<PAGE> 1
MORGAN STANLEY DEAN WITTER UTILITIES FUND Two World Trade Center
LETTER TO THE SHAREHOLDERS June 30, 2000 New York, New York 10048
DEAR SHAREHOLDER:
Amid increasing market volatility, Morgan Stanley Dean Witter Utilities Fund
outpaced the broad market as measured by the Standard & Poor's 500 Stock Index
(S&P 500)(1) during the six-month period ended June 30, 2000. The Fund's Class B
shares provided a total return of 1.07 percent for this period, compared to
-0.43 percent for the S&P 500. For the same period, the Fund's Class A, C and D
shares returned 1.45 percent, 1.10 percent and 1.57 percent, respectively. The
performance of the Fund's four share classes varies because of differing
expenses. Total return figures assume the reinvestment of all distributions but
do not reflect the deduction of any applicable sales charges.
The Fund's outperformance relative to the broad market was attributable
primarily to solid performance within its electric power and natural gas
holdings. Select holdings within the Fund's telecommunications allocation also
contributed to the Fund's overall performance.
UTILITIES MARKET OVERVIEW
The telecommunications sector continued to benefit from positive global demand.
Growth was particularly robust within the wireless and broadband communications
subsectors, which benefited from accelerated demand for connectivity.
Telecommunications infrastructure suppliers, which experienced healthy order
flow during the period, remains one of the fasted growing industries worldwide.
Within the electric power sector, share prices appreciated sharply as companies
within the sector benefited from their defensive appeal, attractive relative
valuations and strong financial results. This sector's positive financial
performance was driven by excellent results associated with new-economy growth
businesses in addition to surging electric power usage. The natural gas sector
remained fundamentally strong and continued to benefit from robust
profitability, favorable supply/demand dynamics and a firm pricing environment.
The sector's performance was further bolstered by strong growth in diversified
operations, which provided a nice complement to core business results.
---------------------
(1) The Standard & Poor's 500 Stock Index (S&P 500) 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 representation. The
performance of the index does not include any expenses, fees or charges. The
index is unmanaged and should not be considered an investment.
<PAGE> 2
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
PORTFOLIO STRATEGY
On June 30, 2000, 92 percent of the Fund's net assets were allocated to utility
and utility-related equities. Within this equity component, 49 percent was
allocated to telecommunications, 36 percent to electric power and 15 percent to
energy. Adding a further degree of diversification to the Fund's portfolio was
its international holdings (19 percent of its net assets), which focused on
telecommunications infrastructure growth. The Fund's high-quality fixed-income
portfolio accounted for 7 percent of net assets, with the remaining 1 percent
held in cash and cash equivalents. 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 Investors Service and Standard & Poor's Corporation,
respectively.
Among the Fund's largest equity holdings on June 30, 2000, were SBC
Communications, Sprint Corp., BellSouth Corp. and Nortel Networks
(telecommunications), Duke Energy, Calpine Corp. Dominion Resources (electric
power) and Enron Corporation, El Paso Energy and Williams Companies (natural
gas/energy). Included among the Fund's major international holdings were
Vodafone AirTouch and Telefonica de Espana S.A. of Spain.
During the period under review the Fund added several high-quality
telecommunications companies to its portfolio, including AT&T Wireless Group,
Motorola Inc. and Hughes Electronics Corp. The Fund also initiated positions in
electric power infrastructure providers General Electric and Emerson Electric.
Overall portfolio diversification was further enhanced with the addition of
Crown Castle International, SBA Communications and American Tower in the
wireless tower subsector.
LOOKING AHEAD
During the second half of 2000, we currently anticipate modestly increasing the
Fund's international component while maintaining a healthy balance between the
telecommunications, electric power and natural gas industries. Broad
diversification among the various utility industries and their subsectors
remains an important component of the Fund's overall investment strategy. We
believe that the Fund remains well positioned as it pursues its objective of
seeking both capital appreciation and current income.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER UTILITIES FUND
LETTER TO THE SHAREHOLDERS June 30, 2000, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Utilities Fund
and look forward to serving your future needs and investment objectives.
<TABLE>
<S> <C>
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO /s/ MITCHELL M. MERIN
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
Chairman of the Board President
</TABLE>
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FUND PERFORMANCE June 30, 2000
AVERAGE ANNUAL TOTAL RETURNS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A SHARES*
------------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 6.82%(1) 1.22%(2)
Since Inception (7/28/97) 18.26%(1) 16.10%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C SHARES+
------------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 6.08%(1) 5.10%(2)
Since Inception (7/28/97) 17.36%(1) 17.36%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B SHARES**
------------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 6.04%(1) 1.16%(2)
5 Years 15.34%(1) 15.11%(2)
10 Years 12.04%(1) 12.04%(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D SHARES++
------------------------------------------------
<S> <C> <C>
PERIOD ENDED 6/30/00
-------------------------
1 Year 7.08%(1)
Since Inception (7/28/97) 18.51%(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE. WHEN YOU SELL FUND SHARES, THEY MAY BE WORTH
MORE OR LESS THAN THEIR ORIGINAL COST.
---------------------
<TABLE>
<S> <C>
(1) Figure shown assumes reinvestment of all distributions and
does not reflect the deduction of any sales charges.
(2) Figure shown assumes reinvestment of all distributions and
the deduction of the maximum applicable sales charge. See
the Fund's current prospectus for complete details on fees
and sales charges.
* The maximum front-end sales charge for Class A is 5.25%.
** The maximum contingent deferred sales charge (CDSC) for
Class B is 5.0%. The CDSC declines to 0% after six years.
+ The maximum CDSC for Class C shares is 1% for shares
redeemed within one year of purchase.
++ Class D shares have no sales charge.
</TABLE>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.6%)
Electric Utilities (32.1%)
684,000 AES Corp.*............................................... $ 31,207,500
940,000 Allegheny Energy, Inc. .................................. 25,732,500
655,000 Ameren Corp. ............................................ 22,106,250
520,000 American Electric Power Co., Inc. ....................... 15,405,000
350,000 Avista Corp. ............................................ 6,103,125
812,000 Calpine Corp.*........................................... 53,389,000
749,470 Cinergy Corp. ........................................... 19,064,643
396,000 CMS Energy Corp. ........................................ 8,761,500
695,000 Consolidated Edison, Inc. ............................... 20,589,375
830,000 Constellation Energy Group, Inc. ........................ 27,026,875
740,000 Dominion Resources, Inc. ................................ 31,727,500
1,330,750 DPL, Inc. ............................................... 29,193,328
574,000 DQE, Inc. ............................................... 22,673,000
690,000 DTE Energy Co. .......................................... 21,088,125
758,862 Duke Energy Corp. ....................................... 42,780,845
1,004,500 Edison International..................................... 20,592,250
1,000,000 Endesa S.A. (ADR) (Spain)................................ 19,500,000
1,000,000 Energy East Corp. ....................................... 19,062,500
320,000 Entergy Corp. ........................................... 8,700,000
500,000 FirstEnergy Corp. ....................................... 11,687,500
570,000 Florida Progress Corp. .................................. 26,718,750
475,000 FPL Group, Inc. ......................................... 23,512,500
853,000 GPU, Inc. ............................................... 23,084,312
600,000 Kansas City Power & Light Co............................. 13,500,000
410,000 Montana Power Co. ....................................... 14,478,125
716,000 New Century Energies, Inc. .............................. 21,480,000
1,110,000 NiSource Inc. ........................................... 20,673,750
705,000 Northern States Power Co. ............................... 14,232,187
550,000 NSTAR.................................................... 22,378,125
385,000 Peco Energy Co. ......................................... 15,520,312
180,000 PG & E Corp. ............................................ 4,432,500
753,000 Pinnacle West Capital Corp. ............................. 25,507,875
435,000 Potomac Electric Power Co. .............................. 10,875,000
300,000 PPL Corp. ............................................... 6,581,250
630,000 Public Service Enterprise Group, Inc. ................... 21,813,750
1,245,000 Reliant Energy, Inc. .................................... 36,805,312
285,000 RGS Energy Group Inc. ................................... 6,341,250
820,000 SCANA Corp. ............................................. 19,782,500
307,690 Scottish Power PLC (ADR) (United Kingdom)................ 10,288,384
995,000 Southern Co. ............................................ 23,195,937
401,000 TECO Energy, Inc. ....................................... 8,045,062
616,000 TXU Corp. ............................................... 18,172,000
--------------
843,809,697
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------------------------------------------------------------------------------------
<C> <S> <C>
Electrical Products (0.7%)
185,000 Emerson Electric Co. .................................... $ 11,169,375
140,000 General Electric Co. .................................... 7,420,000
--------------
18,589,375
--------------
Energy (14.0%)
530,000 AGL Resources, Inc. ..................................... 8,446,875
680,000 Coastal Corp. ........................................... 41,395,000
215,000 Columbia Energy Group.................................... 14,109,375
670,000 Dynegy, Inc. (Class A)................................... 45,769,375
1,055,670 El Paso Energy Corp. .................................... 53,773,191
1,339,274 Enron Corp. ............................................. 86,383,173
150,000 Exxon Mobil Corp. ....................................... 11,775,000
450,200 KeySpan Corp. ........................................... 13,843,650
280,000 New Jersey Resources Corp. .............................. 10,657,500
669,511 Sempra Energy............................................ 11,381,687
816,000 UtiliCorp United Inc. ................................... 16,218,000
320,000 Washington Gas Light Co. ................................ 7,700,000
1,076,000 Williams Companies, Inc. ................................ 44,855,750
--------------
366,308,576
--------------
Telecommunications (44.8%)
320,000 Alcatel (ADR) (France)................................... 21,280,000
804,900 ALLTEL Corp. ............................................ 49,853,494
122,000 American Tower Corp. (Class A)........................... 5,085,875
307,990 AT&T Corp. .............................................. 9,740,184
220,000 AT&T Corp. - Liberty Media Group (Class A)*.............. 5,335,000
276,900 AT&T Wireless Group, Inc. ............................... 7,718,587
749,000 BCE, Inc. (Canada)....................................... 17,835,562
667,000 Bell Atlantic Corp.*..................................... 33,891,938
1,351,000 BellSouth Corp. ......................................... 57,586,375
90,000 British Telecommunications PLC (ADR) (United Kingdom).... 11,902,500
375,000 BroadWing Inc.*.......................................... 9,726,563
580,000 Cable & Wireless HKT Ltd. (Hong Kong).................... 12,470,000
200,000 Cable & Wireless PLC (ADR) (United Kingdom).............. 10,012,500
1,076,250 CenturyTel, Inc. ........................................ 30,942,188
400,000 Cisco Systems, Inc.*..................................... 25,425,000
50,000 COLT Telecom Group PLC (ADR) (United Kingdom)*........... 6,696,875
157,000 Crown Castle International Corp.*........................ 5,720,688
1,320,000 Ericsson (L.M.) Telefonaktiebolaqet (ADR) (Sweden)....... 26,400,000
152,500 France Telecom S.A. (ADR) (France)....................... 21,731,250
100,000 General Motors Corp. (Class H)*.......................... 8,775,000
1,211,493 Global Crossing Ltd. (Bermuda)*.......................... 31,877,410
370,000 Global Telesystems Group, Inc.*.......................... 4,463,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------------------------------------------------------------------------------------
<C> <S> <C>
628,000 GTE Corp. ............................................... $ 39,093,000
357,620 Lucent Technologies Inc. ................................ 21,188,985
1,040,000 McLeodUSA, Inc. (Class A)*............................... 21,515,000
400,000 MediaOne Group, Inc.*.................................... 26,525,500
245,000 Motorola, Inc. .......................................... 7,120,313
200,000 Nextel Communications, Inc. (Class A)*................... 12,237,500
260,000 NEXTLINK Communications, Inc. (Class A)*................. 9,863,750
660,000 Nokia Oyj (ADR) (Finland)................................ 32,958,750
1,657,626 Nortel Networks Corp. (Canada)........................... 113,132,975
622,802 Qwest Communications International, Inc.*................ 30,945,474
120,000 SBA Communications Corp.*................................ 6,232,500
2,002,972 SBC Communications, Inc. ................................ 86,628,539
931,000 Sprint Corp. (FON Group)................................. 47,481,000
583,000 Sprint Corp. (PCS Group)*................................ 34,688,500
300,000 Telecommunications Corp. New Zealand, Ltd. (ADR) (New
Zealand)................................................ 8,437,500
772,642 Telefonica de Espana S.A. (ADR) (Spain)*................. 49,497,378
560,000 Telefonos de Mexico S.A. (Series L) (ADR) (Mexico)....... 31,990,000
620,241 U.S. West, Inc. ......................................... 53,185,666
1,150,000 Vodafone Group PLC (ADR) (United Kingdom)................ 47,653,125
190,000 Voicestream Wireless Corp.*.............................. 22,099,375
125,000 Williams Communications Group, Inc.*..................... 4,148,438
351,900 WinStar Communications, Inc.*............................ 11,920,613
913,753 WorldCom, Inc.*.......................................... 41,918,419
--------------
1,174,932,414
--------------
TOTAL COMMON STOCKS
(Identified Cost $1,224,869,043)......................... 2,403,640,062
--------------
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE
--------- ------- ---------
<C> <S> <C> <C> <C>
CORPORATE BONDS (6.6%)
Electric Utilities (3.1%)
$ 1,499 AEP Generating Co. ................. 9.81% 12/07/22 $ 1,617,085
5,000 Arizona Public Service Co. ......... 7.25 08/01/23 4,464,600
5,000 Calenergy Inc. ..................... 8.48 09/15/28 5,097,300
6,000 Chugach Electric Co. ............... 9.14 03/15/22 6,566,880
5,000 Cincinnati Gas & Electric Co. ...... 7.20 10/01/23 4,391,050
5,000 Consumers Energy Co. ............... 7.375 09/15/23 4,343,900
5,000 Gulf States Utilities Co. .......... 8.94 01/01/22 4,948,850
6,796 Indiantown Cogeneration LP.......... 9.26 12/15/10 6,967,156
8,250 New Century Energies Inc. .......... 8.75 03/01/22 8,288,197
5,000 New York State Electric & Gas
Corp. ............................. 8.875 11/01/21 5,035,450
5,134 Niagara Mohawk Power Corp. ......... 8.77 01/01/18 5,189,345
5,000 Public Service Electric & Gas
Co. ............................... 7.00 09/01/24 4,349,850
5,000 Salton Sea Funding Corp. ........... 7.475 11/30/18 4,780,350
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
$ 5,000 Selkirk Cogen Funding Corp. ........ 8.98% 06/26/12 $ 5,017,050
5,000 Virginia Electric Power Co. ........ 8.625 10/01/24 5,012,250
5,000 Wisconsin Power & Light Co. ........ 8.60 03/15/27 4,973,800
--------------
81,043,113
--------------
Energy (1.6%)
5,000 ANR Pipeline Co. ................... 9.625 11/01/21 5,739,850
10,000 Coastal Corp. ...................... 9.625 05/15/12 11,206,000
5,000 Colorado Interstate Gas Co. ........ 10.00 06/15/05 5,452,550
3,000 Southern Union Co. ................. 8.25 11/15/29 2,967,300
4,750 Southwest Gas Corp. ................ 8.00 08/01/26 4,455,737
5,000 Transco Energy Co. ................. 9.875 06/15/20 5,788,700
5,000 Williams Companies, Inc. ........... 9.375 11/15/21 5,506,650
--------------
41,116,787
--------------
Telecommunications (1.9%)
5,000 BellSouth Capital Funding Corp. .... 7.875 02/15/30 4,986,000
5,000 British Sky Broadcasting Group, Inc.
(United Kingdom)................... 6.875 02/23/09 4,309,850
2,000 Cable & Wireless Optus Ltd. - 144A**
(Australia)........................ 8.00 06/22/10 1,993,800
5,000 Cox Enterprises Inc. - 144A**....... 7.375 07/15/27 4,384,900
5,000 GTE Corp. .......................... 6.94 04/15/28 4,437,550
5,000 Sprint Capital Corp. ............... 6.875 11/15/28 4,343,150
5,000 Sprint Corp. ....................... 9.25 04/15/22 5,501,500
5,000 Teleglobe Inc. ..................... 7.70 07/20/29 4,741,800
5,000 Telephone & Data Systems, Inc. ..... 10.00 01/15/21 5,352,900
5,000 Telephone & Data Systems, Inc. ..... 9.58 11/19/21 5,071,900
5,000 Vodafone AirTouch PLC - 144A**
(United Kingdom)................... 7.875 02/15/30 4,924,950
--------------
50,048,300
--------------
TOTAL CORPORATE BONDS
(Identified Cost $171,660,335).......................... 172,208,200
--------------
U.S. GOVERNMENT OBLIGATIONS (0.4%)
2,000 U.S. Treasury Note.................. 6.50 02/15/10 2,068,120
25,000 U.S. Treasury Note Strip............ 0.00 08/15/19 7,655,000
--------------
9,723,120
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Identified Cost $10,491,928)........................... 9,723,120
--------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER UTILITIES FUND
PORTFOLIO OF INVESTMENTS June 30, 2000 (unaudited) continued
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN COUPON MATURITY
THOUSANDS RATE DATE VALUE
--------------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT-TERM INVESTMENT (1.1%)
U.S. GOVERNMENT AGENCY (a) (1.1%)
$ 29,650 Federal Home Loan Banks
(Amortized Cost $29,639,178)....... 6.57% 07/03/00 $ 29,639,178
--------------
REPURCHASE AGREEMENT (0.0%)
101 The Bank of New York
(dated 06/30/00;
proceeds $101,464)(b)
(Identified Cost $101,405)......... 7.00 07/03/00 101,405
--------------
TOTAL SHORT-TERM INVESTMENT
(Identified Cost $29,740,583)............................ 29,740,583
--------------
TOTAL INVESTMENTS
(Identified Cost $1,436,761,889) (c)............ 99.7% 2,615,311,965
OTHER ASSETS IN EXCESS OF LIABILITIES............ 0.3 8,100,456
----- --------------
NET ASSETS...................................... 100.0% $2,623,412,421
===== ==============
</TABLE>
---------------------
<TABLE>
<C> <S>
ADR American Depository Receipt.
* Non-income producing security.
** Resale is restricted to qualified institutional investors.
(a) Purchased on a discount basis. The interest rate shown has
been adjusted to reflect a money market equivalent yield.
(b) Collateralized by $16,530 Federal Home Loan Banks 6.75% due
02/01/02 valued at $16,929 and $84,610 U.S. Treasury Note
6.00% due 08/15/00 valued at $86,506.
(c) The aggregate cost for federal income tax purposes
approximates identified cost. The aggregate gross unrealized
appreciation is $1,210,024,016 and the aggregate gross
unrealized depreciation is $31,473,940, resulting in net
unrealized appreciation of $1,178,550,076.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $1,436,761,889)........................... $2,615,311,965
Receivable for:
Investments sold........................................ 12,287,290
Dividends............................................... 4,228,783
Interest................................................ 3,802,985
Shares of beneficial interest sold...................... 1,714,332
Foreign withholding taxes reclaimed..................... 204,260
Prepaid expenses and other assets........................... 91,832
--------------
TOTAL ASSETS............................................ 2,637,641,447
--------------
LIABILITIES:
Payable for:
Investments purchased................................... 9,265,259
Plan of distribution fee................................ 2,205,271
Shares of beneficial interest repurchased............... 1,332,517
Investment management fee............................... 1,205,780
Accrued expenses and other payables......................... 220,199
--------------
TOTAL LIABILITIES....................................... 14,229,026
--------------
NET ASSETS.............................................. $2,623,412,421
==============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $1,337,047,135
Net unrealized appreciation................................. 1,178,550,076
Accumulated net investment loss............................. (1,072,938)
Accumulated undistributed net realized gain................. 108,888,148
--------------
NET ASSETS.............................................. $2,623,412,421
==============
CLASS A SHARES:
Net Assets.................................................. $15,264,617
Shares Outstanding (unlimited authorized, $.01 par value)... 787,628
NET ASSET VALUE PER SHARE............................... $19.38
==============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $20.45
==============
CLASS B SHARES:
Net Assets.................................................. $2,568,319,794
Shares Outstanding (unlimited authorized, $.01 par value)... 132,187,558
NET ASSET VALUE PER SHARE............................... $19.43
==============
CLASS C SHARES:
Net Assets.................................................. $14,354,746
Shares Outstanding (unlimited authorized, $.01 par value)... 739,300
NET ASSET VALUE PER SHARE............................... $19.42
==============
CLASS D SHARES:
Net Assets.................................................. $25,473,264
Shares Outstanding (unlimited authorized, $.01 par value)... 1,315,596
NET ASSET VALUE PER SHARE............................... $19.36
==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended June 30, 2000 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends (net of $310,760 foreign withholding tax)......... $32,151,360
Interest.................................................... 8,782,820
-----------
TOTAL INCOME............................................ 40,934,180
-----------
EXPENSES
Plan of distribution fee (Class A shares)................... 17,065
Plan of distribution fee (Class B shares)................... 13,302,257
Plan of distribution fee (Class C shares)................... 66,058
Investment management fee................................... 7,319,729
Transfer agent fees and expenses............................ 1,042,262
Shareholder reports and notices............................. 135,541
Custodian fees.............................................. 57,429
Professional fees........................................... 40,077
Registration fees........................................... 35,061
Trustees' fees and expenses................................. 8,899
Other....................................................... 4,341
-----------
TOTAL EXPENSES.......................................... 22,028,719
-----------
NET INVESTMENT INCOME................................... 18,905,461
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 110,970,895
Net change in unrealized appreciation....................... (97,888,606)
-----------
NET GAIN................................................ 13,082,289
-----------
NET INCREASE................................................ $31,987,750
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
JUNE 30, 2000 DECEMBER 31, 1999
---------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.............................. $ 18,905,461 $ 48,746,166
Net realized gain.................................. 110,970,895 179,742,637
Net change in unrealized appreciation.............. (97,888,606) 34,094,678
-------------- --------------
NET INCREASE................................... 31,987,750 262,583,481
-------------- --------------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income
Class A shares................................. (160,215) (325,894)
Class B shares................................. (19,682,185) (48,736,862)
Class C shares................................. (106,705) (178,804)
Class D shares................................. (345,059) (773,272)
Net realized gain
Class A shares................................. (268,578) (743,247)
Class B shares................................. (44,936,019) (145,019,769)
Class C shares................................. (249,319) (597,665)
Class D shares................................. (443,876) (1,443,288)
-------------- --------------
TOTAL DIVIDENDS AND DISTRIBUTIONS.............. (66,191,956) (197,818,801)
-------------- --------------
Net decrease from transactions in shares of
beneficial interest............................... (108,091,573) (92,465,156)
-------------- --------------
NET DECREASE................................... (142,295,779) (27,700,476)
NET ASSETS:
Beginning of period................................ 2,765,708,200 2,793,408,676
-------------- --------------
END OF PERIOD
(Including a net investment loss of $1,072,938
and undistributed net investment income of
$315,765, respectively)........................ $2,623,412,421 $2,765,708,200
============== ==============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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 both
capital appreciation and current income. 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
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
utilizing similar factors); (4) certain of the Fund's portfolio securities may
be valued by an outside pricing service approved by the Trustees. 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> 15
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (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.
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 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
$32,743,719 at June 30, 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,
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
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, 2000, the distribution fee was accrued for Class A shares
and Class C shares at the annual rate of 0.24% and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended June 30,
2000, it received contingent deferred sales charges from certain redemptions of
the Fund's Class A, Class B and Class C shares of $1,500, $708,887 and $5,534,
respectively and received $26,506 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, 2000 aggregated
$169,597,761 and $323,466,379, respectively. Included in the aforementioned are
purchases and sales of U.S. Government securities of $14,857,888 and
$13,072,344, respectively.
For the six months ended June 30, 2000, the Fund incurred $29,925 in brokerage
commissions with Dean Witter Reynolds Inc., an affiliate of the Investment
Manager and Distributor, for portfolio transactions executed on behalf of the
Fund.
For the six months ended June 30, 2000, the Fund incurred brokerage commissions
of $4,750 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, 2000
included in Trustees' fees and expenses in the Statement of Operations amounted
to $3,079. At June 30, 2000, the Fund had an accrued pension liability of
$53,236 which is included in accrued expenses in the Statement of Assets and
Liabilities.
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER UTILITIES FUND
NOTES TO FINANCIAL STATEMENTS June 30, 2000 (unaudited) continued
5. FEDERAL INCOME TAX STATUS
As of December 31, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
6. 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, 2000 DECEMBER 31, 1999
--------------------------- ---------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold...................................................... 252,185 $ 5,086,009 415,079 $ 8,077,971
Reinvestment of dividends and distributions............... 6,484 131,417 49,792 955,657
Redeemed.................................................. (225,171) (4,454,025) (249,521) (4,882,705)
----------- ------------- ----------- -------------
Net increase - Class A.................................... 33,498 763,401 215,350 4,150,923
----------- ------------- ----------- -------------
CLASS B SHARES
Sold...................................................... 6,680,655 134,176,231 11,295,521 219,772,333
Reinvestment of dividends and distributions............... 766,644 15,621,690 8,368,147 161,065,061
Redeemed.................................................. (12,970,805) (260,552,046) (24,796,406) (483,837,209)
----------- ------------- ----------- -------------
Net decrease - Class B.................................... (5,523,506) (110,754,125) (5,132,738) (102,999,815)
----------- ------------- ----------- -------------
CLASS C SHARES
Sold...................................................... 236,214 4,741,126 372,109 7,252,767
Reinvestment of dividends and distributions............... 4,354 88,549 36,252 696,927
Redeemed.................................................. (89,576) (1,796,544) (159,132) (3,112,493)
----------- ------------- ----------- -------------
Net increase - Class C.................................... 150,992 3,033,131 249,229 4,837,201
----------- ------------- ----------- -------------
CLASS D SHARES
Sold...................................................... 483,152 9,703,333 654,645 12,555,868
Reinvestment of dividends and distributions............... 16,381 332,778 113,475 2,176,148
Redeemed.................................................. (558,536) (11,170,091) (691,022) (13,185,481)
----------- ------------- ----------- -------------
Net increase (decrease) - Class D......................... (59,003) (1,133,980) 77,098 1,546,535
----------- ------------- ----------- -------------
Net decrease in Fund...................................... (5,398,019) $(108,091,573) (4,591,061) $ (92,465,156)
=========== ============= =========== =============
</TABLE>
17
<PAGE> 18
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 PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
----------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $19.65 $19.22 $17.01 $15.89
------ ------ ------ -----
Income from investment operations:
Net investment income........................... 0.22 0.50 0.54 0.27
Net realized and unrealized gain................ 0.09 1.53 3.24 2.52
------ ------ ------ -----
Total income from investment operations.......... 0.31 2.03 3.78 2.79
------ ------ ------ -----
Less dividends and distributions from:
Net investment income........................... (0.23) (0.51) (0.55) (0.35)
Net realized gain............................... (0.35) (1.09) (1.02) (1.32)
------ ------ ------ -----
Total dividends and distributions................ (0.58) (1.60) (1.57) (1.67)
------ ------ ------ -----
Net asset value, end of period................... $19.38 $19.65 $19.22 $17.01
====== ====== ====== =====
TOTAL RETURN+.................................... 1.45%(1) 10.97% 22.86% 18.06%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 0.87%(2)(3) 0.85%(3) 0.90%(3) 0.92%(2)
Net investment income............................ 2.16%(2)(3) 2.55%(3) 2.98%(3) 4.05%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $15,265 $14,817 $10,357 $3,581
Portfolio turnover rate.......................... 6%(1) 14% 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED DECEMBER 31,
MONTHS ENDED --------------------------------------------------------------
JUNE 30, 2000++ 1999++ 1998++ 1997*++ 1996 1995
-----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of
period.............................. $19.70 $19.26 $17.04 $15.22 $15.15 $12.30
------ ------ ------ ------ ------ ------
Income from investment operations:
Net investment income............... 0.14 0.35 0.40 0.50 0.56 0.58
Net realized and unrealized gain.... 0.09 1.54 3.25 3.28 0.16 2.85
------ ------ ------ ------ ------ ------
Total income from investment
operations.......................... 0.23 1.89 3.65 3.78 0.72 3.43
------ ------ ------ ------ ------ ------
Less dividends and distributions
from:
Net investment income............... (0.15) (0.36) (0.41) (0.51) (0.58) (0.58)
Net realized gain................... (0.35) (1.09) (1.02) (1.45) (0.07) --
------ ------ ------ ------ ------ ------
Total dividends and distributions.... (0.50) (1.45) (1.43) (1.96) (0.65) (0.58)
------ ------ ------ ------ ------ ------
Net asset value, end of period....... $19.43 $19.70 $19.26 $17.04 $15.22 $15.15
====== ====== ====== ====== ====== ======
TOTAL RETURN+........................ 1.07%(1) 10.09% 21.95% 25.79% 4.99% 28.42%
RATIOS TO AVERAGE NET ASSETS:
Expenses............................. 1.63%(2)(3) 1.65%(3) 1.65%(3) 1.67% 1.64% 1.65%
Net investment income................ 1.40%(2)(3) 1.75%(3) 2.23%(3) 3.15% 3.63% 4.19%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands........................... $2,568,320 $2,712,326 $2,751,600 $2,430,270 $2,676,945 $3,321,001
Portfolio turnover rate.............. 6%(1) 14% 6% 6% 7% 9%
</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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $19.69 $19.26 $17.06 $15.89
------ ------ ------ ------
Income from investment operations:
Net investment income........................... 0.14 0.34 0.40 0.22
Net realized and unrealized gain................ 0.10 1.54 3.25 2.51
------ ------ ------ ------
Total income from investment operations.......... 0.24 1.88 3.65 2.73
------ ------ ------ ------
Less dividends and distributions from:
Net investment income........................... (0.16) (0.36) (0.43) (0.24)
Net realized gain............................... (0.35) (1.09) (1.02) (1.32)
------ ------ ------ ------
Total dividends and distributions................ (0.51) (1.45) (1.45) (1.56)
------ ------ ------ ------
Net asset value, end of period................... $19.42 $19.69 $19.26 $17.06
====== ====== ====== ======
TOTAL RETURN+.................................... 1.10%(1) 10.09% 21.92% 17.67%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 1.63%(2)(3) 1.65%(3) 1.65%(3) 1.69%(2)
Net investment income............................ 1.40%(2)(3) 1.75%(3) 2.23%(3) 3.14%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $14,355 $11,583 $6,532 $1,405
Portfolio turnover rate.......................... 6%(1) 14% 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER UTILITIES FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED ENDED THROUGH
JUNE 30, 2000 DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period............. $19.63 $19.21 $16.99 $15.89
------ ------ ------ ------
Income from investment operations:
Net investment income........................... 0.24 0.54 0.58 0.22
Net realized and unrealized gain................ 0.09 1.52 3.25 2.58
------ ------ ------ ------
Total income from investment operations.......... 0.33 2.06 3.83 2.80
------ ------ ------ ------
Less dividends and distributions from:
Net investment income........................... (0.25) (0.55) (0.59) (0.38)
Net realized gain............................... (0.35) (1.09) (1.02) (1.32)
------ ------ ------ ------
Total dividends and distributions................ (0.60) (1.64) (1.61) (1.70)
------ ------ ------ ------
Net asset value, end of period................... $19.36 $19.63 $19.21 $16.99
====== ====== ====== ======
TOTAL RETURN+.................................... 1.57%(1) 11.13% 23.21% 18.13%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 0.63%(2)(3) 0.65%(3) 0.65%(3) 0.67%(2)
Net investment income............................ 2.40%(2)(3) 2.75%(3) 3.23%(3) 4.21%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $25,473 $26,983 $24,920 $17,106
Portfolio turnover rate.......................... 6%(1) 14% 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) Not annualized.
(2) Annualized.
(3) Reflects overall Fund ratios for investment income and non-class specific
expenses.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER UTILITIES FUND
CHANGE IN INDEPENDENT ACCOUNTANTS
On July 1, 2000 PricewaterhouseCoopers LLP resigned as independent accountants
of the Fund.
The reports of PricewaterhouseCoopers LLP on the financial statements of the
Fund for the past two fiscal years contained no adverse opinion or disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope or
accounting principle.
In connection with its audits for the two most recent fiscal years and 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 for such years.
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.
22
<PAGE> 23
(This Page Intentionally Left Blank)
<PAGE> 24
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
Edward F. Gaylor
Vice President
Ronald B. Silvestri
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
----------------------------------
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
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 Distributors Inc., member NASD.
MORGAN STANLEY
DEAN WITTER
UTILITIES FUND
Semiannual Report
June 30, 2000
