of the Manager, to serve as the Funds' new investment manager and
that a new investment management agreement between the Fund and MSDW Advisors
be submitted to shareholders for approval. Under the new agreement, MSDW
Advisors would be responsible for all the services presently provided by both
the Manager and the Adviser. The compensation paid to MSDW Advisors would be
equal to the total compensation presently paid to both the Manager and the
Adviser.
Additionally, on February 25, 1999, the Board of Trustees recommended that a
new sub-advisory agreement between MSDW Advisors and the present Adviser be
submitted to shareholders for approval. Under the new sub-advisory agreement,
MSDW Advisors would pay the new sub-adviser monthly compensation equal to 40%
of the compensation it receives under the new investment management agreement.
15
<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 YEAR ENDED JULY 31,
-----------------------------------------------------
FOR THE SIX
MONTHS ENDED
JANUARY 31, 1999++ 1998++ 1997** 1996
------------------------ ----------------- ---------------- ------------------
(unaudited)
<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 from investment operations:
Net investment income (loss) ................... (0.08) (0.08) 0.04 0.15
Net realized and unrealized gain ............... 2.19 1.31 5.81 0.80
------------ ------------ ----------- -----------
Total income from investment operations ......... 2.11 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 .................. $ 17.90 $ 16.68 $ 16.59 $ 12.00
============ ============ =========== ===========
TOTAL RETURN+ ................................... 12.85 %(1) 8.25 % 51.66 % 8.23 %
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.93 %(2)(4) 1.90 % 2.05 % 1.98 %(3)
Net investment income (loss) .................... (0.91)%(2)(4) (0.49)% 0.28 % 1.30 %(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $168,835 $152,380 $117,041 $48,524
Portfolio turnover rate ......................... 57 %(1) 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 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 the Manager and 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
16
<PAGE>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JANUARY 31, 1999 JULY 31, 1998 JULY 31, 1997
------------------------ --------------- ---------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.78 $16.59 $16.07
------- ------- --------
Income from investment operations:
Net investment income (loss) ..................... (0.02) (0.01) 0.01
Net realized and unrealized gain ................. 2.21 1.34 0.51
------- ------- --------
Total income from investment operations ........... 2.19 1.33 0.52
------- ------- --------
Less distributions from net realized gain ......... (0.89) (1.14) --
------- ------- --------
Net asset value, end of period .................... $18.08 $16.78 $16.59
======= ======= ========
TOTAL RETURN+ ..................................... 13.19 %(1) 8.94 % 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.28 %(2)(3) 1.31 % 1.31%(2)
Net investment income (loss) ...................... (0.26)%(2)(3) (0.07)% 4.08%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $1,959 $1,254 $ 10
Portfolio turnover rate ........................... 57 % 93 % 198%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.66 $ 16.59 $16.07
------- -------- --------
Income from investment operations:
Net investment income (loss) ..................... (0.08) (0.12) 0.01
Net realized and unrealized gain ................. 2.18 1.33 0.51
------- -------- -------
Total income from investment operations ........... 2.10 1.21 0.52
------- -------- -------
Less distributions from net realized gain ......... (0.89) (1.14) --
------- -------- --------
Net asset value, end of period .................... $17.87 $16.66 $16.59
======= ======== ========
TOTAL RETURN+ ..................................... 12.81 %(1) 8.12 % 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 2.03 %(2)(3) 2.06 % 2.06%(2)
Net investment income (loss) ...................... (1.01)%(2)(3) (0.70)% 2.75%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $ 767 $ 700 $ 38
Portfolio turnover rate ........................... 57 %(1) 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>
TCW/DW TOTAL RETURN TRUST
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JANUARY 31, 1999 JULY 31, 1998 JULY 31, 1997
------------------------ --------------- ---------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $16.83 $16.59 $16.07
------- ------- --------
Income from investment operations:
Net investment income ............................ -- 0.06 0.01
Net realized and unrealized gain ................. 2.22 1.32 0.51
------- ------- --------
Total income from investment operations ........... 2.22 1.38 0.52
------- ------- --------
Less distributions from net realized gain ......... (0.89) (1.14) --
------- -------- --------
Net asset value, end of period .................... $18.16 $16.83 $16.59
======= ======== ========
TOTAL RETURN+ ..................................... 13.34 %(1) 9.20% 3.24%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses .......................................... 1.03 %(2)(3) 1.06% 1.06%(2)
Net investment income (loss) ...................... (0.01)%(2)(3) 0.34% 4.33%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $ 13 $ 11 $ 10
Portfolio turnover rate ........................... 57 %(1) 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
18
<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 K. McKissick
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
MANAGER
Morgan Stanley Dean Witter Services Company Inc.
ADVISER
TCW Funds Management, Inc.
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholdres 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
SEMIANNUAL REPORT
JANUARY 31, 1999
