<PAGE> 1
MORGAN STANLEY DEAN WITTER GROWTH FUND Two World Trade Center, New York, New
York 10048
LETTER TO THE SHAREHOLDERS September 30, 1998
DEAR SHAREHOLDER:
During the third quarter of 1998, the stock market became increasingly volatile
and corrected sharply from highs seen earlier in the year. Although the market
has since bounced back, the downturn has been blamed on valuation levels, the
situation in Asia and financial problems in Russia. Despite these continuing
macroeconomic concerns, the Fund's sub-adviser, Morgan Stanley Asset Management
Inc. (MSAM), remains optimistic about companies with strong balance sheets and
solid management that are well positioned to take advantage of acquisition
opportunities.
PERFORMANCE
For the six-month period ended September 30, 1998 Morgan Stanley Dean Witter
Growth Fund's Class B shares produced a total return of -13.82 percent versus
- -6.96 percent for the S&P 500 and -8.89 percent for the Lipper Analytical
Services, Inc. Growth Fund Index. For the same time period, the Fund's Class A,
C and D shares posted total returns of -13.58 percent, -13.99 percent and -13.54
percent, respectively. The performance of the Fund's four share classes varies
because each class has different expenses.
During the period under review the Fund's technology and health care holdings
positively affected performance but did not make up for the negative performance
in the consumer cyclical (specifically Continental Airlines) and transportation
(General Motors in particular) sectors. The portfolio management team recently
has shifted away from cyclical stocks which are affected by changes in consumer
spending, due to the team's anticipation of slower economic growth.
<PAGE> 2
MORGAN STANLEY DEAN WITTER GROWTH FUND
LETTER TO THE SHAREHOLDERS September 30, 1998, continued
THE PORTFOLIO
During the past six months, the Fund eliminated its General Motors Corp.
holding. In MSAM's view, a lengthy, cash-draining strike has negatively affected
the company's ability to repurchase shares. Continental Airlines, Inc. also has
been a drag on performance. While the company continues to exceed earnings
expectations and is aggressively repurchasing shares, MSAM believes that the
prospects of economic difficulty, and the potential for reduced consumer
spending, supported a reduction of this stock. The Fund's Cendant Corp. position
has been especially troublesome. The company has weathered some highly
publicized difficulties over the past several months and, unfortunately, the
Fund was affected.
Holdings that contributed positively over the past six months included Microsoft
Corp., Cisco Systems, Inc., Warner-Lambert Co., and Lilly (Eli) & Co. Positions
that have been increased include Clear Channel Communications, Inc., United
Technologies Corp., Loews Corp., and Cisco.
LOOKING AHEAD
The Fund will continue to seek out opportunities in today's challenging
investing environment. The investment focus remains on three types of stocks:
familiar or "classic" long-term growth stories; less familiar companies that are
expected to deliver positive earnings surprises; and companies whose stock
prices have been driven down by what are perceived to be unfounded fears, but
which maintain healthy fundamentals. The Fund will continue to decisively but
prudently seek to construct a portfolio that is consistent with this philosophy.
We appreciate your support of Morgan Stanley Dean Witter Growth Fund and look
forward to continuing to serve your investment needs and objectives.
Very truly yours,
/s/ CHARLES A. FIUMEFREDDO
CHARLES A. FIUMEFREDDO
Chairman of the Board
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER GROWTH FUND
PORTFOLIO OF INVESTMENTS September 30, 1998 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
COMMON AND PREFERRED STOCKS (97.3%)
Aerospace (4.4%)
360,100 Boeing Co. .................. $ 12,355,931
500,900 Gulfstream Aerospace
Corp.*...................... 20,161,225
------------
32,517,156
------------
Airlines (7.0%)
1,362,900 Continental Airlines, Inc.
(Class B)*.................. 51,449,474
------------
Beverages (Non-Alcoholic) (2.0%)
543,400 Coca-Cola Enterprises
Inc. ....................... 13,720,850
------------
Broadcasting (6.6%)
411,011 CBS Corp. ................... 9,967,017
774,900 Clear Channel Communications,
Inc.*....................... 36,807,750
43,300 Tele-Communications Liberty
Media Group (Class A)*...... 1,585,863
------------
48,360,630
------------
Building Materials Chains (3.2%)
592,200 Home Depot, Inc.*............ 23,391,900
------------
Computer Software (5.1%)
336,900 Microsoft Corp.*............. 37,080,056
------------
Computers Communications (4.4%)
517,488 Cisco Systems, Inc.*......... 31,987,258
------------
Diversified Financial Services (5.4%)
183,600 American Express Co. ........ 14,251,950
396,500 Fannie Mae................... 25,475,125
------------
39,727,075
------------
Diversified Manufacturing (10.4%)
260,200 Tyco International Ltd. ..... 14,376,050
806,400 United Technologies Corp. ... 61,639,199
------------
76,015,249
------------
E.D.P. Services (2.2%)
301,000 Computer Sciences Corp.*..... 16,404,500
------------
Investment Bankers/Brokers/Services (2.0%)
304,300 Merrill Lynch & Co., Inc. ... 14,416,213
------------
Life Insurance (0.9%)
133,200 Reinsurance Group of America,
Inc.*....................... 6,893,100
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
Major Banks (3.0%)
112,800 BankAmerica Corp. ........... $ 6,782,100
42,500 Wells Fargo & Co. ........... 15,087,500
------------
21,869,600
------------
Major Pharmaceuticals (11.5%)
196,100 Johnson & Johnson*........... 15,344,825
399,900 Lilly (Eli) & Co. ........... 31,317,169
498,600 Warner-Lambert Co. .......... 37,644,299
------------
84,306,293
------------
Military/Government/Technical (2.0%)
184,200 General Motors Corp. (Class
H).......................... 6,780,863
511,200 Loral Space & Communications
Ltd.*....................... 7,540,200
------------
14,321,063
------------
Movies/Entertainment (2.9%)
238,300 Time Warner, Inc. ........... 20,866,144
------------
Multi-Line Insurance (4.7%)
409,300 Loews Corp. ................. 34,534,688
------------
Office Equipment & Supplies (2.1%)
269,800 Knoll, Inc.*................. 5,901,875
109,100 Pitney Bowes, Inc. .......... 5,734,569
45,200 Xerox Corp. ................. 3,830,700
------------
15,467,144
------------
Other Consumer Services
(0.6%)
362,200 Cendant Corp.*............... 4,210,575
------------
Package Goods/Cosmetics (3.4%)
355,600 Procter & Gamble Co. ........ 25,225,375
------------
Photographic Products (1.2%)
117,600 Eastman Kodak Co. ........... 9,091,950
------------
Property - Casualty Insurers (2.5%)
91,700 General Re Corp. ............ 18,615,100
------------
Publishing/Newspapers (0.4%)
120,000 News Corp. Ltd. (ADR)
(Australia) (Pref.)......... 2,685,000
1,800 Pulitzer Publishing Co. ..... 142,425
------------
2,827,425
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER GROWTH FUND
PORTFOLIO OF INVESTMENTS September 30, 1998 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<S> <C> <C>
Retail - Specialty Apparel (1.3%)
14,000 Gap, Inc. (The)*............. $ 738,500
289,900 Staples, Inc.*............... 8,515,813
------------
9,254,313
------------
Semiconductors (3.0%)
256,100 Intel Corp. ................. 21,960,575
------------
Telecommunication Equipment (2.3%)
240,000 Lucent Technologies, Inc. ... 16,575,000
------------
Tobacco (2.8%)
444,700 Philip Morris Companies,
Inc. ....................... 20,483,994
------------
TOTAL COMMON AND PREFERRED STOCKS
(Identified Cost
$538,187,757)............... 711,572,700
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS
- ---------
<S> <C> <C>
SHORT-TERM INVESTMENT (4.0%)
REPURCHASE AGREEMENT
$ 29,564 The Bank of New York
5.00% due 10/01/98
(dated 09/30/98; proceeds
$29,568,107) (a)
(Identified Cost
$29,564,001).................. 29,564,001
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
- ----------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS
(Identified Cost $567,751,758)
(b).............................. 101.3% $741,136,701
LIABILITIES IN EXCESS OF OTHER
ASSETS........................... (1.3) (9,292,300)
----- ------------
NET ASSETS....................... 100.0% $731,844,401
===== ============
</TABLE>
- ---------------------
<TABLE>
<S> <C>
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $27,075,450 U.S. Treasury Note
5.625% due 05/15/08 valued at $30,155,281 and
$166 U.S. Treasury Bond 7.25% due 08/15/22 valued
at $211.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$207,663,774 and the aggregate gross unrealized
depreciation is $34,278,831, resulting in net
unrealized appreciation of $173,384,943.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1998 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $567,751,758)............................. $741,136,701
Receivable for:
Investments sold........................................ 2,238,530
Shares of beneficial interest sold...................... 362,890
Dividends............................................... 255,816
Interest................................................ 4,106
Prepaid expenses and other assets........................... 143,146
------------
TOTAL ASSETS............................................ 744,141,189
------------
LIABILITIES:
Payable for:
Investments purchased................................... 11,067,891
Investment management fee............................... 486,550
Plan of distribution fee................................ 461,035
Shares of beneficial interest repurchased............... 234,787
Accrued expenses and other payables......................... 46,525
------------
TOTAL LIABILITIES....................................... 12,296,788
------------
NET ASSETS.............................................. $731,844,401
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $578,932,414
Net unrealized appreciation................................. 173,384,943
Net investment loss......................................... (2,630,373)
Accumulated net realized loss............................... (17,842,583)
------------
NET ASSETS.............................................. $731,844,401
============
CLASS A SHARES:
Net Assets.................................................. $1,638,152
Shares Outstanding (unlimited authorized, $.01 par value)... 124,971
NET ASSET VALUE PER SHARE............................... $13.11
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $13.84
============
CLASS B SHARES:
Net Assets.................................................. $728,581,575
Shares Outstanding (unlimited authorized, $.01 par value)... 55,894,340
NET ASSET VALUE PER SHARE............................... $13.03
============
CLASS C SHARES:
Net Assets.................................................. $1,604,932
Shares Outstanding (unlimited authorized, $.01 par value)... 123,706
NET ASSET VALUE PER SHARE............................... $12.97
============
CLASS D SHARES:
Net Assets.................................................. $19,742
Shares Outstanding (unlimited authorized, $.01 par value)... 1,501
NET ASSET VALUE PER SHARE............................... $13.15
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the year ended September 30, 1998 (unaudited)
NET INVESTMENT INCOME:
INCOME
Dividends................................................... $ 3,734,425
Interest.................................................... 497,139
-------------
TOTAL INCOME............................................ 4,231,564
-------------
EXPENSES
Investment management fee................................... 3,371,510
Plan of distribution fee (Class A shares)................... 1,846
Plan of distribution fee (Class B shares)................... 2,788,718
Plan of distribution fee (Class C shares)................... 6,209
Transfer agent fees and expenses............................ 468,209
Shareholder reports and notices............................. 103,865
Registration fees........................................... 39,736
Professional fees........................................... 36,793
Custodian fees.............................................. 22,628
Trustees' fees and expenses................................. 10,619
Other....................................................... 11,804
-------------
TOTAL EXPENSES.......................................... 6,861,937
-------------
NET INVESTMENT LOSS..................................... (2,630,373)
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss........................................... (18,825,847)
Net change in unrealized appreciation....................... (97,945,443)
-------------
NET LOSS................................................ (116,771,290)
-------------
NET DECREASE................................................ $(119,401,663)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998*
- ------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................. $ (2,630,373) $ (5,271,022)
Net realized gain (loss)............................ (18,825,847) 237,138,133
Net change in unrealized appreciation............... (97,945,443) 58,221,456
------------- -------------
NET INCREASE (DECREASE)......................... (119,401,663) 290,088,567
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED
GAIN:
Class A shares...................................... -- (85,555)
Class B shares...................................... -- (285,764,089)
Class C shares...................................... -- (72,388)
Class D shares...................................... -- (4,322,077)
------------- -------------
TOTAL DISTRIBUTIONS............................. -- (290,244,109)
------------- -------------
Net increase (decrease) from transactions in shares
of beneficial interest............................. (42,945,099) 166,818,675
------------- -------------
NET INCREASE (DECREASE)......................... (162,346,762) 166,663,133
NET ASSETS:
Beginning of period................................. 894,191,163 727,528,030
------------- -------------
END OF PERIOD
(Including a net investment loss of
$2,630,373 and $0, respectively)................ $ 731,844,401 $ 894,191,163
============= =============
</TABLE>
- ---------------------
* Class A, Class C and Class D shares were issued July 28, 1997.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Growth Fund (the "Fund") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund's investment objective is long-term
growth of capital. The Fund seeks to achieve its objective by investing
primarily in common stocks and securities convertible into common stocks issued
by domestic and foreign companies. The Fund was organized as a Massachusetts
business trust on January 31, 1992 and commenced operations on May 29, 1992. On
July 28, 1997, the Fund commenced offering three additional classes of shares,
with the then current shares designated as Class B shares.
The Fund offers Class A shares, Class B shares, Class C shares and Class D
shares. The four classes are substantially the same except that most Class A
shares are subject to a sales charge imposed at the time of purchase and some
Class A shares, and most Class B shares and Class C shares are subject to a
contingent deferred sales charge imposed on shares redeemed within one year, six
years and one year, respectively. Class D shares are not subject to a sales
charge. Additionally, Class A shares, Class B shares and Class C shares incur
distribution expenses.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual results could differ from
those estimates.
The following is a summary of significant accounting policies:
A. VALUATION OF INVESTMENTS -- (1) an equity security listed or traded on the
New York, American or other domestic or foreign stock exchange is valued at its
latest sale price on that exchange prior to the time when assets are valued; if
there were no sales that day, the security is valued at the latest bid price;
(2) all other portfolio securities for which over-the-counter market quotations
are readily available are valued at the latest available bid price prior to the
time of valuation; (3) when market quotations are not readily available,
including circumstances under which it is determined by Morgan Stanley Asset
Management Inc. (the "Sub-Advisor") an affiliate of Morgan Stanley Dean Witter
Advisors Inc. (the "Investment Manager"), formerly Dean Witter InterCapital
Inc., that sale or bid prices are not reflective of a security's market value,
portfolio securities are valued at their fair value as determined in good faith
under procedures established by and under the general supervision of the
Trustees (valuation of debt securities for which market quotations are not
readily available may be based upon current market prices of securities which
are comparable in coupon, rating and maturity or an appropriate matrix utilizing
similar factors); and (4) short-term debt securities having a maturity date of
more than sixty
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
days at time of purchase are valued on a mark-to-market basis until sixty days
prior to maturity and thereafter at amortized cost based on their value on the
61st day. Short-term debt securities having a maturity date of sixty days or
less at the time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of net
realized capital gains. To the extent they exceed net investment income and net
realized capital gains for tax purposes, they are reported as distributions of
paid-in-capital.
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to an Investment Management Agreement, the Fund pays the Investment
Manager a management fee, accrued daily and payable monthly, by applying the
following annual rates to the net assets of the Fund determined as of the close
of each business day: 0.80% of the portion of net assets
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
not exceeding $750 million; 0.75% of the portion of daily net assets exceeding
$750 million but not $1.5 billion and 0.70% of the portion of daily net assets
in excess of $1.5 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.
Under a Sub-Advisory Agreement between the Sub-Advisor and the Investment
Manager, the Sub-Advisor provides the Fund with investment advice and portfolio
management relating to the Fund's investments in securities, subject to the
overall supervision of the Investment Manager. As compensation for its services
provided pursuant to the Sub-Advisory Agreement, the Investment Manager pays the
Sub-Advisor compensation equal to 40% of its monthly compensation.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the Investment Manager. The Fund has
adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the
Act. The Plan provides that the Fund will pay the Distributor a fee which is
accrued daily and paid monthly at the following annual rates: (i) Class A -- up
to 0.25% of the average daily net assets of Class A; (ii) Class B -- 1.0% of the
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, Morgan Stanley
Dean Witter Financial Advisors and others who engage in or support distribution
of the shares or who service shareholder accounts, including overhead and
telephone expenses; (2) printing and distribution of prospectuses and reports
used in connection with the offering of these shares to other than current
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
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 $18,773,011 at September 30, 1998.
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 September 30, 1998, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.0%, respectively.
The Distributor has informed the Fund that for the six months ended September
30, 1998, it received contingent deferred sales charges from certain redemptions
of the Fund's Class B shares and Class C shares of $316,595 and $723,
respectively and received $35,701 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 September 30, 1998 aggregated
$437,617,055 and $489,703,782, respectively.
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS September 30, 1998 (unaudited) continued
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent. At September 30, 1998, the Fund had
transfer agent fees and expenses payable of approximately $3,800.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
[CAPTION]
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998*
------------------------- ---------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 106,853 $ 1,563,034 37,956 $ 633,209
Reinvestment of distributions............................... -- -- 5,054 77,016
Redeemed.................................................... (24,509) (347,192) (383) (6,771)
---------- ------------ ----------- -------------
Net increase - Class A...................................... 82,344 1,215,842 42,627 703,454
---------- ------------ ----------- -------------
CLASS B SHARES
Sold........................................................ 3,282,337 48,212,029 4,545,691 77,314,601
Reinvestment of distributions............................... -- -- 16,919,027 264,591,495
Redeemed.................................................... (6,450,076) (93,795,927) (10,620,556) (180,817,478)
---------- ------------ ----------- -------------
Net increase (decrease) - Class B........................... (3,167,739) (45,583,898) 10,844,162 161,088,618
---------- ------------ ----------- -------------
CLASS C SHARES
Sold........................................................ 103,944 1,527,224 32,145 541,605
Reinvestment of distributions............................... -- -- 4,683 71,691
Redeemed.................................................... (8,249) (115,105) (8,817) (152,695)
---------- ------------ ----------- -------------
Net increase - Class C...................................... 95,695 1,412,119 28,011 460,601
---------- ------------ ----------- -------------
CLASS D SHARES
Sold........................................................ 749 10,838 1,361,485 25,004,121
Reinvestment of distributions............................... -- -- 182 2,817
Redeemed.................................................... -- -- (1,360,915) (20,440,936)
---------- ------------ ----------- -------------
Net increase - Class D...................................... 749 10,838 752 4,566,002
---------- ------------ ----------- -------------
Net increase (decrease) in Fund............................. (2,988,951) $(42,945,099) 10,915,552 $ 166,818,675
========== ============ =========== =============
</TABLE>
- ---------------------
* For Class A, C and D shares, for the period July 28, 1997 (issue date) through
March 31, 1998.
6. FEDERAL INCOME TAX STATUS
As of March 31, 1998, the Fund had temporary book/tax differences attributable
to capital loss deferrals on wash sales.
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER GROWTH 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 MARCH 31,
MONTHS ENDED ----------------------------------------------------------------
SEPTEMBER 30, 1998++ 1998*++ 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
CLASS B SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of
period.......................... $15.12 $15.09 $15.09 $12.11 $12.10 $11.26
------ ------ ------ ------ ------ ------
Net investment loss.............. (0.05) (0.11) (0.12) (0.11) (0.06) (0.06)
Net realized and unrealized gain
(loss).......................... (2.04) 6.07 1.39 3.09 0.07 0.90
------ ------ ------ ------ ------ ------
Total from investment
operations...................... (2.09) 5.96 1.27 2.98 0.01 0.84
------ ------ ------ ------ ------ ------
Less distributions from net
realized gain................... -- (5.93) (1.27) -- -- --
------ ------ ------ ------ ------ ------
Net asset value, end of period... $13.03 $15.12 $15.09 $15.09 $12.11 $12.10
====== ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN+......... (13.82)%(1) 42.61% 8.31% 24.69% 0.08% 7.46%
RATIOS TO AVERAGE NET ASSETS:
Expenses......................... 1.62%(2)(3) 1.64% 1.73% 1.82% 1.96% 1.93%
Net investment loss.............. (0.62)%(2)(3) (0.64)% (0.75)% (0.72)% (0.48)% (0.59)%
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands....................... $728,582 $893,111 $727,528 $767,170 $697,350 $707,069
Portfolio turnover rate.......... 54%(1) 77% 45% 48% 38% 35%
</TABLE>
- ---------------------
* Prior to July 28, 1997, the Fund issued one class of shares. All shares of
the Fund held prior to that date have been designated Class B 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
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
SEPTEMBER 30, 1998++ MARCH 31, 1998++
- ---------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
CLASS A SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.17 $17.58
------ ------
Net investment loss......................................... (0.02) (0.04)
Net realized and unrealized gain (loss)..................... (2.04) 2.28
------ ------
Total from investment operations............................ (2.06) 2.24
------ ------
Less distributions from net realized gain................... -- (4.65)
------ ------
Net asset value, end of period.............................. $13.11 $15.17
====== ======
TOTAL INVESTMENT RETURN+.................................... (13.58)%(1) 13.84%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.21%(2)(3) 1.33%(2)
Net investment loss......................................... (0.21)%(2)(3) (0.34)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,638 $647
Portfolio turnover rate..................................... 54%(1) 77%
CLASS C SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.08 $17.58
------ ------
Net investment loss......................................... (0.07) (0.11)
Net realized and unrealized gain (loss)..................... (2.04) 2.26
------ ------
Total from investment operations............................ (2.11) 2.15
------ ------
Less distributions from net realized gain................... -- (4.65)
------ ------
Net asset value, end of period.............................. $12.97 $15.08
====== ======
TOTAL INVESTMENT RETURN+.................................... (13.99)%(1) 13.33%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.96%(2)(3) 2.02%(2)
Net investment loss......................................... (0.96)%(2)(3) (1.00)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $1,605 $422
Portfolio turnover rate..................................... 54%(1) 77%
</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
14
<PAGE> 15
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX JULY 28, 1997*
MONTHS ENDED THROUGH
SEPTEMBER 30, 1998++ MARCH 31, 1998++
- -----------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
CLASS D SHARES
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period........................ $15.21 $17.58
------ ------
Net investment loss......................................... -- (0.08)
Net realized and unrealized gain (loss)..................... (2.06) 2.36
------ ------
Total from investment operations............................ (2.06) 2.28
------ ------
Less distributions from net realized gain................... -- (4.65)
------ ------
Net asset value, end of period.............................. $13.15 $15.21
====== ======
TOTAL INVESTMENT RETURN+.................................... (13.54)%(1) 14.09%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 0.96%(2)(3) 1.43%(2)
Net investment income (loss)................................ 0.04%(2)(3) (0.78)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $20 $11
Portfolio turnover rate..................................... 54%(1) 77%
</TABLE>
- ---------------------
* The date shares were first issued.
++ 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
15
<PAGE> 16
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
John R. Haire
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Phillip J. Purcell
John L. Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Barry Fink
Vice President, Secretary and General Counsel
Thomas F. Caloia
Treasurer
TRANSFER AGENT
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center - Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
Morgan Stanley Asset Management Inc.
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,
fee, 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.
MORGAN STANLEY
DEAN WITTER
GROWTH FUND
[PHOTO]
SEMIANNUAL REPORT
SEPTEMBER 30, 1998
