<PAGE> 1
MORGAN STANLEY DEAN WITTER EQUITY FUND
Two World Trade Center, New York, New York 10048
LETTER TO THE SHAREHOLDERS November 30, 1999
DEAR SHAREHOLDER:
The six-month period ended November 30, 1999, was one of growth, albeit
interrupted, in the large-capitalization, domestic equity market. The period
began with a short-lived shift in market sentiment away from growth-oriented
companies to value-oriented ones in the late spring. Then, as investors returned
to their preference for growth over value, a fear of higher inflation and
interest rates began influencing the market. This concern resulted in a sharp
erosion of equity prices by late summer. By the end of September, the individual
stocks in the Standard & Poor's 500 Composite Stock Price Index (S&P 500) had
fallen an average of nearly 24 percent from their 52-week highs. However, fears
of inflation and rate hikes moderated somewhat as inflation remained benign and
evidence grew that the Federal Reserve Board would retain a balanced approach to
interest rates.
The market became increasingly narrow during the period as growth stocks (mainly
technology and telecommunications equipment) outperformed most other sectors by
wide margins. For example, the S&P Barra Growth Index outperformed the
broad-based S&P 500 Index by eight percentage points, the technology sector led
the S&P Barra Growth Index by 19 percentage points and telecommunications
equipment outstripped technology by more than 50 percent. During the downside
months of August and September, the 50 largest stocks in the S&P 500 (by market
capitalization) dropped proportionately less than did the overall index.
Investors seem to have focused increasingly on technology, momentum and the
largest stocks, apparently remaining indifferent to value and many small- to
medium-sized companies.
PERFORMANCE
For the six-month period ended November 30, 1999, Morgan Stanley Dean Witter
Equity Fund's Class A, B, C and D shares returned 3.40 percent, 2.91 percent,
3.07 percent and 3.48 percent, respectively. (The performance of the four
classes varies because of differing expenses. Total return figures assume the
reinvestment of all
<PAGE> 2
MORGAN STANLEY DEAN WITTER EQUITY FUND
LETTER TO THE SHAREHOLDERS November 30, 1999, continued
distributions and do not reflect the deduction of any applicable sales charges.)
During the same period, the broad-based S&P 500 returned 7.36 percent, while the
Lipper Growth Funds Index returned 11.12 percent.
According to Miller Anderson & Sherrerd, LLP (MAS), the Fund's sub-advisor, the
Fund's underperformance relative to its benchmark indexes was attributable
substantially to a small number of positions that performed poorly during the
period under review. Many of these positions have since been reevaluated and
either reduced or liquidated. While this underperformance resulted in a partial
giveback of the substantial return margin generated by the Fund earlier in the
year, performance has rebounded in the last two months. Year-to-date and for the
trailing 12 months, the Fund has remained ahead of its benchmarks.
PORTFOLIO STRATEGY
On November 30, 1999, the portfolio was overweighted in consumer services
(principally cable, radio and media stocks), technology (Internet backbone
companies, enhanced-bandwidth equipment manufacturers, e-business software
service providers), energy (emphasizing oilfield services) and heavy industry.
MAS nevertheless believes that strong fundamentals persist. The portfolio is
underweighted in utilities and financials, whose prospects have been affected by
interest-rate concerns. Near-market weights are being maintained in the
remaining sectors, including retailing and drugs. Positions have been increased
or initiated in pharmaceuticals (previously underweighted) during the period
under review, taking advantage of more attractive relative valuations. During
August the portfolio's style tilt was adjusted from a slight value bias to a
position neutral with the market. It has since moved to a slight growth
emphasis, with favorable performance results so far.
Among the largest holdings as of November 30, 1999, were Microsoft, Cisco
Systems, Qualcomm, General Electric and Citigroup.
LOOKING AHEAD
MAS believes that an investor sentiment toward technology and telecommunications
is undeniable and shows few signs of abating in the near future. According to
MAS, large-, mid- and small-capitalization stock returns alike have favored
growth over value since early June, with no reversion to value-style investing
in sight. The sharp reversal toward growth has bedeviled many active managers
and has affected the Fund's sub-advisor to a lesser degree. Fortunately, the
portfolio's approach incorporates a balanced, diversified investment strategy,
which integrates reasonable valuation with attractive earnings dynamics.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER EQUITY FUND
LETTER TO THE SHAREHOLDERS November 30, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Equity Fund and
look forward to continuing to serve your investment needs.
<TABLE>
<S> <C>
Very truly yours,
/s/ C. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER EQUITY FUND
FUND PERFORMANCE November 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A*
- -----------------------------------------------
<S> <C> <C>
PERIOD ENDED 11/30/99
- --------------------------
Since Inception (7/29/98) 15.73(1) 11.16(2)
1 Year 24.34(1) 17.81(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C++
- -----------------------------------------------
<S> <C> <C>
PERIOD ENDED 11/30/99
- --------------------------
Since Inception (7/29/98) 15.09(1) 15.09(2)
1 Year 23.79(1) 22.79(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B+
- -----------------------------------------------
<S> <C> <C>
PERIOD ENDED 11/30/99
- --------------------------
Since Inception (7/29/98) 14.80(1) 11.94(2)
1 Year 23.38(1) 18.38(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D#
- -----------------------------------------------
<S> <C> <C>
PERIOD ENDED 11/30/99
- --------------------------
Since Inception (7/29/98) 16.01(1)
1 Year 24.74(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------------
<TABLE>
<S> <C>
(1) Figure shown assumes reinvestment of all distributions and
does not reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and
the deduction of the maximum applicable sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 5.25%.
+ The maximum contingent deferred sales charge (CDSC) for
Class B is 5.0%. The CDSC declines to 0% after six years.
++ The maximum contingent deferred sales charge for Class C
shares is 1% for shares redeemed within one year of
purchase.
# Class D shares have no sales charge.
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS November 30, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON AND PREFERRED
STOCKS (96.4%)
Accident & Health Insurance (0.1%)
13,100 UNUMProvident Corp. ......... $ 426,569
------------
Aerospace (0.5%)
32,100 Northrop Grumman Corp. ...... 1,803,619
------------
Alcoholic Beverages (1.0%)
44,700 Anheuser-Busch Companies,
Inc. ....................... 3,344,119
------------
Beverages -- Non-Alcoholic
(0.8%)
43,000 Coca Cola Co. ............... 2,894,437
------------
Biotechnology (0.5%)
39,600 Amgen Inc.*.................. 1,801,800
------------
Broadcasting (1.9%)
36,600 Clear Channel Communications,
Inc.*....................... 2,941,725
103,700 Infinity Broadcasting Corp.
(Series A)*................. 3,778,569
------------
6,720,294
------------
Building Materials (0.4%)
94,000 Owens Corning................ 1,480,500
------------
Building Materials/DIY
Chains (1.2%)
45,000 Home Depot, Inc. (The)....... 3,557,812
16,200 Lowe's Companies, Inc. ...... 806,962
------------
4,364,774
------------
Cable Television (2.9%)
127,596 AT&T Corp. -- Liberty Media
Group (Class A)*............ 5,335,108
90,900 Charter Communications, Inc.
(Class A)................... 2,102,062
35,800 MediaOne Group, Inc.*........ 2,837,150
------------
10,274,320
------------
Cellular Telephone (1.6%)
18,050 Sprint Corp. (PCS Group)*.... 1,656,087
86,250 Vodafone AirTouch PLC (ADR)
(United Kingdom)............ 4,069,922
------------
5,726,009
------------
Computer Communications (2.9%)
116,100 Cisco Systems, Inc.*......... 10,347,412
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Computer Software (6.2%)
48,800 Computer Associates
International, Inc. ........ $ 3,172,000
152,400 Microsoft Corp.*............. 13,868,400
69,000 Oracle Corp.*................ 4,674,750
------------
21,715,150
------------
Computer/Video Chains (1.0%)
21,500 Best Buy Co., Inc.*.......... 1,343,750
27,700 Tandy Corp. ................. 2,122,512
------------
3,466,262
------------
Construction/Agricultural
Equipment/Trucks (0.1%)
10,600 CNH Global N.V.
(Netherlands)............... 145,087
------------
Containers/Packaging (0.5%)
27,300 Temple-Inland, Inc. ......... 1,562,925
------------
Contract Drilling (1.1%)
109,100 Global Marine, Inc.*......... 1,670,594
34,000 Nabors Industries, Inc.*..... 903,125
47,300 Transocean Offshore, Inc. ... 1,333,269
------------
3,906,988
------------
Discount Chains (2.2%)
133,800 Wal-Mart Stores, Inc. ....... 7,710,225
------------
Diversified Electronic
Products (2.1%)
28,000 Honeywell, Inc. ............. 3,134,250
18,000 JDS Uniphase Corp.*.......... 4,116,375
------------
7,250,625
------------
Diversified Financial
Services (2.1%)
8,000 American Express Co. ........ 1,210,500
117,325 Citigroup, Inc. ............. 6,320,884
------------
7,531,384
------------
Diversified Manufacturing
(1.1%)
32,100 AlliedSignal, Inc.*.......... 1,919,981
43,900 Tyco International Ltd.
(Bermuda)................... 1,758,744
------------
3,678,725
------------
Drugstore Chains (0.9%)
82,700 CVS Corp. ................... 3,282,156
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS November 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
E.D.P. Peripherals (0.8%)
17,700 EMC Corp.*................... $ 1,479,056
73,300 Quantum Corp. -- DLT & Storage
Systems*.................... 1,154,475
------------
2,633,531
------------
E.D.P. Services (0.6%)
34,000 Electronic Data Systems
Corp. ...................... 2,186,625
------------
Electric Utilities (0.4%)
57,000 Energy East Corp. ........... 1,339,500
600 PECO Energy Co. ............. 19,762
------------
1,359,262
------------
Electronic Data Processing
(2.8%)
21,000 Hewlett-Packard Co. ......... 1,992,375
39,900 International Business
Machines Corp. ............. 4,112,194
16,300 Sun Microsystems, Inc.*...... 2,154,656
56,000 Unisys Corp. ................ 1,610,000
------------
9,869,225
------------
Finance Companies (1.8%)
48,000 Capital One Financial
Corp. ...................... 2,235,000
67,400 Freddie Mac.................. 3,327,875
18,200 Household International,
Inc. ....................... 720,037
------------
6,282,912
------------
Fluid Controls (0.3%)
21,700 Parker-Hannifin Corp. ....... 1,021,256
------------
Food Chains (0.9%)
63,000 Kroger Co.*.................. 1,342,687
46,100 Safeway Inc.*................ 1,699,937
------------
3,042,624
------------
Forest Products (0.3%)
18,800 Weyerhaeuser Co. ............ 1,151,500
------------
Industrial Machinery/
Components (0.9%)
62,200 Ingersoll-Rand Co. .......... 3,012,813
------------
Insurance Brokers/Services
(0.9%)
39,000 Marsh & McLennan Companies,
Inc. ....................... 3,066,375
------------
Integrated Oil Companies
(2.6%)
38,700 Chevron Corp. ............... 3,427,369
69,000 Royal Dutch Petroleum Co.
(ADR) (Netherlands)......... 4,002,000
30,800 Texaco, Inc. ................ 1,876,875
------------
9,306,244
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Internet Services (3.0%)
77,100 America Online, Inc.*........ $ 5,604,206
63,796 At Home Corp. (Series A)*.... 3,098,093
8,100 Yahoo! Inc.*................. 1,724,288
------------
10,426,587
------------
Investment Bankers/Brokers/
Services (1.6%)
11,500 Goldman Sachs Group, Inc. ... 863,938
23,000 Lehman Brothers Holdings,
Inc. ....................... 1,756,625
25,600 Merrill Lynch & Co., Inc. ... 2,064,000
26,000 Schwab (Charles) Corp. ...... 986,375
------------
5,670,938
------------
Major Banks (3.1%)
53,300 Bank of New York Co.,
Inc. ....................... 2,125,338
37,200 Chase Manhattan Corp. (The).. 2,873,700
35,081 Fleet Boston Financial
Corp. ...................... 1,326,500
15,900 PNC Bank Corp. .............. 886,425
11,800 State Street Corp. .......... 866,563
58,000 Wells Fargo & Co. ........... 2,697,000
------------
10,775,526
------------
Major Chemicals (0.5%)
30,300 Du Pont (E.I.) de Nemours &
Co., Inc. .................. 1,800,956
------------
Major Pharmaceuticals (10.0%)
47,400 Abbott Laboratories.......... 1,801,200
67,700 American Home Products
Corp. ...................... 3,520,400
63,300 Bristol-Myers Squibb Co. .... 4,624,856
40,200 Johnson & Johnson............ 4,170,750
16,800 Lilly (Eli) & Co. ........... 1,205,400
94,100 Merck & Co., Inc. ........... 7,386,850
81,000 Pfizer, Inc. ................ 2,931,188
31,100 Pharmacia & Upjohn, Inc. .... 1,700,781
43,400 Schering-Plough Corp. ....... 2,218,825
62,200 Warner-Lambert Co. .......... 5,578,563
------------
35,138,813
------------
Major U.S.
Telecommunications (5.1%)
81,202 MCI WorldCom, Inc.*.......... 6,714,390
118,072 SBC Communications, Inc. .... 6,132,365
72,800 Sprint Corp. (FON Group)..... 5,050,500
------------
17,897,255
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS November 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Media Conglomerates (2.1%)
83,500 Fox Entertainment Group
(Class A)*.................. $ 1,920,500
92,700 News Corporation Ltd. (The)
(Pref.) (ADR) (Australia)... 2,867,906
44,500 Time Warner Inc. ............ 2,745,094
------------
7,533,500
------------
Medical Specialties (0.6%)
32,700 Baxter International,
Inc. ....................... 2,209,294
------------
Military/Gov't/Technical (2.0%)
69,100 General Dynamics Corp. ...... 3,562,969
40,100 General Motors Corp. (Class
H).......................... 3,433,563
------------
6,996,532
------------
Motor Vehicles (1.5%)
71,300 Ford Motor Co. .............. 3,600,650
24,600 General Motors Corp. ........ 1,771,200
------------
5,371,850
------------
Multi-Line Insurance (1.4%)
47,200 American International Group,
Inc. ....................... 4,873,400
------------
Multi-Sector Companies (3.1%)
85,100 General Electric Co. ........ 11,063,000
100 Textron, Inc. ............... 7,106
------------
11,070,106
------------
Oil Refining/Marketing (0.5%)
27,400 Total Fina S.A. (ADR)
(France).................... 1,811,825
------------
Oil/Gas Transmission (0.8%)
76,300 Coastal Corp. ............... 2,689,575
------------
Oilfield Services/Equipment
(2.2%)
59,300 BJ Services Co.*............. 2,068,088
96,900 Halliburton Co. ............. 3,748,819
53,200 Smith International, Inc.*... 2,121,350
------------
7,938,257
------------
Other Telecommunications
(0.7%)
72,700 Qwest Communications
International, Inc.*........ 2,480,888
------------
Package Goods/Cosmetics (1.2%)
17,200 Gillette Co. ................ 691,225
21,600 Kimberly-Clark Corp. ........ 1,379,700
19,400 Procter & Gamble Co. ........ 2,095,200
------------
4,166,125
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Packaged Foods (0.6%)
59,300 General Mills, Inc. ......... $ 2,234,869
------------
Paper (0.3%)
23,300 International Paper Co. ..... 1,215,969
------------
Property -- Casualty Insurers
(0.2%)
23,800 Travelers Property Casualty
Corp. (Class A)............. 792,838
------------
Railroads (0.5%)
59,500 Burlington Northern Santa Fe
Corp. ...................... 1,725,500
------------
Semiconductors (1.9%)
71,800 Intel Corp. ................. 5,501,675
21,500 LSI Logic Corp.*............. 1,299,406
------------
6,801,081
------------
Specialty Chemicals (0.9%)
54,100 Engelhard Corp. ............. 909,556
165,300 Grace (W.R.) & Co.*......... 2,252,213
------------
3,161,769
------------
Specialty Insurers (0.9%)
19,100 Ambac Financial Group,
Inc. ....................... 1,040,950
13,600 MBIA, Inc. .................. 680,000
24,800 XL Capital Ltd. (Class A).... 1,264,800
------------
2,985,750
------------
Telecommunications (1.0%)
64,159 AT&T Corp. .................. 3,584,884
------------
Telecommunications Equipment
(7.3%)
56,800 General Instrument Corp.*.... 3,720,400
37,600 Lucent Technologies Inc. .... 2,747,150
21,200 Motorola, Inc. .............. 2,422,100
52,800 Nortel Networks Corp. ....... 3,907,200
26,100 QUALCOMM Inc.*............... 9,454,725
51,700 Tellabs, Inc.*............... 3,350,806
------------
25,602,381
------------
TOTAL COMMON AND PREFERRED
STOCKS
(Identified Cost
$283,901,978)................ 339,322,215
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER EQUITY FUND
PORTFOLIO OF INVESTMENTS November 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
SHORT-TERM INVESTMENTS (5.1%)
U.S. GOVERNMENT AGENCY (a)
(1.4%)
$ 5,000 Federal Home Loan Mortgage
Assoc. 5.22% due 12/08/99
(Identified Cost
$4,994,925)................. $ 4,994,925
------------
REPURCHASE AGREEMENT (3.7%)
13,100 The Bank of New York
5.375% due 12/01/99
(dated 11/30/99; proceeds
$13,102,243) (b)
(Identified Cost
$13,100,287)................ 13,100,287
------------
TOTAL SHORT-TERM INVESTMENTS
(Identified Cost
$18,095,212)................. 18,095,212
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $301,997,190)
(c).............................. 101.5% $357,417,427
LIABILITIES IN EXCESS OF
OTHER ASSETS..................... (1.5) (5,291,900)
------- ------------
NET ASSETS....................... 100.0% $352,125,527
======= ============
</TABLE>
- ---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
(a) Security was purchased on a discount basis. The
interest rate shown has been adjusted to reflect
a money market equivalent yield.
(b) Collateralized by $11,453,174 U.S. Treasury Bond
7.875% due 02/15/21 valued at $13,361,163.
(c) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$63,950,244 and the aggregate gross unrealized
depreciation is $8,530,007, resulting in net
unrealized appreciation of $55,420,237.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
November 30, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $301,997,190)........... $357,417,427
Receivable for:
Investments sold...................... 6,064,653
Shares of beneficial interest sold.... 1,054,367
Dividends............................. 299,163
Foreign withholding taxes reclaimed... 16,718
Prepaid expenses and other assets......... 129,316
------------
TOTAL ASSETS.......................... 364,981,644
------------
LIABILITIES:
Payable for:
Investments purchased................. 11,844,993
Shares of beneficial interest
repurchased.......................... 372,669
Plan of distribution fee.............. 298,278
Investment management fee............. 259,287
Payable to bank........................... 38,068
Accrued expenses and other payables....... 42,822
------------
TOTAL LIABILITIES..................... 12,856,117
------------
NET ASSETS............................ $352,125,527
============
COMPOSITION OF NET ASSETS:
Paid-in-capital........................... $297,650,920
Net unrealized appreciation............... 55,420,237
Net investment loss....................... (1,284,147)
Accumulated undistributed net realized
gain..................................... 338,517
------------
NET ASSETS............................ $352,125,527
============
CLASS A SHARES:
Net Assets................................ $9,869,948
Shares Outstanding (unlimited authorized,
$.01 par value).......................... 811,971
NET ASSET VALUE PER SHARE............. $12.16
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net
asset value)......................... $12.83
============
CLASS B SHARES:
$322,639,874
Net Assets................................
Shares Outstanding (unlimited authorized, 26,811,166
$.01 par value)..........................
NET ASSET VALUE PER SHARE............. $12.03
============
CLASS C SHARES:
$18,797,744
Net Assets................................
Shares Outstanding (unlimited authorized, 1,557,683
$.01 par value)..........................
NET ASSET VALUE PER SHARE............. $12.07
============
CLASS D SHARES:
$817,961
Net Assets................................
Shares Outstanding (unlimited authorized, 67,066
$.01 par value)..........................
NET ASSET VALUE PER SHARE............. $12.20
============
</TABLE>
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended
November 30, 1999 (unaudited)
NET INVESTMENT LOSS:
INCOME
Dividends (net of $20,256 foreign
withholding tax)........................ $ 1,608,064
Interest................................. 293,026
------------
TOTAL INCOME......................... 1,901,090
------------
EXPENSES
Plan of distribution fee (Class A
shares)................................. 11,254
Plan of distribution fee (Class B
shares)................................. 1,478,655
Plan of distribution fee (Class C
shares)................................. 64,599
Investment management fee................ 1,370,758
Transfer agent fees and expenses......... 158,397
Registration fees........................ 36,880
Professional fees........................ 25,142
Custodian fees........................... 12,824
Shareholder reports and notices.......... 9,625
Directors' fees and expenses............. 8,110
Offering costs........................... 7,533
Other.................................... 1,460
------------
TOTAL EXPENSES....................... 3,185,237
------------
NET INVESTMENT LOSS.................. (1,284,147)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss........................ (993,022)
Net change in unrealized appreciation.... 12,122,149
------------
NET GAIN............................. 11,129,127
------------
NET INCREASE............................. $ 9,844,980
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
FOR THE SIX JULY 29, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
- ----------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................. $ (1,284,147) $ (1,293,228)
Net realized gain (loss)............................ (993,022) 2,324,956
Net change in unrealized appreciation............... 12,122,149 43,298,088
------------ ------------
NET INCREASE.................................... 9,844,980 44,329,816
Net increase from transactions in shares of
beneficial interest................................ 45,190,364 252,660,367
------------ ------------
NET INCREASE.................................... 55,035,344 296,990,183
NET ASSETS:
Beginning of period................................. 297,090,183 100,000
------------ ------------
END OF PERIOD
(Including a net investment loss of $1,284,147
and $0, respectively)........................... $352,125,527 $297,090,183
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Equity Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund's investment objective is total
return. The Fund seeks to achieve its objective by investing at least 65% of its
total assets in equity securities. The Fund was organized as a Massachusetts
business trust on April 6, 1998 and had no operations other than those relating
to organizational matters and the issuance of 2,500 shares of beneficial
interest by each class for $25,000 of each class to Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), to effect the Fund's initial
capitalization. The Fund commenced operations on July 29, 1998.
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;
(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 the Investment Manager
or Miller Anderson & Sherrerd, LLP (the "Sub-Advisor"), an affiliate of the
Investment Manager, that sale or bid prices are not reflective of a security's
market value, portfolio securities are valued at their fair value as determined
in good faith under procedures established by and under the general supervision
of the Trustees (valuation of debt securities for which market quotations are
not readily available may be based upon current market prices of securities
which are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); and (4) short-term debt securities
11
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MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1999 (unaudited) continued
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.
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.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged 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 ex-dividend 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. OFFERING COSTS -- The Investment Manager incurred offering costs on behalf of
the Fund in the amount of approximately $126,000 which will be reimbursed for
the full amount thereof. Such expenses were deferred and were fully amortized as
of July 29, 1999.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1999 (unaudited) continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
annual rate of 0.85% to the net assets of the Fund determined as of the close of
each business day.
Under the terms of the Agreement, in addition to managing the Fund's
investments, the Investment Manager maintains certain of the Fund's books and
records and furnishes, at its own expense, office space, facilities, equipment,
clerical, bookkeeping and certain legal services and pays the salaries of all
personnel, including officers of the Fund who are employees of the Investment
Manager. The Investment Manager also bears the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the Sub-Advisor provides the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager and
Sub-Advisor. 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 average daily net assets of Class B; and
(iii) Class C -- up to 1.0% of the average daily net assets of Class C. In the
case of Class A shares, amounts paid under the Plan are paid to the Distributor
for services provided. In the case of Class B and Class C shares, amounts paid
under the Plan are paid to the Distributor for (1) services provided and the
expenses borne by it and others in the distribution of the shares of these
Classes, including the payment of commissions for sales of these Classes and
incentive compensation to, and expenses of, Morgan Stanley Dean Witter Financial
Advisors and others who engage in or support distribution of the shares or who
service shareholder accounts, including overhead and telephone expenses; (2)
printing and distribution of prospectuses and reports used in connection with
the offering of these shares to other than current shareholders; and (3)
preparation, printing and distribution of
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1999 (unaudited) continued
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, Distributor and Sub-Advisor, 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 $13,242,726 at November 30, 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 November 30, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.24%
and 0.75%, respectively.
The Distributor has informed the Fund that for the six months ended November 30,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A shares, Class B shares and Class C shares of $121, $348,625
and $9,189, respectively and received $23,359 in front-end sales charges from
sales of the Fund's Class A shares. The respective shareholders pay such charges
which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the six months ended November 30, 1999 aggregated
$234,167,320 and $192,651,739, respectively.
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER EQUITY FUND
NOTES TO FINANCIAL STATEMENTS November 30, 1999 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager,
Distributor and Sub-Advisor, is the Fund's transfer agent.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 29, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
------------------------ -------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 335,589 $ 3,960,044 986,023 $ 9,815,933
Redeemed.................................................... (198,144) (2,349,887) (313,997) (3,248,973)
---------- ----------- ---------- ------------
Net increase - Class A...................................... 137,445 1,610,157 672,026 6,566,960
---------- ----------- ---------- ------------
CLASS B SHARES
Sold........................................................ 5,534,342 64,993,484 26,743,761 266,671,820
Redeemed.................................................... (2,113,101) (24,678,647) (3,356,336) (33,876,428)
---------- ----------- ---------- ------------
Net increase - Class B...................................... 3,421,241 40,314,837 23,387,425 232,795,392
---------- ----------- ---------- ------------
CLASS C SHARES
Sold........................................................ 431,812 5,097,740 1,753,484 17,458,304
Redeemed.................................................... (219,223) (2,585,253) (410,890) (4,196,497)
---------- ----------- ---------- ------------
Net increase - Class C...................................... 212,589 2,512,487 1,342,594 13,261,807
---------- ----------- ---------- ------------
CLASS D SHARES
Sold........................................................ 61,322 753,833 3,326 36,208
Redeemed.................................................... (82) (1,000) -- --
---------- ----------- ---------- ------------
Net increase - Class D...................................... 61,240 752,883 -- --
---------- ----------- ---------- ------------
Net increase in Fund........................................ 3,832,515 $45,190,364 25,405,371 $252,660,367
========== =========== ========== ============
</TABLE>
- ---------------------
* Commencement of operations.
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a beneficial interest outstanding
throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 29, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
- ------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS A SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.76 $10.00
------ ------
Income from investment operations:
Net investment income...................................... -- 0.01
Net realized and unrealized gain........................... 0.40 1.75
------ ------
Total income from investment operations..................... 0.40 1.76
------ ------
Net asset value, end of period.............................. $12.16 $11.76
====== ======
TOTAL RETURN+............................................... 3.40%(1) 17.60%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.25 %(2)(3 1.38%(2)(3)
Net investment income (loss)................................ (0.07)%(2)(3) 0.07%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $9,870 $7,933
Portfolio turnover rate..................................... 61%(1) 80%(1)
</TABLE>
- ---------------------
* Commencement of operations.
++ 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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 29, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
- -------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS B SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.69 $10.00
------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.05) (0.07)
Net realized and unrealized gain........................... 0.39 1.76
------ ------
Total income from investment operations..................... 0.34 1.69
------ ------
Net asset value, end of period.............................. $12.03 $11.69
====== ======
TOTAL RETURN+............................................... 2.91%(1) 16.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.01%(2)(3) 2.13%(2)(3)
Net investment loss......................................... (0.83)%(2)(3) (0.68)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $322,640 $273,345
Portfolio turnover rate..................................... 61%(1) 80%(1)
</TABLE>
- ---------------------
* Commencement of operations.
++ 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> 18
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<S> <C> <C>
FOR THE PERIOD
FOR THE SIX JULY 28, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
- ------------------------------------------------------------------------------------------------
(unaudited)
CLASS C SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.70 $10.00
------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.03) (0.04)
Net realized and unrealized gain........................... 0.40 1.74
------ ------
Total income from investment operations..................... 0.37 1.70
------ ------
Net asset value, end of period.............................. $12.07 $11.70
====== ======
TOTAL RETURN+............................................... 3.07%(1) 17.10%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.76 %(2)(3 1.91%(2)(3)
Net investment loss......................................... (0.58)%(2)(3) (0.46)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $18,798 $15,744
Portfolio turnover rate..................................... 61%(1) 80%(1)
</TABLE>
- ---------------------
* Commencement of operations.
++ 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
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER EQUITY FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<S> <C> <C>
FOR THE PERIOD
FOR THE SIX JULY 28, 1998*
MONTHS ENDED THROUGH
NOVEMBER 30, 1999 MAY 31, 1999
- ------------------------------------------------------------------------------------------------
(unaudited)
CLASS D SHARES ++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $11.79 $10.00
------ ------
Income from investment operations:
Net investment income...................................... 0.01 0.03
Net realized and unrealized gain........................... 0.40 1.76
------ ------
Total income from investment operations..................... 0.41 1.79
------ ------
Net asset value, end of period.............................. $12.20 $11.79
====== ======
TOTAL RETURN+............................................... 3.48% 17.90%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.01%(2)(3) 1.13%(2)(3)
Net investment income....................................... 0.17%(2)(3) 0.32%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $818 $69
Portfolio turnover rate..................................... 61%(1) 80%(1)
</TABLE>
- ---------------------
* Commencement of operations.
++ 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
19
<PAGE> 20
TRUSTEES
- ----------------------------------
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
- ----------------------------------
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
- ----------------------------------
Miller Anderson & Sherrerd, LLP
One Tower Bridge
West Conshohocken, PA 19428
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 shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus of
the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
EQUITY FUND
Semiannual Report
November 30, 1999
