<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND Two World Trade Center,
LETTER TO THE SHAREHOLDERS June 30, 1999 New York, New York 10048
DEAR SHAREHOLDER:
During the first six months of 1999, the broad equity market produced robust
gains amid a backdrop of strong economic growth and low inflation. Utilities
stocks also advanced in this environment as investors were attracted to both
the energy and telecommunications sectors of the market.
UTILITIES SECTOR OVERVIEW
During the first half of 1999, the electric utility industry continued to
navigate toward a competitive landscape with many states passing fair and
balanced restructuring bills. In addition, the electric utility sector remained
focused on share repurchases and consolidation, with many companies continuing
to implement growth initiatives designed to provide good earnings visibility
for shareholders. The telecommunications sector also benefited during the
six-month period as investors were attracted to the powerful demand trends
occurring across the entire global telecommunications spectrum. Moreover,
telecommunication companies produced strong earnings buoyed by solid core
growth, surging data and wireless usage worldwide and robust demand for
convenience features such as Caller ID and Call Waiting. The natural gas sector
performed nicely during the first half of 1999 as pricing of the commodity
strengthened due to a positive supply-and-demand backdrop. The natural gas
sector further benefited from persistent merger and acquisition activity and
favorable growth fundamentals within its diversified business segments.
PERFORMANCE
For the six-month period ended June 30, 1999, Morgan Stanley Dean Witter
Utilities Fund's Class B shares provided a total return of 4.93 percent,
compared to 6.78 percent for the Lipper Utilities Funds Index and 12.38 percent
for the broad-based Standard & Poor's 500 Composite Stock Price Index (S&P 500).
For the same period, the Fund's Class A, C and
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1999, continued
D shares returned 5.38 percent, 4.92 percent and 5.41 percent, respectively.
The performance of the Fund's four share classes varies because of differing
expenses.
A flourishing economy in conjunction with strong industrial earnings set the
stage for the broad market's outperformance of the Fund. The Fund lagged its
peer group during the six-month period due primarily to its above-average
weighting of electric utilities and fixed-income securities. The Fund did,
however, outperform the broad market during the second quarter with its Class B
shares providing a total return of 9.20 percent compared to 7.05 percent for
the S&P 500.
PORTFOLIO STRATEGY
Widespread diversification remains a key characteristic and strength of the
Fund. On June 30, 1999, 88.7 percent of the Fund's net assets were allocated to
utility and utility-related equities, 8.5 percent to high-quality fixed-income
securities and 2.8 percent to cash and cash equivalents. Within the equity
component, 45 percent were telecommunications, with electric utilities and
energy accounting for the balance. Enhancing overall Fund diversification were
selective foreign securities accounting for 11 percent of net assets primarily
focused on the growth area of global telecommunications. The fixed-income
portion of the Fund remains well diversified with a weighted average credit
rating of Baa1 and BBB+ as measured by Moody's Investor Service Inc. and
Standard & Poor's Corporation, respectively.
Among the Fund's largest equity holdings on June 30, 1999, were MCI WorldCom,
SBC Communications, Ameritech, Bell Atlantic and BellSouth
(telecommunications), Duke Energy, NiSource Inc. and New Century Energies
(electric utilities) and The Williams Companies, Enron Corporation and Coastal
Corp. (energy). Included among the Fund's major foreign holdings were BCE Inc.
and Telefonica de Espana S.A. The Fund initiated positions in several
international telecommunications companies during the period, including Korea
Telecom, Nokia of Finland, China Telecom, Colt Telecom of the U.K. and Matav
Telecom of Hungary. Other new portfolio holdings included RCN Corp., USEC
Corp., Calpine Corp. and VoiceStream Wireless.
LOOKING AHEAD
During the second half of 1999, the Fund anticipates maintaining a prudent
balance among electric utilities, telecommunications and energy. Currently, the
Fund expects to increase its international telecommunications holdings modestly
while expanding its allocation to the natural gas sector. We believe that the
Fund is well positioned to meet its long-term investment objectives.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley
Dean Witter Funds. Mr. Merin is the President and Chief Operating Officer of
Asset Management for Morgan Stanley Dean
2
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 1999, continued
Witter & Co. and President, Chief Executive Officer and Director of Morgan
Stanley Dean Witter Advisors Inc., the Fund's investment manager. He also
serves as Chairman, Chief Executive Officer and Director of the Fund's
distributor and transfer agent.
We appreciate your ongoing support of Morgan Stanley Dean Witter Utilities 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
* * *
On August 4, 1999, the Fund's shareholders approved the following changes to
the Fund's investment objective and investment restrictions:
Change in Investment Objective. The Fund's shareholders approved changing the
Fund's investment objective to: "seek both capital appreciation and current
income." Prior to this change, the Fund's objective was "to provide current
income and long-term growth of income and capital." Adoption of this change
eliminates long-term growth of income as an objective of the Fund.
Change in Investment Restriction. Shareholders approved eliminating the word
"public" from the Fund's investment restriction on concentrating investments.
This change has the effect of permitting the Fund to concentrate investments in
the entire utilities industry, as opposed to the more limited public utilities
industry.
3
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FUND PERFORMANCE June 30, 1999
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES*
- -------------------------------------------------------------
PERIOD ENDED 6/30/99
- ---------------------------
<S> <C> <C>
1 Year 18.29%(1) 12.08%(2)
Since Inception (7/28/97) 24.71%(1) 21.25%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES++
- -------------------------------------------------------------
PERIOD ENDED 6/30/99
- ---------------------------
<S> <C> <C>
1 Year 17.26%(1) 16.26%(2)
Since Inception (7/28/97) 23.71%(1) 23.71%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES+
- -------------------------------------------------------------
PERIOD ENDED 6/30/99
- ---------------------------
<S> <C> <C>
1 Year 17.31%(1) 12.31%(2)
5 Years 16.93%(1) 16.72%(2)
10 Years 12.18%(1) 12.18%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
- ---------------------------------------------
PERIOD ENDED 6/30/99
- ---------------------------
<S> <C>
1 Year 18.46%(1)
Since Inception (7/28/97) 24.95%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------
(1) Figure shown assumes reinvestment of all distributions and does not reflect
the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and the deduction of
the maximum applicable sales charge. See the Fund's current prospectus for
complete details on fees and sales charges.
* The maximum front-end sales charge for Class A shares is 5.25%.
+ The maximum CDSC for Class B is 5.0%. The CDSC declines to 0% after six
years.
++ The maximum CDSC for Class C shares is 1% for shares redeemed within one
year of purchase.
++ Class D shares have no sales charge.
4
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (88.7%)
Electric Utilities (36.6%)
165,000 AES Corp.* ................................. $ 9,590,625
930,000 Allegheny Energy, Inc. ..................... 29,818,125
825,000 Ameren Corp. ............................... 31,659,375
560,000 American Electric Power Co., Inc. .......... 21,035,000
560,000 Avista Corp. ............................... 9,100,000
540,000 BEC Energy ................................. 22,275,000
50,000 Calpine Corp.* ............................. 2,700,000
270,000 Carolina Power & Light Co. ................. 11,559,375
520,000 Central & South West Corp. ................. 12,155,000
1,004,470 CINergy Corp. .............................. 32,143,040
619,000 CMS Energy Corp. ........................... 25,920,625
700,000 Consolidated Edison, Inc. .................. 31,675,000
785,000 Constellation Energy Group, Inc. ........... 23,255,625
785,000 Dominion Resources, Inc. ................... 34,000,312
1,380,750 DPL, Inc. .................................. 25,371,281
539,000 DQE, Inc. .................................. 21,627,375
690,000 DTE Energy Co. ............................. 27,600,000
758,862 Duke Energy Corp. .......................... 41,263,121
1,014,500 Edison International ....................... 27,137,875
1,005,000 Endesa S.A. (ADR) (Spain) .................. 21,356,250
1,000,000 Energy East Corp. .......................... 26,000,000
445,000 Entergy Corp. .............................. 13,906,250
565,000 FirstEnergy Corp. .......................... 17,515,000
605,000 Florida Progress Corp. ..................... 24,994,062
512,000 FPL Group, Inc. ............................ 27,968,000
903,000 GPU, Inc. .................................. 38,095,312
610,000 Illinova Corp. ............................. 16,622,500
660,000 Kansas City Power & Light Co. .............. 16,830,000
200,000 Montana Power Co. .......................... 14,100,000
926,000 New Century Energies, Inc. ................. 35,940,375
705,000 New England Electric System ................ 35,338,125
1,410,000 NiSource Inc. .............................. 36,395,625
770,000 Northern States Power Co. .................. 18,624,375
585,500 PacifiCorp ................................. 10,758,562
385,000 Peco Energy Co. ............................ 16,121,875
165,000 PG & E Corp. ............................... 5,362,500
783,000 Pinnacle West Capital Corp. ................ 31,515,750
435,000 Potomac Electric Power Co. ................. 12,805,312
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- --------------------------------------------------------------------------------------
<S> <C> <C>
370,000 PP&L Resources, Inc. .................................... $ 11,377,500
590,000 Public Service Enterprise Group, Inc. ................... 24,116,250
1,215,000 Reliant Energy, Inc. .................................... 33,564,375
340,000 Rochester Gas & Electric Corp. .......................... 9,031,250
810,000 SCANA Corp. ............................................. 18,933,750
1,095,000 Southern Co. ............................................ 29,017,500
481,000 TECO Energy, Inc. ....................................... 10,942,750
801,000 Texas Utilities Co. ..................................... 33,041,250
100,000 USEC Inc. ............................................... 1,487,500
-------------
1,031,648,752
-------------
Energy (12.2%)
650,000 AGL Resources, Inc. ..................................... 11,984,375
330,000 Burlington Resources, Inc. .............................. 14,272,500
760,000 Coastal Corp. ........................................... 30,400,000
175,000 Columbia Energy Group ................................... 10,970,312
305,000 Consolidated Natural Gas Co. ............................ 18,528,750
1,040,670 El Paso Energy Corp. .................................... 36,618,576
907,137 Enron Corp. ............................................. 74,158,450
105,000 Exxon Corp. ............................................. 8,098,125
435,200 KeySpan Corp. ........................................... 11,478,400
240,000 New Jersey Resources Corp. .............................. 8,985,000
879,511 Sempra Energy ........................................... 19,898,936
716,000 Utilicorp United, Inc. .................................. 17,407,750
285,000 Washington Gas Light Co. ................................ 7,410,000
1,691,000 Williams Companies, Inc. ................................ 71,973,188
-------------
342,184,362
-------------
Telecommunications (39.9%)
80,000 Alcatel (ADR) (France) .................................. 2,270,000
824,900 ALLTEL Corp. ............................................ 58,980,350
1,000,000 Ameritech Corp. ......................................... 73,500,000
682,990 AT&T Corp. .............................................. 38,119,379
919,000 BCE, Inc. (Canada) ...................................... 45,318,188
902,000 Bell Atlantic Corp. ..................................... 58,968,250
1,451,000 BellSouth Corp. ......................................... 68,015,625
115,000 British Telecommunications PLC (ADR) (United Kingdom) ... 19,693,750
200,000 Cable & Wireless PLC (ADR) (United Kingdom) ............. 7,925,000
1,076,250 CenturyTel Inc. ......................................... 42,780,938
30,000 China Telecom (Hong Kong) Ltd. (ADR)* ................... 1,710,000
25,000 COLT Telecom Group PLC (ADR) (United Kingdom)* .......... 2,135,938
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
480,000 Ericsson (L.M.) Telefonaktiebolaqet (ADR) (Sweden) ............ $ 15,780,000
152,500 France Telecom S.A. (ADR) (France) ............................ 11,742,500
625,000 Frontier Corp. ................................................ 36,875,000
196,493 Global Crossing Ltd. (Bermuda)* ............................... 8,363,233
210,000 Global Telesystems Group, Inc. ................................ 16,996,875
688,000 GTE Corp. ..................................................... 52,116,000
600,000 Hong Kong Telecommunications, Ltd. (ADR) (Hong Kong) .......... 16,162,500
75,000 Korea Telecom Corp. (South Korea) (ADR)* ...................... 3,000,000
497,620 Lucent Technologies Inc. ...................................... 33,558,249
40,000 Magyar Tavkozlesi RT (MATAV) (ADR) (Hungary) .................. 1,100,000
879,169 MCI WorldCom, Inc.* ........................................... 75,608,534
145,000 McLeodUSA, Inc. (Class A) ..................................... 7,956,875
400,000 MediaOne Group, Inc. .......................................... 29,750,000
30,000 Nokia Corp. (ADR) (Finland) ................................... 2,746,875
627,802 Qwest Communications International, Inc. ...................... 20,756,704
25,000 RCN Corp.* .................................................... 1,040,625
1,214,612 SBC Communications, Inc. ...................................... 70,447,496
1,086,000 Sprint Corp. (FON Group) ...................................... 57,354,375
306,500 Sprint Corp. (PCS Group)* ..................................... 17,508,813
455,000 Telecommunications Corp. New Zealand, Ltd. (ADR)
(New Zealand) ................................................. 15,896,563
250,000 Telefonica de Argentina S.A. (ADR) (Argentina) ................ 7,843,750
270,504 Telefonica de Espana S.A. (ADR) (Spain) ....................... 39,797,901
305,000 Telefonos de Mexico S.A. (Series L) (ADR) (Mexico) ............ 24,647,813
124,750 Telstra Corp. Ltd. (ADR) (Australia)* ......................... 14,283,875
645,241 U.S. West, Inc. ............................................... 37,907,909
380,000 Vodafone Group PLC (ADR) (United Kingdom) ..................... 74,860,000
70,000 VoiceStream Wireless Corp. .................................... 1,990,625
149,600 Winstar Communications, Inc.* ................................. 7,293,000
-------------
1,122,803,508
-------------
TOTAL COMMON STOCKS
(Identified Cost $1,251,732,192)............................... 2,496,636,622
-------------
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
--------- ---- ----
<S> <C> <C> <C> <C>
CORPORATE BONDS (8.2%)
Electric Utilities (4.5%)
$ 1,499 AEP Generating Co. .................. 9.81% 12/07/22 1,805,332
5,000 Arizona Public Service Co. .......... 7.25 08/01/23 4,761,100
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 5,000 Calenergy Inc. ............................... 8.48% 09/15/28 $ 5,335,100
1,250 CE Generation LLC -- 144A** .................. 7.416 12/15/18 1,184,125
6,000 Chugach Electric Co. ......................... 9.14 03/15/22 6,783,000
5,000 Cincinnati Gas & Electric Co. ................ 7.20 10/01/23 4,732,800
5,000 Commonwealth Edison Co. ...................... 8.375 02/15/23 5,149,450
5,000 Consumers Energy Co. ......................... 7.375 09/15/23 4,698,500
5,757 DQU II Funding Corp. ......................... 8.70 06/01/16 6,011,056
5,000 Gulf States Utilities Co. .................... 8.94 01/01/22 5,198,050
7,000 Indiantown Cogeneration LP ................... 9.26 12/15/10 7,687,890
5,100 Long Island Lighting Co. ..................... 8.20 03/15/23 5,296,554
5,250 National Rural Utilities Cooperative
Finance Corp. ................................ 9.00 09/01/21 5,665,537
10,250 New Century Energies Inc. .................... 8.75 03/01/22 10,972,933
5,000 New York State Electric & Gas Corp. .......... 8.875 11/01/21 5,210,200
5,204 Niagara Mohawk Power Corp. ................... 8.77 01/01/18 5,355,488
5,000 Niagara Mohawk Power Corp. ................... 9.50 03/01/21 5,304,100
5,000 Public Service Electric & Gas Co. ............ 7.00 09/01/24 4,674,050
5,000 Salton Sea Funding Corp. -- 144A** ........... 7.475 11/30/18 4,779,700
5,000 Selkirk Cogen Funding Corp. .................. 8.98 06/26/12 5,348,850
5,000 Texas Utilities Electric Co. ................. 7.375 10/01/25 4,934,700
5,000 Virginia Electric Power Co. .................. 8.625 10/01/24 5,306,900
4,500 Western Resources Inc. ....................... 7.125 08/01/09 4,465,575
5,000 Wisconsin Power & Light Co. .................. 8.60 03/15/27 5,443,250
--------------
126,104,240
--------------
Natural Gas (1.4%)
5,000 ANR Pipeline Co. ............................. 9.625 11/01/21 6,086,650
10,000 Coastal Corp. ................................ 9.625 05/15/12 11,979,700
5,000 Colorado Interstate Gas Co. .................. 10.00 06/15/05 5,718,100
4,750 Southwest Gas Corp. .......................... 8.00 08/01/26 4,729,813
5,000 Transco Energy Co. ........................... 9.875 06/15/20 6,171,400
5,000 Williams Companies, Inc. ..................... 9.375 11/15/21 5,676,600
--------------
40,362,263
--------------
Telecommunications (2.3%)
5,000 AT&T Corp. ................................... 6.50 03/15/29 4,529,000
6,000 British Sky Broadcasting Group, Inc.
(United Kingdom) ............................. 6.875 02/23/09 5,508,960
5,000 Cable & Wireless Optus Ltd.
(Australia) .................................. 8.125 06/15/09 5,061,250
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 1999 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 4,000 Century Telephone Enterprises, Inc. .......... 8.25% 05/01/24 $ 4,068,200
5,000 GTE Corp. .................................... 7.90 02/01/27 5,062,750
5,000 GTE Corp. .................................... 6.94 04/15/28 4,750,750
5,000 SBC Communications Inc. ...................... 7.375 07/15/43 4,895,950
10,000 Sprint Capital Corp. ......................... 6.875 11/15/28 9,121,300
5,000 Sprint Corp. ................................. 9.25 04/15/22 5,893,300
5,000 Telecomunicaciones de Puerto Rico ............ 6.80 05/15/09 4,797,200
5,000 Telephone & Data Systems, Inc. ............... 10.00 01/15/21 5,537,300
5,000 Telephone & Data Systems, Inc. ............... 9.58 11/19/21 5,300,300
--------------
64,526,260
--------------
TOTAL CORPORATE BONDS
(Identified Cost $222,935,150).......................................... 230,992,763
--------------
U.S. GOVERNMENT AGENCY (0.3%)
25,000 U.S. Treasury Note Strip
(Identified Cost $8,012,659).................. 0.00 08/15/19 7,013,500
--------------
SHORT-TERM INVESTMENTS (a) (2.6%)
U.S. GOVERNMENT AGENCIES
44,300 Federal Home Loan Banks 4.60% due 07/01/99 ............................. 44,300,000
30,000 Federal National Mortgage Assoc. 4.85% due 07/06/99 .................... 29,979,792
--------------
TOTAL SHORT-TERM INVESTMENTS
(Amortized Cost $74,279,791)............................................ 74,279,792
--------------
TOTAL INVESTMENTS
(Identified Cost $1,556,959,792) (b)..................... 99.8% 2,808,922,677
CASH AND OTHER ASSETS IN EXCESS OF
LIABILITIES ............................................. 0.2 6,884,816
----- --------------
NET ASSETS .............................................. 100.0% $2,815,807,493
===== ==============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Securities were purchased on a discount basis. The interest rates
shown have been adjusted to reflect a money market equivalent yield.
(b) The aggregate cost for federal income tax purposes approximates
identified cost. The aggregate gross unrealized appreciation is
$1,259,778,192 and the aggregate gross unrealized depreciation is
$7,815,307, resulting in net unrealized appreciation of $1,251,962,885.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999 (unaudited)
<TABLE>
<S> <C>
ASSETS :
Investments in securities, at value
(identified cost $1,556,959,792)................................. $2,808,922,677
Cash .............................................................. 4,526,118
Receivable for :
Investments sold ............................................... 5,722,235
Dividends ...................................................... 5,311,252
Interest ....................................................... 4,578,204
Shares of beneficial interest sold ............................. 2,191,115
Foreign withholding taxes reclaimed ............................ 179,646
Prepaid expenses and other assets ................................. 113,309
--------------
TOTAL ASSETS ................................................... 2,831,544,556
--------------
LIABILITIES :
Payable for :
Investments purchased .......................................... 7,127,763
Shares of beneficial interest repurchased ...................... 3,548,801
Plan of distribution fee ....................................... 2,539,267
Investment management fee ...................................... 1,379,922
Dividends and distributions to shareholders .................... 1,004,697
Accrued expenses and other payables ............................... 136,613
--------------
TOTAL LIABILITIES .............................................. 15,737,063
--------------
NET ASSETS ..................................................... $2,815,807,493
==============
COMPOSITION OF NET ASSETS :
Paid-in-capital ................................................... $1,466,092,948
Net unrealized appreciation ....................................... 1,251,962,885
Accumulated net investment loss ................................... (618,710)
Accumulated undistributed net realized gain ....................... 98,370,370
--------------
NET ASSETS ..................................................... $2,815,807,493
==============
CLASS A SHARES :
Net Assets ........................................................ $10,617,020
Shares Outstanding (unlimited authorized, $.01 par value) ......... 533,862
NET ASSET VALUE PER SHARE ...................................... $19.89
======
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value) ............... $20.99
======
CLASS B SHARES :
Net Assets ........................................................ $2,768,771,094
Shares Outstanding (unlimited authorized, $.01 par value) ......... 138,930,528
NET ASSET VALUE PER SHARE ...................................... $19.93
======
CLASS C SHARES :
Net Assets ........................................................ $9,585,307
Shares Outstanding (unlimited authorized, $.01 par value) ......... 481,082
NET ASSET VALUE PER SHARE ...................................... $19.92
======
CLASS D SHARES :
Net Assets ........................................................ $26,834,072
Shares Outstanding (unlimited authorized, $.01 par value) ......... 1,350,541
NET ASSET VALUE PER SHARE ...................................... $19.87
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF OPERATIONS
For the six months ended June 30, 1999 (unaudited)
<TABLE>
<S> <C>
NET INVESTMENT INCOME :
INCOME
Dividends (net of $285,875 foreign withholding tax)......... $ 35,971,353
Interest ................................................... 11,458,975
------------
TOTAL INCOME ............................................ 47,430,328
------------
EXPENSES
Plan of distribution fee (Class A shares) .................. 9,816
Plan of distribution fee (Class B shares) .................. 13,497,780
Plan of distribution fee (Class C shares) .................. 40,591
Investment management fee .................................. 7,387,062
Transfer agent fees and expenses ........................... 1,242,288
Shareholder reports and notices ............................ 100,611
Custodian fees ............................................. 61,869
Registration fees .......................................... 38,667
Professional fees .......................................... 31,731
Trustees' fees and expenses ................................ 8,711
Other ...................................................... 19,437
------------
TOTAL EXPENSES .......................................... 22,438,563
------------
NET INVESTMENT INCOME ................................... 24,991,765
------------
NET REALIZED AND UNREALIZED GAIN :
Net realized gain .......................................... 98,594,047
Net change in unrealized appreciation ...................... 9,618,881
------------
NET GAIN ................................................ 108,212,928
------------
NET INCREASE ............................................... $133,204,693
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1999 DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS :
OPERATIONS :
Net investment income .................................... $ 24,991,765 $ 56,595,530
Net realized gain ........................................ 98,594,047 132,906,441
Net change in unrealized appreciation .................... 9,618,881 323,997,946
-------------- --------------
NET INCREASE .......................................... 133,204,693 513,499,917
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM :
Net investment income
Class A shares ........................................ (165,109) (195,162)
Class B shares ........................................ (26,546,245) (56,213,582)
Class C shares ........................................ (88,106) (82,276)
Class D shares ........................................ (395,461) (680,717)
Net realized gain
Class A shares ........................................ (53,810) (481,447)
Class B shares ........................................ (11,890,948) (139,042,766)
Class C shares ........................................ (40,699) (285,747)
Class D shares ........................................ (114,532) (1,268,629)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS ..................... (39,294,910) (198,250,326)
-------------- --------------
Net increase (decrease) from transactions in shares of
beneficial interest .................................... (71,510,966) 25,796,333
-------------- --------------
NET INCREASE .......................................... 22,398,817 341,045,924
NET ASSETS :
Beginning of period ...................................... 2,793,408,676 2,452,362,752
-------------- --------------
END OF PERIOD
(Including a net investment loss of $618,710 and
undistributed net income of $1,584,446, respectively.) $2,815,807,493 $2,793,408,676
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Utilities 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 current income and long-term growth of income and capital. The Fund
seeks to achieve its objective by investing primarily in equity and fixed
income securities of companies engaged in the public utilities industry. The
Fund was organized as a Massachusetts business trust on December 8, 1987 and
commenced operations on April 29, 1988. On July 28, 1997, the Fund converted to
a multiple class share structure.
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 securities are traded on more than one exchange; the securities
are valued on the exchange designated as the primary market pursuant to the
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 Morgan Stanley Dean Witter Advisors, Inc. (the "Investment
Manager"), that sale or bid prices are not reflective of a security's market
value, portfolio securities are valued at their fair value as determined in
good faith under procedures established by and under the general supervision of
the Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix
utilizing similar factors); (4) certain of the Fund's portfolio securities may
be valued by an outside pricing service approved by the Trustees.
13
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
The pricing service may utilize a matrix system incorporating security quality,
maturity and coupon as the evaluation model parameters, and/or research and
evaluations by its staff, including review of broker-dealer market price
quotations, if available, in determining what it believes is the fair valuation
of the portfolio securities valued by such pricing service; and (5) 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.
Discounts are amortized over the life of the respective securities. Dividend
income and other distributions are recorded on the ex-dividend date. 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 record 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.
14
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
2. INVESTMENT MANAGEMENT AGREEMENT
Pursuant to an Investment Management Agreement with the Investment Manager, the
Fund pays the Investment Manager a management fee, accrued daily and payable
monthly, by applying the annual rate of 0.65% to the portion of daily net
assets not exceeding $500 million; 0.55% to the portion of daily net assets
exceeding $500 million but not exceeding $1 billion; 0.525% to the portion of
daily net assets exceeding $1 billion but not exceeding $1.5 billion; 0.50% to
the portion of daily net assets exceeding $1.5 billion but not exceeding $2.5
billion; 0.475% to the portion of daily net assets exceeding $2.5 billion but
not exceeding $3.5 billion; 0.45% to the portion of daily net assets exceeding
$3.5 billion but not exceeding $5 billion; and 0.425% to the portion of daily
net assets exceeding $5 billion.
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 lesser of: (a) the average daily aggregate gross sales of the Class B
shares since the inception of the Fund (not including reinvestment of dividend
or capital gain distributions) less the average daily aggregate net asset value
of the Class B shares redeemed since the Fund's inception upon which a
contingent deferred sales charge has been imposed or waived; or (b) 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, the 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
15
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
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.
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 $47,430,198 at June 30, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended June 30, 1999, the distribution fee was
accrued for Class A shares and Class C shares at the annual rate of 0.16% and
1.0%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
1999, it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares of $827,539 and received $242 in front-end sales
charges from sales of the Fund's Class A shares. The respective shareholders
pay such charges which are not an expense of the Fund.
4. SECURITY TRANSACTIONS AND TRANSACTIONS WITH AFFILIATES
The cost of purchases and proceeds from sales of portfolio securities,
excluding short-term investments, for the six months ended June 30, 1999
aggregated $184,619,657 and $225,066,644, respectively. Included in the
aforementioned are purchases and sales of U.S. Government securities of
$7,829,500 and $9,470,745, respectively.
For the six months ended June 30, 1999, the Fund incurred $6,500 in brokerage
commissions with DWR for portfolio transactions executed on behalf of the Fund.
16
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
For the six months ended June 30, 1999, the Fund incurred brokerage commissions
of $5,000 with Morgan Stanley & Co., Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
The Fund has an unfunded noncontributory defined benefit pension plan covering
all independent Trustees of the Fund who will have served as independent
Trustees for at least five years at the time of retirement. Benefits under this
plan are based on years of service and compensation during the last five years
of service. Aggregate pension costs for the six months ended June 30, 1999
included in Trustees' fees and expenses in the Statement of Operations amounted
to $2,988. At June 30, 1999, the Fund had an accrued pension liability of
$52,045 which is included in accrued expenses in the Statement of Assets and
Liabilities.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 1999 DECEMBER 31, 1998
------------------------------ ------------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold ...................................... 139,032 $ 2,669,416 471,524 $ 8,460,496
Reinvestment of dividends and distributions 10,003 196,251 33,328 613,355
Redeemed .................................. (153,953) (3,039,338) (176,648) (3,093,414)
------------- ------------- ------------- -------------
Net increase (decrease) -- Class A ........ (4,918) (173,671) 328,204 5,980,437
------------- ------------- ------------- -------------
CLASS B SHARES
Sold ...................................... 7,227,062 139,761,436 19,178,545 349,176,866
Reinvestment of dividends and distributions 1,578,210 31,088,089 8,756,868 161,419,594
Redeemed .................................. (12,718,546) (245,926,159) (27,729,620) (500,666,327)
------------- ------------- ------------- -------------
Net increase (decrease) -- Class B ........ (3,913,274) (75,076,634) 205,793 9,930,133
------------- ------------- ------------- -------------
CLASS C SHARES
Sold ...................................... 206,570 3,995,389 315,427 5,761,324
Reinvestment of dividends and distributions 5,371 105,989 17,427 321,582
Redeemed .................................. (69,938) (1,355,561) (76,154) (1,373,522)
------------- ------------- ------------- -------------
Net increase -- Class C ................... 142,003 2,745,817 256,700 4,709,384
------------- ------------- ------------- -------------
CLASS D SHARES
Sold ...................................... 359,960 6,811,538 442,423 8,058,763
Reinvestment of dividends and distributions 25,186 493,472 103,737 1,906,622
Acquisition of Dean Witter Retirement
Series -- Utilities Series .............. -- -- 244,186 4,310,004
Redeemed .................................. (332,106) (6,311,488) (499,814) (9,099,010)
------------- ------------- ------------- -------------
Net increase -- Class D ................... 53,040 993,522 290,532 5,176,379
------------- ------------- ------------- -------------
Net increase (decrease) in Fund ........... (3,723,149) $ (71,510,966) 1,081,229 $ 25,796,333
============= ============= ============= =============
</TABLE>
17
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 1999 (unaudited) continued
6. FEDERAL INCOME TAX STATUS
As of December 31, 1998, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
7. ACQUISITION OF DEAN WITTER RETIREMENT SERIES -- UTILITIES SERIES
As of the close of business on September 11, 1998, the Fund acquired all the
net assets of Dean Witter Retirement Series -- Utilities Series ("Retirement
Utilities") pursuant to a plan of reorganization (the "Plan") approved by the
shareholders of Retirement Utilities on August 19, 1998. The acquisition was
accomplished by a tax-free exchange of 244,186 Class D shares of the Fund at a
net asset value of $17.65 per share for 411,249 shares of Retirement Utilities.
The net assets of the Fund and Retirement Utilities immediately before the
acquisition were $2,422,836,927 and $4,310,004, respectively, including
unrealized appreciation of $694,594 for Retirement Utilities. Immediately after
the acquisition, the combined net assets of the Fund amounted to
$2,427,146,931.
8. SUBSEQUENT EVENT
On August 4, 1999, the Fund's shareholders approved a change in the Fund's
investment objective from current income and long-term growth of income and
capital to capital appreciation and current income. The new objective was
effective on August 5, 1999.
18
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS
Selected ratios and per share data for a share of beneficial interest
outstanding throughout each period:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED --------------------------------------------------------
JUNE 30, 1999++ 1998++ 1997*++ 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............. $19.26 $17.04 $15.22 $15.15 $12.30 $14.34
------ ------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income ........................... 0.18 0.40 0.50 0.56 0.58 0.63
Net realized and unrealized gain (loss) ......... 0.77 3.25 3.28 0.16 2.85 (2.04)
------ ------ ------ ------ ------ ------
Total income (loss) from investment operations ... 0.95 3.65 3.78 0.72 3.43 (1.41)
------ ------ ------ ------ ------ ------
Less dividends and distributions from:
Net investment income ........................... (0.19) (0.41) (0.51) (0.58) (0.58) (0.61)
Net realized gain ............................... (0.09) (1.02) (1.45) (0.07) -- (0.02)
------ ------ ------ ------ ------ ------
Total dividends and distributions ................ (0.28) (1.43) (1.96) (0.65) (0.58) (0.63)
------ ------ ------ ------ ------ ------
Net asset value, end of period ................... $19.93 $19.26 $17.04 $15.22 $15.15 $12.30
====== ====== ====== ====== ====== ======
TOTAL RETURN+ .................................... 4.93%(2) 21.95% 25.79% 4.99% 28.42% (9.90)%
RATIOS TO AVERAGE NET ASSETS:
Expenses ......................................... 1.67%(1)(3) 1.65%(1) 1.67% 1.64% 1.65% 1.64%
Net investment income ............................ 1.81%(1)(3) 2.23%(1) 3.15% 3.63% 4.19% 4.67%
SUPPLEMENTAL DATA:
Net assets, end of period, in millions ........... $2,769 $2,752 $2,430 $2,677 $3,321 $2,827
Portfolio turnover rate .......................... 7%(2) 6% 6% 7% 9% 11%
</TABLE>
- -------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date, other than shares held by certain employee
benefit plans established by Dean Witter Reynolds Inc., have been designated
Class B shares. Shares held by those employee benefit plans prior to July
28, 1997 have been designated Class D shares.
++ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
(2) Not annualized.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ----------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $19.22 $17.01 $15.89
------ ------ ------
Income from investment operations:
Net investment income .......................... 0.38 0.54 0.27
Net realized and unrealized gain ............... 0.65 3.24 2.52
------ ------ ------
Total income from investment operations ......... 1.03 3.78 2.79
------ ------ ------
Less dividends and distributions from:
Net investment income .......................... (0.27) (0.55) (0.35)
Net realized gain .............................. (0.09) (1.02) (1.32)
------ ------ ------
Total dividends and distributions ............... (0.36) (1.57) (1.67)
------ ------ ------
Net asset value, end of period .................. $19.89 $19.22 $17.01
====== ====== ======
TOTAL RETURN+ ................................... 5.38%(2) 22.86% 18.06%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.83%(1)(3) 0.90%(1) 0.92%(3)
Net investment income ........................... 2.65%(1)(3) 2.98%(1) 4.05%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $10,617 $10,357 $3,581
Portfolio turnover rate ......................... 7%(2) 6% 6%
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $19.26 $17.06 $15.89
------ ------ ------
Income from investment operations:
Net investment income .......................... 0.35 0.40 0.22
Net realized and unrealized gain ............... 0.60 3.25 2.51
------ ------ ------
Total income from investment operations ......... 0.95 3.65 2.73
------ ------ ------
Less dividends and distributions from:
Net investment income .......................... (0.20) (0.43) (0.24)
Net realized gain .............................. (0.09) (1.02) (1.32)
------ ------ ------
Total dividends and distributions ............... (0.29) (1.45) (1.56)
------ ------ ------
Net asset value, end of period .................. $19.92 $19.26 $17.06
====== ====== ======
TOTAL RETURN+ ................................... 4.92%(2) 21.92% 17.67%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 1.67%(1)(3) 1.65%(1) 1.69%(3)
Net investment income ........................... 1.81%(1)(3) 2.23%(1) 3.14%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $9,585 $6,532 $1,405
Portfolio turnover rate ......................... 7%(2) 6% 6%
</TABLE>
- --------------
* The date shares were first issued.
+ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
(2) Not annualized.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
JUNE 30, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period ............ $19.21 $16.99 $15.89
------ ------ ------
Income from investment operations:
Net investment income .......................... 0.31 0.58 0.22
Net realized and unrealized gain ............... 0.73 3.25 2.58
------ ------ ------
Total income from investment operations ......... 1.04 3.83 2.80
------ ------ ------
Less dividends and distributions from:
Net investment income .......................... (0.29) (0.59) (0.38)
Net realized gain .............................. (0.09) (1.02) (1.32)
------ ------ ------
Total dividends and distributions ............... (0.38) (1.61) (1.70)
------ ------ ------
Net asset value, end of period .................. $19.87 $19.21 $16.99
====== ====== ======
TOTAL RETURN+ ................................... 5.41%(2) 23.21% 18.13%(2)
RATIOS TO AVERAGE NET ASSETS:
Expenses ........................................ 0.67%(1)(3) 0.65%(1) 0.67%(3)
Net investment income ........................... 2.81%(1)(3) 3.23%(1) 4.21%(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands ......... $26,834 $24,920 $17,106
Portfolio turnover rate ......................... 7%(2) 6% 6%
</TABLE>
- --------------
* The date shares were first issued. Shareholders who held shares of the Fund
prior to July 28, 1997 (the date the Fund converted to a multiple class
share structure) should refer to the Financial Highlights of Class B to
obtain the historical per share data and ratio information of their shares.
++ 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) Reflects overall Fund ratios for investment income and non-class specific
expenses.
(2) Not annualized.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
(This page has been left blank intentionally.)
<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
Edward F. Gaylor
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
The financial statements included herein have been taken from the records of
the Fund without examination by the independent accountants and accordingly
they do not express an opinion thereon.
This report is submitted for the general information of shareholders of the
Fund. For more detailed information about the Fund, its officers and trustees,
fees, expenses and other pertinent information, please see the prospectus
of the Fund.
This report is not authorized for distribution to prospective investors in the
Fund unless preceded or accompanied by an effective prospectus. Read the
prospectus carefully before investing.
MORGAN STANLEY
DEAN WITTER
UTILITIES FUND
[Graphic]
SEMIANNUAL REPORT
JUNE 30, 1999