<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER GROWTH FUND TWO WORLD TRADE CENTER,
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 1999 NEW YORK, NEW YORK 10048
</TABLE>
DEAR SHAREHOLDER:
During the six-month period ended September 30, 1999, financial markets around
the world continued to experience volatility. After a peak in the domestic
markets in the middle of July, stock prices pulled back toward the end of the
period amid concerns that the U.S. economy was growing too fast. This concern
was manifested in the two Federal Reserve Board moves, in June and August, that
raised the federal-funds rate a total of 50 basis points while inflation
remained low and the economy continued to grow.
PERFORMANCE
For the six-month period ended September 30, 1999, Morgan Stanley Dean Witter
Growth Fund Class B shares produced a total return of 5.88 percent, compared to
0.36 percent for the S&P 500 Composite Stock Price Index (S&P 500 Index) and
0.95 percent for the Lipper Growth Funds Index. For the same period, the Fund's
Class A, C and D shares posted total returns of 6.07 percent, 5.74 percent and
6.22 percent, respectively. The performance of the Fund's four share classes
varies because each class has different expenses. (Total return figures assume
the reinvestment of all distributions and do not reflect the deduction of any
applicable sales charges.)
During the period under review, stock selection was the primary driver of the
Fund's outperformance, with a modest positive contribution from sector
allocation. According to Morgan Stanley Dean Witter Investment Management Inc.,
the Fund's sub-advisor, top performers during the period under review included
Tyco International, Cisco Systems, Gulfstream Aerospace, Intel and Clear Channel
Communications. Detractors from performance included Eli Lilly & Co and
MCI/Worldcom.
The Fund continues to owe a great deal of its strong performance as much to what
it doesn't own as to what it does. The Fund was generally underweighted in much
of the consumer sector and held no Coca-Cola, Pepsi, Gillette, Clorox or Avon,
for example. The Fund also held no Abbott Laboratories and had sold its modest
American Home Products position before that stock's decline. Avoiding these
blow-ups
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 1999, CONTINUED
was very helpful in generating performance during the period. The Fund's overall
performance during the period was hindered by its slight overweighting in the
health-care sector, while its technology exposure provided a modest plus.
PORTFOLIO STRATEGY
The Fund seeks long-term capital appreciation by investing primarily in the
common stocks of predominantly U.S. companies. Earlier this year the Fund's
sub-advisor began gradually increasing the median market capitalization of the
Fund's portfolio securities. This increase in capitalization is largely a
function of the sub-advisor's bottom-up research conviction on specific issues.
The Fund continues to be broadly diversified by issue, holding 84 securities at
September 30, 1999. Further, the Fund remains a mix of "classic" growth stocks
such as Microsoft, General Electric, Cisco, Home Depot and Pfizer, as well as
less traditional growth names such as Tyco International, United Technologies
and Clear Channel Communications. On September 30, 1999, the Fund's largest
position was in Tyco, which represented approximately 7 percent of the Fund's
assets with the 10 largest holdings accounting for about 43.1 percent of total
assets.
Tyco rose some 37 percent during the first half of the Fund's fiscal year,
before pulling back in early October. Clear Channel, a top-10 holding for some
time, given its burgeoning cash flow, has merged with AMFM to become the
nation's largest radio company, with more than 100 million weekly listeners. And
the sub-advisor believes that this unparalleled distribution platform will
enable the company to further leverage its strong advertiser and consumer ties
through new initiatives like radio networks and the Internet. The sub-advisor
remains enthusiastic about Worldcom in the wake of its merger with Sprint. The
sub-advisor believes the new company will be the fastest-growing large company
in one of the fastest-growing industries in the world and still sell at a
discount to the S&P 500 on cash earnings.
Technology now accounts for about 27 percent of the Fund's holdings. Not
surprisingly, its largest technology holdings include Microsoft, Cisco, Intel
and Motorola. The sub-advisor is a big believer in the Motorola/General
Instrument merger and is a major fan of the wireless/broadband play that this
now offers.
The Fund slightly increased its health-care exposure during the period under
review, due to continued relative earnings weakness. The Fund currently has
approximately 13 percent health-care exposure versus 11 percent for the S&P 500.
The sub-advisor will look to increase the Fund's weightings in this stable
growth area when it gains confidence that S&P 500 earnings growth rates are
peaking and as further clarification of the Medicare drug benefit debate becomes
available. The Fund sharply reduced its position in Merck, as a result of the
sub-advisor's belief that its relative earnings growth may become increasingly
less attractive as we near the 2001-2002 patent expirations
2
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
LETTER TO THE SHAREHOLDERS SEPTEMBER 30, 1999, CONTINUED
for several of its leading drugs. On the buy side, the Fund initiated a position
in the leading medical device manufacturer Medtronic and added to Bristol-Myers
Squibb (now a top-10 holding) and Warner Lambert.
LOOKING AHEAD
Notwithstanding modest interest-rate increases, the Fund's sub-advisor continues
to see little inflation pressure because of 1) continued lack of pricing
pressure in all but a few sectors; 2) productivity increases driven by
technology (specifically the Internet) and ongoing corporate restructuring; and
3) increasing domestic budget surpluses. The benign inflation outlook, combined
with the gradual "u-shaped" recoveries the sub-advisor expects in many foreign
markets, lead it to believe that the outperformance of large-cap growth can
continue.
In addition, the sub-advisor continues to be a big believer in the Internet's
impact on the consumer as well as business-to-business interaction. The
sub-advisor believes the development of the Internet is a transformation event
and has thus been concentrating on companies assembling the assets that will
enable those companies to win in the future and provide real cash flow now. In
following this investment strategy the Fund seeks to deliver high returns and
manage risk. Consequently, the Fund is limiting its pure play Internet exposure,
which now stands at only about 1.4 percent. One of the Fund's smaller
Internet-oriented investments that worked out quite well is Internet Capital
Group. This is a holding company of 36 business-to-business companies, only
three of which are now publicly traded. The sub-advisor is enthusiastic about
the "business-to-business" concept as well as this particular management team.
Most of the Fund's Internet exposure is what the sub-advisor terms "embedded"
and is spread among the categories of content, advertising/media,
telecom/satellite infrastructure and hardware plays in stocks such as Cisco,
Clear Channel/AMFM, MCI/Worldcom, Liberty and MediaOne.
We appreciate your ongoing support of Morgan Stanley Dean Witter Growth Fund and
look forward to continuing to serve your investment needs.
Very truly yours,
<TABLE>
<S> <C>
[SIGNATURE] [SIGNATURE]
CHARLES A. FIUMEFREDDO MITCHELL M. MERIN
CHAIRMAN OF THE BOARD PRESIDENT
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FUND PERFORMANCE SEPTEMBER 30, 1999
</TABLE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
---------------------------------------------------------------------------------------------------------------------
CLASS A* CLASS B+
------------------------------------------------------- -------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 Year 43.44(1) 35.91(1) 1 Year 42.92(1) 37.92(2)
Since Inception (7/28/97) 17.17(1) 14.30(2) 5 Years 19.13(1) 18.93(2)
Since Inception (5/29/92) 15.47(1) 15.47(2)
<CAPTION>
CLASS C++ CLASS D#
------------------------------------------------------- -------------------------------------------------------
1 Year (1) 42.49 (2) 41.49 1 Year (1) 43.78
<S> <C> <C> <C> <C> <C>
Since Inception (7/28/97) 16.31(1) 16.31(2) Since Inception (7/28/97) 17.44(1)
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS
</TABLE>
- ------------------------
(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 contingent deferred sales charge for Class C shares is 1% for
shares redeemed within one year of purchase.
# Class D shares have no sales charge.
4
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (99.0%)
ADVERTISING (1.1%)
2,900 FreeShop.com, Inc.*....... $ 33,350
130,100 Omnicom Group, Inc........ 10,302,294
------------
10,335,644
------------
AEROSPACE (3.6%)
568,700 United Technologies
Corp.................... 33,731,019
------------
ALCOHOLIC BEVERAGES (0.5%)
72,500 Anheuser-Busch Companies,
Inc..................... 5,079,531
------------
BIOTECHNOLOGY (0.6%)
71,400 Amgen Inc.*............... 5,819,100
------------
BROADCASTING (5.9%)
25,500 Acme Communications
Inc.*................... 790,500
183,000 AMFM, Inc................. 11,140,125
191,011 CBS Corp.................. 8,834,259
439,300 Clear Channel
Communications, Inc.*... 35,089,087
------------
55,853,971
------------
BUILDING MATERIALS/DIY CHAINS (3.9%)
530,600 Home Depot, Inc. (The).... 36,412,425
------------
BUILDING PRODUCTS (0.1%)
33,300 Masco Corp................ 1,032,300
------------
CABLE TELEVISION (4.5%)
344,600 AT&T Corp. - Liberty Media
Group (Class A)*........ 12,793,275
416,300 Comcast Corp. (Class A
Special)*............... 16,573,944
183,400 MediaOne Group, Inc.*..... 12,528,512
21,700 Tivo Inc.*................ 649,644
------------
42,545,375
------------
CELLULAR TELEPHONE (0.5%)
9,700 AirGate PCS, Inc.*........ 241,287
259,500 Crown Castle International
Corp.*.................. 4,833,187
------------
5,074,474
------------
CLOTHING/SHOE/ACCESSORY STORES (1.9%)
257,000 Abercrombie & Fitch Co.
(Class A)*.............. 8,754,062
107,875 Gap, Inc. (The)........... 3,452,000
157,200 Limited (The), Inc........ 6,012,900
------------
18,218,962
------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
COMPUTER COMMUNICATIONS (6.5%)
7,800 Alteon Websystems Inc.*... $ 737,100
841,776 Cisco Systems, Inc.*...... 57,661,656
5,800 Foundry Networks*......... 730,800
10,600 Juniper Networks, Inc.*... 1,929,862
------------
61,059,418
------------
COMPUTER SOFTWARE (5.9%)
521,600 Microsoft Corp.*.......... 47,237,400
258,700 Novell, Inc.*............. 5,335,687
67,000 Oracle Corp.*............. 3,048,500
------------
55,621,587
------------
DISCOUNT CHAINS (3.6%)
263,200 Costco Wholesale Corp..... 18,933,950
312,700 Wal-Mart Stores, Inc...... 14,872,794
------------
33,806,744
------------
DIVERSIFIED COMMERCIAL SERVICES (0.4%)
109,600 Nielsen Media Research,
Inc.*................... 4,075,750
------------
DIVERSIFIED ELECTRONIC PRODUCTS (1.1%)
87,500 JDS Uniphase Corp.*....... 9,953,125
------------
DIVERSIFIED FINANCIAL SERVICES (3.1%)
118,500 American Express Co....... 15,953,062
310,050 Citigroup, Inc............ 13,642,200
------------
29,595,262
------------
DIVERSIFIED MANUFACTURING (7.4%)
673,900 Tyco International Ltd.
(Bermuda)*.............. 69,580,175
------------
ELECTRIC UTILITIES (0.3%)
87,600 Montana Power Co.......... 2,666,325
------------
ELECTRONIC COMPONENTS (0.4%)
50,300 Solectron Corp.*.......... 3,612,169
------------
ELECTRONIC DATA PROCESSING (1.5%)
52,900 Hewlett-Packard Co........ 4,866,800
103,900 Sun Microsystems, Inc.*... 9,662,700
------------
14,529,500
------------
ELECTRONIC PRODUCTION EQUIPMENT (0.8%)
95,200 Applied Materials,
Inc.*................... 7,389,900
------------
INTERNET SERVICES (1.6%)
94,800 America Online, Inc.*..... 9,859,200
11,700 Bluestone Software*....... 270,562
1,600 Digital Insight Inc....... 24,000
11,500 Egain Communications
Corp.*.................. 212,031
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED) CONTINUED
<TABLE>
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
19,900 Inktomi Corp.*............ $ 2,388,000
14,900 Internet Capital Group
Inc.*................... 1,308,406
11,500 Kana Communications
Inc.*................... 573,562
9,800 Netzero Inc.*............. 254,188
2,200 Radware Ltd.*............. 60,500
7,700 Vitria Technology Inc.*... 281,531
------------
15,231,980
------------
INVESTMENT
BANKERS/BROKERS/SERVICES (1.2%)
161,800 Merrill Lynch & Co.,
Inc..................... 10,870,938
------------
MAJOR BANKS (1.0%)
292,300 Bank of New York Co.,
Inc..................... 9,773,781
------------
MAJOR PHARMACEUTICALS (11.9%)
448,300 Bristol-Myers Squibb
Co...................... 30,260,250
196,100 Johnson & Johnson......... 18,016,688
264,800 Lilly (Eli) & Co.......... 16,947,200
178,500 Merck & Co., Inc.......... 11,569,031
191,000 Pfizer, Inc............... 6,864,063
142,300 Schering-Plough Corp...... 6,207,838
345,100 Warner-Lambert Co......... 22,906,013
------------
112,771,083
------------
MAJOR U.S. TELECOMMUNICATIONS (4.0%)
205,500 Bell Atlantic Corp........ 13,832,719
338,600 MCI WorldCom, Inc.*....... 24,315,713
------------
38,148,432
------------
MEDIA CONGLOMERATES (1.8%)
276,200 Time Warner Inc........... 16,779,150
------------
MEDICAL EQUIPMENT & SUPPLIES (0.4%)
119,400 Medtronic, Inc............ 4,238,700
------------
MILITARY/GOV'T/TECHNICAL (3.3%)
276,300 General Dynamics Corp..... 17,251,481
123,300 General Motors Corp.
(Class H)*.............. 7,058,925
406,100 Loral Space &
Communications Ltd.*.... 6,979,844
------------
31,290,250
------------
MULTI-SECTOR COMPANIES (5.5%)
345,600 General Electric Co....... 40,975,200
139,000 Textron, Inc.............. 10,755,125
------------
51,730,325
------------
NUMBER OF
SHARES VALUE
- -----------------------------------------------------------------
<S> <C> <C>
OFFICE EQUIPMENT/SUPPLIES (2.6%)
396,800 Pitney Bowes, Inc......... $ 24,180,000
------------
OTHER SPECIALTY STORES (0.4%)
55,300 Tiffany & Co.............. 3,314,544
------------
OTHER TELECOMMUNICATIONS (0.4%)
150,300 Ixnet Inc.*............... 2,263,894
53,100 Pinnacle Holdings Inc.*... 1,380,600
------------
3,644,494
------------
PACKAGE GOODS/COSMETICS (2.0%)
204,800 Procter & Gamble Co....... 19,200,000
------------
RESTAURANTS (0.3%)
94,600 Brinker International,
Inc.*................... 2,566,025
------------
SEMICONDUCTORS (4.0%)
411,000 Intel Corp................ 30,542,438
13,600 Maxim Integrated Products,
Inc.*................... 857,650
83,000 Texas Instruments, Inc.... 6,826,750
------------
38,226,838
------------
SPECIALTY FOODS/CANDY (0.5%)
148,000 Keebler Foods Co.*........ 4,421,500
------------
TELECOMMUNICATIONS EQUIPMENT (3.7%)
283,300 American Tower Corp.
(Class A)............... 5,542,056
146,100 CIENA Corp.*.............. 5,323,519
40,900 L-3 Communications
Holdings, Inc.*......... 1,543,975
131,200 Lucent Technologies
Inc..................... 8,511,600
138,300 Motorola, Inc............. 12,170,400
29,100 Nortel Networks Corp.
(Canada)................ 1,484,100
------------
34,575,650
------------
TOBACCO (0.8%)
235,300 Philip Morris Companies,
Inc..................... 8,044,319
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST
$606,199,917)............. 935,000,765
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
PORTFOLIO OF INVESTMENTS SEPTEMBER 30, 1999 (UNAUDITED) CONTINUED
<TABLE>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -----------------------------------------------------------------
<S> <C> <C>
SHORT-TERM INVESTMENT (0.6%)
REPURCHASE AGREEMENT
$ 5,594 The Bank of New York 5.00%
due 10/01/99
(dated 09/30/99;
proceeds $5,594,750) (a)
(IDENTIFIED COST
$5,593,973)............. $ 5,593,973
------------
</TABLE>
<TABLE>
<S> <C> <C>
TOTAL INVESTMENTS
(IDENTIFIED COST
$611,793,890) (B)........... 99.6% 940,594,738
OTHER ASSETS IN EXCESS OF
LIABILITIES................. 0.4 3,879,367
----- ------------
NET ASSETS.................. 100.0% $944,474,105
----- ------------
----- ------------
</TABLE>
- ---------------------
* Non-income producing security.
(a) Collateralized by $3,932,789 U.S. Treasury Note
5.625% due 10/31/99 valued at $4,026,605 and
$1,664,665 U.S. Treasury Note 5.875% due
02/15/04 valued at $1,681,485.
(b) The aggregate cost for federal income tax
purposes approximates identified cost. The
aggregate gross unrealized appreciation is
$341,431,225 and the aggregate gross unrealized
depreciation is $12,630,377, resulting in net
unrealized appreciation of $328,800,848.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments in securities, at value
(identified cost $611,793,890)............................ $940,594,738
Receivable for:
Investments sold........................................ 7,244,556
Shares of beneficial interest sold...................... 1,326,694
Dividends............................................... 518,624
Prepaid expenses and other assets........................... 78,841
------------
TOTAL ASSETS........................................... 949,763,453
------------
LIABILITIES:
Payable for:
Investments purchased................................... 3,696,408
Investment management fee............................... 619,843
Plan of distribution fee................................ 478,041
Shares of beneficial interest repurchased............... 434,323
Accrued expenses and other payables......................... 60,733
------------
TOTAL LIABILITIES...................................... 5,289,348
------------
NET ASSETS............................................. $944,474,105
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $559,834,380
Net unrealized appreciation................................. 328,800,848
Accumulated net investment loss............................. (4,288,691)
Accumulated undistributed net realized gain................. 60,127,568
------------
NET ASSETS............................................. $944,474,105
============
CLASS A SHARES:
Net Assets.................................................. $8,072,792
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 466,292
NET ASSET VALUE PER SHARE.............................. $17.31
============
MAXIMUM OFFERING PRICE PER SHARE,
(NET ASSET VALUE PLUS 5.54% OF NET ASSET VALUE)...... $18.27
============
CLASS B SHARES:
Net Assets.................................................. $930,213,931
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 54,290,402
NET ASSET VALUE PER SHARE.............................. $17.13
============
CLASS C SHARES:
Net Assets.................................................. $3,942,265
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 231,991
NET ASSET VALUE PER SHARE.............................. $16.99
============
CLASS D SHARES:
Net Assets.................................................. $2,245,117
Shares Outstanding (UNLIMITED AUTHORIZED, $.01 PAR VALUE)... 128,899
NET ASSET VALUE PER SHARE.............................. $17.42
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
NET INVESTMENT LOSS:
INCOME
Dividends................................................... $ 2,642,624
Interest.................................................... 187,309
-----------
TOTAL INCOME........................................... 2,829,933
-----------
EXPENSES
Investment management fee................................... 3,722,071
Plan of distribution fee (Class A shares)................... 8,668
Plan of distribution fee (Class B shares)................... 2,842,033
Plan of distribution fee (Class C shares)................... 15,734
Transfer agent fees and expenses............................ 349,613
Shareholder reports and notices............................. 55,330
Registration fees........................................... 43,773
Professional fees........................................... 40,132
Custodian fees.............................................. 30,141
Trustees' fees and expenses................................. 6,750
Other....................................................... 4,379
-----------
TOTAL EXPENSES......................................... 7,118,624
-----------
NET INVESTMENT LOSS.................................... (4,288,691)
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain........................................... 66,956,237
Net change in unrealized appreciation....................... (9,283,373)
-----------
NET GAIN............................................... 57,672,864
-----------
NET INCREASE................................................ $53,384,173
===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, MARCH 31,
1999 1999
- ---------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss............................. $ (4,288,691) $ (5,921,762)
Net realized gain............................... 66,956,237 65,327,474
Net change in unrealized appreciation........... (9,283,373) 66,753,835
------------ ------------
NET INCREASE............................... 53,384,173 126,159,547
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED
GAIN:
Class A shares.................................. (401,644) (57,063)
Class B shares.................................. (54,560,938) (17,822,626)
Class C shares.................................. (209,051) (45,433)
Class D shares.................................. (42,125) (527)
------------ ------------
TOTAL DISTRIBUTIONS........................ (55,213,758) (17,925,649)
------------ ------------
Net increase (decrease) from transactions in
shares of beneficial interest................. 23,653,215 (79,774,586)
------------ ------------
NET INCREASE............................... 21,823,630 28,459,312
NET ASSETS:
Beginning of period............................. 922,650,475 894,191,163
------------ ------------
END OF PERIOD
(INCLUDING A NET INVESTMENT LOSS OF
$4,288,691 AND $0, RESPECTIVELY)............ $944,474,105 $922,650,475
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (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 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;
(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 Investment Management Inc. (the "Sub-Advisor"), an affiliate of Morgan
Stanley Dean Witter Advisors Inc. (the "Investment Manager"), that sale or bid
prices are not reflective of a security's market value, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation of
debt securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in coupon,
rating and maturity or an appropriate matrix utilizing similar factors); and (4)
short-term debt securities having a maturity date of more than sixty
11
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (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
12
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) CONTINUED
assets of the Fund determined as of the close of each business day: 0.80% to the
portion of daily net assets not exceeding $750 million; 0.75% to the portion of
daily net assets exceeding $750 million but not exceeding $1.5 billion; and
0.70% to the portion of daily net assets exceeding $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
13
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) CONTINUED
offering of these shares to other than current shareholders; and (3)
preparation, printing and distribution of sales literature and advertising
materials. In addition, the Distributor may utilize fees paid pursuant to the
Plan, in the case of Class B shares, to compensate Dean Witter Reynolds Inc.
("DWR"), an affiliate of the Investment Manager and Distributor, and other
selected broker-dealers for their opportunity costs in advancing such amounts,
which compensation would be in the form of a carrying charge on any unreimbursed
expenses.
In the case of Class B shares, provided that the Plan continues in effect, any
cumulative expenses incurred by the Distributor but not yet recovered may be
recovered through the payment of future distribution fees from the Fund pursuant
to the Plan and contingent deferred sales charges paid by investors upon
redemption of Class B shares. Although there is no legal obligation for the Fund
to pay expenses incurred in excess of payments made to the Distributor under the
Plan and the proceeds of contingent deferred sales charges paid by investors
upon redemption of shares, if for any reason the Plan is terminated, the
Trustees will consider at that time the manner in which to treat such expenses.
The Distributor has advised the Fund that such excess amounts, including
carrying charges, totaled $16,902,018 at September 30, 1999.
In the case of Class A shares and Class C shares, expenses incurred pursuant to
the Plan in any calendar year in excess of 0.25% or 1.0% of the average daily
net assets of Class A or Class C, respectively, will not be reimbursed by the
Fund through payments in any subsequent year, except that expenses representing
a gross sales credit to Morgan Stanley Dean Witter Financial Advisors or other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended September 30, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 0.89%, respectively.
The Distributor has informed the Fund that for the six months ended
September 30, 1999, it received contingent deferred sales charges from certain
redemptions of the Fund's Class A shares, Class B shares and Class C shares of
$829, $209,576 and $1,059, respectively and received $8,951 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, 1999 aggregated
$42,406,990 and $48,562,166, respectively.
14
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1999 (UNAUDITED) CONTINUED
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
5. SHARES OF BENEFICIAL INTEREST
Transactions in shares of beneficial interest were as follows:
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
--------------------------- --------------------------
(UNAUDITED)
SHARES AMOUNT SHARES AMOUNT
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold............................................................. 311,258 $ 5,477,275 331,535 $ 5,195,083
Reinvestment of distributions.................................... 23,150 386,600 3,781 56,150
Redeemed......................................................... (155,783) (2,663,632) (90,276) (1,415,690)
---------- ------------- ----------- -------------
Net increase - Class A 178,625 3,200,243 245,040 3,835,543
---------- ------------- ----------- -------------
CLASS B SHARES
Sold............................................................. 2,683,879 46,767,589 5,248,657 79,679,953
Reinvestment of distributions.................................... 3,065,540 50,734,686 1,123,085 16,565,513
Redeemed......................................................... (4,546,175) (78,686,958) (12,346,663) (183,588,963)
---------- ------------- ----------- -------------
Net increase (decrease) - Class B................................ 1,203,244 18,815,317 (5,974,921) (87,343,497)
---------- ------------- ----------- -------------
CLASS C SHARES
Sold............................................................. 83,494 1,439,166 173,035 2,597,416
Reinvestment of distributions.................................... 12,244 201,169 2,985 43,796
Redeemed......................................................... (41,689) (714,438) (26,089) (376,564)
---------- ------------- ----------- -------------
Net increase - Class C........................................... 54,049 925,897 149,931 2,264,648
---------- ------------- ----------- -------------
CLASS D SHARES
Sold............................................................. 249,829 4,370,824 88,973 1,468,193
Reinvestment of distributions.................................... 448 7,526 35 527
Redeemed......................................................... (211,138) (3,666,592) -- --
---------- ------------- ----------- -------------
Net increase - Class D........................................... 39,139 711,758 89,008 1,468,720
---------- ------------- ----------- -------------
Net increase (decrease) in Fund.................................. 1,475,057 $ 23,653,215 (5,490,942) $ (79,774,586)
========== ============= =========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of March 31, 1999, the Fund had temporary book/tax differences attributable
to capital loss deferrals on wash sales.
15
<PAGE>
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 PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $17.34 $15.17 $17.58
------ ------ ------
Income (loss) from investment operations:
Net investment loss...................................... (0.09) (0.05) (0.04)
Net realized and unrealized gain......................... 1.10 2.55 2.28
------ ------ ------
Total income from investment operations..................... 1.01 2.50 2.24
------ ------ ------
Less distributions from net realized gain................... (1.04) (0.33) (4.65)
------ ------ ------
Net asset value, end of period.............................. $17.31 $17.34 $15.17
====== ====== ======
TOTAL RETURN+............................................... 6.07 %(1) 16.87 % 13.84 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.15 %(2)(3) 1.19 %(3) 1.33 %(2)
Net investment loss......................................... (0.55)%(2)(3) (0.29)%(3) (0.34)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $8,073 $4,987 $647
Portfolio turnover rate..................................... 34 % 113 % 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
16
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30, 1999++
(UNAUDITED)
- ---------------------------------------------------------------------
<S> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.......... $ 17.20
-------
Income (loss) from investment operations:
Net investment loss........................ (0.16)
Net realized and unrealized gain........... 1.13
-------
Total income from investment operations....... 0.97
-------
Less distributions from net realized gain..... (1.04)
-------
Net asset value, end of period................ $ 17.13
=======
TOTAL RETURN+................................. 5.88 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses...................................... 1.51 %(2)(3)
Net investment loss........................... (0.91)%(2)(3)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands....... $930,214
Portfolio turnover rate....................... 34 %
<CAPTION>
FOR THE YEAR ENDED MARCH 31,
----------------------------------------------------------
1999++ 1998*++ 1997 1996 1995
- ---------------------------------------------- ----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CLASS B SHARES
SELECTED PER SHARE DATA:
Net asset value, beginning of period.......... $ 15.12 $ 15.09 $ 15.09 $ 12.11 $ 12.10
-------- ------- ------- -------- --------
Income (loss) from investment operations:
Net investment loss........................ (0.11) (0.11) (0.12) (0.11) (0.06)
Net realized and unrealized gain........... 2.52 6.07 1.39 3.09 0.07
-------- ------- ------- -------- --------
Total income from investment operations....... 2.41 5.96 1.27 2.98 0.01
-------- ------- ------- -------- --------
Less distributions from net realized gain..... (0.33) (5.93) (1.27) -- --
-------- ------- ------- -------- --------
Net asset value, end of period................ $ 17.20 $ 15.12 $ 15.09 $ 15.09 $ 12.11
======== ======= ======= ======== ========
TOTAL RETURN+................................. 16.32 % 42.61 % 8.31 % 24.69 % 0.08 %
RATIOS TO AVERAGE NET ASSETS:
Expenses...................................... 1.60 %(3) 1.64 % 1.73 % 1.82 % 1.96 %
Net investment loss........................... (0.70)%(3) (0.64)% (0.75)% (0.72)% (0.48)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands....... $913,060 $893,111 $727,528 $767,170 $697,350
Portfolio turnover rate....................... 113 % 77 % 45 % 48 % 38 %
</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
17
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of
period............................ $17.09 $15.08 $17.58
------ ------ ------
Income (loss) from investment
operations:
Net investment loss............. (0.20) (0.16) (0.11)
Net realized and unrealized
gain............................ 1.14 2.50 2.26
------ ------ ------
Total income from investment
operations........................ 0.94 2.34 2.15
------ ------ ------
Less distributions from net
realized gain..................... (1.04) (0.33) (4.65)
------ ------ ------
Net asset value, end of period..... $16.99 $17.09 $15.08
====== ====== ======
TOTAL RETURN+...................... 5.74 %(1) 15.90 % 13.33 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 1.79 %(2)(3) 1.94 %(3) 2.02 %(2)
Net investment loss................ (1.19)%(2)(3) (1.04)%(3) (1.00)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $3,942 $3,041 $422
Portfolio turnover rate............ 34 % 113 % 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
18
<PAGE>
MORGAN STANLEY DEAN WITTER GROWTH FUND
FINANCIAL HIGHLIGHTS, CONTINUED
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999 MARCH 31, 1998
(UNAUDITED)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of
period............................ $17.41 $15.21 $17.58
------ ------ ------
Income (loss) from investment
operations:
Net investment loss............. (0.05) (0.01) (0.08)
Net realized and unrealized
gain............................ 1.10 2.54 2.36
------ ------ ------
Total income from investment
operations........................ 1.05 2.53 2.28
------ ------ ------
Less distributions from net
realized gain..................... (1.04) (0.33) (4.65)
------ ------ ------
Net asset value, end of period..... $17.42 $17.41 $15.21
====== ====== ======
TOTAL RETURN+...................... 6.22 %(1) 17.02 % 14.09 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses........................... 0.90 %(2)(3) 0.94 %(3) 1.43 %(2)
Net investment loss................ (0.30)%(2)(3) (0.04)%(3) (0.78)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in
thousands......................... $2,245 $1,563 $11
Portfolio turnover rate............ 34 % 113 % 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
19
<PAGE>
TRUSTEES
Michael Bozic
Charles A. Fiumefreddo
Edwin J. Garn
Wayne E. Hedien
Dr. Manuel H. Johnson
Michael E. Nugent
Philip J. Purcell
John L Schroeder
OFFICERS
Charles A. Fiumefreddo
Chairman and Chief Executive Officer
Mitchell M. Merin
President
Barry Fink
Vice President, Secretary and General Counsel
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 Dean Witter Investment Management Inc.
1221 Avenue of the Americas
New York, New York 10020
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
GROWTH FUND
[PHOTO]
SEMIANNUAL REPORT
SEPTEMBER 30, 1999
