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PROSPECTUS May 1, 1999 as supplemented through October 12, 1999
A Portfolio of
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
[MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS LOGO APPEARS HERE]
MID CAP GROWTH PORTFOLIO
Long-term capital growth by investing primarily in common stocks and other
equity securities.
Investment Adviser Miller Anderson & Sherrerd, LLP
Distributor Morgan Stanley & Co. Incorporated
Morgan Stanley Dean Witter Universal Funds, Inc. (the "Fund") is a mutual
fund that provides investment vehicles for variable annuity contracts and
variable life insurance policies and for certain tax-qualified investors. The
Mid Cap Growth Portfolio (the "Portfolio") is one portfolio of the Fund
managed by Miller Anderson & Sherrerd, LLP ("MAS" or the "Adviser"), an
affiliate of Morgan Stanley Dean Witter Investment Management Inc.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation
to the contrary is a criminal offense.
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TABLE OF CONTENTS
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INVESTMENT SUMMARY
Mid Cap Growth Portfolio 1
Additional Risk Factors and Information 2
INVESTMENT ADVISER 3
MANAGEMENT FEE 3
PORTFOLIO MANAGERS 4
SHAREHOLDER INFORMATION 5
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INVESTMENT SUMMARY
MID CAP GROWTH PORTFOLIO
The Mid Cap Growth Portfolio seeks long-term capital growth by investing
primarily in common stocks and other equity securities.
Approach
The Adviser particularly focuses on the expectations of stock analysts and
invests the Portfolio in stocks of companies that it believes will report
earnings growth exceeding analysts' expectations. The equity capitalization of
these companies will generally match those in the S&P MidCap 400 Index
(currently $500 million to $6 billion). The Portfolio may invest to a limited
extent in foreign equity securities.
Process
The Adviser uses a quantitative screen to sort stocks based on revisions to
analysts' earnings predictions. The Adviser then conducts extensive fundamental
research into those companies with the most attractive earnings revisions.
Finally, the Adviser evaluates the valuation of the stocks to eliminate from
consideration the most overvalued stocks. The Adviser also follows a strict
sell discipline. The Portfolio sells stocks when their earnings revision scores
fall to unacceptable levels, fundamental research reveals unfavorable trends,
or their valuations exceed levels that are reasonable in relation to the
stocks' growth prospects.
Risk
Investing in the Portfolio may be appropriate for you if you are willing to
accept the risk and uncertainties of investing in mid-cap equity securities in
the hope of earning superior total returns. In general, prices of equity
securities are more volatile than those of fixed income securities. The prices
of equity securities will rise and fall in response to a number of different
factors. In particular, prices of equity securities will respond to events
which affect entire financial markets or industries (changes in inflation or
consumer demand, for example) and to events that affect particular issuers
(news about the success or failure of a new product, for example). As a result
of this price volatility, there is a risk that you may lose money by investing
in the Portfolio. Investments in smaller companies may involve greater risk
than investments in larger, more established companies, and smaller companies'
securities may be subject to more abrupt or erratic price movements. Certain
market conditions may favor growth stocks or stocks of mid-sized companies,
while other conditions may favor value stocks or stocks of larger or smaller
companies. Accordingly, a portfolio of mid- cap growth stocks may, over certain
periods of time, underperform a portfolio of value stocks or stocks of larger
or smaller companies.
There is no performance information for the Mid Cap Growth Portfolio since it
has not commenced operations as of the date of this Prospectus.
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INVESTMENT SUMMARY
ADDITIONAL RISK FACTORS AND INFORMATION
This section discusses additional risk factors and information relating to the
Portfolio. The Portfolio's investment practices and limitations are described in
more detail in the Statement of Additional Information ("SAI") which is legally
part of this Prospectus. For details on how to obtain a copy of the SAI and
other reports and information, see the back cover of this Prospectus.
Price volatility
The value of your investment in the Portfolio is based on the market prices of
the securities the Portfolio holds. These prices change daily due to economic
and other events that affect markets generally, as well as those that affect
particular regions, countries, industries and companies. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities the Portfolio owns and the markets in which the
securities trade. Over time, equity securities have generally shown superior
gains, although they have tended to be more volatile than fixed income
securities in the short term.
Foreign investing
Investing in foreign countries entails the risk that news and events unique to
a country or region will affect those markets and their issuers. These same
events will not necessarily have an effect on the U.S. economy or similar
issuers located in the United States. In addition, the Portfolio's investments
in foreign countries generally will be denominated in foreign currencies. As a
result, changes in the value of a country's currency compared to the U.S.
dollar may affect the value of the Portfolio's investments. These changes may
happen separately from and in response to events that do no otherwise affect
the value of the security in the issuer's home country. The Adviser may invest
in certain instruments, such as derivatives and may use certain techniques
such as hedging, to manage these risks. However, the Adviser cannot guarantee
that it will be practical to hedge these risks or that it will succeed in
doing so. The Adviser may use derivatives for other purposes such as gaining
exposure to foreign markets.
Year 2000 risk
The advisory and distribution services that the Adviser and Morgan Stanley &
Co. Incorporated ("Morgan Stanley") provide to the Fund depend on the smooth
functioning of their computer systems. Many computer software systems in use
today cannot recognize the year 2000, but revert to 1900 or some other date,
due to the manner in which dates were encoded and calculated. That failure
could have a negative impact on the handling of securities trades, pricing and
account services. The Adviser and Morgan Stanley have been actively working on
necessary changes to their own computer systems to deal with the year 2000
problem and expect that their systems will be adapted before that date. There
can be no assurance, however, that they will be successful. In addition, other
unaffiliated service providers may be faced with similar problems. The Adviser
and Morgan Stanley are monitoring their remedial efforts, however, there can
be no assurance that they and the services they provide will not be adversely
affected.
In addition, it is possible that the markets for securities in which the
Portfolio invests may be detrimentally affected by computer failures
throughout the financial services industry beginning January 1, 2000.
Improperly functioning trading systems may result in settlement problems and
liquidity issues. In addition, corporate and governmental data processing
errors may result in production problems for individual companies and overall
economic uncertainties. Earnings of individual issuers will be affected by
remediation costs, which may be substantial and may be reported inconsistently
in U.S. and foreign financial statements. Accordingly, the Portfolio's
investments may be adversely affected.
Temporary defensive investments
When the Adviser believes that changes in economic, financial or political
conditions warrant, the Portfolio may invest without limit in certain short-
and medium-term fixed income securities for temporary defensive purposes. If
the Adviser incorrectly predicts the effects of these changes, such defensive
investments may adversely affect the Portfolio's performance and the Portfolio
may not achieve its investment objective.
Portfolio turnover
Consistent with its investment policies, the Portfolio will purchase and sell
securities without regard to the effect on portfolio turnover. Higher
portfolio turnover will cause the Portfolio to incur additional transaction
costs.
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INVESTMENT ADVISER
MAS, with principal offices at One Tower Bridge, West Conshohocken,
Pennsylvania 19428 provides investment advisory services to employee benefit
plans, endowment funds, foundations and other institutional investors and has
served as investment adviser to several open-end investment companies since
1984. MAS is a subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). MSDW
is a preeminent global financial services firm that maintains leading market
positions in each of its three primary businesses -- securities, asset
management and credit services. As of July 31, 1999, MAS and its institutional
advisory affiliates had approximately $175 billion in assets under management
or fiduciary advice.
MANAGEMENT FEE
The Adviser is entitled to receive a management fee at an annual percentage of
the Portfolio's average daily net assets as follows:
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ASSETS FEE
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First $500 million 0.75%
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From $500 million to $1 billion 0.70%
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More than $1 billion 0.65%
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However, the Adviser has voluntarily agreed to reduce its management fee
and/or reimburse the Portfolio so that total annual operating expenses of the
Portfolio will not exceed 1.05% of its average daily assets. For purposes of
determining the amount of the voluntary management fee waiver and/or
reimbursement, if any, the annual operating expenses of the Portfolio exclude
certain investment related expenses such as foreign country tax expense and
interest expense on amounts borrowed. As a result, the expense ratio,
including these expenses, after fee waivers and/or reimbursements may be
higher than 1.05%. Fee waivers and/or expense reimbursements are voluntary and
the Adviser reserves the right to terminate any waiver and/or reimbursement at
any time without notice.
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PORTFOLIO MANAGERS
The following individuals have primary day-to-day portfolio management
responsibility for the Portfolio:
MID CAP GROWTH PORTFOLIO
Arden C. Armstrong, David P. Chu and Steven B. Chulik
Arden C. Armstrong, a Managing Director of Morgan Stanley, joined MAS in 1986.
She assumed responsibility for the MAS Funds Mid Cap Growth Portfolio in 1990,
the MAS Funds Growth Portfolio in 1993 and the MAS Funds Equity Portfolio in
1994. Ms. Armstrong received a B.A. (Magna Cum Laude) in Economics from Brown
University, an M.B.A. from the Wharton School at University of Pennsylvania and
is a Chartered Financial Analyst. David P. Chu, a Vice President of Morgan
Stanley, joined MAS in 1998. He served as a Senior Equity Analyst from 1992 to
1997 and as Co-Portfolio Manager in 1997 for NationsBank and its subsidiary,
TradeStreet Investment Associates. He assumed responsibility for the MAS Funds
Mid Cap Growth and Small Cap Growth Portfolios in 1998. Steven B. Chulik joined
MAS in 1997. He served as a Quantitative Hedge Fund Analyst at IBJ Schroder Bank
and Trust from 1994 to 1995. He attended The Wharton School of the University of
Pennsylvania from 1995 to 1997 and received his M.B.A. in 1997. He served as an
Equity Analyst at MAS from 1997 to 1999. He assumed responsibility for the MAS
Funds Mid Cap Growth and Small Cap Growth Portfolios in 1999. Ms. Armstrong and
Messrs. Chu and Chulik have shared primary responsibility for managing the
Portfolio since its inception.
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SHAREHOLDER INFORMATION
Purchasing and selling Fund shares
Shares are offered on each day that the New York Stock Exchange (the "NYSE")
is open for business.
The Portfolio offers its shares only to insurance companies for separate
accounts they establish to fund variable life insurance and variable annuity
contracts and by other entities under qualified pension and retirement plans.
An insurance company purchases or redeems shares of the Portfolio based on,
among other things, the amount of net contract premiums or purchase payments
allocated to a separate account investment division, transfers to or from a
separate account investment division, contract loans and repayments, contract
withdrawals and surrenders, and benefit payments. The contract prospectus
describes how contract owners may allocate, transfer and withdraw amounts to,
and from, separate accounts.
The price per share will be the net asset value (NAV) per share next
determined after the Fund receives the insurance company's purchase order. In
some cases, an insurance company's order may be executed at the NAV that was
computed at the close of the previous business day. NAV for one share is the
value of that share's portion of all of the assets in the Portfolio. The Fund
determines the net asset value for the Portfolio as of the close of the NYSE
(normally 4:00 p.m. Eastern Time) on each day that the NYSE is open for
business.
About net asset value
In calculating NAV, the Portfolio generally values its portfolio securities at
their market price. If market prices are unavailable or the Portfolio thinks
that they are unreliable because of events occurring after the close of
trading, the Portfolio may determine fair value prices using methods approved
by the Board of Directors. The Portfolio may hold portfolio securities that
are listed on foreign exchanges. These securities may trade on weekends or
other days when the Portfolio does not calculate NAV. As a result, the value
of these investments may change on days when you cannot purchase or sell
shares.
Dividends and distributions
The Portfolio distributes its investment income annually as dividends and
makes distributions of capital gains, if any, at least annually.
Taxes
Please consult your tax advisor regarding your specific questions about
federal, state and local income taxes. Below is summarized some important tax
issues that affect the Portfolio and its shareholders. The summary is based on
current tax laws, which may change.
The Portfolio expects that it will not have to pay income taxes if it
distributes all of its income and gains. Net income and realized capital gains
that the Portfolio distributes are not currently taxable when left to
accumulate within a variable annuity or variable life insurance contract or
under a qualified pension or retirement plan.
For information on federal income taxation of a life insurance company with to
its receipt of distributions from the Portfolio and federal income taxation of
owners of variable annuity or variable life insurance contracts, refer to the
contract prospectus.
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WHERE TO FIND ADDITIONAL INFORMATION
Statement of Additional Information
In addition to this Prospectus, the Fund has an SAI, dated May 1, 1999, as
supplemented through September 2, 1999, which contains additional, more
detailed information about the Fund and the Portfolio. The SAI is incorporated
by reference into this Prospectus and, therefore, legally forms a part of this
Prospectus.
Shareholder Reports
The Fund publishes annual and semi-annual reports containing financial
statements. These reports contain additional information about the Portfolio's
investments. In the Fund's shareholder reports, you will find a discussion of
the market conditions and the investment strategies that significantly
affected the Portfolio's performance during that period.
For additional Fund information, including information regarding the
investments comprising the Portfolio, please call 1-800-281-2715 or contact
your insurance company.
You may obtain the SAI and shareholder reports, when available, without charge
by contacting the Fund at the toll-free number above or your insurance
company.
Information about the Fund, including the SAI, and the annual and semi-annual
reports, may be obtained from the Securities and Exchange Commission in any of
the following ways: (1) In person: you may review and copy documents in the
Commission's Public Reference Room in Washington, D.C. (for information call
1-800-SEC-0330); (2) On-line: you may retrieve information from the
Commission's web site at "http://www.sec.gov"; or (3) By mail; you may request
documents, upon payment of a duplicating fee, by writing to Securities
Exchange Commission, Public Reference Section, Washington, D.C. 20549-6009. To
aid you in obtaining this information, the Fund's Investment Company Act
registration number is 811-7607.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
[MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC. LOGO APPEARS HERE]
P.O. Box 2798
Boston, Massachusetts 02208-2798
For information call 1-800-281-2715
