<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund Two World Trade Center,
Letter to the Shareholders February 29, 2000 New York, New York 10048
DEAR SHAREHOLDER:
During the 12-month period ended February 29, 2000, financial markets around the
world continued to experience volatility. After peaking in the middle of July,
stock prices pulled back in the fall on concerns that the U.S. economy might be
growing too fast. The issue was manifested in two Federal Reserve Board moves,
in June and August, that raised the federal funds rate a total of 50 basis
points. These actions were followed by two additional moves that raised rates by
another 50 basis points by the end of February. All of this occurred in an
economic setting in which inflation remained low while the economy continued to
grow. Commodity-related industries, led by rising oil prices, rebounded sharply
during the first six months of the period, while technology issues led the major
indexes to new highs in the second half.
PERFORMANCE AND PORTFOLIO STRATEGY
For the 12-month period ended February 29, 2000, Morgan Stanley Dean Witter S&P
500 Select Fund's Class A, B, C and D shares posted returns of 11.50 percent,
10.67 percent, 10.67 percent and 11.84 percent, respectively. During the same
period, the Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index)
returned 11.73 percent. The performance of the Fund's four share classes varies
because of differing expenses. Total return figures assume the reinvestment of
all distributions and do not reflect the deduction of any applicable sales
charges. The accompanying chart compares the performance of the Fund to that of
the S&P 500 Index.
The Fund, which commenced operations on September 28, 1998, seeks to deliver
investment performance, before expenses, that is above the total return of the
S&P 500 by investing in the common stocks of selected companies included in the
index. The Fund seeks, according to the recommendations and research of Wall
Street analysts, to filter out the potential underperforming stocks from the
Index while focusing on stronger performers. Based on these criteria, the Fund
ended the year
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Letter to the Shareholders February 29, 2000, continued
slightly overweight in the technology, capital goods and communication services
sectors and a bit underweight in the energy, basic materials and consumer
staples sectors. The Fund remained diversified across a broad range of
industries and companies in an effort to reduce the volatility of specific
sectors.
LOOKING AHEAD
In the months ahead, we believe that the stock market will show continued
volatility as a result of concerns over rising interest rates and valuations.
Certain sectors, however, should exhibit strong earnings growth. Furthermore, we
believe that both large-cap and small-cap stocks will participate fully in
continued market gains. With its diversified portfolio, the Fund is well
positioned to participate in any future market gains.
We appreciate your ongoing support of the Morgan Stanley Dean Witter S&P 500
Select Fund and look forward to continuing to serve your investment needs.
Very truly yours,
/s/ Charles A. Fiumefreddo /s/ Mitchell M. Merin
- -------------------------- ---------------------
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
2
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Fund Performance February 29, 2000
GROWTH OF $10,000 CLASS B
($ in Thousands)
- --------------------------------------------------------------------------------
Date Class A Class B Class C Class D S&P 500
- --------------------------------------------------------------------------------
September 28, 1998 9,475 10,000 10,000 10,000 10,000
- --------------------------------------------------------------------------------
February 28, 1999 11,211 11,796 11,794 11,838 11,874
- --------------------------------------------------------------------------------
February 29, 2000 12,500(3) 12,655(3) 13,053(3) 13,240(3) 13,266
- --------------------------------------------------------------------------------
-- Class A -- Class B -- Class C -- Class D -- S&P 500 (4)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. PERFORMANCE FOR CLASS A,
CLASS B, CLASS C, AND CLASS D SHARES WILL VARY DUE TO DIFFERENCES IN SALES
CHARGES AND EXPENSES.
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
CLASS A SHARES*
- --------------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 11.50%(1) 5.65%(2)
Since Inception (9/28/98) 21.53%(1) 17.01%(2)
CLASS C SHARES+
- --------------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 10.67%(1) 9.67%(2)
Since Inception (9/28/98) 20.62%(1) 20.62%(2)
CLASS B SHARES**
- --------------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 10.67%(1) 5.67%(2)
Since Inception (9/28/98) 20.63%(1) 18.02%(2)
CLASS D SHARES#
- --------------------------------------------------------------
PERIOD ENDED 2/29/00
- --------------------
1 Year 11.84%(1)
Since Inception (9/28/98) 21.84%(1)
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
(3) Closing value assuming a complete redemption on February 29, 2000.
(4) The Standard & Poor's 500 Stock Index (S&P 500) is a broad-based index, the
performance of which is based on the average performance of 500 widely held
common stocks. The performance of the Index does not include any expenses,
fees or charges. The Index is unmanaged and should not be considered an
investment.
* 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.
3
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
COMMON STOCKS (96.3%)
Accident & Health Insurance (0.1%)
1,567 Torchmark Corp. ....................... $ 31,046
2,957 UNUMProvident Corp. ................... 39,550
------------
70,596
------------
Advertising (0.3%)
2,318 Interpublic Group of Companies,
Inc. .................................. 93,155
1,914 Omnicom Group, Inc. ................... 180,275
854 Young & Rubicam, Inc. ................. 43,127
------------
316,557
------------
Aerospace (0.6%)
8,794 Boeing Co. ............................ 324,279
1,230 Goodrich (B.F.) Co. (The) ............. 29,443
642 Northrop Grumman Corp. ................ 29,171
5,920 United Technologies Corp. ............. 301,550
------------
684,443
------------
Airlines (0.2%)
1,337 AMR Corp.* ............................ 70,694
1,297 Delta Air Lines, Inc. ................. 59,176
5,912 Southwest Airlines Co. ................ 109,002
------------
238,872
------------
Alcoholic Beverages (0.3%)
5,371 Anheuser-Busch Companies, Inc. ........ 344,415
564 Coors (Adolph) Co. (Class B) .......... 24,745
------------
369,160
------------
Aluminum (0.3%)
2,519 Alcan Aluminium, Ltd. (Canada) ........ 83,127
4,220 Alcoa, Inc. ........................... 289,070
------------
372,197
------------
Apparel (0.0%)
738 Liz Claiborne, Inc. ................... 27,629
------------
Auto Parts: O.E.M. (0.3%)
1,947 Dana Corp. ............................ 41,495
8,622 Delphi Automotive Systems Corp. 143,880
896 Eaton Corp. ........................... 67,144
770 Johnson Controls, Inc. ................ 41,099
1,560 TRW Inc. .............................. 74,880
------------
368,498
------------
Beverages - Non-Alcoholic (1.3%)
20,554 Coca Cola Co.** ....................... 995,584
4,453 Coca-Cola Enterprises Inc. ............ 104,089
15,654 PepsiCo, Inc. ......................... 504,841
------------
1,604,514
------------
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
Biotechnology (0.8%)
11,056 Amgen Inc.* ........................... $ 753,190
1,430 Biogen, Inc. .......................... 154,351
------------
907,541
------------
Books/Magazines (0.0%)
708 Harcourt General, Inc. ................ 24,382
528 Meredith Corp. ........................ 15,114
------------
39,496
------------
Broadcasting (0.6%)
8,207 CBS Corp.* ............................ 488,829
3,759 Clear Channel Communications,
Inc.* ............................... 250,443
------------
739,272
------------
Building Materials (0.0%)
505 Owens Corning ......................... 7,322
------------
Building Materials/DIY Chains (1.4%)
24,862 Home Depot, Inc. (The) ................ 1,437,334
4,239 Lowe's Companies, Inc. ................ 201,882
------------
1,639,216
------------
Building Products (0.1%)
253 Armstrong World Industries, Inc. ...... 4,807
5,026 Masco Corp. ........................... 89,840
------------
94,647
------------
Cable Television (0.7%)
9,367 Comcast Corp. (Class A Special)* ...... 398,097
5,098 MediaOne Group, Inc.* ................. 400,193
------------
798,290
------------
Casino/Gambling (0.0%)
2,042 Harrah's Entertainment, Inc.* ......... 39,053
------------
Cellular Telephone (0.8%)
3,971 Nextel Communications, Inc.
(Class A)* ............................ 543,034
8,728 Sprint Corp. (PCS Group)* ............. 451,674
------------
994,708
------------
Clothing/Shoe/Accessory Stores (0.5%)
8,562 Gap, Inc. (The) ....................... 413,652
2,416 Limited (The), Inc. ................... 82,144
1,475 Nordstrom, Inc. ....................... 31,436
3,391 TJX Companies, Inc. ................... 54,044
------------
581,276
------------
Computer Communications (4.2%)
2,925 3Com Corp.* ........................... 287,198
874 Adaptec, Inc.* ........................ 35,779
1,641 Cabletron Systems, Inc.* .............. 80,409
35,432 Cisco Systems, Inc.* .................. 4,681,453
------------
5,084,839
------------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
Computer Software (7.0%)
4,243 Adobe Systems, Inc. .................. $ 432,521
669 Autodesk, Inc. ....................... 29,770
2,100 BMC Software, Inc.* .................. 96,600
2,150 Citrix Systems, Inc. ................. 226,691
5,816 Computer Associates
International, Inc. ................ 374,041
3,838 Compuware Corp.* ..................... 84,916
53,018 Microsoft Corp.* ** .................. 4,735,170
3,514 Novell, Inc.* ........................ 116,182
31,200 Oracle Corp.* ........................ 2,314,650
2,862 Parametric Technology Corp.* ......... 86,754
------------
8,497,295
------------
Computer/Video Chains (0.2%)
2,156 Best Buy Co., Inc.* .................. 117,232
2,133 Circuit City Stores, Inc. - Circuit
City Group ......................... 86,120
2,121 Tandy Corp. .......................... 80,731
------------
284,083
------------
Construction/Agricultural
Equipment/Trucks (0.2%)
3,030 Caterpillar, Inc. .................... 106,239
1,966 Deere & Co. .......................... 70,284
1,627 Navistar International Corp.* ........ 53,284
------------
229,807
------------
Consumer Electronics/
Appliances (0.0%)
666 Maytag Corp. ......................... 17,607
612 Whirlpool Corp. ...................... 33,239
------------
50,846
------------
Consumer Sundries (0.0%)
862 American Greetings Corp.
(Class A) .......................... 14,869
------------
Containers/Packaging (0.1%)
368 Ball Corp. ........................... 9,913
294 Bemis Company, Inc. .................. 8,746
1,956 Owens-Illinois, Inc.* ................ 27,017
1,839 Pactiv Corp.* ........................ 15,287
951 Sealed Air Corp.* .................... 47,253
563 Temple-Inland, Inc. .................. 28,783
------------
136,999
------------
Contract Drilling (0.1%)
919 Rowan Companies, Inc.* ............... 23,090
2,345 Transocean Sedco Forex Inc. .......... 92,481
------------
115,571
------------
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
Department Stores (0.3%)
2,740 Federated Department Stores,
Inc.* .............................. $ 100,524
2,063 Kohl's Corp.* ........................ 156,401
3,311 May Department Stores Co. ............ 86,707
------------
343,632
------------
Discount Chains (2.5%)
646 Consolidated Stores Corp.* ........... 7,267
5,018 Costco Wholesale Corp.* .............. 249,645
2,765 Dollar General Corp. ................. 57,892
4,341 Kmart Corp.* ......................... 38,255
4,925 Target Corp. ......................... 290,575
49,584 Wal-Mart Stores, Inc.** .............. 2,414,121
------------
3,057,755
------------
Diversified Commercial Services (0.1%)
2,383 Paychex, Inc. ........................ 119,299
------------
Diversified Financial Services (2.3%)
4,322 American Express Co. ................. 579,958
41,204 Citigroup, Inc. ...................... 2,129,732
1,531 Providian Financial Corp. ............ 99,228
------------
2,808,918
------------
Diversified Manufacturing (1.1%)
1,640 Danaher Corp. ........................ 66,932
2,351 Dover Corp. .......................... 90,660
8,092 Honeywell International, Inc. ........ 389,427
704 ITT Industries, Inc. ................. 17,072
1,863 Thermo Electron Corp.* ............... 29,109
20,820 Tyco International Ltd. (Bermuda) 789,859
------------
1,383,059
------------
Drugstore Chains (0.3%)
4,409 CVS Corp. ............................ 154,315
9,123 Walgreen Co. ......................... 235,487
------------
389,802
------------
E.D.P. Peripherals (1.3%)
11,000 EMC Corp.* ........................... 1,309,000
1,368 Lexmark International Group, Inc.
(Class A)* ......................... 163,134
455 Network Appliance, Inc.* ............. 85,881
------------
1,558,015
------------
E.D.P. Services (1.0%)
5,221 Automatic Data Processing, Inc. ...... 227,440
15,530 Ceridian Corp.* ...................... 307,688
1,746 Computer Sciences Corp.* ............. 137,607
5,167 Electronic Data Systems Corp. ........ 334,563
4,495 First Data Corp. ..................... 202,275
------------
1,209,573
------------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
Electric Utilities (1.4%)
2,342 AES Corp. (The)* ...................... $ 196,289
1,780 CMS Energy Corp. ...................... 29,815
3,257 Consolidated Edison, Inc. ............. 89,771
2,583 Constellation Energy Group, Inc. ...... 76,844
2,757 Dominion Resources, Inc. .............. 101,147
6,681 Duke Energy Corp. ..................... 324,028
5,351 Edison International .................. 140,798
3,603 Entergy Corp. ......................... 72,961
2,990 FPL Group, Inc. ....................... 115,489
3,570 PECO Energy Co. ....................... 133,206
1,196 Pinnacle West Capital Corp. ........... 33,039
4,784 Reliant Energy, Inc. .................. 98,371
4,643 Texas Utilities Co. ................... 151,478
3,610 Unicom Corp. .......................... 136,503
------------
1,699,739
------------
Electrical Products (0.2%)
3,670 Emerson Electric Co. .................. 167,214
1,422 Molex Inc. ............................ 79,276
599 Thomas & Betts Corp. .................. 13,440
------------
259,930
------------
Electronic Components (0.2%)
484 Andrew Corp.* ......................... 11,918
3,143 Solectron Corp.* ...................... 205,866
------------
217,784
------------
Electronic Data Processing (5.9%)
4,187 Apple Computer, Inc.* ................. 479,935
14,245 Compaq Computer Corp. ................. 354,344
27,589 Dell Computer Corp.* .................. 1,124,252
3,478 Gateway, Inc. ......................... 239,112
11,081 Hewlett-Packard Co. ................... 1,490,395
19,667 International Business Machines
Corp. ............................... 2,006,034
812 NCR Corp.* ............................ 30,805
13,819 Sun Microsystems, Inc.* ............... 1,316,260
3,498 Unisys Corp.* ......................... 104,721
------------
7,145,858
------------
Electronic Production
Equipment (1.4%)
5,739 Applied Materials, Inc.* .............. 1,049,520
6,118 KLA-Tencor Corp.* ..................... 476,822
1,964 Teradyne, Inc.* ....................... 170,868
------------
1,697,210
------------
Environmental Services (0.1%)
11,707 Allied Waste Industries, Inc.* ........ 65,852
------------
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ------------
<S> <C> <C>
Finance Companies (1.4%)
8,872 Associates First Capital Corp.
(Class A) ........................... $ 176,331
2,110 Capital One Financial Corp. ........... 77,674
1,082 Countrywide Credit Industries,
Inc. ................................ 26,982
12,421 Fannie Mae ............................ 658,313
8,411 Freddie Mac ........................... 351,159
5,047 Household International, Inc. ......... 161,189
8,737 MBNA Corp. ............................ 198,767
1,465 SLM Holding Corp. ..................... 45,873
------------
1,696,288
------------
Financial Publishing/Services (0.1%)
1,533 Dun & Bradstreet Corp. ................ 40,145
1,329 Equifax, Inc. ......................... 28,158
2,084 McGraw-Hill Companies, Inc. ........... 106,024
------------
174,327
------------
Fluid Controls (0.3%)
8,972 Parker-Hannifin Corp. ................. 325,235
------------
Food Chains (0.4%)
551 Great Atlantic & Pacific Tea Co.,
Inc. ................................ 12,914
12,949 Kroger Co.* ........................... 192,616
7,593 Safeway Inc.* ......................... 292,805
------------
498,335
------------
Food Distributors (0.1%)
1,606 Supervalu, Inc. ....................... 27,603
3,472 SYSCO Corp. ........................... 113,925
------------
141,528
------------
Forest Products (0.1%)
1,452 Georgia-Pacific Corp. ................. 50,366
2,051 Weyerhaeuser Co. ...................... 105,242
------------
155,608
------------
Generic Drugs (0.0%)
1,075 Watson Pharmaceuticals, Inc.* ......... 43,000
------------
Home Building (0.0%)
594 Centex Corp. .......................... 11,694
598 Kaufman & Broad Home Corp. ............ 11,437
707 Pulte Corp. ........................... 11,886
------------
35,017
------------
</TABLE>
See Notes to Financial Statements
6
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ---------
<S> <C> <C>
Home Furnishings (0.1%)
2,071 Leggett & Platt, Inc. ................. $ 34,819
2,480 Newell Rubbermaid, Inc. ............... 57,350
608 Tupperware Corp. ...................... 10,450
---------
102,619
---------
Hospital/Nursing Management (0.2%)
6,173 Columbia/HCA Healthcare Corp. ......... 119,216
621 Manor Care, Inc. ...................... 5,395
3,506 Tenet Healthcare Corp.* ............... 61,355
---------
185,966
---------
Hotels/Resorts (0.2%)
7,203 Carnival Corp. ........................ 207,536
2,339 Marriott International, Inc.
(Class A) ........................... 64,469
---------
272,005
---------
Industrial Machinery/Components (0.2%)
4,092 Illinois Tool Works Inc. .............. 211,505
1,917 Ingersoll-Rand Co. .................... 73,445
---------
284,950
---------
Industrial Specialties (0.1%)
1,704 Ecolab, Inc. .......................... 48,138
1,332 Pall Corp. ............................ 26,307
---------
74,445
---------
Insurance Brokers/Services (0.2%)
2,786 AON Corp. ............................. 58,332
2,838 Marsh & McLennan Companies,
Inc. ................................ 219,590
---------
277,922
---------
Integrated Oil Companies (3.5%)
1,312 Amerada Hess Corp. .................... 66,338
6,592 Chevron Corp. ......................... 492,340
10,953 Conoco, Inc. (Class B) ................ 215,637
28,672 Exxon Mobil Corp.** ................... 2,159,360
3,701 Phillips Petroleum Co. ................ 141,563
17,850 Royal Dutch Petroleum Co. (ADR)
(Netherlands) ....................... 937,125
4,511 Texaco, Inc. .......................... 213,991
2,153 Unocal Corp. .......................... 57,593
---------
4,283,947
---------
Internet Services (1.9%)
24,360 America Online, Inc.* ................. 1,437,240
5,670 Yahoo! Inc.* .......................... 905,428
---------
2,342,668
---------
<CAPTION>
NUMBER OF
SHARES VALUE
------------ ---------
<S> <C> <C>
Investment Bankers/Brokers/
Services (0.8%)
1,203 Bear Stearns Companies, Inc. .......... $ 47,218
1,153 Lehman Brothers Holdings, Inc. ........ 83,593
4,183 Merrill Lynch & Co., Inc. ............. 428,758
1,292 Paine Webber Group, Inc. .............. 49,419
9,513 Schwab (Charles) Corp. ................ 397,762
---------
1,006,750
---------
Investment Managers (0.1%)
2,093 Franklin Resources, Inc. .............. 56,903
857 Price (T.) Rowe Associates, Inc. ...... 28,227
---------
85,130
---------
Life Insurance (0.3%)
3,667 American General Corp. ................ 191,372
4,291 Conseco, Inc. ......................... 62,756
2,331 Lincoln National Corp. ................ 64,831
---------
318,959
---------
Major Banks (3.8%)
23,915 Bank of America Corp. ................. 1,101,585
10,079 Bank of New York Co., Inc. ............ 335,757
3,631 BB&T Corp. ............................ 85,329
11,613 Chase Manhattan Corp. (The) ........... 924,685
1,905 Comerica, Inc. ........................ 70,366
12,638 FleetBoston Financial Corp. ........... 344,386
7,059 Mellon Financial Corp. ................ 212,652
3,201 PNC Bank Corp. ........................ 123,839
2,069 SouthTrust Corp. ...................... 47,458
1,794 State Street Corp. .................... 130,738
4,366 SunTrust Banks, Inc. .................. 221,847
7,731 U.S. Bancorp .......................... 141,574
2,268 Wachovia Corp. ........................ 129,701
22,260 Wells Fargo & Co. ..................... 735,971
---------
4,605,888
---------
Major Chemicals (0.8%)
13,557 Du Pont (E.I.) de Nemours & Co.,
Inc. ................................ 684,629
5,223 Monsanto Co. .......................... 202,718
2,858 Rohm & Haas Co. ....................... 115,392
---------
1,002,739
---------
Major Pharmaceuticals (5.9%)
16,592 Abbott Laboratories ................... 543,388
10,901 American Home Products Corp. .......... 474,194
16,553 Bristol-Myers Squibb Co. .............. 940,417
15,039 Johnson & Johnson ..................... 1,079,048
9,051 Lilly (Eli) & Co. ..................... 537,969
</TABLE>
See Notes to Financial Statements
7
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ -----------
<S> <C> <C>
19,465 Merck & Co., Inc.** .................... $ 1,198,314
32,000 Pfizer, Inc.** ......................... 1,028,000
4,250 Pharmacia & Upjohn, Inc. ............... 202,406
14,847 Schering-Plough Corp. .................. 517,789
7,117 Warner-Lambert Co. ..................... 608,948
-----------
7,130,473
-----------
Major U.S. Telecommunications (6.3%)
3,347 ALLTEL Corp. ........................... 194,126
34,374 AT&T Corp. ............................. 1,699,365
16,898 Bell Atlantic Corp. .................... 826,946
15,506 BellSouth Corp. ........................ 631,870
10,537 GTE Corp. .............................. 621,683
30,665 MCI WorldCom, Inc.* .................... 1,368,426
37,225 SBC Communications, Inc. ............... 1,414,550
9,386 Sprint Corp. (FON Group) ............... 572,546
4,232 U.S. West, Inc. ........................ 307,349
-----------
7,636,861
-----------
Managed Health Care (0.4%)
1,301 Aetna Inc. ............................. 53,504
6,628 United HealthCare Corp. ................ 338,857
751 Wellpoint Health Networks, Inc.* ....... 50,693
-----------
443,054
-----------
Meat/Poultry/Fish (0.1%)
6,160 ConAgra, Inc. .......................... 100,870
-----------
Media Conglomerates (1.8%)
17,102 Disney (Walt) Co. ...................... 572,917
14,029 Time Warner Inc. ....................... 1,199,480
7,578 Viacom, Inc. (Class B)* ................ 422,474
-----------
2,194,871
-----------
Medical Equipment & Supplies (0.5%)
12,978 Medtronic, Inc. ........................ 628,622
-----------
Medical Specialties (0.8%)
1,094 ALZA Corp. (Class A)* .................. 40,136
350 Bard (C.R.), Inc. ...................... 13,825
621 Bausch & Lomb, Inc. .................... 32,758
3,192 Baxter International, Inc. ............. 173,964
2,207 Becton, Dickinson & Co. ................ 68,555
1,307 Biomet, Inc. ........................... 43,131
3,378 Boston Scientific Corp.* ............... 61,649
3,365 Guidant Corp. .......................... 226,717
2,312 PE Corporation-PE Biosystems
Group ................................ 243,916
688 St. Jude Medical, Inc.* ................ 17,974
-----------
922,625
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ -----------
<S> <C> <C>
Medical/Dental Distributors (0.1%)
3,522 Cardinal Health, Inc. .................. $ 145,283
-----------
Mid-Sized Banks (0.5%)
4,572 AmSouth Bancorporation ................. 66,294
3,587 Fifth Third Bancorp .................... 186,524
13,371 Firstar Corp. .......................... 238,171
1,218 Old Kent Financial Corp. ............... 31,896
1,513 Union Planters Corp. ................... 41,418
-----------
564,303
-----------
Military/Gov't/Technical (0.2%)
2,405 General Dynamics Corp. ................. 104,016
684 PerkinElmer, Inc. ...................... 44,204
2,903 Raytheon Co. (Class B) ................. 53,706
-----------
201,926
-----------
Motor Vehicles (0.7%)
17,436 Ford Motor Co. ......................... 725,774
1,851 Harley-Davidson, Inc. .................. 126,099
-----------
851,873
-----------
Movies/Entertainment (0.2%)
4,762 Seagram Co. Ltd. (Canada) .............. 279,768
-----------
Multi-Line Insurance (1.6%)
8,592 Allstate Corp. ......................... 167,544
16,793 American International Group,
Inc. ................................. 1,485,131
2,077 CIGNA Corp. ............................ 153,309
2,390 Hartford Financial Services
Group, Inc. .......................... 74,688
-----------
1,880,672
-----------
Multi-Sector Companies (4.1%)
623 Crane Co. .............................. 12,382
1,719 Fortune Brands, Inc. ................... 37,603
36,185 General Electric Co. ................... 4,783,205
3,328 McDermott International, Inc. .......... 31,200
422 National Service Industries, Inc. ...... 8,651
1,426 Textron, Inc. .......................... 86,986
-----------
4,960,027
-----------
Natural Gas (0.0%)
341 Nicor Inc. ............................. 10,358
454 ONEOK, Inc. ............................ 10,300
357 Peoples Energy Corp. ................... 10,331
-----------
30,989
-----------
Newspapers (0.3%)
767 Dow Jones & Co., Inc. .................. 47,842
2,308 Gannett Co., Inc. ...................... 150,453
708 Knight-Ridder, Inc. .................... 33,188
</TABLE>
See Notes to Financial Statements
8
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ -----------
<S> <C> <C>
1,987 New York Times Co. (The)
(Class A) .......................... $ 83,951
450 Times Mirror Co. (Class A) ........... 22,950
-----------
338,384
-----------
Office Equipment/Supplies (0.3%)
967 Avery Dennison Corp. ................. 58,685
2,799 Pitney Bowes, Inc. ................... 138,551
5,913 Xerox Corp. .......................... 128,238
-----------
325,474
-----------
Oil & Gas Production (0.2%)
1,491 Anardarko Petroleum Corp. ............ 45,848
1,172 Apache Corp. ......................... 42,778
2,400 Burlington Resources, Inc. ........... 66,300
790 Kerr-McGee Corp. ..................... 35,353
3,017 Union Pacific Resources Group,
Inc. ............................... 26,964
-----------
217,243
-----------
Oil Refining/Marketing (0.4%)
1,238 Sunoco, Inc. ......................... 30,563
2,026 Tosco Corp. .......................... 54,196
18,050 USX-Marathon Group ................... 390,331
-----------
475,090
-----------
Oil/Gas Transmission (0.9%)
2,529 Coastal Corp. ........................ 106,376
721 Columbia Energy Group ................ 42,539
2,714 El Paso Energy Corp. ................. 100,588
8586 Enron Corp. .......................... 592,434
5,298 Williams Companies, Inc. ............. 221,523
-----------
1,063,460
-----------
Oilfield Services/Equipment (0.6%)
3,097 Baker Hughes Inc. .................... 80,135
4,825 Halliburton Co. ...................... 184,255
6,005 Schlumberger Ltd. (Netherlands) ...... 443,619
-----------
708,009
-----------
Other Consumer Services (0.2%)
1,230 Block (H.&R.), Inc. .................. 53,966
8,294 Cendant Corp.* ....................... 147,737
-----------
201,703
-----------
Other Metals/Minerals (0.1%)
974 Allegheny Technologies Inc. .......... 16,497
1,679 Inco Ltd. (Canada)* .................. 29,383
598 Phelps Dodge Corp. ................... 28,231
-----------
74,111
-----------
Other Specialty Stores (0.2%)
1,457 AutoZone, Inc.* ...................... 35,788
1,705 Bed Bath & Beyond Inc.* .............. 48,273
<CAPTION>
NUMBER OF
SHARES VALUE
- ------------ -----------
<S> <C> <C>
3,806 Office Depot, Inc.* .................. $ 46,386
5,222 Staples, Inc.* ....................... 140,994
-----------
271,441
-----------
Other Telecommunications (0.4%)
1,467 CenturyTel, Inc. ..................... 49,328
8,182 Global Crossing Ltd. (Bermuda)* ...... 381,486
-----------
430,814
-----------
Package Goods/Cosmetics (1.9%)
380 Alberto-Culver Co. (Class B) ......... 8,123
2,308 Avon Products, Inc. .................. 62,460
2,521 Clorox Co. ........................... 101,943
4,848 Colgate-Palmolive Co. ................ 253,005
8,888 Gillette Co. ......................... 313,302
1,122 International Flavors &
Fragrances, Inc. ................... 33,660
5,913 Kimberly-Clark Corp. ................. 305,628
14,265 Procter & Gamble Co. ................. 1,255,320
-----------
2,333,441
-----------
Packaged Foods (0.9%)
4,119 Bestfoods ............................ 172,741
3,508 General Mills, Inc. .................. 115,545
4,160 Heinz (H.J.) Co. ..................... 132,860
4,308 Nabisco Group Holdings Corp. ......... 37,157
4,142 Ralston-Ralston Purina Group ......... 117,270
11,283 Sara Lee Corp. ....................... 169,245
6,998 Unilever N.V. (Netherlands) .......... 318,409
-----------
1,063,227
-----------
Paints/Coatings (0.1%)
1,760 PPG Industries, Inc. ................. 86,900
1,555 Sherwin-Williams Co. ................. 29,739
-----------
116,639
-----------
Paper (0.3%)
491 Boise Cascade Corp. .................. 14,638
1,033 Champion International Corp. ......... 53,458
1,935 Fort James Corp. ..................... 36,402
4,268 International Paper Co. .............. 157,116
1,176 Mead Corp. ........................... 35,207
1,167 Westavaco Corp. ...................... 32,165
889 Willamette Industries, Inc. .......... 30,170
-----------
359,156
-----------
Photographic Products (0.2%)
3,571 Eastman Kodak Co. .................... 204,663
-----------
Precious Metals (0.1%)
4,900 Barrick Gold Corp. (Canada) .......... 79,931
1,868 Freeport-McMoran Copper &
Gold, Inc. (Class B) ............... 25,685
</TABLE>
See Notes to Financial Statements
9
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
------------ -----------
<S> <C> <C>
1,807 Newmont Mining Corp. .................... $ 39,980
3,869 Placer Dome Inc. (Canada) ............... 33,854
-----------
179,450
-----------
Precision Instruments (0.0%)
271 Tektronix, Inc. ......................... 15,718
-----------
Printing/Forms (0.0%)
1,686 Deluxe Corp. ............................ 39,516
-----------
Property - Casualty Insurers (0.1%)
1,837 Chubb Corp. ............................. 90,357
856 Loews Corp. ............................. 38,092
2,314 St. Paul Companies, Inc. ................ 51,776
-----------
180,225
-----------
Railroads (0.3%)
9,489 Burlington Northern Santa Fe
Corp. ................................. 186,815
2,163 Kansas City Southern Industries,
Inc. .................................. 170,336
-----------
357,151
-----------
Recreational Products/Toys (0.1%)
1,865 Brunswick Corp. ......................... 32,987
4,078 Hasbro, Inc. ............................ 64,229
-----------
97,216
-----------
Rental/Leasing Companies (0.0%)
435 Ryder System, Inc. ...................... 8,102
-----------
Restaurants (0.3%)
1,099 Darden Restaurants, Inc. ................ 14,493
11,220 McDonald's Corp. ........................ 354,131
1,358 Tricon Global Restaurants, Inc.* ........ 36,157
984 Wendy's International, Inc. ............. 15,498
-----------
420,279
-----------
Savings & Loan Associations (0.1%)
6,427 Washington Mutual, Inc. ................. 142,197
-----------
Semiconductors (5.7%)
1,174 Advanced Micro Devices, Inc.* ........... 45,933
1,899 Analog Devices, Inc.* ................... 298,143
1,624 Conexant Systems, Inc.* ................. 159,558
36,089 Intel Corp.** ........................... 4,078,057
3,270 LSI Logic Corp.* ........................ 209,484
2,210 Micron Technology, Inc.* ................ 216,718
1,906 National Semiconductor Corp.* ........... 143,188
8,668 Texas Instruments, Inc. ................. 1,443,222
3,595 Xilinx, Inc.* ........................... 286,701
-----------
6,881,004
-----------
<CAPTION>
NUMBER OF
SHARES VALUE
------------ -----------
<S> <C> <C>
Services to the Health Industry (0.1%)
3,784 IMS Health Inc. ......................... $ 76,153
2,006 Quintiles Transnational Corp.* .......... 59,553
208 Shared Medical Systems Corp. ............ 8,099
-----------
143,805
-----------
Shoe Manufacturing (0.1%)
3,049 Nike, Inc. (Class B) .................... 86,706
-----------
Specialty Chemicals (0.1%)
2,877 Air Products & Chemicals, Inc. .......... 74,083
1,494 Engelhard Corp. ......................... 20,356
172 FMC Corp.* .............................. 8,310
941 Grace (W. R.) & Co. ..................... 9,469
1,279 Sigma-Aldrich Corp. ..................... 30,376
-----------
142,594
-----------
Specialty Insurers (0.1%)
1,294 MBIA, Inc. .............................. 49,657
1,448 MGIC Investment Corp. ................... 54,119
-----------
103,776
-----------
Specialty Steels (0.0%)
1,058 Nucor Corp. ............................. 52,569
-----------
Steel/Iron Ore (0.0%)
1,377 Bethlehem Steel Corp.* .................. 7,832
1,000 USX-U.S. Steel Group .................... 21,875
-----------
29,707
-----------
Telecommunication Equipment (5.7%)
3,372 ADC Telecommunications, Inc.* ........... 151,319
803 Comverse Technology, Inc.* .............. 157,639
3,407 Corning Inc. ............................ 640,516
33,823 Lucent Technologies Inc. ................ 2,012,469
7,436 Motorola, Inc. .......................... 1,267,838
14,488 Nortel Networks Corp. (Canada) .......... 1,615,412
5,457 QUALCOMM Inc.* .......................... 777,281
960 Scientific-Atlanta, Inc. ................ 98,580
4,300 Tellabs, Inc.* .......................... 206,400
-----------
6,927,454
-----------
Textiles (0.0%)
286 Springs Industries, Inc. (Class A) ...... 10,135
-----------
Tobacco (0.4%)
21,140 Philip Morris Companies, Inc. ........... 424,121
-----------
Tools/Hardware (0.1%)
1,354 Black & Decker Corp. .................... 44,597
208 Briggs & Stratton Corp. ................. 6,955
574 Snap-On, Inc. ........................... 12,520
-----------
64,072
-----------
</TABLE>
See Notes to Financial Statements
10
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Portfolio of Investments February 29, 2000, continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- ----------- ------------
<S> <C> <C>
TOTAL COMMON STOCKS
(Identified Cost $94,885,634) .......... $116,638,217
------------
SHORT-TERM INVESTMENT (3.4%)
REPURCHASE AGREEMENT
$ 4,092 The Bank of New York 5.688%
due 03/01/00 (dated 02/29/00;
proceeds $4,093,539) (a)
(Identified Cost $4,092,892)............ 4,092,892
------------
TOTAL INVESTMENTS
(Identified Cost $98,978,526) (b) ......... 99.7% 120,731,109
OTHER ASSETS IN EXCESS OF
LIABILITIES ............................... 0.3 326,159
----- ------------
NET ASSETS ................................ 100.0% $121,057,268
===== ============
</TABLE>
- --------------------------------
* Non-income producing security.
** Some or all of these securities are segregated in connection with open
futures contracts.
(a) Collateralized by $4,151,800 Federal National Mortgage Assoc. 7.392% due
05/01/24 valued at $4,174,765.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $31,054,546 and the
aggregate gross unrealized depreciation is $9,301,963, resulting in net
unrealized appreciation of $21,752,583.
FUTURES CONTRACTS OPEN AT FEBRUARY 29, 2000:
DESCRIPTION UNDERLYING
NUMBER OF DELIVERY MONTH, FACE AMOUNT UNREALIZED
CONTRACTS AND YEAR AT VALUE LOSS
- ----------------------------------------------------------
13 S&P 500 Index/ $4,459,000 $(212,242)
March 2000
See Notes to Financial Statements
11
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
February 29, 2000
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(identified cost $98,978,526) ................................... $120,731,109
Cash .............................................................. 31,417
Receivable for:
Shares of beneficial interest sold ............................. 558,394
Dividends ...................................................... 124,612
Variation margin on futures contracts .......................... 78,975
Prepaid expenses and other assets ................................. 70,487
------------
TOTAL ASSETS ................................................... 121,594,994
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ...................... 328,457
Plan of distribution fee ....................................... 93,950
Investment management fee ...................................... 58,580
Accrued expenses and other payables ............................... 56,739
------------
TOTAL LIABILITIES .............................................. 537,726
------------
NET ASSETS ..................................................... $121,057,268
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ................................................... $100,992,421
Net unrealized appreciation ....................................... 21,540,341
Accumulated net realized loss ..................................... (1,475,494)
------------
NET ASSETS ..................................................... $121,057,268
============
CLASS A SHARES:
Net Assets ........................................................ $4,703,158
Shares Outstanding (unlimited authorized, $.01 par value) ......... 359,040
NET ASSET VALUE PER SHARE ...................................... $13.10
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ................ $13.83
======
CLASS B SHARES:
Net Assets ........................................................ $106,069,839
Shares Outstanding (unlimited authorized, $.01 par value) ......... 8,174,825
NET ASSET VALUE PER SHARE ...................................... $12.98
======
CLASS C SHARES:
Net Assets ........................................................ $9,130,844
Shares Outstanding (unlimited authorized, $.01 par value) ......... 703,585
NET ASSET VALUE PER SHARE ...................................... $12.98
======
CLASS D SHARES:
Net Assets ........................................................ $1,153,427
Shares Outstanding (unlimited authorized, $.01 par value) ......... 87,812
NET ASSET VALUE PER SHARE ...................................... $13.14
======
</TABLE>
See Notes to Financial Statements
12
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Statements, continued
STATEMENT OF OPERATIONS
For the year ended February 29, 2000
<TABLE>
<CAPTION>
NET INVESTMENT LOSS:
<S> <C>
INCOME
Dividends (net of $13,542 foreign withholding tax) ......... $ 1,323,296
Interest ................................................... 240,030
------------
TOTAL INCOME ............................................ 1,563,326
------------
EXPENSES
Plan of distribution fee (Class A shares) .................. 10,747
Plan of distribution fee (Class B shares) .................. 1,040,513
Plan of distribution fee (Class C shares) .................. 87,813
Investment management fee .................................. 705,671
Transfer agent fees and expenses ........................... 144,803
Offering costs ............................................. 77,629
Registration fees .......................................... 59,587
Professional fees .......................................... 43,173
Custodian fees ............................................. 37,584
Shareholder reports and notices ............................ 28,736
Trustees' fees and expenses ................................ 13,477
Other ...................................................... 28,050
------------
TOTAL EXPENSES .......................................... 2,277,783
------------
NET INVESTMENT LOSS ..................................... (714,457)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain/loss on:
Investments ............................................. (1,729,802)
Futures contracts ....................................... 138,987
------------
NET LOSS ................................................ (1,590,815)
------------
Net change in unrealized appreciation/depreciation on:
Investments ............................................. 13,151,412
Futures contracts ....................................... (95,717)
------------
NET APPRECIATION ........................................ 13,055,695
------------
NET GAIN ................................................ 11,464,880
------------
NET INCREASE ............................................... $ 10,750,423
============
</TABLE>
See Notes to Financial Statements
13
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Statements, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------- --------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ............................. $ (714,457) $ (92,893)
Net realized gain (loss) ........................ (1,590,815) 685,459
Net change in unrealized appreciation ........... 13,055,695 8,484,646
------------ -----------
NET INCREASE ................................. 10,750,423 9,077,212
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares ............................... - (3,651)
Class B shares ............................... - (13,797)
Class C shares ............................... - (301)
Class D shares ............................... - (252)
Net realized gain
Class A shares ............................... (16,029) (4,603)
Class B shares ............................... (368,751) (128,154)
Class C shares ............................... (29,852) (8,097)
Class D shares ............................... (910) (235)
------------ -----------
TOTAL DIVIDENDS AND DISTRIBUTIONS ............ (415,542) (159,090)
------------ -----------
Net increase from transactions in shares of
beneficial interest ........................... 17,812,441 83,891,824
------------ -----------
NET INCREASE ................................. 28,147,322 92,809,946
NET ASSETS:
Beginning of period ............................. 92,909,946 100,000
------------ -----------
END OF PERIOD ................................ $121,057,268 $92,909,946
============ ===========
</TABLE>
- ---------------------
* Commencement of operations.
See Notes to Financial Statements
14
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter S&P 500 Select 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 to
provide a total return (before expenses) that exceeds the total return of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The
Fund seeks to achieve its objective by investing, under normal circumstances, at
least 80% of the value of its net assets in common stocks of selected companies
included in the S&P 500 Index. The Fund was organized as a Massachusetts
business trust on June 8, 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 September 28, 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 (in
cases where a security is traded on more than one exchange, the security is
valued on the exchange designated as the primary market pursuant to procedures
adopted by the Trustees); (2) all other portfolio securities for which
over-the-counter market quotations are readily available are valued at the
latest available bid price prior to the time of valuation; (3) when market
quotations are not readily available, including circumstances under which it is
determined by 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; and (4) short-term debt securities having a
maturity date of more than sixty days at time of
15
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000, continued
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. FUTURES CONTRACTS - A futures contract is an agreement between two parties to
buy and sell financial instruments at a set price on a future date. Upon
entering into such a contract, the Fund is required to pledge to the broker
cash, U.S. Government securities or other liquid portfolio securities equal to
the minimum initial margin requirements of the applicable futures exchange.
Pursuant to the contract, the Fund agrees to receive from or pay to the broker
an amount of cash equal to the daily fluctuation in the value of the contract,
which is known as variation margin. Such receipts or payments are recorded by
the Fund as unrealized gains or losses. Upon closing of the contract, the Fund
realizes a gain or loss 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.
E. 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.
F. 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.
16
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000, continued
G. OFFERING COSTS - The Investment Manager incurred offering costs on behalf of
the Fund in the amount of approximately $143,000 and was reimbursed for the full
amount thereof. Such expenses were deferred and fully amortized as of September
28, 1999.
2. INVESTMENT MANAGEMENT AGREEMENT
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 0.60% 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.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A - up
to 0.25% of the average daily net assets of Class A; (ii) Class B - 1.0% of the
average daily net assets of Class B; and (iii) Class C - up to 1.0% of the
average daily net assets of Class C. In the case of Class A shares, amounts paid
under the Plan are paid to the Distributor for services provided. In the case of
Class B and Class C shares, amounts paid under the Plan are paid to the
Distributor for (1) services provided and the expenses borne by it and others in
the distribution of the shares of these Classes, including the payment of
commissions for sales of these Classes and incentive compensation to, and
expenses of, Morgan Stanley Dean Witter Financial Advisors and others who engage
in or support distribution of the shares or who service shareholder accounts,
including overhead and telephone expenses; (2) printing and distribution of
prospectuses and reports used in connection with the offering of these shares to
other than current shareholders; and (3) preparation, printing and distribution
of sales literature and advertising materials. In addition, the Distributor may
utilize fees paid pursuant to the Plan, in the case of Class B shares, to
compensate Dean Witter Reynolds Inc. ("DWR"), an affiliate of the Investment
Manager and Distributor, and other selected broker-dealers for their opportunity
costs in advancing such amounts, which compensation would be in the form of a
carrying charge on any unreimbursed expenses.
17
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000, continued
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 $216,540 at February 29, 2000.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the year ended February 29, 2000, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.25% and
1.0%, respectively.
The Distributor has informed the Fund that for the year ended February 29, 2000,
it received contingent deferred sales charges from certain redemptions of the
Fund's Class A shares, Class B shares and Class C shares of $4,005, $328,400 and
$8,903, respectively and received $34,477 in front-end sales charges from sales
of the Fund's Class A shares. The respective shareholders pay such charges which
are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities, excluding
short-term investments, for the year ended February 29, 2000 aggregated
$51,187,669 and $30,922,884, respectively.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
18
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000, continued
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
--------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ................................................ 195,682 $ 2,483,357 287,669 $ 3,063,240
Reinvestment of dividends and distributions ......... 1,113 14,063 696 8,153
Redeemed ............................................ (115,113) (1,473,680) (13,507) (148,699)
-------- ------------- ------- ------------
Net increase - Class A .............................. 81,682 1,023,740 274,858 2,922,694
-------- ------------- ------- ------------
CLASS B SHARES
Sold ................................................ 3,616,854 45,961,205 7,352,876 78,346,802
Reinvestment of dividends and distributions ......... 26,589 334,485 11,216 131,227
Redeemed ............................................ (2,525,828) (32,424,065) (309,382) (3,536,821)
---------- ------------- --------- ------------
Net increase - Class B .............................. 1,117,615 13,871,625 7,054,710 74,941,208
---------- ------------- --------- ------------
CLASS C SHARES
Sold ................................................ 379,260 4,809,371 590,107 6,366,780
Reinvestment of dividends and distributions ......... 2,318 29,166 691 8,077
Redeemed ............................................ (223,405) (2,877,016) (47,886) (514,807)
---------- ------------- --------- ------------
Net increase - Class C .............................. 158,173 1,961,521 542,912 5,860,050
---------- ------------- --------- ------------
CLASS D SHARES
Sold ................................................ 76,694 1,032,652 14,665 167,520
Reinvestment of dividends and distributions ......... 54 685 42 488
Redeemed ............................................ (6,132) (77,782) (11) (136)
---------- ------------- --------- ------------
Net increase - Class D .............................. 70,616 955,555 14,696 167,872
---------- ------------- --------- ------------
Net increase in Fund ................................ 1,428,086 $ 17,812,441 7,887,176 $ 83,891,824
========= ============= ========= ============
</TABLE>
- ---------------
* Commencement of operations.
6. FEDERAL INCOME TAX STATUS
At February 29, 2000, the Fund had a net capital loss carryover of approximately
$746,000 which will be available through February 29, 2008 to offset future
capital gains to the extent provided by regulations.
19
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Notes to Financial Statements February 29, 2000, continued
Capital losses incurred after October 31 ("post-October" losses) within the
taxable year are deemed to arise on the first business day of the Fund's next
taxable year. The Fund incurred and will elect to defer net capital losses of
approximately $612,000 during fiscal 2000.
As of February 29, 2000, the Fund had temporary book/tax differences primarily
attributable to post-October losses, the mark-to-market of futures contracts and
capital loss deferrals on wash sales and permanent book/tax differences
primarily attributable to nondeductible expenses and a net operating loss. To
reflect reclassifications arising from the permanent differences,
paid-in-capital was charged $715,639, undistributed net realized gain was
credited $1,182 and net investment loss was credited $714,457.
7. PURPOSES OF AND RISKS RELATING TO CERTAIN FINANCIAL INSTRUMENTS
The Fund may purchase and sell stock index futures ("futures contracts") for the
following reasons: to simulate full investment in the S&P 500 Index while
retaining a cash balance for fund management purposes; to facilitate trading; to
reduce transaction costs; or to seek higher investment returns when a futures
contract is priced more attractively than stocks comprising the S&P 500 Index.
These futures contracts involve elements of market risk in excess of the amount
reflected in the Statement of Assets and Liabilities. The Fund bears the risk of
an unfavorable change in the value of the underlying securities.
At February 29, 2000, the Fund had outstanding futures contracts.
20
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------- ----------------------
<S> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $11.79 $10.00
------- ----------
Income from investment operations:
Net investment income .......................... 0.01 0.02
Net realized and unrealized gain ............... 1.34 1.81
------- ----------
Total income from investment operations ......... 1.35 1.83
------- ----------
Less dividends and distributions from:
Net investment income .......................... - (0.02)
Net realized gains ............................. (0.04) (0.02)
-------- ----------
Total dividends and distributions ............... (0.04) (0.04)
-------- ----------
Net asset value, end of period .................. $13.10 $11.79
====== ======
TOTAL RETURN + .................................. 11.50% 18.32%(1)
RATIOS TO AVERAGE NET ASSETS(4):
Expenses ........................................ 1.22% 1.23%(2)(3)
Net investment income ........................... 0.11% 0.38%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $4,703 $3,269
Portfolio turnover rate ......................... 26% 3%(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) If the Fund had borne all of its expenses that were reimbursed or waived by
the Investment Manager, the annualized expense and the net investment
income ratios would have been 1.55% and 0.06%, respectively, for the period
ended February 28, 1999.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
See Notes to Financial Statements
21
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------- ------------------------
<S> <C> <C>
CLASS B SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period .............. $11.76 $10.00
------ ------
Income (loss) from investment operations:
Net investment loss .............................. (0.08) (0.02)
Net realized and unrealized gain ................. 1.34 1.80
------ ------
Total income from investment operations ........... 1.26 1.78
------ ------
Less distributions from net realized gain ......... (0.04) (0.02)#
------ ------
Net asset value, end of period .................... $12.98 $11.76
====== ======
TOTAL RETURN + .................................... 10.67 % 17.96 %(1)
RATIOS TO AVERAGE NET ASSETS(4):
Expenses .......................................... 1.97 % 1.98 %(2)(3)
Net investment loss ............................... (0.64)% (0.37)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ........... $106,070 $83,021
Portfolio turnover rate ........................... 26 % 3 %(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.
# Includes $0.002 of dividends from net investment income.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by
the Investment Manager, the annualized expense and the net investment
income ratios would have been 2.30% and (0.69)%, respectively, for period
ended February 28, 1999.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
See Notes to Financial Statements
22
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------- ------------------------
<S> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............... $11.77 $10.00
------ ------
Income (loss) from investment operations:
Net investment loss ............................... (0.08) (0.02)
Net realized and unrealized gain .................. 1.33 1.81
------ ------
Total income from investment operations ............ 1.25 1.79
------ ------
Less distributions from net realized gains ......... (0.04) (0.02)#
------ ------
Net asset value, end of period ..................... $12.98 $11.77
====== ======
TOTAL RETURN + ..................................... 10.67 % 17.94 %(1)
RATIOS TO AVERAGE NET ASSETS(4):
Expenses ........................................... 1.97 % 1.98 %(2)(3)
Net investment loss ................................ (0.64)% (0.37)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ............ $9,131 $6,417
Portfolio turnover rate ............................ 26 % 3 %(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.
# Includes $.000859 of dividends from net investment income.
(1) Not annualized.
(2) Annualized.
(3) If the Fund had borne all of its expenses that were reimbursed or waived by
the Investment Manager, the annualized expense and the net investment
income ratios would have been 2.30% and (0.69)%, respectively, for the
period ended February 28, 1999.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
See Notes to Financial Statements
23
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Financial Highlights, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE YEAR SEPTEMBER 28, 1998*
ENDED THROUGH
FEBRUARY 29, 2000 FEBRUARY 28, 1999
------------------- ----------------------
<S> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $11.79 $10.00
------ ------
Income from investment operations:
Net investment income .......................... 0.04 0.02
Net realized and unrealized gain ............... 1.35 1.81
------ ------
Total income from investment operations ......... 1.39 1.83
------ ------
Less dividends and distributions from:
Net investment income .......................... - (0.02)
Net realized gains ............................. (0.04) (0.02)
------ ------
Total dividends and distributions ............... (0.04) (0.04)
------ ------
Net asset value, end of period .................. $13.14 $11.79
====== ======
TOTAL RETURN + .................................. 11.84% 18.38%(1)
RATIOS TO AVERAGE NET ASSETS(4):
Expenses ........................................ 0.97% 0.98%(2)(3)
Net investment income ........................... 0.36% 0.63%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $1,153 $203
Portfolio turnover rate ......................... 26% 3%(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) If the Fund had borne all of its expenses that were reimbursed or waived by
the Investment Manager, the annualized expense and the net investment
income ratios would have been 1.30% and 0.31%, respectively, for the period
ended February 28, 1999.
(4) Reflects overall Fund ratios for investment income and non-class specific
expenses.
See Notes to Financial Statements
24
<PAGE>
Morgan Stanley Dean Witter S&P 500 Select Fund
Report of Independent Accountants
TO THE SHAREHOLDERS AND TRUSTEES
OF MORGAN STANLEY DEAN WITTER S&P 500 SELECT FUND
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Morgan Stanley Dean Witter S&P 500
Select Fund (the "Fund") at February 29, 2000, the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for the year then ended and for the period September 28, 1998
(commencement of operations) through February 28, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
February 29, 2000 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP 1177
Avenue of the Americas
New York, New York 10036
April 17, 2000
2000 FEDERAL TAX NOTICE (unaudited)
For the period ended February 29, 2000, the Fund paid to shareholders $0.03
per share from long-term capital gains. For such period, 97.46% of the
income paid qualified for the dividends received deduction available to
corporations.
25
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
Guy Rutherford, Jr.
Vice President
Kevin Jung
Assistant Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
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
S&P 500
SELECT FUND
[GRAPHIC OMITTED]
ANNUAL REPORT
February 29, 2000
