<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND Two World Trade Center,
LETTER TO THE SHAREHOLDERS August 31, 2000 New York, New York 10048
DEAR SHAREHOLDER:
Morgan Stanley Dean Witter Tax-Managed Growth Fund commenced operations on
April 26, 2000. The Fund seeks long-term growth of capital on an after-tax
basis by investing primarily in the common stocks of companies having a stock
market capitalization of at least $1 billion. The Fund attempts to reduce the
impact of federal taxes on returns by employing tax-management strategies.
Morgan Stanley Dean Witter Investment Management Inc. serves as the Fund's
sub-advisor.
MARKET OVERVIEW
Increased volatility has marked the U.S. equity markets since the inception of
the Fund. While the Standard & Poor's 500 Stock Index(1) (S&P 500(Reg. TM))
increased 4.39 percent for the period ended August 31, 2000, it had been down
as much as 5 percent. Growth stocks outperformed value issues as the Russell
1000 Growth Index appreciated 8.28 percent compared to 1.09 percent for the
Russell 1000 Value Index. Financial and utility stocks were the dominant
contributors to the S&P 500's performance, while communication services and
consumer cyclicals were the index's greatest detractors. Early in the period,
investors focused on assessing the likelihood of further interest rate
increases based on economic indicators and testimony from Federal Reserve Board
Chairman Alan Greenspan. In response to the uncertainty, investors rapidly
rotated between old- and new-economy stocks. Then in August, they rotated back
to new-economy stocks because of continued signs of a soft economic landing. As
a result, the technology sector experienced a strong rebound in performance.
------------------
1 The Standard & Poor's 500 Index is a broad-based index, the performance of
which is based on the performance of 500 widely held common stocks chosen
for market size, liquidity and industry group representation. The Index does
not include any expenses, fees or charges. The Index is unmanaged and should
not be considered an investment.
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
LETTER TO THE SHAREHOLDERS August 31, 2000, continued
PERFORMANCE
From its inception through August 31, 2000, the Fund's Class A, B, C and D
shares posted total returns of 4.60 percent, 4.40 percent, 4.40 percent and
4.70 percent, respectively. For the same period, the S&P 500 returned 4.39
percent. The performance of the Fund's four share classes varies because of
differing expenses. The total return figures given assume the reinvestment of
all distributions but do not reflect the deduction of any applicable sales
charges.
The Fund's outperformance of its benchmark index was the result of its neutral
posture toward technology versus the index weight. The capital goods sector,
the Fund's second-largest sector and its largest overweighting versus the S&P
500, was the Fund's second-best-performing sector for the period. Tyco
International, the largest holding in the portfolio as of August 31, advanced
more than 20 percent since the Fund's inception, making it one of the best
performing stocks on both an absolute and a relative basis. Other major
contributors to performance results were Maxim Integrated, Juniper Networks and
Ciena Corp.
PORTFOLIO STRATEGY
According to Morgan Stanley Dean Witter Investment Management, the Fund's
portfolio will generally be diversified among 75 to 100 issues. The portfolio
will typically hold a balance of classic growth stocks such as Home Depot,
General Electric and Cisco, and less well-known growth names such as Tyco
International and United Technologies. A hallmark of the sub-advisor's strategy
is its philosophy of opportunistic concentration, of which the Fund's weighting
in Tyco is a good example. The Fund can own up to 10 percent of its assets in a
single name. The sub-advisor believes that this willingness to invest according
to its convictions should lead to attractive performance as well as limit
portfolio turnover caused by tight weighting restrictions. In addition, the top
ten holdings will typically represent 35 to 45 percent of the portfolio.
Security selection is driven by fundamental equity research, with portfolios
built by using a bottom-up approach. The sub-advisor seeks companies with an
understandable and compelling business strategy, a strong management team and
shareholder orientation, market or niche dominance, and most importantly the
prospect of strong earnings growth.
LOOKING AHEAD
Going forward, Morgan Stanley Dean Witter Investment Management believes that
long-term fundamentals remain strong across industries. In addition, the
sub-advisor continues to feel that the Fed is
2
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
LETTER TO THE SHAREHOLDERS August 31, 2000, continued
nearing the end of its current cycle of interest-rate increases and, while the
global economic backdrop is generally positive, growth is not too strong in all
areas of the world. This scenario provides a favorable environment for growth
stocks.
We appreciate your ongoing support of Morgan Stanley Dean Witter Tax-Managed
Growth Fund and look forward to continuing to serve your investment needs.
Very truly yours,
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
3
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 2000
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCKS (96.5%)
Advertising/Marketing Services (0.4%)
9,100 Omnicom Group, Inc. .................. $ 759,281
------------
Aerospace & Defence (3.4%)
43,500 General Dynamics Corp. ............... 2,737,781
63,200 General Motors Corp. (Class H)* ...... 2,093,500
23,900 Textron, Inc. ........................ 1,339,894
------------
6,171,175
------------
Apparel/Footwear Retail (0.7%)
59,800 Limited, Inc. (The) .................. 1,196,000
------------
Beverages: Non-Alcoholic (0.9%)
38,200 PepsiCo, Inc. ........................ 1,628,275
------------
Beverages: Alcoholic (1.1%)
26,100 Anheuser-Busch Companies, Inc. ....... 2,057,006
------------
Biotechnology (1.2%)
11,000 Amgen Inc.* .......................... 833,937
5,000 Bruker Daltonics, Inc. ............... 251,250
7,900 MedImmune, Inc.* ..................... 664,587
700 Millennium Pharmaceuticals, Inc.* .... 100,187
9,700 Tularik Inc. ......................... 323,737
------------
2,173,698
------------
Broadcasting (2.8%)
69,700 Clear Channel Communications, Inc.* .. 5,044,537
------------
Cable/Satellite TV (2.1%)
104,600 AT&T Corp. - Liberty Media
Group (Class A)* ................... 2,235,825
44,000 Comcast Corp. (Class A Special)*...... 1,639,000
------------
3,874,825
------------
Computer Communications (5.7%)
130,200 Cisco Systems, Inc.* ................. 8,918,700
5,900 Juniper Networks, Inc.* .............. 1,261,125
2,800 McDATA Corp. - (Class B) ............. 301,175
------------
10,481,000
------------
Computer Peripherals (1.8%)
26,000 EMC Corp.* ........................... 2,548,000
12,200 Seagate Technology, Inc.* ............ 724,375
------------
3,272,375
------------
Computer Processing Hardware (3.5%)
10,700 Hewlett-Packard Co. .................. 1,292,025
14,500 International Business Machines
Corp. .............................. 1,914,000
25,200 Sun Microsystems, Inc.* .............. 3,198,825
------------
6,404,850
------------
Discount Stores (1.1%)
9,900 Dollar Tree Stores, Inc.* ............ $ 401,569
35,100 Wal-Mart Stores, Inc. ................ 1,665,056
------------
2,066,625
------------
Electronic Equipment/Instruments (1.5%)
3,600 Exfo Electro-Optical Engineering
Inc. (Canada)* ..................... 204,300
7,924 Gemstar-TV Guide International, Inc. . 715,141
14,550 JDS Uniphase Corp.* .................. 1,811,248
------------
2,730,689
------------
Electronic Production Equipment (2.1%)
38,800 Applied Materials, Inc.* ............. 3,348,925
10,400 ASM Lithography Holding NV
(Netherlands)* ..................... 396,500
------------
3,745,425
------------
Engineering & Construction (0.3%)
20,400 Spectrasite Holdings, Inc.* .......... 478,125
------------
Finance/Rental/Leasing (0.9%)
37,600 Freddie Mac .......................... 1,583,900
------------
Financial Conglomerates (3.0%)
29,500 American Express Co. ................. 1,744,187
62,667 Citigroup, Inc. ...................... 3,658,167
------------
5,402,354
------------
Food Retail (0.7%)
25,000 Safeway Inc.* ........................ 1,232,812
------------
Food: Major Diversified (0.7%)
19,900 Quaker Oats Company (The) ............ 1,351,956
------------
Food: Specialty/Candy (0.4%)
17,400 Keebler Foods Co. .................... 797,137
------------
Home Improvement Chains (2.5%)
94,600 Home Depot, Inc. (The) ............... 4,546,712
------------
Hospital/Nursing Management (0.3%)
18,000 HCA-The Healthcare Corp. ............. 621,000
------------
Household/Personal Care (0.5%)
14,000 Procter & Gamble Co. ................. 865,375
------------
Industrial Conglomerates (14.0%)
140,900 General Electric Co. ................. 8,269,069
182,900 Tyco International Ltd. (Bermuda) .... 10,425,300
109,300 United Technologies Corp. ............ 6,824,419
------------
25,518,788
------------
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 2000, continued
NUMBER OF
SHARES VALUE
----------- ------------
Information Technology Services (0.3%)
4,600 StorageNetworks, Inc.* ................. $ 466,900
------------
Internet Software/Services (3.0%)
64,100 America Online, Inc.* .................. 3,757,862
2,500 Inktomi Corp.* ......................... 325,937
5,900 RealNetworks, Inc.* .................... 287,256
300 TeleCommunication Systems, Inc.
(Class B) ............................ 8,606
2,100 VeriSign, Inc.* ........................ 417,638
5,650 Yahoo! Inc.* ........................... 686,475
------------
5,483,774
------------
Major Banks (2.8%)
52,800 Bank of New York Co., Inc. ............. 2,768,700
15,200 Chase Manhattan Corp. (The) ............ 849,300
34,800 FleetBoston Financial Corp. ............ 1,485,525
------------
5,103,525
------------
Major Telecommunications (2.8%)
29,900 AT&T Corp. ............................. 941,850
66,608 Verizon Communications ................. 2,905,774
34,500 WorldCom, Inc.* ........................ 1,259,250
------------
5,106,874
------------
Media Conglomerates (0.7%)
19,532 Viacom, Inc. (Class B) (Non-Voting)* ... 1,314,748
------------
Medical Specialties (0.4%)
8,100 PE Corporation-PE Biosystems Group ..... 796,838
------------
Multi-Line Insurance (1.1%)
22,050 American International Group, Inc. ..... 1,965,206
------------
Packaged Software (3.9%)
57,100 Microsoft Corp.* ....................... 3,986,294
35,100 Oracle Corp.* .......................... 3,191,906
------------
7,178,200
------------
Pharmaceuticals: Major (10.5%)
18,500 Abbott Laboratories .................... 809,375
36,600 American Home Products Corp. ........... 1,983,263
26,500 Bristol-Myers Squibb Co. ............... 1,404,500
24,900 Johnson & Johnson ...................... 2,289,244
14,300 Lilly (Eli) & Co. ...................... 1,043,900
22,900 Merck & Co., Inc. ...................... 1,600,138
165,125 Pfizer Inc. ............................ 7,141,656
40,300 Pharmacia Corp. ........................ 2,360,069
15,100 Schering-Plough Corp. .................. 605,888
------------
19,238,033
------------
Semiconductors (9.4%)
3,400 Analog Devices, Inc.* .................. $ 341,700
3,800 Broadcom Corp. (Class A)* .............. 950,000
8,800 Infineon Techologies AG (ADR)
(Germany)* ........................... 580,250
110,800 Intel Corp. ............................ 8,296,150
14,700 Intersil Holding Corp. (Class H)* ...... 793,800
31,000 Maxim Integrated Products, Inc.*........ 2,718,313
2,600 PMC - Sierra, Inc.* .................... 613,600
43,600 Texas Instruments, Inc. ................ 2,918,475
------------
17,212,288
------------
Specialty Stores (0.6%)
27,600 Tiffany & Co. .......................... 1,148,850
------------
Specialty Telecommunications (0.7%)
13,816 Global Crossing Ltd. (Bermuda)*......... 415,344
8,800 Pinnacle Holdings, Inc.* ............... 354,200
10,100 TyCom, Ltd. ............................ 420,413
------------
1,189,957
------------
Telecommunication Equipment (7.4%)
41,400 American Tower Corp. (Class A)*......... 1,503,338
6,300 CIENA Corp.* ........................... 1,396,631
6,400 Corning Inc. ........................... 2,098,800
2,200 Corvis Corp.* .......................... 228,388
37,900 Lucent Technologies Inc. ............... 1,584,694
900 Microtune, Inc. ........................ 49,050
42,000 Motorola, Inc. ......................... 1,514,625
64,100 Nortel Networks Corp. (Canada) ......... 5,228,156
------------
13,603,682
------------
Wireless Communications (1.3%)
12,700 AT&T Wireless Group, Inc. .............. 332,581
36,100 Crown Castle International Corp.*....... 1,252,219
11,700 Nextel Communications, Inc. (Class A)*.. 648,619
3,700 SBA Communications Corp.* .............. 165,113
------------
2,398,532
------------
TOTAL COMMON STOCKS
(Cost $162,246,341)..................... 176,211,327
------------
PREFERRED STOCK (0.3%)
Media Conglomerates
12,000 News Corporation Ltd. (The)
(ADR) (Australia) (Cost $522,323) .... 531,000
------------
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 2000, continued
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
----------- ------------
SHORT-TERM INVESTMENT (2.9%)
REPURCHASE AGREEMENT
$5,428 The Bank of New York
6.438% due 09/01/00
(dated 08/31/00;
proceeds $5,429,117) (a)
(Cost $5,428,147)........... $ 5,428,147
------------
TOTAL INVESTMENTS
(Cost $168,196,811) (b)......... 99.7% 182,170,474
OTHER ASSETS IN EXCESS OF
LIABILITIES .................... 0.3 469,833
----- ------------
NET ASSETS ..................... 100.0% $182,640,307
===== ============
------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $2,322,779 U.S. Treasury Note 6.625% due 02/15/27
valued at $2,554,489 and $2,969,135 U.S. Treasury Note 5.25% due 05/31/01
valued at $2,983,264.
(b) The aggregate cost for federal income tax purposes approximates the
aggregate cost for book purposes. The aggregate gross unrealized
appreciation is $19,370,624 and the aggregate gross unrealized
depreciation is $5,396,961, resulting in net unrealized appreciation of
$13,973,663.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
August 31, 2000
ASSETS:
Investments in securities, at value
(cost $168,196,811) ....................................... $182,170,474
Receivable for:
Shares of beneficial interest sold ........................ 884,300
Dividends ................................................. 100,325
Deferred offering costs ..................................... 70,340
Prepaid expenses and other assets ........................... 11,077
------------
TOTAL ASSETS .............................................. 183,236,516
------------
LIABILITIES:
Payable for:
Shares of beneficial interest repurchased ................. 139,128
Plan of distribution fee .................................. 136,471
Investment management fee ................................. 126,000
Investments purchased ..................................... 102,368
Offering costs .............................................. 1,002
Accrued expenses and other payables ......................... 91,240
------------
TOTAL LIABILITIES ......................................... 596,209
------------
NET ASSETS ................................................ $182,640,307
============
COMPOSITION OF NET ASSETS:
Paid-in-capital ............................................. $173,815,979
Net unrealized appreciation ................................. 13,973,663
Net realized loss ........................................... (5,149,335)
------------
NET ASSETS ................................................ $182,640,307
============
CLASS A SHARES:
Net Assets .................................................. $18,694,620
Shares Outstanding (unlimited authorized, $.01 par value) ... 1,786,774
NET ASSET VALUE PER SHARE ................................. $10.46
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ........... $11.04
======
CLASS B SHARES:
Net Assets .................................................. $136,498,357
Shares Outstanding (unlimited authorized, $.01 par value) ... 13,080,278
NET ASSET VALUE PER SHARE ................................. $10.44
======
CLASS C SHARES:
Net Assets .................................................. $27,133,425
Shares Outstanding (unlimited authorized, $.01 par value) ... 2,600,122
NET ASSET VALUE PER SHARE ................................. $10.44
======
CLASS D SHARES:
Net Assets .................................................. $313,905
Shares Outstanding (unlimited authorized, $.01 par value) ... 29,976
NET ASSET VALUE PER SHARE ................................. $10.47
======
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the period April 26, 2000* through August 31, 2000
NET INVESTMENT LOSS:
INCOME
Dividends ......................................... $ 360,001
Interest .......................................... 208,397
------------
TOTAL INCOME ................................... 568,398
------------
EXPENSES
Investment management fee ......................... 483,762
Plan of distribution fee (Class A shares) ......... 16,253
Plan of distribution fee (Class B shares) ......... 416,877
Plan of distribution fee (Class C shares) ......... 86,287
Registration fees ................................. 65,080
Transfer agent fees and expenses .................. 41,763
Professional fees ................................. 40,500
Offering costs .................................... 37,855
Shareholder reports and notices ................... 8,500
Custodian fees .................................... 4,974
Trustees' fees and expenses ....................... 3,170
Other ............................................. 3,791
------------
TOTAL EXPENSES ................................. 1,208,812
------------
NET INVESTMENT LOSS ............................ (640,414)
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized loss ................................. (5,149,335)
Net unrealized appreciation ....................... 13,973,663
------------
NET GAIN ....................................... 8,824,328
------------
NET INCREASE ...................................... $ 8,183,914
============
------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 26, 2000*
THROUGH
AUGUST 31, 2000
----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss ..................................................... $ (640,414)
Net realized loss ....................................................... (5,149,335)
Net unrealized appreciation ............................................. 13,973,663
------------
NET INCREASE ......................................................... 8,183,914
Net increase from transactions in shares of beneficial interest ......... 174,356,393
------------
NET INCREASE ......................................................... 182,540,307
NET ASSETS:
Beginning of period ..................................................... 100,000
------------
END OF PERIOD ........................................................ $182,640,307
============
</TABLE>
---------------
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 2000
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Tax-Managed Growth Fund (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The Fund's investment
objective is long-term growth of capital on an after-tax basis. The Fund seeks
to achieve its objective by investing primarily in common stocks of companies
having stock market values or capitalizations of at least $1 billion. The Fund
was organized as a Massachusetts business trust on December 27, 1999 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
April 26, 2000.
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 portfolio security listed or traded
on the New York or American Stock Exchange, NASDAQ, or other exchange is valued
at its latest sale price, 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; (3) when market quotations are not readily
available, including circumstances under which it is determined by the
Investment Manager, and/or Morgan Stanley Dean Witter Investment Management
Inc. (the "Sub-Advisor") 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
10
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 2000, continued
comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (4) short-term debt securities having a maturity date of
more than sixty days at time of purchase are valued on a mark-to-market basis
until sixty days prior to maturity and thereafter at amortized cost based on
their value on the 61st day. Short-term debt securities having a maturity date
of sixty days or less at the time of purchase are valued at amortized cost.
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 tax purposes, 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 $108,000 which will be reimbursed by
the Fund for the full amount thereof. Such expenses were deferred and are being
amortized by the Fund on the straight-line method over the period of benefit of
approximately one year or less from the commencement of operations.
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.
11
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 2000, continued
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. 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 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 totaled
$1,108,984 at August 31, 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 period ended August 31, 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 period ended August 31,
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 $4,700, $75,233
and $7,103, respectively and received $28,530 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.
12
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 2000, continued
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the period ended August 31, 2000
aggregated $195,136,148, and $27,218,148, respectively.
For the period ended August 31, 2000, the Fund incurred brokerage commissions
of $4,835 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager
and Distributor, is the Fund's transfer agent. At August 31, 2000, the Fund had
transfer agent fees and expenses payable of approximately $100.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
FOR THE PERIOD
APRIL 26, 2000*
THROUGH
AUGUST 31, 2000
--------------------------------
SHARES AMOUNT
------------- ----------------
CLASS A SHARES
Sold ........................... 2,105,376 $ 21,026,014
Redeemed ....................... (321,102) (3,259,702)
--------- ------------
Net increase - Class A ......... 1,784,274 17,766,312
--------- ------------
CLASS B SHARES
Sold ........................... 13,438,151 133,961,982
Redeemed ....................... (360,373) (3,591,890)
---------- ------------
Net increase - Class B ......... 13,077,778 130,370,092
---------- ------------
CLASS C SHARES
Sold ........................... 2,691,429 26,873,820
Redeemed ....................... (93,807) (929,749)
---------- ------------
Net increase - Class C ......... 2,597,622 25,944,071
---------- ------------
CLASS D SHARES
Sold ........................... 27,476 275,918
---------- ------------
Net increase in Fund ........... 17,487,150 $174,356,393
========== ============
---------------
* Commencement of operations.
13
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 2000, continued
6. FEDERAL INCOME TAX STATUS
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 $5,149,000 during fiscal 2000.
At August 31, 2000, the Fund had temporary book/tax differences attributable to
post-October losses and permanent book/tax differences attributable to a net
operating loss and nondeductible expenses. To reflect reclassifications arising
from the permanent differences, paid-in-capital was charged and net investment
loss was credited $640,414.
14
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout the period:
<TABLE>
<CAPTION>
FOR THE PERIOD APRIL 26, 2000* THROUGH AUGUST 31, 2000**
--------------------------------------------------------
CLASS A CLASS B CLASS C CLASS D
SHARES SHARES SHARES SHARES
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $10.00 $10.00 $10.00 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment loss ............................ (0.02) (0.04) (0.04) (0.01)
Net realized and unrealized gain ............... 0.48 0.48 0.48 0.48
------ ------ ------ ------
Total income from investment operations ......... 0.46 0.44 0.44 0.47
------ ------ ------ ------
Net asset value, end of period .................. $10.46 $10.44 $10.44 $10.47
====== ====== ====== ======
TOTAL RETURN+(1) ............................... 4.60 % 4.40 % 4.40 % 4.70 %
RATIOS TO AVERAGE NET ASSETS(2)(3):
Expenses ........................................ 1.46 % 2.21 % 2.21 % 1.21 %
Net investment loss ............................. (0.46)% (1.21)% (1.21)% (0.21)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $18,695 $136,498 $27,133 $314
Portfolio turnover rate (1) ..................... 17 % 17 % 17 % 17 %
</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
15
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF TRUSTEES
OF MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND:
We have audited the accompanying statement of assets and liabilities of Morgan
Stanley Dean Witter Tax-Managed Growth Fund (the "Fund"), including the
portfolio of investments, as of August 31, 2000, and the related statements of
operations and changes in net assets, and the financial highlights for the
period April 26, 2000 (commencement of operations) to August 31, 2000. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. Our procedures included confirmation of securities owned as of
August 31, 2000, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Morgan Stanley Dean Witter Tax-Managed Growth Fund as of August 31, 2000, the
results of its operations, the changes in its net assets and the financial
highlights for the period April 26, 2000 (commencement of operations) to August
31, 2000, in conformity with accounting principles generally accepted in the
United States of America.
Deloitte & Touche LLP
New York, New York
October 10, 2000
16
<PAGE>
MORGAN STANLEY DEAN WITTER TAX-MANAGED GROWTH FUND
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000, PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The report of PricewaterhouseCoopers LLP on the financial statement of the Fund
as of
February 22, 2000 contained no adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principle.
From February 22, 2000 through July 1, 2000, there have been no disagreements
with PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of
PricewaterhouseCoopers LLP would have caused them to make reference thereto in
their report on the financial statements.
The Fund, with the approval of its Board of Trustees and its Audit Committee,
engaged Deloitte & Touche LLP as its new independent accountants as of July 1,
2000.
17
<PAGE>
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<PAGE>
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<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
James F. Higgins
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
Deloitte & Touche LLP
Two World Financial Center
New York, New York 10281
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
Morgan Stanley Dean Witter
Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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 Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
TAX-MANAGED
GROWTH FUND
[GRAPHIC OMITTED]
ANNUAL REPORT
AUGUST 31, 2000
