<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
- --------------------------------------------------------------------------------
VALUE PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 1999
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW
COMPOSITION OF NET ASSETS (AT JUNE 30, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<S> <C>
Basic Materials 7.6%
Capital Goods 10.5%
Communication Service 3.8%
Consumer Cyclicals 20.4%
Consumer Staples 3.2%
Energy 3.6%
Financial 20.3%
Health Care 7.5%
Technology 10.4%
Transportation 5.7%
Utilities 3.2%
Other 3.8%
</TABLE>
PERFORMANCE COMPARED TO THE S&P 500
INDEX(1)
- ------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS
-----------------------------------------
ONE AVERAGE ANNUAL
YTD YEAR SINCE INCEPTION
---------- ---------- -----------------
<S> <C> <C> <C>
PORTFOLIO... 12.16% 4.03% 12.06%
INDEX....... 12.38 22.75 30.39
</TABLE>
1. The S&P 500 Index is comprised of 500 large-cap U.S. companies with market
capitalization of $1 billion or more. These 500 companies are a
representative sample of some 100 industries chosen mainly for market size,
liquidity and industry group representation.
2. Total returns for the Portfolio reflect expenses waived and reimbursed, if
applicable, by the Adviser. Without such waiver and reimbursement, total
returns would be lower.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE.
<TABLE>
<CAPTION>
TOP FIVE HOLDINGS
PERCENT OF
SECURITY INDUSTRY NET ASSETS
- ------------------------- ------------------ -------------
<S> <C> <C>
General Motors Corp. Consumer Cyclicals 4.1%
International Business
Machines Corp. Technology 3.1
Chase Manhattan Corp. Financial 3.1
AMR Corp. Transporation 2.7
Wasington Mutual, Inc. Financial 2.7
</TABLE>
<TABLE>
<CAPTION>
TOP FIVE SECTORS
VALUE PERCENT OF
SECTOR (000) NET ASSETS
- -------------------- --------- -------------
<S> <C> <C>
Consumer Cyclicals $ 7,059 20.4%
Financial 7,017 20.3
Capital Goods 3,624 10.5
Technology 3,590 10.4
Basic Materials 2,616 7.6
</TABLE>
THE INFORMATION CONTAINED IN THIS OVERVIEW REGARDING SPECIFIC SECURITIES IS FOR
INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A RECOMMENDATION TO
PURCHASE OR SELL THE SECURITIES MENTIONED. THE PERFORMANCE RESULTS PROVIDED ARE
FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE CONSTRUED AS A GUARANTEE OF
THE PORTFOLIO'S FUTURE PERFORMANCE. PAST PERFORMANCE SHOWN IS NOT PREDICTIVE OF
FUTURE PERFORMANCE. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT
AN INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR
ORIGINAL COST.
The Value Portfolio seeks above-average total return over a market cycle of
three to five years by investing primarily in a portfolio of common stocks and
other equity securities that are deemed by the Portfolio's Adviser to be
relatively undervalued based on various measures such as price/ earnings ratios
and price/book ratios.
For the six months ended June 30, 1999, the Portfolio had a total return of
12.16% compared to 12.38% for the S&P 500 Index (the "Index"). For the one year
ended June 30, 1999, the Portfolio had a total return of 4.03% compared to
22.75% for the Index. For the period since inception on January 2, 1997 through
June 30, 1999, the Portfolio had a total return of 12.06% compared to 30.39% for
the Index.
The difficult environment for low price-earnings investing continued early in
the new year. Traditional performance attribution reveals both stock selection
and sector allocation contributed to the Portfolio's underperformance.
Individual holdings in the technology, financial services, and health care
sector lagged their Index counterparts. The Portfolio's overweighting in food
and tobacco, as well as its considerable underweighting in technology, generated
most of the negative sector allocation results.
As difficult as the first quarter was, good stock selection and a large takeover
helped the Portfolio handily outperform its investible universe. The Portfolio's
total return was much better than that of the low price-earnings universe return
of -5.1%. According to our work, which has been confirmed by Sanford Bernstein,
the quarter ended March 31, 1999 represented the greatest quarterly spread in
two decades for low price-earnings investing. This spread between the two
highest price-earnings quintiles of our universe and the two lowest
price-earnings quintiles was 1,500 basis points.
Our best performing holdings during the first quarter included First Data,
Delta, United HealthCare, General Motors, Chase Manhattan, and Aeroquip-Vickers.
Notable laggards included Philip Morris, Avnet, Arrow, Springs Industries, and
Healthsouth Corp. In general, our attempt to take more significant positions in
stocks with shorter term catalysts for change helped performance in the
Portfolio relative to the low price-earnings universe.
1
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
INVESTMENT OVERVIEW (CONT.)
The Portfolio's sector commitments remained fairly consistent with those at
year-end. Our largest overweightings remained in the financial, industrial, and
consumer durable sectors while the Portfolio continued to underweight consumer
services and staples, technology, and telecommunications. During the first
quarter, we did take advantage of the buying opportunities in the health care
services industry to expand our health care holdings. We added to positions in
United HealthCare, Foundation Health, and HEALTHSOUTH. We find many HMO and
hospital management stocks to have attractive long-term growth opportunities,
stable demand characteristics, positive secular demographics, and compelling
valuations at 10 times earnings and 6 times cash flows. The healthcare sector,
not too long ago our largest underweighting, became essentially market weighted.
New positions in other sectors included Navistar, US West, Coastal, and PECO
Energy. Sales from the Portfolio included Dole, Phillips Petroleum,
Mallinckrodt, Philip Morris and First Union.
Early in the year, it appeared that the equity markets had gone increasingly
"digital." The digital world reduces inputs to streams of 1s or 0s, off or on,
with no mention or measurement of degree. Investors seemed to have reduced their
opinions about companies and their stock prices to the same level of simplicity.
Internet, technology, and mega-cap growth stocks were switched "on" in the
equity markets. The few true revenue growth companies absolutely had to be owned
by the ever increasingly large cadre of growth investors and indexers.
Valuations were irrelevant in this new digital investment world. Most other
sectors of the market were deemed "off." Conceptually unappealing sectors such
as small- and mid-caps and economically sensitive companies of every size
remained ignored irrespective of fundamentals or valuations.
Stock valuations in the broad market continued to reflect investor apathy. The
price-earnings ratio of the average company, as defined by the Russell 1000
equally weighted price-earnings ratio, was 16 times 1999 estimated profits at
the end of the first quarter. This appeared quite attractive in a low inflation,
low interest rate environment. Growth rates appeared to be under pressure for
many companies, especially those small and mid- sized, industrial and commodity
businesses. But this was likely the result of a temporary slowdown in domestic
industrial production combined with recessions in many other parts of the world.
Eventually, we felt that economies abroad would stabilize and recover and the
U.S. inventory reduction in the industrial sector would subside. Continued
healthy domestic demand combined with recovering foreign economies would
accelerate revenue and profit growth for many economically sensitive companies.
For these reasons, we remained fully invested in low price-earnings value
stocks.
The second quarter of 1999 represented an excellent quarter for value and low
price-earnings investing. The Portfolio returned 13.70% for the quarter compared
to 7.05% for the S&P 500. The months of April and May were particularly strong
for our style although June did show some rotation back to mega-cap growth
stocks. Conventional performance attribution versus the S&P 500 reveals that
stock selection generated the vast majority of the Portfolio's outperformance.
Our individual holdings in healthcare, technology, and heavy industry performed
extremely well during the quarter. Our sector selection contributed very
modestly to relative performance with positive contributions from overweightings
in cyclicals and underweightings in defensive growth and negative contributions
from underweighting technology, energy, and telephone services.
The most important aspect of the second quarter was the market's significant
rotation towards the low price-earnings, value style of investing. For the first
time in recent years, the trend of mega-cap growth outperfomance was broken.
Generally, everything that had suffered over the past 18 months recovered: large
outperformed mega cap, cyclical outperformed defensive, value outperformed
growth and low price-earnings outperformed high price-earnings. Some of the
fundamental factors contributing to the significant psychological change in
investor sentiment include rising interest and inflation rates, a steepening of
the U.S. yield curve, accelerating growth rates and a broadening of positive
estimate revisions for U.S. companies, and, finally, meaningful recoveries in
many foreign economies.
The Portfolio's characteristics demonstrate its commitment to low valuation
stocks. The current price-earnings ratio for the Portfolio is 13 times next four
quarter earnings compared to 25 times for the S&P 500. Our price-sales ratio of
.68 compares to 2.20 for the S&P 500.
Our outlook towards the equity market remains one that is cautiously optimistic:
cautious towards many fairly valued or still expensive sectors, but optimistic
that the current broadening of the market can continue to generate acceptable
returns for good companies with attractive valuations. We recognize that the
July-October period has produced a volatile equity market for each of the past 3
years, and we would not be surprised to see 1999 act similarly. Nevertheless,
the combination of a still healthy U.S. economy with a global healing now in
process, and a Federal Reserve that does not appear hostile to the economy or
financial markets, may cause the market to continue to generate acceptable
results from equities. Our hope remains that the better returns will accrue to
the value style that has performed so well historically, purchasing reasonable
companies at large valuation discounts.
July 1999
2
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
COMMON STOCK (96.2%)
BASIC MATERIALS (7.6%)
CHEMICALS (2.3%)
5,900 Air Products and Chemicals, Inc.................. $ 238
15,900 IMC Global, Inc.................................. 280
6,600 Rohm & Haas Co................................... 283
-------
801
-------
CHEMICALS (DIVERSIFIED) (0.8%)
13,300 Solutia, Inc..................................... 283
-------
CHEMICALS (SPECIALTY) (3.8%)
700 Eastman Chemical Co.............................. 36
21,400 Engelhard Corp................................... 484
16,900 Lubrizol Corp.................................... 461
(a)17,200 W.R. Grace & Co.................................. 316
-------
1,297
-------
IRON & STEEL (0.7%)
10,400 Ryerson Tull, Inc................................ 235
-------
TOTAL BASIC MATERIALS........................................ 2,616
-------
CAPITAL GOODS (10.5%)
MACHINERY (DIVERSIFIED) (7.0%)
10,500 Case Corp........................................ 505
16,200 Cummins Engine Co., Inc.......................... 926
4,100 Eaton Corp....................................... 377
(a)6,200 Navistar International Corp...................... 310
4,700 Tecumseh Products Co., Class A................... 285
-------
2,403
-------
MANUFACTURING (DIVERSIFIED) (1.2%)
(a)6,200 FMC Corp......................................... 424
-------
MANUFACTURING (SPECIALIZED) (1.4%)
10,750 Parker-Hannifin Corp............................. 492
-------
METAL FABRICATORS (0.6%)
6,600 Kennametal, Inc.................................. 204
-------
OFFICE EQUIPMENT & SUPPLIES (0.3%)
3,300 Standard Register Co............................. 101
-------
TOTAL CAPITAL GOODS.......................................... 3,624
-------
COMMUNICATION SERVICES (3.8%)
TELEPHONE (3.8%)
8,200 Bell Atlantic Corp............................... 536
4,900 GTE Corp......................................... 371
7,000 US West Inc...................................... 412
-------
1,319
-------
CONSUMER CYCLICALS (20.4%)
AUTO PARTS & EQUIPMENT (3.2%)
10,800 Dana Corp........................................ 497
2,700 Goodyear Tire & Rubber Co........................ 159
8,400 TRW, Inc......................................... 461
-------
1,117
-------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
AUTOMOBILES (6.6%)
15,500 Ford Motor Co.................................... $ 875
21,500 General Motors Corp.............................. 1,419
-------
2,294
-------
BUILDING MATERIALS (1.5%)
14,200 Owens Corning.................................... 488
-------
HOUSEHOLD FURNISHINGS & APPLIANCES (1.0%)
4,500 Whirlpool Corp................................... 333
-------
RETAIL (DEPARTMENT STORES) (0.7%)
7,300 Dillard's, Inc., Class A......................... 256
-------
RETAIL (GENERAL MERCHANDISE) (0.9%)
(a)100 Consolidated Stores Corp......................... 3
6,600 Sears, Roebuck & Co.............................. 294
-------
297
-------
RETAIL (SPECIALTY/APPAREL)(1.1%)
(a)19,100 Toys 'R' Us, Inc................................. 395
-------
SERVICES (COMMERCIAL & CONSUMER) (1.0%)
18,600 Service Corp. International...................... 358
-------
TEXTILES (APPAREL) (3.7%)
15,400 Liz Claiborne, Inc............................... 562
16,900 V.F. Corp........................................ 723
-------
1,285
-------
TEXTILES (HOME FURNISHINGS) (0.7%)
5,400 Springs Industries, Inc., Class A................ 236
-------
TOTAL CONSUMER CYCLICALS..................................... 7,059
-------
CONSUMER STAPLES (3.2%)
FOODS (1.3%)
7,700 IBP, Inc......................................... 183
13,600 Universal Foods Corp............................. 287
-------
470
-------
SERVICES (EMPLOYMENT) (0.3%)
17,100 Olsten Corp...................................... 108
-------
TOBACCO (1.6%)
(a)21,100 Nabisco Group Holdings Corp...................... 413
(a)4,133 R.J. Reynolds Tobacco Holdings................... 130
-------
543
-------
TOTAL CONSUMER STAPLES....................................... 1,121
-------
ENERGY (3.6%)
OIL & GAS (DRILLING) (1.8%)
(a)19,200 Nabors Industries, Inc........................... 469
6,500 Transocean Offshore, Inc......................... 171
-------
640
-------
OIL & GAS (REFINING & MARKETING) (1.8%)
3,600 PECO Energy Co................................... 151
5,900 Tosco Corp....................................... 153
14,000 Ultramar Diamond Shamrock Corp................... 305
-------
609
-------
TOTAL ENERGY................................................. 1,249
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONT.)
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
VALUE
SHARES (000)
- ------------------------------------------------------------------------
<C> <S> <C>
FINANCIAL (20.3%)
BANKS (MAJOR REGIONAL) (8.2%)
8,200 Bank of America Corp............................. $ 601
8,100 Bank One Corp.................................... 482
4,400 BankBoston Corp.................................. 225
5,450 First Union Corp................................. 256
9,800 Key Corp......................................... 315
11,900 PNC Bank Corp.................................... 686
7,800 UnionBanCal Corp................................. 282
-------
2,847
-------
BANKS (MONEY CENTER) (3.1%)
12,300 Chase Manhattan Corp............................. 1,065
-------
INSURANCE (LIFE & HEALTH) (1.2%)
9,500 ReliaStar Financial Corp......................... 416
-------
INSURANCE (MULTI-LINE) (2.1%)
3,200 American General Corp............................ 241
8,100 Hartford Financial Services Group, Inc........... 472
-------
713
-------
INSURANCE (PROPERTY - CASUALTY) (3.0%)
6,000 Ace Ltd.......................................... 170
12,500 Allstate Corp.................................... 448
7,200 Everest Reinsurance Holdings, Inc................ 235
10,450 Old Republic International Corp.................. 181
200 Transatlantic Holdings, Inc...................... 15
-------
1,049
-------
SAVINGS & LOANS (2.7%)
26,200 Washington Mutual, Inc........................... 927
-------
TOTAL FINANCIAL.............................................. 7,017
-------
HEALTH CARE (7.5%)
HEALTH CARE (DIVERSIFIED) (0.7%)
2,900 CIGNA Corp....................................... 258
-------
HEALTH CARE (HOSPITAL MANAGEMENT) (1.8%)
8,400 Columbia/HCA Healthcare Corp..................... 192
(a)537 LifePoint Hospitals, Inc......................... 7
(a)21,900 Tenet Healthcare Corp............................ 406
(a)537 Triad Hospitals, Inc............................. 7
-------
612
-------
HEALTH CARE (LONG-TERM CARE) (2.3%)
(a)53,300 HEALTHSOUTH Rehabilitation Corp.................. 796
-------
HEALTH CARE (MANAGED CARE) (1.7%)
(a)10,570 Foundation Health Systems, Inc., Class A......... 159
7,000 United HealthCare Corp........................... 438
-------
597
-------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) (1.0%)
6,800 Beckman Coulter, Inc............................. 331
-------
TOTAL HEALTH CARE............................................ 2,594
-------
<CAPTION>
VALUE
SHARES (000)
<C> <S> <C>
- ------------------------------------------------------------------------
TECHNOLOGY (10.4%)
COMPUTERS (HARDWARE) (5.1%)
8,300 International Business Machines Corp............. $ 1,073
(a)28,600 Quantum Corp..................................... 690
-------
1,763
-------
COMPUTERS (SOFTWARE & SERVICES) (1.8%)
12,700 First Data Corp.................................. 621
-------
ELECTRONICS (COMPONENT DISTRIBUTORS) (1.5%)
(a)12,300 Arrow Electronics, Inc........................... 234
5,800 Avnet, Inc....................................... 269
-------
503
-------
ELECTRONICS (INSTRUMENTATION) (1.0%)
11,450 Tektronix, Inc................................... 346
-------
ELECTRONICS (SEMICONDUCTORS) (1.0%)
6,000 Intel Corp....................................... 357
-------
TOTAL TECHNOLOGY............................................. 3,590
-------
TRANSPORTATION (5.7%)
AIR FREIGHT (0.4%)
3,700 CNF Transportation, Inc.......................... 142
-------
AIRLINES (4.2%)
(a)13,900 AMR Corp......................................... 949
8,700 Delta Air Lines, Inc............................. 501
-------
1,450
-------
RAILROADS (0.5%)
5,400 Burlington Northern Santa Fe, Inc................ 167
-------
TRUCKERS (0.6%)
8,100 Ryder Systems, Inc............................... 211
-------
TOTAL TRANSPORTATION......................................... 1,970
-------
UTILITIES (3.2%)
ELECTRIC COMPANIES (2.8%)
2,300 Cinergy Corp..................................... 73
100 CMP Group, Inc................................... 3
5,200 DTE Energy Co.................................... 208
2,817 Duke Energy Corp................................. 153
5,300 Entergy Corp..................................... 166
4,500 GPU, Inc......................................... 190
6,700 Southern Co...................................... 177
-------
970
-------
NATURAL GAS (0.4%)
3,200 Coastal Corp..................................... 128
-------
TOTAL UTILITIES.............................................. 1,098
-------
TOTAL COMMON STOCK (COST $30,797).............................. 33,257
-------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF NET ASSETS (CONT.)
JUNE 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
FACE
AMOUNT VALUE
(000) (000)
<C> <S> <C>
- ------------------------------------------------------------------------
SHORT-TERM INVESTMENT (6.7%)
REPURCHASE AGREEMENT (6.7%)
$2,299 Chase Securities, Inc. 4.55%, dated 6/30/99, due
7/1/99, to be repurchased at $2,299,
collateralized by U.S. Treasury Notes, 11.125%,
due 8/15/03, valued at $2,364
(COST $2,299).................................. $ 2,299
-------
TOTAL INVESTMENTS (102.9%) (COST $33,096)...................... 35,556
-------
</TABLE>
<TABLE>
<S> <C> <C>
OTHER ASSETS (0.9%)
Cash....................................... $ 65
Receivable for Investments Sold............ 207
Dividends Receivable....................... 26
Receivable for Portfolio Shares Sold....... 11 309
------
LIABILITIES (-3.8%)
Payable for Investments Purchased.......... (1,234)
Payable for Portfolio Shares Redeemed...... (24)
Investment Advisory Fees Payable........... (14)
Administrative Fees Payable................ (8)
Professional Fees Payable.................. (6)
Custodian Fees Payable..................... (5)
Other Liabilities.......................... (12) (1,303)
------ --------
NET ASSETS (100%).................................... $ 34,562
--------
--------
NET ASSET VALUE, OFFERING AND REDEMPTION
PRICE PER SHARE
Applicable to 2,776,216 outstanding $0.001 par value
shares (authorized 500,000,000 shares)............. $ 12.45
--------
--------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT
(000)
<S> <C> <C>
- ---------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid in Capital...................................... $31,884
Undistributed Net Investment Income.................. 191
Accumulated Net Realized Gain........................ 27
Unrealized Appreciation on Investments............... 2,460
--------
NET ASSETS........................................... $34,562
--------
--------
</TABLE>
- ----------------------------------------------------------------
(a) - Non-income producing security
- ----------------------------------------------------------------
At June 30, 1999, cost and unrealized appreciation (depreciation) for U.S.
Federal income tax purposes of the investments of the Portfolio were:
<TABLE>
<CAPTION>
NET
COST APPRECIATION (DEPRECIATION) APPRECIATION
(000) (000) (000) (000)
- --------- ------------- --------------- -------------
<S> <C> <C> <C>
$ 33,096 $ 3,700 $ (1,240) $ 2,460
</TABLE>
- ----------------------------------------------------------------
For the six months ended June 30, 1999, purchases and sales of investment
securities for the Portfolio, other than long-term U.S. Government securities
and short-term investments, were approximately $18,760,000 and $6,207,000,
respectively. There were no purchases and sales of U.S. Government securities
for the six months ended June 30, 1999.
- ----------------------------------------------------------------
Net capital and net currency losses incurred after October 31 and within the
taxable year are deemed to arise on the first business day of the Portfolio's
next taxable year. For the period from November 1, 1998 to December 31, 1998,
the Portfolio incurred and elected to defer until January 1, 1999 for U.S.
Federal income tax purposes, net capital losses of approximately $150,000.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1999
(UNAUDITED)
(000)
<S> <C>
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 250
Interest 60
------
Total Income 310
------
EXPENSES:
Investment Advisory Fees 80
Less: Fees Waived (46)
------
Net Investment Advisory Fees 34
Administrative Fees 40
Shareholder Reports 24
Professional Fees 17
Custodian Fees 6
Directors' Fees and Expenses 1
Other 2
------
Net Expenses 124
------
Net Investment Income 186
------
NET REALIZED GAIN ON:
Investments Sold 188
------
CHANGE IN UNREALIZED APPRECIATION/DEPRECIATION ON:
Investments 3,105
------
Net Realized Gain and Change in Unrealized
Appreciation/Depreciation 3,293
------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,479
------
------
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998
(000) (000)
<S> <C> <C>
- ------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS:
Net Investment Income $ 186 $ 288
Net Realized Gain 188 301
Change in Unrealized
Appreciation/Depreciation 3,105 (1,152)
------- -------
Net Increase (Decrease) in Net Assets
Resulting from Operations 3,479 (563)
------- -------
DISTRIBUTIONS:
Net Investment Income -- (283)
Net Realized Gain -- (299)
In Excess of Net Realized Gain -- (161)
------- -------
Total Distributions -- (743)
------- -------
CAPITAL SHARE TRANSACTIONS (1):
Subscribed 9,767 18,370
Distributions Reinvested -- 743
Redeemed (4,774) (6,381)
------- -------
Net Increase in Net Assets Resulting
from Capital Share Transactions 4,993 12,732
------- -------
Total Increase in Net Assets 8,472 11,426
NET ASSETS:
Beginning of Period 26,090 14,664
------- -------
End of Period (Including undistributed
net investment income of $191 and
$5, respectively) $34,562 $26,090
------- -------
------- -------
- ------------------------------------------------------------------------------
(1) Capital Share Transactions:
Shares Subscribed 842 1,584
Shares Issued on Distributions
Reinvested -- 68
Shares Redeemed (416) (547)
------- -------
Net Increase in Capital Shares
Outstanding 426 1,105
------- -------
------- -------
- ------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
VALUE PORTFOLIO
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
PERIOD FROM
SIX MONTHS ENDED YEAR ENDED JANUARY 2, 1997*
JUNE 30, 1999 DECEMBER 31, TO DECEMBER 31,
SELECTED PER SHARE DATA AND RATIOS (UNAUDITED) 1998++ 1997
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.10 $ 11.78 $ 10.00
------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.10 0.19 0.10
Net Realized and Unrealized Gain
(Loss) 1.25 (0.45) 1.99
------- ------- -------
Total From Investment Operations 1.35 (0.26) 2.09
------- ------- -------
DISTRIBUTIONS
Net Investment Income -- (0.16) (0.10)
In Excess of Net Investment Income -- -- 0.00+
Net Realized Gain -- (0.17) (0.21)
In Excess of Net Realized Gain -- (0.09) 0.00+
------- ------- -------
Total Distributions -- (0.42) (0.31)
------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 12.45 $ 11.10 $ 11.78
------- ------- -------
------- ------- -------
TOTAL RETURN 12.16% (2.13)% 20.98%
------- ------- -------
------- ------- -------
RATIOS AND SUPPLEMENTAL DATA:
Net Assets, End of Period (000's) $34,562 $26,090 $14,664
Ratio of Expenses to Average Net
Assets 0.85%** 0.85% 0.85%**
Ratio of Net Investment Income to
Average Net Assets 1.27%** 1.57% 1.70%**
Portfolio Turnover Rate 24% 45% 34%
- ------------------------------------------------------------------------------------------------
Effect of Voluntary Expense
Limitation During the Period:
Per Share Benefit to Net Investment
Income $ 0.02 $ 0.05 $ 0.06
Ratios Before Expense Limitation:
Expenses to Average Net Assets 1.16%** 1.32% 1.87%**
Net Investment Income to Average
Net Assets 0.96%** 1.10% 0.68%**
</TABLE>
- --------------------------------------------------------------------------------
* Commencement of operations
** Annualized
+ Amount is less than $0.01 per share.
++ Per share amounts for the year ended December 31, 1998 are based on
average shares outstanding.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc., formerly Morgan Stanley
Universal Funds, Inc., (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. As of
June 30, 1999, the Fund was comprised of twelve separate active portfolios
(individually referred to as a "Portfolio", collectively as the "Portfolios").
The accompanying financial statements relate to the Value Portfolio. Please
refer to the Investment Overview for the Portfolio's investment objectives.
The Fund is intended to be the funding vehicle for variable annuity contracts
and variable life insurance policies to be offered by the separate accounts of
certain life insurance companies.
A. ACCOUNTING POLICIES: The following significant accounting policies are in
conformity with generally accepted accounting principles for investment
companies. Such policies are consistently followed by the Fund in the
preparation of the financial statements. Generally accepted accounting
principles may require management to make estimates and assumptions that affect
the reported amounts and disclosures in the financial statements. Actual results
may differ from those estimates.
1. SECURITY VALUATION: Equity securities listed on a U.S. exchange and equity
securities traded on NASDAQ are valued at the latest quoted sales price on the
valuation date. Securities listed on a foreign exchange are valued at their
closing price. Unlisted securities and listed securities not traded on the
valuation date, for which market quotations are readily available, are valued at
the average of the mean between the current bid and asked prices obtained from
reputable brokers. Bonds and other fixed income securities may be valued
according to the broadest and most representative market. In addition, bonds and
other fixed income securities may be valued on the basis of prices provided by a
pricing service. The prices provided by a pricing service are determined without
regard to bid or last sale prices, but take into account institutional size
trading in similar groups of securities and any developments related to the
specific securities. Debt securities purchased with remaining maturities of 60
days or less are valued at amortized cost, if it approximates market value. All
other securities and assets for which market values are not readily available,
including restricted securities, are valued at fair value as determined in good
faith by the Board of Directors, although the actual calculations may be done by
others.
2. INCOME TAXES: It is each Portfolio's intention to qualify as a regulated
investment company and distribute all of its taxable and tax-exempt income.
Accordingly, no provision for Federal income taxes is required in the financial
statements.
Certain Portfolios may be subject to taxes imposed by countries in which it
invests. Such taxes are generally based on income and/or capital gains earned or
repatriated. Taxes are accrued and applied to net investment income, net
realized gains and net unrealized appreciation as these amounts are earned.
Taxes may also be based on transactions in foreign currency and are accrued
based on the value of investments denominated in such currency.
3. REPURCHASE AGREEMENTS: The Portfolios of the Fund may enter into repurchase
agreements under which the Portfolio lends excess cash and takes possession of
securities with an agreement that the counterparty will repurchase such
securities. In connection with transactions in repurchase agreements, a bank as
custodian for the Fund takes possession of the underlying securities which are
held as collateral, with a market value at least equal to the amount of the
repurchase transaction, including principal and accrued interest. To the extent
that any repurchase transaction exceeds one business day, the value of the
collateral is marked-to-market on a daily basis to determine the adequacy of the
collateral. In the event of default on the obligation to repurchase, the Fund
has the right to liquidate the collateral and apply the proceeds in satisfaction
of the obligation. In the event of default or bankruptcy by the counterparty to
the agreement, realization and/or retention of the collateral or proceeds may be
subject to legal proceedings.
4. FOREIGN CURRENCY TRANSLATION AND FOREIGN INVESTMENTS: The books and records
of the Fund are maintained in U.S. dollars. Foreign currency amounts are
translated into U.S. dollars at the mean of the bid and asked prices of such
currencies against U.S. dollars last quoted by a major bank as follows:
- investments, other assets and liabilities at the prevailing rates of
exchange on the valuation date;
- investment transactions and investment income at the prevailing rates of
exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates
and market values at the close of the period, the Fund does not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of the securities held at period end. Similarly, the Fund does not
isolate the effect of changes in foreign exchange rates from the fluctuations
arising from changes in the market prices of securities sold during the period.
Accordingly, realized and unrealized foreign currency gains (losses) are
included in the reported net realized and unrealized gains (losses) on
investment transactions and balances. However, pursuant to U.S. Federal income
tax regulations, gains and losses from certain foreign currency transactions and
the foreign currency portion of gains and losses realized on sales and
maturities of foreign denominated debt securities are treated as ordinary income
for U.S. Federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net
foreign exchange gains (losses) from foreign
8
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
currency exchange contracts, disposition of foreign currencies, currency gains
or losses realized between the trade and settlement dates on securities
transactions, and the difference between the amount of investment income and
foreign withholding taxes recorded on the Fund's books and the U.S. dollar
equivalent amounts actually received or paid. Net unrealized currency gains
(losses) from valuing foreign currency denominated assets and liabilities at
period end exchange rates are reflected as a component of unrealized
appreciation (depreciation) on the Statement of Net Assets. The change in net
unrealized currency gains (losses) for the period is reflected on the Statement
of Operations.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. dollar denominated
transactions as a result of, among other factors, the possibility of lower
levels of governmental supervision and regulation of foreign securities markets
and the possibility of political or economic instability.
Prior governmental approval for foreign investments may be required under
certain circumstances in some countries, and the extent of foreign investments
in domestic companies may be subject to limitation in other countries. Foreign
ownership limitations also may be imposed by the charters of individual
companies to prevent, among other concerns, violation of foreign investment
limitations. As a result, an additional class of shares (identified as "Foreign"
in the Statement of Net Assets) may be created and offered for investment. The
"local" and "foreign" shares' market values may differ. In the absence of
trading of the foreign shares in such markets, the Fund values the foreign
shares at the closing exchange price of the local shares. Such securities are
identified as fair valued in the Statement of Net Assets.
The investment techniques of the Fund described in the following notes (5-11)
are applicable to certain, but not all, of the Portfolios of the Fund.
5. FOREIGN CURRENCY EXCHANGE CONTRACTS: Certain Portfolios may enter into
foreign currency exchange contracts generally to attempt to protect securities
and related receivables and payables against changes in future foreign currency
exchange rates. A foreign currency exchange contract is an agreement between two
parties to buy or sell currency at a set price on a future date. The market
value of the contract will fluctuate with changes in currency exchange rates.
The contract is marked-to-market daily and the change in market value is
recorded by the Portfolio as unrealized gain or loss. The Portfolio records
realized gains or losses when the contract is closed equal to the difference
between the value of the contract at the time it was opened and the value at the
time it was closed. Risk may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
is generally limited to the amount of the unrealized gain on the contracts, if
any, at the date of default. Risks may also arise from unanticipated movements
in the value of a foreign currency relative to the U.S. dollar.
6. FORWARD COMMITMENTS AND WHEN-ISSUED/DELAYED DELIVERY SECURITIES: Certain
Portfolios may make forward commitments to purchase or sell securities. Payment
and delivery for securities which have been purchased or sold on a forward
commitment basis can take place up to 120 days after the date of the
transaction. Additionally, a Portfolio may purchase securities on a when-issued
or delayed delivery basis. Securities purchased on a when-issued or delayed
delivery basis are purchased for delivery beyond the normal settlement date at a
stated price and yield, and no income accrues to the Portfolio on such
securities prior to delivery. When the Portfolio enters into a purchase
transaction on a when-issued or delayed delivery basis, it establishes either a
segregated account in which it maintains liquid assets in an amount at least
equal in value to the Portfolio's commitments to purchase such securities or
designates such assets as segregated on the records of the Portfolio. Purchasing
securities on a forward commitment or when-issued or delayed-delivery basis may
involve a risk that the market price at the time of delivery may be lower than
the agreed upon purchase price, in which case there could be an unrealized loss
at the time of delivery.
7. LOAN AGREEMENTS: Certain Portfolios may invest in fixed and floating rate
loans ("Loans") arranged through private negotiations between an issuer of
sovereign debt obligations and one or more financial institutions ("Lenders")
deemed to be creditworthy by the investment adviser. A Portfolio's investments
in Loans may be in the form of participations in Loans ("Participations") or
assignments of all or a portion of Loans ("Assignments") from third parties. A
Portfolio's investment in Participations typically results in the Portfolio
having a contractual relationship with only the Lender and not with the
borrower. The Portfolio has the right to receive payments of principal, interest
and any fees to which it is entitled only upon receipt by the Lender of the
payments from the borrower. A Portfolio generally has no right to enforce
compliance by the borrower with the terms of the loan agreement. As a result,
the Portfolio may be subject to the credit risk of both the borrower and the
Lender that is selling the Participation. When a Portfolio purchases Assignments
from Lenders, it typically acquires direct rights against the borrower on the
Loan. Because Assignments are arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by the Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.
8. SHORT SALES: Certain Portfolios may sell securities short. A short sale is a
transaction in which the Portfolio sells securities it may or may not own, but
has borrowed, in anticipation of a decline in the market price of the
securities. The Portfolio is obligated to replace the borrowed securities at the
market price at the time of replacement. The Portfolio may have to pay a premium
to borrow the securities as well as pay any dividends or interest payable on the
securities until they are replaced. The Portfolio's obligation to replace the
securities borrowed in connection with a short sale will
9
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
generally be secured by collateral deposited with the broker that consists of
cash, U.S. government securities or other liquid, high grade debt obligations.
In addition, the Portfolio will either designate on the custodian records in its
regular custody account or place in a segregated account with its Custodian an
amount of cash, U.S. government securities or other liquid high grade debt
obligations equal to the difference, if any, between (1) the market value of the
securities sold and (2) any cash, U.S. government securities or other liquid
high grade debt obligations deposited as collateral with the broker in
connection with the short sale. Short sales by the Portfolio involve certain
risks and special considerations. Possible losses from short sales differ from
losses that could be incurred from a purchase of a security, because losses from
short sales may be unlimited, whereas losses from purchases cannot exceed the
total amount invested.
9. FUTURES: Certain Portfolios may purchase and sell futures contracts. Futures
contracts provide for the sale by one party and purchase by another party of a
specified amount of a specified security, index, instrument or basket of
instruments. Futures contracts (secured by cash or government securities
deposited with brokers or custodians as "initial margin") are valued based upon
their quoted daily settlement prices; changes in initial settlement value
(represented by cash paid to or received from brokers as "variation margin") are
accounted for as unrealized appreciation (depreciation). When futures contracts
are closed, the difference between the opening value at the date of purchase and
the value at closing is recorded as realized gains or losses in the Statement of
Operations.
Certain Portfolios may use futures contracts in order to manage exposure to the
stock and bond markets, to hedge against unfavorable changes in the value of
securities or to remain fully invested and to reduce transaction costs. Futures
contracts involve market risk in excess of the amounts recognized in the
Statement of Net Assets. Risks arise from the possible movements in security
values underlying these instruments. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments, which may
not correlate with the change in value of the hedged investments. In addition,
there is the risk that a Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market.
10. SWAP AGREEMENTS: The Portfolios may enter into swap agreements to exchange
one return or cash flow for another return or cash flow in order to hedge
against unfavorable changes in the value of securities or to remain fully
invested and to reduce transaction costs. The following summarizes swaps which
may be entered into by the Portfolios.
INTEREST RATE SWAPS: Interest rate swaps involve the exchange of commitments to
pay and receive interest based on a notional principal amount. Net periodic
interest payments to be received or paid are accrued daily and are recorded in
the Statement of Operations as an adjustment to interest income. Interest rate
swaps are marked-to-market daily based upon quotations from market makers and
the change, if any, is recorded as unrealized appreciation or depreciation in
the Statement of Operations.
TOTAL RETURN SWAPS: Total return swaps involve commitments to pay interest in
exchange for a market-linked return based on a notional amount. To the extent
the total return of the security, instrument or basket of instruments underlying
the transaction exceeds or falls short of the offsetting interest obligation,
the Portfolio will receive a payment from or make a payment to the counterparty,
respectively. Total return swaps are marked-to-market daily based upon
quotations from market makers and the change, if any, is recorded as
appreciation or depreciation in the Statement of Operations. Periodic payments
received or made at the end of each measurement period are recorded as realized
gains or losses in the Statement of Operations.
Realized gains or losses on maturity or termination of interest rate and total
return swaps are presented in the Statement of Operations.
Because there is no organized market for these swap agreements, the value of
open swaps reported in the Statement of Net Assets may differ from that which
would be realized in the event the Portfolio terminated its position in the
agreement. Risks may arise upon entering into these agreements from the
potential inability of the counterparties to meet the terms of the agreements
and are generally limited to the amount of net interest payments to be received
and/or favorable movements in the value of the underlying security, instrument
or basket of instruments, if any, at the date of default.
11. PURCHASED AND WRITTEN OPTIONS: Certain Portfolios may write covered call and
put options on portfolio securities and other financial instruments. Premiums
are received and are recorded as liabilities. The liabilities are subsequently
adjusted to reflect the current value of the options written. Premiums received
from writing options which expire are treated as realized gains. Premiums
received from writing options which are exercised or are closed are added to or
offset against the proceeds or amount paid on the transaction to determine the
net realized gain or loss. By writing a covered call option, a Portfolio, in
exchange for the premium, foregoes the opportunity for capital appreciation
above the exercise price should the market price of the underlying security
increase. By writing a covered put option, a Portfolio, in exchange for the
premium, accepts the risk of a decline in the market value of the underlying
security below the exercise price.
Certain Portfolios may purchase call and put options on their portfolio
securities or other financial instruments. A Portfolio may purchase call options
to protect against an increase in the price of the security or financial
instrument it anticipates purchasing. Each Portfolio may purchase put options on
securities which it holds or other financial instruments to protect against a
decline in the value of the security or financial instrument or to close out
covered
10
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS (CONT.)
JUNE 30, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
written put positions. Risks may arise from an imperfect correlation between the
change in market value of the securities held by the Portfolio and the prices of
options relating to the securities purchased or sold by the Portfolio and from
the possible lack of a liquid secondary market for an option. The maximum
exposure to loss for any purchased option is limited to the premium initially
paid for the option.
12. OTHER: Security transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses on the sale of investment
securities are determined on the specific identified cost basis. Dividend income
is recorded on the ex-dividend date (except for certain foreign dividends that
may be recorded as soon as the Fund is informed of such dividends) net of
applicable withholding taxes where recovery of such taxes is not reasonably
assured. Interest income is recognized on the accrual basis except where
collection is in doubt. Discounts and premiums on securities purchased (other
than mortgage-backed securities) are amortized according to the effective yield
method over their respective lives. Most expenses of the Fund can be directly
attributed to a particular Portfolio. Expenses which cannot be directly
attributed are apportioned among the Portfolios based upon relative net assets.
Distributions from the Portfolios are recorded on the ex-distribution date.
The amount and character of income and capital gain distributions to be paid by
Portfolios of the Fund are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing book and tax treatments for the
character and timing of the recognition of gains or losses on securities and
foreign currency exchange contracts, the timing of the deductibility of certain
foreign taxes and dividends received from real estate investment trusts.
Permanent book and tax basis differences relating to shareholder distributions
may result in reclassifications among undistributed net investment income
(loss), accumulated net realized gain (loss) and paid in capital.
Permanent book and tax differences, if any, are not included in ending
undistributed (distributions in excess of) net investment income/accumulated net
investment loss for the purpose of calculating net investment income (loss) per
share in the Financial Highlights.
Settlement and registration of foreign securities transactions may be subject to
significant risks not normally associated with investments in the United States.
In certain markets, including Russia, ownership of shares is defined according
to entries in the issuer's share register. In Russia, there currently exists no
central registration system and the share registrars may not be subject to
effective state supervision. It is possible that a Portfolio holding these
securities could lose its share registration through fraud, negligence or even
mere oversight. In addition, shares being delivered for sales and cash being
paid for purchases may be delivered before the exchange is complete. This may
subject the Portfolio to further risk of loss in the event of a failure to
complete the transaction by the counterparty.
B. ADVISER: Miller Anderson & Sherrerd, LLP ("MAS"), a wholly-owned subsidiary
of Morgan Stanley Dean Witter & Co., provides the Portfolio with investment
advisory services for a fee, paid quarterly, at the annual rate based on average
daily net assets as follows:
<TABLE>
<CAPTION>
FROM MORE
FIRST $500 MILLION TO THAN
PORTFOLIO $500 MILLION $1 BILLION $1 BILLION
- --------- --------------- ----------------- -------------
<S> <C> <C> <C>
Value 0.55% 0.50% 0.45%
</TABLE>
MAS has agreed to reduce fees payable to it and to reimburse the Portfolio, if
necessary, to the extent that the annual operating expenses, as defined,
expressed as a percentage of average daily net assets, exceed the maximum ratio
of 0.85%.
C. ADMINISTRATOR: Morgan Stanley Dean Witter Investment Management Inc. (the
"Administrator"), a wholly-owned subsidiary of Morgan Stanley Dean Witter & Co.,
provides the Portfolio with administrative services pursuant to an
administrative agreement for a monthly fee which on an annual basis equals 0.25%
of the average daily net assets of the Portfolio, plus reimbursement of
out-of-pocket expenses. Under an agreement between the Administrator and Chase
Global Funds Services Company ("CGFSC"), a corporate affiliate of The Chase
Manhattan Bank ("Chase"), CGFSC provides certain administrative services to the
Fund. For such services, the Administrator pays CGFSC a portion of the fee the
Administrator receives from the Fund. Certain employees of CGFSC are officers of
the Fund. In addition, the Fund incurs local administration fees in connection
with doing business in certain emerging market countries.
D. CUSTODIAN: The Chase Manhattan Bank serves as custodian for the Fund in
accordance with a custodian agreement.
E. OTHER: At June 30, 1999, the net assets of certain Portfolios were
substantially comprised of foreign denominated securities and currency. Changes
in currency exchange rates will affect the U.S. dollar value of and investment
income from such securities.
From time to time, a Portfolio may have shareholders that hold a significant
portion of the Portfolio's outstanding shares. Investment activities of these
shareholders could have a material impact on those Portfolios.
11
<PAGE>
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
- --------------------------------------------------------------------------------
DIRECTORS
Barton M. Biggs
CHAIRMAN OF THE BOARD
Chairman and Director, Morgan Stanley Dean Witter Investment
Management Inc. and Morgan Stanley Dean Witter
Investment Management Limited;
Managing Director, Morgan Stanley & Co. Incorporated
Michael F. Klein
DIRECTOR AND PRESIDENT
Principal, Morgan Stanley Dean Witter Investment Management
Inc. and Morgan Stanley & Co. Incorporated
John D. Barrett II
Chairman and Director,
Barrett Associates, Inc.
Gerard E. Jones
Partner, Richards & O'Neil LLP
Andrew McNally IV
River Road Partners
Samuel T. Reeves
Chairman of the Board and Chief Executive Officer,
Pinnacle L.L.C.
Fergus Reid
Chairman and Chief Executive Officer,
LumeLite Plastics Corporation
Frederick O. Robertshaw
Of Counsel, Copple, Chamberlin & Boehm, P.C.
OFFICERS
Stefanie V. Chang
VICE PRESIDENT
James A. Gallo
VICE PRESIDENT
Harold J. Schaaff, Jr.
VICE PRESIDENT
Joseph P. Stadler
VICE PRESIDENT
Richard J. Shoch
VICE PRESIDENT
Mary E. Mullin
SECRETARY
Karl O. Hartmann
ASSISTANT SECRETARY
Belinda A. Brady
ASSISTANT TREASURER
INVESTMENT ADVISERS AND ADMINISTRATORS
Morgan Stanley Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428-2899
DISTRIBUTOR
Morgan Stanley & Co. Incorporated
1221 Avenue of the Americas
New York, NY 10020
CUSTODIAN
The Chase Manhattan Bank
3 Chase MetroTech Center
Brooklyn, NY 11245
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
- --------------------------------------------------------------------------------
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR ACCOMPANIED BY
THE PROSPECTUS OF THE MORGAN STANLEY UNIVERSAL FUNDS, INC. WHICH DESCRIBES IN
DETAIL EACH INVESTMENT PORTFOLIO'S INVESTMENT POLICIES, FEES AND EXPENSES.
PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
12
