<PAGE> 1
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND Two World Trade Center
LETTER TO THE SHAREHOLDERS August 31, 1999 New York, New York 10048
DEAR SHAREHOLDER:
We are pleased to present the semiannual letter to shareholders of Morgan
Stanley Dean Witter Small Cap Growth Fund, formerly TCW/DW Small Cap Growth
Fund, for the six-month period ended August 31, 1999.
At a special meeting held on June 8, 1999, shareholders of TCW/DW Small Cap
Growth Fund approved several proposals (see below) related to an overall
consolidation of the TCW/DW Family of Funds and the Morgan Stanley Dean Witter
Family of Funds. Accordingly, on June 28, 1999, TCW/DW Small Cap Growth Fund
became part of the Morgan Stanley Dean Witter Family of Funds and was renamed
Morgan Stanley Dean Witter Small Cap Growth Fund.
Among the proposals approved by shareholders were a new investment management
agreement between the Fund and Morgan Stanley Dean Witter Advisors Inc. (MSDW
Advisors) and a new sub-advisory agreement between MSDW Advisors and TCW Funds
Management, Inc. (TCW). Under the new investment management agreement, MSDW
Advisors serves as the investment manager for the Fund. The advisory fee rate
that MSDW Advisors charges the Fund is identical to the total aggregate fee rate
that was in effect under the previous management and advisory agreements. In
return for the services that TCW will render under the new sub-advisory
agreement, MSDW Advisors pays TCW monthly compensation equal to 40 percent of
the compensation it receives under the new investment management agreement.
PERFORMANCE
For the six-month period ended August 31, 1999, the Fund's Class B shares
returned 23.27 percent compared to 14.44 percent for the Lipper Small Cap Funds
Index and 9.91 percent for the Russell 2000 Small Stock Index. For the same
period the Fund's Class A, C and D shares returned 23.58 percent, 23.12 percent
and 23.77 percent, respectively. The performance of the Fund's four share
classes varies because of differing
<PAGE> 2
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
expenses. (Total return figures shown assume the reinvestment of all
distributions and do not reflect the deduction of any applicable sales charges.)
MARKET OVERVIEW
The past six months have in many ways been the mirror image of the six months
prior. Today the biggest concerns facing investors are an overheated economy and
the fear of renewed inflation triggering higher interest rates. A year ago
foreign economies were falling apart, rising interest-rate spreads led to the
near-collapse of a major hedge fund, the profit outlook was deteriorating
rapidly and fears of deflation were rampant.
Domestic equity markets continued to experience volatility during the period
under review. After a sharp rebound in smaller and value-oriented securities in
April, the markets returned to a focus on big company growth. Several of the
various major indexes reached all-time highs, driven by a selective few
securities, while at the same time the averages showed signs of internal
deterioration. The rise in short-term and long-term interest rates over the
summer raised fears of the Federal Reserve tightening credit policy further.
SMALL-CAP MARKET OVERVIEW
By mid-August, on fears of a Federal Reserve interest rate increase and a sharp
slowdown in the growth of the money supply, the average Nasdaq stock was down 30
percent from its 52-week high. After the August rate hike, stocks responded very
strongly, on the belief that this would be the last increase of the year.
However, it would not take much, in the form of either positive or negative news
from the central bank, to have a short-term impact on stock market valuations.
PORTFOLIO STRATEGY
Consistent with the Fund's investment strategy, TCW has spent little time trying
to predict macroeconomic events and instead continues to focus on finding
growing, high-quality companies in the most attractive industries. The Fund is
managed with a "bottom up" approach designed to create a portfolio of companies
that TCW believes will grow at a rate faster than Wall Street's expectations.
One reason TCW focuses less on the macroeconomic environment is that the
companies the Fund owns are ones TCW believes are generally benefiting from
powerful shifts in existing industries and the creation of new industries. TCW
believes that fundamental changes such as these are not easily derailed by
changes in the rate of economic growth or interest rates.
2
<PAGE> 3
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
The Fund's outperformance relative to the Russell 2000 Index can be attributed
to the strong performance of several of the Fund's largest holdings, such as
Gemstar, Citrix, Legato, Siebel Systems, Maxim and HNC Software. Despite a rocky
period for Internet stocks in general, some of the portfolio's best performers
were in this sector. In particular, Exodus, Verio and Verisign were among the
biggest contributors to overall Fund performance. TCW believes these companies
are members of a class of high-quality, high-growth Internet infrastructure
companies.
Throughout the Fund's portfolio, TCW saw an extraordinary amount of merger and
acquisition activity in the past six months. No fewer than six of the Fund's
holdings were acquired, including Healthcare Financial Partners, GeoTel
Communications and Outdoor Systems. This activity highlights not only the
attractive valuations of the companies in which the Fund invests but also their
strategic value. Most notably, there was a high level of merger and acquisition
activity in the Internet sector. Telebanc was acquired by E-Trade, Abacus Direct
was acquired by DoubleClick and Broadcast.com was acquired by Yahoo. Leadership
within the Internet sector continues to consolidate, as evidenced by the merger
and acquisition activity witnessed so far this year. TCW expects more
transactions among Internet companies as strategic and irreplaceable assets
consolidate into the hands of the leading companies. As TCW usually sells
positions in companies that have been acquired, acquisition activity typically
will lead to an increase in portfolio turnover.
LOOKING AHEAD
As the Fund heads into the final quarter of 1999, TCW's focus continues to be on
identifying the highest-quality small-cap growth companies believed to possess
the ability to consistently exceed Wall Street's expectations for growth,
profitability and earnings. In the short term, changes in interest rates could
have a negative impact on performance, as they did at times this summer. Longer
term, TCW believes it is the superior earnings growth potential of the companies
in which the Fund seeks to invest that will drive performance.
On May 1, 1999, Mitchell M. Merin was named President of the Morgan Stanley Dean
Witter Funds. Mr. Merin is the President and Chief Operating Officer of Asset
Management for Morgan Stanley Dean Witter & Co. and President, Chief Executive
Officer and Director of Morgan Stanley Dean Witter Advisors Inc., the Fund's
investment manager. He also serves as Chairman, Chief Executive Officer and
Director of the Fund's distributor and transfer agent.
3
<PAGE> 4
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
LETTER TO THE SHAREHOLDERS August 31, 1999, continued
We appreciate your ongoing support of Morgan Stanley Dean Witter Small Cap
Growth Fund and look forward to continuing to serve your investment needs and
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>
4
<PAGE> 5
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
RESULTS OF ANNUAL MEETING (unaudited)
* * *
On June 8, 1999, a special meeting of the Fund's shareholders was held for the
purpose of voting on three separate matters, the results of which were as
follows:
(1) APPROVAL OF A NEW INVESTMENT MANAGEMENT AGREEMENT BETWEEN THE FUND AND
MORGAN STANLEY DEAN WITTER ADVISORS INC.:
<TABLE>
<S> <C>
For......................................................... 6,375,371
Against..................................................... 155,976
Abstain..................................................... 694,507
</TABLE>
(2) APPROVAL OF A NEW SUB-ADVISORY AGREEMENT BETWEEN MORGAN STANLEY DEAN WITTER
ADVISORS INC. AND TCW FUNDS MANAGEMENT, INC.:
<TABLE>
<S> <C>
For......................................................... 6,344,040
Against..................................................... 167,433
Abstain..................................................... 714,381
</TABLE>
(3) ELECTION OF TRUSTEES:
<TABLE>
<S> <C>
Michael Bozic
For......................................................... 6,847,587
Withheld.................................................... 378,267
Charles A. Fiumefreddo
For......................................................... 6,854,600
Withheld.................................................... 371,254
Edwin J. Garn
For......................................................... 6,860,795
Withheld.................................................... 365,059
Wayne E. Hedien
For......................................................... 6,864,015
Withheld.................................................... 361,839
Manuel H. Johnson
For......................................................... 6,847,164
Withheld.................................................... 378,690
Michael E. Nugent
For......................................................... 6,868,101
Withheld.................................................... 357,753
Philip J. Purcell
For......................................................... 6,860,462
Withheld.................................................... 365,392
John L. Schroeder
For......................................................... 6,834,079
Withheld.................................................... 391,775
</TABLE>
5
<PAGE> 6
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FUND PERFORMANCE August 31, 1999
AVERAGE ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS A*
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 8/31/99
- -------------------------
Since Inception (7/28/97) 24.35(1) 21.18(2)
1 Year 79.44(1) 70.02(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS B+
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 8/31/99
- -------------------------
Since Inception (8/2/93) 18.57(1) 18.57(2)
1 Year 78.30(1) 73.30(2)
5 Years 25.04(1) 24.88(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS C++
- ----------------------------------------------
<S> <C> <C>
PERIOD ENDED 8/31/99
- -------------------------
Since Inception (7/28/97) 23.41(1) 23.41(2)
1 Year 78.17(1) 77.17(2)
</TABLE>
<TABLE>
<CAPTION>
CLASS D#
- ----------------------------------------------
<S> <C>
PERIOD ENDED 8/31/99
- -------------------------
Since Inception (7/28/97) 24.62(1)
1 Year 79.92(1)
</TABLE>
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RETURNS.
- ---------------------
<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 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.
</TABLE>
6
<PAGE> 7
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited)
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
COMMON STOCKS (98.4%)
Accident & Health Insurance (0.3%)
56,500 Provident American Corp.*.... $ 981,687
------------
Advertising (1.8%)
112,407 Outdoor Systems, Inc.*....... 3,632,151
111,100 Snyder Communications,
Inc.*....................... 2,263,662
24,700 Wink Communications, Inc.*... 1,004,981
------------
6,900,794
------------
Agricultural Chemicals (0.2%)
106,000 Eco Soil Systems, Inc.*...... 735,375
------------
Biotechnology (1.1%)
70,000 Alkermes, Inc.*.............. 2,590,000
71,800 GelTex Pharmaceuticals,
Inc.*....................... 960,325
31,000 Pharmacyclics, Inc.*......... 871,875
------------
4,422,200
------------
Broadcasting (4.5%)
77,700 Citadel Communications
Corp.*...................... 2,879,756
118,100 Clear Channel Communications,
Inc.*....................... 8,274,381
40,700 Cox Radio, Inc. (Class A)*... 2,157,100
29,500 Emmis Broadcasting Corp.
(Class A)*.................. 1,666,750
66,700 Radio One, Inc.*............. 2,776,387
------------
17,754,374
------------
Catalog/Specialty Distribution (1.1%)
61,100 barnesandnoble.com, Inc.*.... 1,042,519
33,000 Drugstore.com, Inc.*......... 1,975,875
165,500 E4L, Inc.*................... 724,062
60,100 Value America, Inc.*......... 634,806
------------
4,377,262
------------
Clothing/Shoe/Accessory Stores (1.4%)
60,400 AnnTaylor Stores Corp.*...... 2,000,750
104,700 Pacific Sunwear of
California, Inc.*........... 2,434,275
67,500 Too, Inc.*................... 1,185,469
------------
5,620,494
------------
Computer Communications (1.1%)
85,800 Ancor Communications,
Inc.*....................... 2,273,700
41,700 TranSwitch Corp.*............ 2,071,969
------------
4,345,669
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Computer Software (21.8%)
61,900 CBT Group PLC (ADR)
(Ireland)*.................. $ 1,299,900
422,700 Citrix Systems, Inc.*........ 24,067,481
29,700 Great Plains Software,
Inc.*....................... 1,382,906
252,000 HNC Software, Inc.*.......... 9,166,500
41,400 Informatica Corp.*........... 2,282,175
344,600 Legato Systems, Inc.*........ 14,839,338
25,000 Macromedia, Inc.*............ 989,062
60,000 Mercury Interactive Corp.*... 2,861,250
82,000 Micromuse Inc.*.............. 4,679,125
27,200 Mission Critical Software,
Inc.*....................... 1,101,600
55,500 NEON Systems, Inc.*.......... 1,748,250
8,400 NetIQ Corp.*................. 248,850
3,200 Packeteer, Inc.*............. 118,200
148,100 Peregine Systems, Inc.*...... 4,878,044
78,600 Pervasive Software, Inc.*.... 1,670,250
174,800 Siebel Systems, Inc.*........ 11,995,650
59,000 TIBCO Software, Inc.*........ 1,593,000
28,900 USinternetworking, Inc.*..... 433,500
------------
85,355,081
------------
Construction/Agricultural
Equipment/Trucks (0.4%)
45,900 Astec Industries, Inc.*...... 1,554,862
------------
Discount Chains (0.5%)
57,175 Dollar Tree Stores, Inc.*.... 1,883,202
------------
Diversified Commercial Services (9.7%)
20,500 Abacus Direct Corp.*......... 2,082,031
39,700 Concur Technologies, Inc.*... 982,575
138,200 Corporate Executive Board
Co.*........................ 4,837,000
248,000 Dendrite International,
Inc.*....................... 10,276,500
56,800 Exchange Applications,
Inc.*....................... 1,682,700
59,300 HotJobs.com, Ltd.*........... 1,482,500
51,400 Lason, Inc.*................. 2,322,637
204,500 MAXIMUS, Inc.*............... 7,080,812
71,800 ProBusiness Services,
Inc.*....................... 1,920,650
45,200 Romac International, Inc.*... 327,700
33,400 Scient Corp.*................ 2,108,375
70,600 Viant Corp.*................. 2,612,200
------------
37,715,680
------------
Diversified Electronic Products (6.2%)
325,000 Gemstar International Group
Ltd. (Virgin Islands)*...... 22,404,687
58,600 Macrovision Corp............. 1,904,500
------------
24,309,187
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE> 8
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
E.D.P. Services (5.0%)
41,300 Concord Communications,
Inc.*....................... $ 1,522,937
290,480 CSG Systems International,
Inc.*....................... 6,553,955
122,900 International Integration
Inc.*....................... 2,788,294
82,200 Pegasus Systems, Inc.*....... 2,948,925
13,500 Technology Solutions Co...... 161,156
206,500 Whittman-Hart, Inc.*......... 5,433,531
------------
19,408,798
------------
Electronic Components (0.6%)
36,400 Power Integrations, Inc.*.... 2,466,100
------------
Electronic Production Equipment (1.0%)
54,300 Cymer, Inc.*................. 1,886,925
83,200 Varian Semiconductor
Equipment Associates,
Inc.*....................... 1,887,600
------------
3,774,525
------------
Engineering & Construction (0.4%)
52,300 Dycom Industries, Inc.*...... 1,614,762
------------
Finance Companies (0.7%)
101,800 NextCard, Inc.*.............. 2,506,825
------------
Internet Services (22.3%)
29,100 Agile Software Co.*.......... 1,449,544
4,500 Commerce One, Inc............ 200,250
51,400 Critical Path, Inc........... 1,734,750
79,000 Digex, Inc................... 2,636,625
337,200 Exodus Communications,
Inc.*....................... 27,060,300
168,500 GoTo.com, Inc.*.............. 6,097,594
97,800 InfoSpace.com, Inc.*......... 4,498,800
44,200 Lycos, Inc.*................. 1,795,625
30,200 Mpath Interactive, Inc.*..... 356,738
65,500 Online Resources &
Communications Corp.*....... 1,170,813
38,400 Proxicom, Inc.*.............. 1,740,000
65,200 Quest Software, Inc.*........ 2,730,250
66,500 Ramp Networks, Inc.*......... 1,197,000
62,100 Software.com, Inc.*.......... 2,821,669
248,400 Verio Inc.*.................. 9,221,850
93,000 VeriSign, Inc.*.............. 10,073,063
42,200 VerticalNet, Inc.*........... 1,450,625
20,000 Vignette Corp.*.............. 1,355,000
64,268 Yahoo! Inc.*................. 9,471,497
------------
87,061,993
------------
Investment Bankers/Brokers/Services (1.3%)
204,600 E*TRADE Group, Inc.*......... 5,102,213
------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Medical Specialties (1.4%)
200,400 Diametrics Medical, Inc.*.... $ 1,114,725
80,600 Perclose, Inc.*.............. 4,236,538
28,200 Safeskin Corp.*.............. 223,838
------------
5,575,101
------------
Medical/Nursing Services (0.9%)
148,000 Laser Vision Centers,
Inc.*....................... 3,524,250
------------
Movies/Entertainment (2.3%)
62,400 Championship Auto Racing
Teams, Inc.*................ 2,070,900
85,350 SFX Entertainment, Inc.
(Class A)*.................. 3,515,353
89,300 Westwood One, Inc.*.......... 3,426,888
------------
9,013,141
------------
Other Consumer Services (0.3%)
31,300 Cheap Tickets, Inc.*......... 1,150,275
3,700 InsWeb Corp.*................ 118,400
600 MP3.com, Inc.*............... 20,475
------------
1,289,150
------------
Other Specialty Stores (3.1%)
201,400 Bed Bath & Beyond, Inc.*..... 5,525,913
102,100 Cost Plus, Inc.*............. 4,517,925
62,400 Linens 'N Things, Inc.*...... 2,137,200
------------
12,181,038
------------
Other Telecommunications (1.5%)
71,000 AT&T Canada Inc. (Canada)*... 4,295,500
116,200 Convergent Communications,
Inc.*....................... 1,401,663
------------
5,697,163
------------
Printing/Forms (0.1%)
44,400 Applied Graphics
Technologies, Inc.*......... 396,825
------------
Real Estate (0.5%)
21,800 CB Richard Ellis Services,
Inc.*....................... 272,500
114,000 Trammell Crow Co.*........... 1,624,500
------------
1,897,000
------------
Savings & Loan Associations (0.7%)
121,000 Telebanc Financial Corp.*.... 2,843,500
------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE> 9
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
PORTFOLIO OF INVESTMENTS August 31, 1999 (unaudited) continued
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
- -------------------------------------------------------
<C> <S> <C>
Semiconductors (5.7%)
124,300 Maxim Integrated Products,
Inc.*....................... $ 8,359,175
70,500 Micrel, Inc.*................ 5,393,250
66,500 MIPS Technologies, Inc.
(Class A)*.................. 2,269,313
90,000 Semtech Corp.*............... 6,288,750
------------
22,310,488
------------
Services to the Health Industry (0.5%)
57,900 MedQuist Inc.*............... 2,001,169
------------
TOTAL COMMON STOCKS
(Identified Cost
$199,959,331)................ 384,619,908
------------
SHORT-TERM INVESTMENT (1.2%)
REPURCHASE AGREEMENT
$ 4,832 The Bank of New York 5.50%
due 09/01/99 (dated
08/31/99; proceeds
$4,833,145)(a)
(Identified Cost
$4,832,406)................. $ 4,832,406
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT IN
THOUSANDS VALUE
- -------------------------------------------------------
<C> <S> <C>
TOTAL INVESTMENTS
(Identified Cost
$204,791,737)(b)................ $99.6% $389,452,314
OTHER ASSETS IN EXCESS
OF LIABILITIES..................... 0.4 1,497,691
---- ------------
NET ASSETS....................... 100.0% $390,950,005
====== ============
</TABLE>
- ---------------------
ADR American Depository Receipt.
* Non-income producing security.
(a) Collateralized by $1,461,388 U.S. Treasury Note 5.125% due 8/31/00 valued
at $1,455,223 and 7,166,000 U.S. Treasury Note 0.00% due 08/15/10 valued at
$3,473,832.
(b) The aggregate cost for federal income tax purposes approximates identified
cost. The aggregate gross unrealized appreciation is $196,729,516 and the
aggregate gross unrealized depreciation is $12,068,939, resulting in net
unrealized appreciation of $184,660,577.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE> 10
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1999 (unaudited)
ASSETS:
Investments in securities, at value
(identified cost $204,791,737)............................. $389,452,314
Receivable for:
Investments sold........................................ 3,782,081
Shares of beneficial interest sold...................... 823,186
Prepaid expenses and other assets........................... 157,649
------------
TOTAL ASSETS............................................ 394,215,230
------------
LIABILITIES:
Payable for:
Investments purchased................................... 1,934,845
Shares of beneficial interest repurchased............... 707,354
Investment advisory fee................................. 323,956
Plan of distribution fee................................ 266,328
Accrued expenses and other payables......................... 32,742
------------
TOTAL LIABILITIES....................................... 3,265,225
------------
NET ASSETS.............................................. $390,950,005
============
COMPOSITION OF NET ASSETS:
Paid-in-capital............................................. $173,023,609
Net unrealized appreciation................................. 184,660,577
Accumulated net investment loss............................. (3,630,117)
Accumulated undistributed net realized gain................. 36,895,936
------------
NET ASSETS.............................................. $390,950,005
============
CLASS A SHARES:
Net Assets.................................................. $6,832,661
Shares Outstanding (unlimited authorized, $.01 par value)... 245,655
NET ASSET VALUE PER SHARE............................... $27.81
============
MAXIMUM OFFERING PRICE PER SHARE,
(net asset value plus 5.54% of net asset value)........ $29.35
============
CLASS B SHARES:
Net Assets.................................................. $377,432,684
Shares Outstanding (unlimited authorized, $.01 par value)... 13,784,725
NET ASSET VALUE PER SHARE............................... $27.38
============
CLASS C SHARES:
Net Assets.................................................. $4,642,475
Shares Outstanding (unlimited authorized, $.01 par value)... 169,676
NET ASSET VALUE PER SHARE............................... $27.36
============
CLASS D SHARES:
Net Assets.................................................. $2,042,185
Shares Outstanding (unlimited authorized, $.01 par value)... 73,080
NET ASSET VALUE PER SHARE............................... $27.94
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE> 11
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<S> <C>
STATEMENT OF OPERATIONS
For the six months ended August 31, 1999 (unaudited)
NET INVESTMENT LOSS:
INCOME
Interest.................................................... $ 125,864
Dividends................................................... 708
----------
TOTAL INCOME............................................ 126,572
----------
EXPENSES
Plan of distribution fee (Class A shares)................... 5,410
Plan of distribution fee (Class B shares)................... 1,472,725
Plan of distribution fee (Class C shares)................... 17,399
Investment management fee................................... 704,641
Management fee.............................................. 675,182
Investment advisory fee..................................... 450,121
Transfer agent fees and expenses............................ 239,773
Trustees' fees and expenses................................. 75,477
Shareholder reports and notices............................. 31,684
Professional fees........................................... 29,940
Custodian fees.............................................. 22,715
Registration fees........................................... 17,160
Other....................................................... 14,462
----------
TOTAL EXPENSES.......................................... 3,756,689
----------
NET INVESTMENT LOSS..................................... (3,630,117)
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain........................................... 37,629,540
Net change in unrealized appreciation....................... 40,316,742
----------
NET GAIN................................................ 77,946,282
----------
NET INCREASE................................................ $74,316,165
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE> 12
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL STATEMENTS, continued
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE YEAR
MONTHS ENDED ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
- ------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment loss................................. $ (3,630,117) $ (6,603,169)
Net realized gain................................... 37,629,540 12,853,310
Net change in unrealized appreciation............... 40,316,742 18,442,746
------------ ------------
NET INCREASE.................................... 74,316,165 24,692,887
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM NET REALIZED
GAIN:
Class A shares...................................... (123,422) --
Class B shares...................................... (9,774,246) --
Class C shares...................................... (97,423) --
Class D shares...................................... (402) --
------------ ------------
TOTAL DISTRIBUTIONS............................. (9,995,493) --
------------ ------------
Net decrease from transactions in shares of
beneficial interest................................ (984,301) (38,954,929)
------------ ------------
NET INCREASE (DECREASE)......................... 63,336,371 (14,262,042)
NET ASSETS:
Beginning of period................................. 327,613,634 341,875,676
------------ ------------
END OF PERIOD
(Including a net investment loss of
$3,630,117 and $0, respectively)................ $390,950,005 $327,613,634
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE> 13
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Morgan Stanley Dean Witter Small Cap Growth Fund (the "Fund"), formerly TCW/DW
Small Cap Growth Fund, is registered under the Investment Company Act of 1940,
as amended (the "Act"), as a non-diversified, open-end management investment
company. The Fund's investment objective is capital appreciation. The Fund seeks
to achieve its objective by investing primarily in common stocks and other
equity securities of lesser known, smaller capitalization domestic and foreign
companies. The Fund was organized as a Massachusetts business trust on March 11,
1992 and commenced operations on August 2, 1993. 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 or 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
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"), or TCW Funds Management, Inc. (the "Sub-Advisor") that sale or bid
prices are not reflective of a security's market value, portfolio securities are
valued at their fair value as determined in good faith under procedures
established by and under the general supervision of the Trustees (valuation of
debt securities for which market quotations are not readily available may be
based upon current market prices of securities which are comparable in coupon,
13
<PAGE> 14
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued
rating and maturity or an appropriate matrix utilizing similar factors); and (4)
short-term debt securities having a maturity date of more than sixty days at
time of purchase are valued on a mark-to-market basis until sixty days prior to
maturity and thereafter at amortized cost based on their value on the 61st day.
Short-term debt securities having a maturity date of sixty days or less at the
time of purchase are valued at amortized cost.
B. ACCOUNTING FOR INVESTMENTS -- Security transactions are accounted for on the
trade date (date the order to buy or sell is executed). Realized gains and
losses on security transactions are determined by the identified cost method.
Dividend income and other distributions are recorded on the ex-dividend date.
Discounts are accreted over the life of the respective securities. Interest
income is accrued daily.
C. MULTIPLE CLASS ALLOCATIONS -- Investment income, expenses (other than
distribution fees), and realized and unrealized gains and losses are allocated
to each class of shares based upon the relative net asset value on the date such
items are recognized. Distribution fees are charged directly to the respective
class.
D. FEDERAL INCOME TAX STATUS -- It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Accordingly, no federal income tax provision is required.
E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- The Fund records dividends and
distributions to its shareholders on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with federal income tax regulations which may
differ from generally accepted accounting principles. These "book/tax"
differences are either considered temporary or permanent in nature. To the
extent these differences are permanent in nature, such amounts are reclassified
within the capital accounts based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and
distributions which exceed net investment income and net realized capital gains
for 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 SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued
2. INVESTMENT MANAGEMENT AND SUB-ADVISORY AGREEMENTS
Pursuant to a new Investment Management Agreement that took effect June 28,
1999, the Fund pays the Investment Manager a management fee, accrued daily and
payable monthly, by applying the annual rate of 1.0% to the net assets of the
Fund determined as of the close of each business day.
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 new Sub-Advisory Agreement that took effect June 28, 1999 between the
Investment Manager and the Sub-Advisor, 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.
Prior to June 28, 1999, pursuant to a Management Agreement with Morgan Stanley
Dean Witter Services Company Inc. (the "Former Manager"), the Fund paid the
Former Manager a management fee, accrued daily and payable monthly, by applying
the annual rate of 0.60% to the net assets of the Fund determined as of the
close of each business day.
Under the terms of the Management Agreement, the Manager maintained certain of
the Fund's books and records and furnished, at its own expense, office space,
facilities, equipment, clerical, bookkeeping and certain legal services and paid
the salaries of all personnel, including officers of the Fund who were employees
of the Manager. The Manager also bore the cost of telephone services, heat,
light, power and other utilities provided to the Fund.
Prior to June 28, 1999, pursuant to an Investment Advisory Agreement with the
current Sub-Advisor, the Fund paid an advisory fee, accrued daily and payable
monthly, by applying the annual rate of 0.40% to the net assets of the Fund
determined as of the close of each business day.
Under the terms of the Investment Advisory Agreement, the Fund had retained the
current Sub-Advisor to invest the Fund's assets, including placing orders for
the purchase and sale of portfolio
15
<PAGE> 16
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued
securities. The current Sub-Advisor obtained and evaluated such information and
advice relating to the economy, securities markets, and specific securities as
it considered necessary or useful to continuously manage the assets of the Fund
in a manner consistent with its investment objective. In addition, the current
Sub-Advisor paid the salaries of all personnel, including officers of the Fund,
who were employees of the current Sub-Advisor.
3. PLAN OF DISTRIBUTION
Shares of the Fund are distributed by Morgan Stanley Dean Witter Distributors
Inc. (the "Distributor"), an affiliate of the 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 charged 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 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 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
16
<PAGE> 17
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued
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 $12,706,271 at August 31, 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, and other
selected broker-dealer representatives may be reimbursed in the subsequent
calendar year. For the six months ended August 31, 1999, the distribution fee
was accrued for Class A shares and Class C shares at the annual rate of 0.25%
and 1.00%, respectively.
The Distributor has informed the Fund that for the six months ended August 31,
1999 it received contingent deferred sales charges from certain redemptions of
the Fund's Class B shares and Class C shares of $398,087 and $4,678,
respectively and received $10,609 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 August 31, 1999 aggregated
$148,839,995 and $159,935,256, respectively.
For the six months ended August 31, 1999, the Fund incurred brokerage
commissions of $96,007 with Morgan Stanley & Co., Inc., an affiliate of the
Investment Manager and Distributor, for portfolio transactions executed on
behalf of the Fund.
Morgan Stanley Dean Witter Trust FSB, an affiliate of the Investment Manager and
Distributor, is the Fund's transfer agent.
17
<PAGE> 18
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
NOTES TO FINANCIAL STATEMENTS August 31, 1999 (unaudited) continued
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
AUGUST 31, 1999 FEBRUARY 28, 1999
------------------------- --------------------------
(unaudited)
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
CLASS A SHARES
Sold........................................................ 283,895 $ 7,790,623 116,536 $ 2,511,381
Reinvestment of distributions............................... 3,086 80,460 -- --
Redeemed.................................................... (147,260) (4,069,472) (23,647) (450,535)
---------- ------------ ---------- -------------
Net increase - Class A...................................... 139,721 3,801,611 92,889 2,060,846
---------- ------------ ---------- -------------
CLASS B SHARES
Sold........................................................ 1,333,164 34,761,336 4,486,194 90,833,133
Reinvestment of distributions............................... 352,551 9,057,027 -- --
Redeemed.................................................... (2,019,629) (51,984,986) (6,527,001) (133,486,471)
---------- ------------ ---------- -------------
Net decrease - Class B...................................... (333,914) (8,166,623) (2,040,807) (42,653,338)
---------- ------------ ---------- -------------
CLASS C SHARES
Sold........................................................ 85,891 2,277,618 108,755 2,343,245
Reinvestment of distributions............................... 3,587 92,124 -- --
Redeemed.................................................... (36,334) (953,414) (35,976) (705,682)
---------- ------------ ---------- -------------
Net increase - Class C...................................... 53,144 1,416,328 72,779 1,637,563
---------- ------------ ---------- -------------
CLASS D SHARES
Sold........................................................ 76,034 2,059,825 -- --
Reinvestment of distributions............................... 15 402 -- --
Redeemed.................................................... (3,522) (95,844) -- --
---------- ------------ ---------- -------------
Net increase - Class D...................................... 72,527 1,964,383 -- --
---------- ------------ ---------- -------------
Net decrease in Fund........................................ (68,522) $ (984,301) (1,875,139) $ (38,954,929)
========== ============ ========== =============
</TABLE>
6. FEDERAL INCOME TAX STATUS
As of February 28, 1999, the Fund had temporary book/tax differences primarily
attributable to capital loss deferrals on wash sales.
18
<PAGE> 19
MORGAN STANLEY DEAN WITTER SMALL CAP 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
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- -----------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS A SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $23.13 $21.18 $18.12
------ ------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.19) (0.29) (0.15)
Net realized and unrealized gain........................... 7.77 2.24 3.21
------ ------ ------
Total income from investment operations..................... 7.58 1.95 3.06
------ ------ ------
Less distributions from net realized gain................... (2.90) -- --
------ ------ ------
Net asset value, end of period.............................. $27.81 $23.13 $21.18
====== ====== ======
TOTAL RETURN+............................................... 23.58 %(1) 9.21 % 16.89 %(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.48 %(2)(3) 1.50 %(3) 1.52 %(2)
Net investment loss......................................... (1.41)%(2)(3) (1.40)%(3) (1.32)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $6,833 $2,450 $276
Portfolio turnover rate..................................... 41%(1) 51% 61 %(1)
</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
19
<PAGE> 20
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE SIX FOR THE YEAR ENDED FEBRUARY 28,
MONTHS ENDED -------------------------------------------------------
AUGUST 31, 1999++ 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............. $22.84 $21.08 $15.73 $ 16.24 $ 9.90 $10.30
------ ------ ------ ------- ------- ------
Income (loss) from investment operations:
Net investment loss............................. (0.26) (0.43) (0.37) (0.26) (0.19) (0.18)
Net realized and unrealized gain (loss)......... 7.70 2.19 5.72 (0.25) 6.53 (0.22)
------ ------ ------ ------- ------- ------
Total income (loss) from investment operations... 7.44 1.76 5.35 (0.51) 6.34 (0.40)
------ ------ ------ ------- ------- ------
Less distributions from net realized gain........ (2.90) -- -- -- -- --
------ ------ ------ ------- ------- ------
Net asset value, end of period................... $27.38 $22.84 $21.08 $ 15.73 $ 16.24 $ 9.90
====== ====== ====== ======= ======= ======
TOTAL RETURN+.................................... 23.27%(1) 8.35% 34.01% (3.14)% 64.04% (3.88)%
RATIOS TO AVERAGE NET ASSETS:
Expenses......................................... 2.05 %(2)(3) 2.18%(3) 2.25% 2.15% 2.32% 2.57%
Net investment loss.............................. (1.98)%(2)(3) (2.08)%(3) (2.05)% (1.70)% (1.75)% (2.04)%
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands.......... $377,433 $322,489 $340,665 $268,783 $153,366 $69,984
Portfolio turnover rate.......................... 41 %(1) 51% 61% 42% 52% 116%
</TABLE>
- ---------------------
* Year ended February 29.
** 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
20
<PAGE> 21
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS C SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $22.85 $21.08 $18.12
------ ------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.28) (0.45) (0.24)
Net realized and unrealized gain........................... 7.69 2.22 3.20
------ ------ ------
Total income from investment operations..................... 7.41 1.77 2.96
------ ------ ------
Less distributions from net realized gain................... (2.90) -- --
------ ------ ------
Net asset value, end of period.............................. $27.36 $22.85 $21.08
====== ====== ======
TOTAL RETURN+............................................... 23.12%(1) 8.35% 16.39%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 2.23%(2)(3) 2.26%(3) 2.29%(2)
Net investment loss......................................... (2.16)%(2)(3) (2.16)%(3) (2.10)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $4,642 $2,662 $923
Portfolio turnover rate..................................... 41%(1) 51% 61%(1)
</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
21
<PAGE> 22
MORGAN STANLEY DEAN WITTER SMALL CAP GROWTH FUND
FINANCIAL HIGHLIGHTS, continued
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE YEAR JULY 28, 1997*
MONTHS ENDED ENDED THROUGH
AUGUST 31, 1999 FEBRUARY 28, 1999 FEBRUARY 28, 1998
- ---------------------------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C> <C> <C>
CLASS D SHARES++
SELECTED PER SHARE DATA:
Net asset value, beginning of period........................ $23.20 $21.21 $18.12
------ ------ ------
Income (loss) from investment operations:
Net investment loss........................................ (0.36) (0.24) (0.12)
Net realized and unrealized gain........................... 8.00 2.23 3.21
------ ------ ------
Total income from investment operations..................... 7.64 1.99 3.09
------ ------ ------
Less distributions from net realized gain................... (2.90) -- --
------ ------ ------
Net asset value, end of period.............................. $27.94 $23.20 $21.21
====== ====== ======
TOTAL INVESTMENT RETURN+.................................... 23.77%(1) 9.38% 17.05%(1)
RATIOS TO AVERAGE NET ASSETS:
Expenses.................................................... 1.23%(2)(3) 1.26%(3) 1.27%(2)
Net investment loss......................................... (1.16)%(2)(3) (1.16)%(3) (1.10)%(2)
SUPPLEMENTAL DATA:
Net assets, end of period, in thousands..................... $2,042 $13 $12
Portfolio turnover rate..................................... 41%(1) 51%(1) 61%(1)
</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
22
<PAGE> 23
(This Page Intentionally Left Blank)
<PAGE> 24
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
Christopher J. Ainley
Vice President
Charles Larsen
Vice President
Douglas S. Foreman
Vice President
Thomas F. Caloia
Treasurer
TRANSFER AGENT
- ----------------------------------
Morgan Stanley Dean Witter Trust FSB
Harborside Financial Center -- Plaza Two
Jersey City, New Jersey 07311
INDEPENDENT ACCOUNTANTS
- ----------------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
INVESTMENT MANAGER
- ----------------------------------
Morgan Stanley Dean Witter Advisors Inc.
Two World Trade Center
New York, New York 10048
SUB-ADVISOR
- ----------------------------------
TCW Funds Management, Inc.
805 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
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
SMALL CAP
GROWTH FUND
Semiannual Report
August 31, 1999
